Daily market review

United States

Equities retreated into the close Monday as markets stayed on alert for last-minute news on a US fiscal package before hopes faded. The Dow Jones industrial index fell 1.4 percent, the S&P 500 declined 1.6 percent, and the NASDAQ was down 1.7 percent.

News that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were talking Monday afternoon raised hopes, yet stocks took another leg down into the close on a Washington Post report suggesting no progress was likely.

Risk assets derived support earlier from upbeat Chinese economic data. On the other hand, rising Covid-19 cases in Europe and in the US undercut the recovery trade.

Big banks, credit card companies, communications services, health care, energy, and consumer discretionary were among the worst performers. Mega-cap losses weighed on the market, with Apple down 2.6 percent, Amazon off 2.0 percent, Microsoft off 2.5 percent, Facebook off 1.7 percent, and Google down 2.4 percent. Among other heavyweights, American Express fell 2.0 percent, Johnson & Johnson declined 2.6, and UnitedHealth was down 1.7 percent.

On the positive side, industrials outperformed led by airlines on better air traffic numbers, with American Airlines up 0.8 percent. Chemicals and industrial metals gave materials a lift, with US Steel up 0.5 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 40 cents to US$42.40 while spot gold rose US$2.08 to US$1,901.82. The US dollar declined against major currencies. The US Treasury 30-year bond yield rose 1 basis point to 1.54 percent while the 10-year note yield was up 2 basis points at 0.76 percent.


Rising Covid-19 cases across Europe and tightening restrictions depressed equities Monday. The Europe-wide STOXX 600 eased 0.3 percent, the German DAX declined 0.4 percent, the French CAC eased 0.1 percent, and the UK FTSE-100 slipped 0.6 percent.

Signs of movement in EU-UK Brexit talks tended to support risk appetite across European markets though sterling's uptick undercut the export-oriented FTSE-100. EU officials said they would step up efforts to reach a deal. Equities losses were limited by optimism over prospects for the Oxford-AstraZeneca Covid-19 vaccine to become available by year end.

Among sectors, banks and financial services outperformed led by Julius Baer Group, up 6.2 percent after an earnings beat. Pulled higher by Julius Baer, Credit Suisse rose 5.0 percent and UBS gained 3.0 percent.

Other outperformers included insurance, real estate, travel & leisure, and telecom. Leading to the downside were chemicals, personal & household goods, media, utilities, industrials, and health care. Among companies, troubled UK retailer boohoo dropped after its auditor resigned. Saab, the Swedish aerospace & defense company, fell 14 percent on an earnings miss.

Asia Pacific

Most major Asian markets closed higher Monday after the release of Chinese data showing further economic recovery and news over the weekend suggesting that President Trump may reach a deal with Congress on additional fiscal stimulus. Japan's Nikkei and Topix indices rose 1.1 percent and 1.3 percent respectively, while Australia's All Ordinaries index and Hong Kong's Hang Seng index advanced 0.8 percent and 0.6 percent respectively. Despite the broadly positive Chinese data, however, the Shanghai Composite index underperformed, closing down 0.7 percent on the day.

China's GDP expanded 4.9 percent on the year in the third quarter, well above expectations for 3.3 percent and strengthening from second-quarter growth of 3.2 percent. Officials forecast that the Chinese economy will record annual growth of around 2.0 percent this year despite sharp contraction during the initial stages of the pandemic. Monthly Chinese data also published Monday showed favorable results for industrial production, retail sales, and fixed asset investment.

In contrast, Japanese trade data showed ongoing weakness in both exports and imports in September. Imports fell particularly sharply, resulting in an increase in the trade surplus from ¥248.6 billion in August to ¥675.0 billion in September, though this was well below the consensus forecast for a surplus of ¥976.0 billion. Exports fell 4.9 percent after dropping 14.8 percent in August, a bigger decline than expected, while imports fell 17.2 percent after dropping 20.8 percent.

Looking ahead*

On Tuesday in Asia/Pacific, Reserve Bank of Australia minutes and Chinese house price figures are scheduled. In Europe, Swiss merchandise trade and German PPI reports are due. In North America, the US housing starts and permits report is on tap.

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