Daily market review

United States

Dip-buying after last week's selloff gave equities a boost Monday, with support from surprisingly strong industrial purchasing managers' data. The Dow Jones industrial index rose 1.6 percent, the S&P 500 gained 1.2 percent, and the NASDAQ firmed 0.4 percent.

Cyclicals were the best performers, led by industrials, energy, financials, and materials, but gains were across the board. Energy shares rose after crude oil prices perked up, with Chevron up 3.8 percent.

Weakness in Amazon, off 1.0 percent, held back consumer discretionary stocks, and Apple, down 0.1 percent, and Microsoft, down 0.1 percent, limited gains in information technology. Communications services lagged too, with Facebook down 0.3 percent.

Cyclicals saw a relief rally as the US elections period is ending and markets price in what some analysts say are expectations for a definitive Democratic sweep of Congress and the White House. Investors see that outcome leading to aggressive fiscal stimulus in the first quarter.

Among companies in the news, Clorox rose 1.6 percent after an earnings beat and better guidance. The company's business has seen surging demand for its cleaning products during the pandemic. Camping World, the recreational vehicle maker, rose 3.0 percent on a big earnings beat and a guidance upgrade also powered by pandemic demand. Dunkin' Brands gained 6.5 percent after it agreed to be acquired by Inspire Brands, which already owns several fast food businesses.

On the downside, Norwegian Cruise Lines declined 2.8 percent after extending its suspension of cruises through December. ON Semiconductor slipped 2.9 percent after disappointing guidance. Ollie's Bargain Outlet fell 5.7 percent after a downgrade at Wells Fargo.

In US economic data, ISM's manufacturing index was exceptionally strong at 59.3 in October, well above expectations, and up from 55.4 in September. New orders led the report, surging nearly 8 points to 67.9 for their fourth straight plus-60 showing.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.85 to US$39.31 while spot gold rose US$17.24 to US$1,895.40. The US dollar was little changed against major currencies. The US Treasury 30-year bond yield fell 3 basis points to 1.63 percent while the 10-year note yield fell 2 basis points to 0.85 percent.


Upbeat purchasing managers data gave equities a lift Monday. The Europe-wide STOXX 600 gained 1.6 percent, the German DAX advanced 2.0 percent, while the French CAC jumped 2.1 percent, and the UK FTSE-100 rose 1.4 percent.

Risk assets were also bolstered by reports suggesting progress in EU-UK Brexit talks, and rising expectations for European Central Bank easing to bolster the Eurozone economy. On the negative side, news of new UK and Italian lockdown measures, on top of similar measures in Germany, France, and elsewhere, remained in focus, with services business suffering the most.

Among sectors, leading the gains were oil & gas, banks, construction, chemicals, autos, and industrials. Laggards were travel & leisure, technology, food & beverage, real estate, and retail.

On the earnings front, Ocado, the UK online grocer, rose 8.0 percent after raising its guidance as consumers continue to favor online and delivery-based retailers. Vontobel, the Swiss private bank, rose 5.1 percent after saying it plans to acquire investment management firms. On the downside, Marston's, the UK pub chain, fell 7.6 percent on the UK lockdown.

In economic data, Eurozone manufacturing was slightly stronger than originally thought in October. The 54.4 flash PMI was revised up to a final 54.8, its highest reading in 27 months and more than a point above September's final 53.7. In Germany, the flash manufacturing PMI was revised up from an already solid 58.0 to 58.2, a 31-month high and comfortably above September's final 56.4. The Eurozone and German PMI figures came alongside similarly strong PMI data from China and the US.

Asia Pacific

Most major Asian markets closed higher Monday, with PMI data showing further improvement in manufacturing conditions across the region in October, though rising global Covid-19 cases and the upcoming US elections also remained in focus. Hong Kong's Hang Seng index closed up 1.5 percent, while Japan's Nikkei and Topix indices also performed well with gains of 1.4 percent and 1.8 percent respectively. Australia's All Ordinaries index, however, posted only a modest 0.2 percent gain, while the Shanghai Composite index was flat on the day.

The Markit manufacturing PMI for China advanced from 53.0 in September to 53.6 in October for its highest level since January 2011, indicating that the sector's recovery from the initial impact of the Covid-19 pandemic has gained momentum. The official CFLP manufacturing PMI survey, published over the weekend, showed a small fall in its headline index from 51.5 in September to 51.4 in October but also continued to show solid expansion in the sector. Official monthly activity indicators for October are scheduled for publication mid-November.

The Markit PMI surveys for the Japanese and Indian manufacturing sectors also showed improved conditions. The headline index for Japan rose from 47.7 in September to 48.7 in October, above the flash estimate of 48.0 and continuing the recent trend of indicating that contraction in the sector is moderating. The equivalent index for India rose from 56.8 in September to 58.9 in October, its highest level in more than ten years, indicating that the recovery in the sector has accelerated after authorities lifted restrictions put in place to curb the pandemic.

Looking ahead*

On Tuesday in Asia/Pacific, the Reserve Bank of Australia policy announcement is scheduled. In Europe, the Swiss CPI report is due. In North America, US motor vehicle sales and US factory orders figures are on tap.

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