Daily market review

United States

Equities rallied Monday on rising expectations for US fiscal stimulus and reports that President Trump's health has improved. The Dow Jones industrial index gained 1.7 percent, the S&P 500 gained 1.8 percent, and the NASDAQ rose 2.3 percent.

Gains were nearly across the board, with strength in cyclicals and small-caps reflecting the recovery trade as did a jump in Treasury yields. Comments from House Speaker Nancy Pelosi increased optimism about a fiscal pact, while expectations for even more expansive fiscal action were raised by Joe Biden's widening lead in presidential polls that are also easing talk of a contested election. A better-than-expected reading in the ISM's service sector report was another positive for risk assets.

On the negative side was news that Italy, France, and the UK were considering tightening restrictions to limit the spread of the coronavirus, and statistics showing new record highs for Covid-19 cases in several US states. The US Centers for Disease Control also warned that the virus can spread through the air beyond six feet indoors.

Among sectors, the heavily-weighted information technology sector outperformed, with high-beta chipmakers leading, including Nvidia up 4.4 percent, Qualcomm up 4.4 percent, and Advanced Micro Devices up 5.3 percent. Apple rose 3.1 percent and Microsoft gained 2 percent.

Financials were winners with Comerica up 6.4 percent, AIG up 2.9 percent, and JP Morgan up 2.1 percent. Other leaders included materials, energy, and health care. Health care advancers included Regeneron, up 7.1 percent, and, and Gilead, up 2.3 percent, both makers of treatments given to President Trump. Lagging were real estate, which was hurt by the rise in interest rates, and defensive sectors including utilities and consumer staples.

In US economic data, at a higher-than-expected 57.8, ISM's services index re-accelerated from 56.9 in August toward July's post-lockdown high of 58.1. New orders surged 5 points to a robust 61.5, though backlog orders were flat, at 50.1 versus August's very strong 56.6.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.30 to US$41.44 while spot gold rose US$9.45 to US$1,912.21. The US dollar declined sharply against most major currencies. The US Treasury 30-year bond yield surged 9 basis points to 1.58 percent while the 10-year note yield rose 7 basis points to 0.77 percent.


Reports that President Trump's health had improved and rising expectations for a US fiscal package lifted stocks Monday. The Europe-wide STOXX 600 rose 0.8 percent, the German DAX percent gained 1.1 percent, the French CAC advanced 1.0 percent, and the UK FTSE-100 rose 0.7 percent.

Rising oil prices gave energy stocks a boost as cyclicals led advancers on more positive news about Trump and the fiscal package. Markets noted reports that Trump may be released from hospital soon, and House Speaker Nancy Pelosi's statement that negotiators are progressing toward a deal. On the negative side: France, Italy and the UK are weighing wider lockdowns to cope with rising virus cases, and cases have accelerated in many US states. On Brexit, the UK and EU extended their talks for another month.

Among sectors, outperforming were telecom, on M&A news, plus travel & leisure, oil & gas, autos, financials, and industrials. Lagging were utilities, food & beverage, chemicals, personal & household goods, and basic resources.

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

Major Asian markets posted strong gains Monday after President Trump and his medical team reported his condition improved over the weekend. Australia's All Ordinaries index outperformed with a 2.5 percent increase ahead of Tuesday's Reserve Bank of Australia policy meeting, at which rates are expected to remain on hold. Japan's Nikkei and Topix indices closed up 1.2 percent and 1.7 percent respectively, while Hong Kong's Hang Seng index advanced 1.3 percent. Chinese markets were gain closed for national holidays.

The Markit PMI Composite Index for Japan rose to 46.6 in September, above the flash estimate of 45.5 and also up from 45.2 in August. This indicates that Japan's economy continued to contract in September but at a progressively slower rate than it did in the initial months of the pandemic. Also published Monday, Singapore's PMI advanced from 43.6 in August to 45.1 in September. In addition to the impact of public health restrictions still in place, weak external demand also continues to weigh on activity in the Singapore economy.

Looking ahead*

On Tuesday in Asia/Pacific, the Reserve Bank of Australia will issue its policy statement; Australian trade balance and Indian PMI composite figures are also on the calendar. In Europe, German manufacturers' orders and the UK construction PMI are due. In North America, US goods and services trade, US JOLTS, and Canadian merchandise trade reports are on tap.

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