Daily market review

United States

Equities continued their rebound for a second day Tuesday, with expectations for government stimulus bolstering risk appetite alongside positive corporate results. The Dow Jones industrial index rose 2.1 percent, the S&P 500 rose 1.8 percent, and the NASDAQ gained 1.9 percent.

On the final day of US election voting, expectations for a Democratic sweep fueled hopes for huge government stimulus in the first quarter. Financials, industrials, and consumer discretionary led value stocks higher, and growth stocks perked up late in the session to add to Monday's recovery from a steep selloff last week. With earnings season mostly done, results have shown a high beat rate, with companies pegged to the stay-at-home trend faring best.

Among industrials, transports, machinery, and aerospace led the winners, while banks advanced on stimulus hopes and a steeper yield curve. Amazon, up 1.5 percent, and other retailers boosted consumer discretionary stocks. Lagging though still higher were communications services, health care, and materials. Energy was the only decliner as oil supermajors gave up some of their recent gains, and exploration and production companies slipped.

Among heavy industrial companies beating expectations for earnings and revenues, Ingersoll-Rand rose 2.7 percent, Emerson Electric gained 3.6 percent, and Eaton Corp. rose 3.6 percent. Among financials, money center banks rose with interest rates, with Citigroup up 3.1 percent, BankAmerica up 2.6 percent, and JP Morgan up 3.2 percent.

On the negative side, Paypal declined 4.2 percent despite reporting huge growth in third quarter business as the fintech leader offered cautious guidance. Chinese e-commerce leader Alibaba fell 8.1 percent after authorities suspended the IPO of Ant Financial, one of the world's biggest fintech firms. Alibaba owns a big stake in Ant.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 64 cents to US$39.95 while spot gold rose US$11.83 to US$1,907.13. The US dollar fell sharply against major currencies. The US Treasury 30-year bond yield rose 4 basis points to 1.66 percent while the 10-year note yield rose 3 basis points to 0.89 percent.


Expectations for a blue wave in US elections, and fiscal stimulus to follow, appeared to propel equities higher across the board Tuesday. The Europe-wide STOXX 600 rose 2.3 percent, the German DAX rose 2.6 percent, the French CAC gained 2.4 percent, and the UK FTSE-100 rose 2.3 percent.

Among sectors, banks and autos led gains on hopes for massive federal spending to revive the US and by extension the global economy. European investors also saw a Biden presidency likely to bring better trade relations. Autos were the main beneficiary from the trade theory, as European automakers have been hit hard by President Trump's trade posture.

In other news, investors noted reports of progress in EU-UK Brexit negotiations, but no breakthrough on major sticking points. On the Covid front, UK authorities are set to expand testing significantly in a bid to break the pandemic's momentum. UK markets got an additional boost from expectations for the Bank of England to step up its asset purchases at its policy meeting on Thursday, and for more government measures to offset the November lockdown. On the negative side, forecasters are increasingly predicting a double-dip recession in the UK.

Among companies reporting results, Ferrari rose 7.1 percent on an upgrade to its 2020 earnings guidance. Among banks, BNP Paribas gained 6.1 percent after earnings and revenues beats reflecting surging trading revenues and lower bad-loan provisioning. Adeccco, the Swiss human resources provider, rose 6 percent on beats in operating earnings and revenues. Hugo Boss, the German clothing company, rose 2.6 percent on higher than expected margins. Bayer, the German chemicals conglomerate, recovered from initial losses on an earnings and revenues miss to end up 0.6 percent.

On the downside, Lundbeck, the Danish pharma, declined 3.6 percent on more cautious guidance.

Asia Pacific

Major Asian markets closer higher Tuesday after solid gains on Wall Street Monday and a cut in Australian policy rates. Hong Kong's Hang Seng index posted a strong increase of 2.0 percent, while the Shanghai Composite index rose 1.4 percent. Australia's All Ordinaries index was among the stronger performers, closing up 1.9 percent.

The Reserve Bank of Australia Tuesday cut its main policy rate by 15 basis points to a new record low of 0.10 percent, in line with the consensus forecast. Officials announced additional measures to provide support to economic recovery, including a reduction in the target for the yield on the 3-year government bond and additional purchases of government bonds over the next six months. In line with previous advice, officials reaffirmed that policy rates will not be raised until progress is made towards full employment and they are confident that inflation will be sustainably within their 2.0 to 3.0 percent target range. Based on their updated economic forecasts, officials do not expect these conditions to be met for at least three years and reiterated that they are prepared to ease policy further in coming months if necessary.

Looking ahead*

On Wednesday in Asia/Pacific, Bank of Japan monetary policy board minutes, Hong Kong purchasing managers, Australian retail sales, Singapore purchasing managers, Chinese Caixin purchasing managers composite, and Indian purchasing managers composite reports are scheduled. In Europe, PMI composite final reports for France, Germany, Eurozone, and UK, plus Eurozone PPI figures are due. In North America, the following are on tap: Canadian merchandise trade, US ADP employment, US international trade in goods & services, US PMI composite final, and the US ISM services index.

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