Daily market review

United States

Surging Covid-19 cases in the US and Europe, and expectations for wider mobility restrictions hit equities Wednesday, with heavy selling across the board. The Dow Jones industrial index lost 3.4 percent, the S&P 500 was down 3.5 percent, and the NASDAQ was down 3.7 percent. Major indexes sank into close with dip-buying mostly absent.

Markets are increasingly conceding there will be no near-term fiscal package to combat the pandemic's impact. Sentiment has been dented by worries that expected Covid-19 vaccines will take longer to roll out than markets anticipated. Not helping was Microsoft, off 5.0 percent after downgrading its revenue guidance to lead mega-caps lower.

Among sectors, energy suffered the most as oil prices dropped on worries about the recovery. Communications services and technology were also hit hard. Suffering the least were materials, health care, financials, and consumer discretionary. Consumer staples held up better in the pandemic stay-at-home trade, and industrials were helped by a surprise return to profitability at General Electric, up 4.5 percent. Holding up best were defensive sectors – real estate and utilities.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.05 to US$39.09 while spot gold fell US$30.02 to US$1,877.63. The US dollar rose sharply against most major currencies. The US Treasury 30-year bond yield was steady at 1.56 percent while the 10-year note yield was unchanged at 0.78 percent.


German plans to shut down much of its economy and expectations for similar steps elsewhere in Europe amid rising Covid-19 infections spurred heavy risk-off selling Wednesday. The Europe-wide STOXX 600 dropped 3.0 percent, the German DAX plunged 4.2 percent, the French CAC lost 3.4 percent, and the UK FTSE-100 was down 2.6 percent.

Adding to risk-off sentiment were rising concerns that Covid-19 vaccines could be delayed. Meanwhile, markets appeared to give up hopes for a near-term US fiscal deal, while US election uncertainty rose because of tightening in presidential election polls. On the positive side, reports said the UK and EU were making progress toward a Brexit deal.

Losses were heavy across the board and deepest in autos, chemicals, and banks. Among the day's biggest decliners, Alten, the French technology and engineering company, fell 9.4 percent on plunging revenues and bleak guidance. BASF, the German chemicals giant, fell 6.2 percent after poor third-quarter results. Heineken, the Dutch brewer, fell 4 percent as the pandemic crushed sales at bars. Peugeot Citroen fell 4.5 percent despite a big revenue beat and maintaining its profits guidance.

Carrefour, the French grocery chain, outperformed as it eased 0.1 percent after reporting surging sales and profits. Deutsche Bank was off 0.3 percent after reporting an unexpected return to profitability and boosting its annual guidance, with its beleaguered investment banking division leading gains.

Asia Pacific

Moves in major Asian markets were mixed but generally small Wednesday, with a light regional data calendar keeping the focus on global Covid-19 developments and the upcoming US elections. Japan's Nikkei and Topix indices both fell 0.3 percent on the day, as did Hong Kong's Hang Seng index. The Shanghai Composite index was among the stronger performers in the region, closing up 0.5 percent, while Australia's All Ordinaries index advanced 0.2 percent.

Headline consumer prices rose sharply in Australia in the three months to September, largely reflecting the withdrawal of subsidies for child care and pre-school education that had been provided by state governments as part of an initial response to the Covid-19 pandemic. Headline CPI rose 1.6 percent on the quarter after dropping 1.9 percent previously and rose 0.7 percent on the year after falling 0.3 percent previously. This remains well below the Reserve Bank of Australia's target range of 2.0 percent to 3.0 percent for headline inflation.

Looking ahead*

On Thursday in Asia/Pacific, the Bank of Japan policy announcement and Japanese retail sales report are scheduled. In Europe, the ECB policy announcement, German unemployment, German CPI, Italian business and consumer confidence, UK M4 money supply, and Eurozone EC Economic Sentiment reports are due. In North America, on tap are US GDP, US jobless claims, and US pending home sales.

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