Daily market review

United States

Renewed hopes for a US fiscal package helped equities recover from their worst levels Friday but weakness in mega-caps kept the major indexes in negative territory. The Dow Jones industrial index declined 0.5 percent, the S&P 500 slipped 1.0 percent, and the NASDAQ fell 2.2 percent.

Major equity indexes dropped initially after word overnight that President Trump had tested positive for Covid-19, as the news raised uncertainty headed into the elections. Traders appeared to buy the dip in cyclicals and hopes for a deal revived as
House Speaker Nancy Pelosi said Trump's illness had altered the dynamics of the talks in favor of a deal. Pelosi also raised the possibility of a standalone measure to allow US airlines to avoid massive pending staff furloughs.

Among sectors, best performers were industrials, energy, materials, financials, consumer staples, real estate, health care, and utilities. Among industrials, leaders included truckers and machinery. Airlines rebounded on the Pelosi comments, with American Airlines up 3.3 percent. Tobacco and grocery stocks boosted consumer staples.

Lagging were growth stocks including the FAANGs -- technology, communications services and consumer discretionary, with Amazon off 3.0 percent, Apple off 3.2 percent, and Google down 2.2 percent.

In US economic data, nonfarm payrolls rose 661,000 in September, on the low end of expectations. This is by far the smallest increase of the reopening and roughly 1/7 of the peak gain in June. But revisions added 145,000 to prior months. Also positive was the unemployment rate, which fell 5 tenths to 7.9 percent, slightly better than expected.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.72 to US$39.14 while spot gold fell US$1.68 to US$1,902.76. The US dollar was stronger against most major currencies though weaker vs. the Japanese yen and UK sterling. The US Treasury 30-year bond yield rose 2 basis points to 1.48 percent while the 10-year note yield rose 1 basis point to 0.69 percent.


Equities recovered from early losses to end mixed to slightly better Friday. The Europe-wide STOXX 600 gained 0.3 percent, the German DAX percent declined 0.3 percent, the French CAC was unchanged, and the UK FTSE-100 rose 0.4 percent.

Markets fell in the morning on news President Trump had tested positive for Covid-19. A soft US employment report helped risk appetite recover as some investors reasoned that it would raise the likelihood of new US fiscal stimulus, and positive comments from top congressional Democrats added to hopes for a deal. Similarly, markets saw the weak Eurozone HICP report as raising the likelihood of ECB stimulus. Meanwhile, in Brexit news, investors appeared to welcome news that UK Prime Minister Boris Johnson would meet EU officials on Saturday.

Among sectors, outperforming were construction, media, utilities, basic resources, and financial services. Laggards included retail, technology, autos, oil & gas, industrials, and personal & household goods.

In economic data, Eurozone inflation unexpectedly decelerated last month. September's flash minus 0.3 percent annual rate was down from August's final minus 0.2 percent and equaled its weakest since January 2015. This was only the second sub-zero print since May 2016.

Asia Pacific

Markets were closed for holidays in many parts of Asia Friday, including China, Hong Kong, Taiwan, Korea, and India. Elsewhere in the region, markets fell on the news that President Trump has tested positive for Covid-19. After trading was halted Thursday due to a computer system malfunction, Japan's Nikkei and Topix indices fell 0.7 percent and 1.0 percent respectively Friday, taking weekly losses to 0.8 percent and 1.5 percent respectively. Australia's All Ordinaries index fell 1.4 percent on the day and 2.6 percent on the week, with shares of major energy producers selling off sharply Friday. Before holidays earlier in the week, Hong Kong's Hang Seng index and the Shanghai Composite index closed down 1.0 percent and unchanged respectively compared with their closing levels at the end of last week.

Japanese labor market data for August show further weakness as the economic impact of the Covid-19 pandemic continued. The seasonally-adjusted unemployment rate rose from 2.9 percent in July to 3.0 percent in August, its highest level since May 2017, while the number of unemployed persons rose by 490,000 on the year, up from an increase of 410,000 previously. The number of employed persons fell by 750,000 on the year in August after dropping 760,000 in July.

Retail sales in Australia fell on the month in August after increasing in each of the three previous months as public health and travel restrictions were re-tightened in parts of the country in response to an increase in new Covid-19 cases. Sales fell 4.0 percent on the month after increasing 3.2 percent in July, with year-on-year growth also weakening from 12.8 percent to 7.1 percent, broadly in line with preliminary estimates. Sales fell in most states and territories but most sharply in Victoria, Australia's second most populous state and location of almost 25 percent of national economic activity, reflecting the impact of a strict lockdown put in place by authorities there in response to a spike in Covid-19 cases. Weakness in sales was also broad-based across major categories of spending but particularly pronounced for clothing, department stores, and cafes and restaurants.

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