Daily market review

United States

Equities rallied across the board Thursday as markets extended their bullish response to tentative US election results and expectations for a split US government. The Dow Jones industrial index and the S&P 500 both rose 2.0 percent, and the NASDAQ gained 2.6 percent.

Mega-cap momentum stocks continued to outperform on expectations of a favorable business environment that will bolster big tech stocks and other growth favorites. Health care stocks extended their rally as Republican control of the Senate was expected to stymie substantive health care reform. The weaker dollar and lower interest rates also boosted markets post-election.

Reaction was muted to the day's as-expected news that the Federal Reserve left policy unchanged. Fed Chair Jerome Powell acknowledged the recent deterioration in business conditions, and markets expect more Fed action to boost the economy, especially because aggressive fiscal support appears less likely.

Analysts considered the market oversold heading into the election results, so it was susceptible to a bounce, with lots of cash on the sidelines. Buying was driven by fear of missing out as the rally took hold. Familiar FAANG names led the way higher, plus chipmakers showed extra strength. Memory chipmaker Qualcomm was a big winner, up 13 percent after beating earnings expectations and raising its guidance.

Among sectors, materials and financials joined tech at the top of the leaderboard while energy, health care, and defensive sectors lagged the market. Among leaders, materials advanced, with better than expected earnings from Albemarle, the chemicals manufacturer, which rose 13 percent on an earnings beat. Freeport-McMoran, the miner, rose 4.5 percent as gold and copper prices perked up.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 47 cents to US$40.69 while spot gold jumped US$48.62 to US$1,950.81. The US dollar dropped sharply against major currencies. The US Treasury 30-year bond yield was down 1 basis point at 1.54 percent while the 10-year note yield fell 1 basis point to 0.77 percent.


Positive corporate earnings, new UK stimulus, and US stock gains lifted equities Thursday. The Europe-wide STOXX 600 rose 1.1 percent, the German DAX rose 2.0 percent, the French CAC gained 1.2 percent, and the UK FTSE-100 was up 0.4 percent.

Expectations for a split US government, which is expected to limit tax increases or regulatory changes that might hurt business, underpinned the gains for a second day. A more aggressive-than-expected easing from the Bank of England gave markets a boost, along with an extension in the UK worker furlough scheme. On the negative side, coronavirus trends in Europe continued to worsen, and lockdowns were declared in more locations.

Among sectors, leaders were media, autos, technology, chemicals and construction. Lagging were oil & gas, health care, food & beverage, and banks.

Among companies reporting earnings, Societe Generale rose 3.7 percent as the big French bank delivered a huge earnings beat and saw more normal market conditions. ProsiebenSat, the German media business, rose 10 percent on a positive earnings surprise. Siemens Gamesa, the wind power leader, rose 6.8 percent after topping earnings expectations.

On the downside, Commerzbank fell 6 percent on a wider-than-expected loss, including a big restructuring charge. Sainsbury's, the big UK retailer, fell 5.2 percent after announcing multiple store closures and layoffs.

Asia Pacific

Major Asian markets posted strong gains Thursday, following the lead set by Wall Street Wednesday, with ongoing uncertainty about the outcome of the US presidential election so far appearing to have little adverse impact on investor sentiment. Hong Kong's Hang Seng index posted a particularly strong gain, closing up 3.3 percent, with the tech sector among the stronger performers. Japan's Nikkei and Topix indices advanced 1.7 percent and 1.4 percent respectively, while the Shanghai Composite index and Australia's All Ordinaries index both gained 1.3 percent.

Australia's trade surplus widened from A$2.618 billion in August to A$5.63 billion in September. Exports rose 3.9 percent on the month after falling 4.1 percent previously, with this rebound largely driven by gold exports, often a volatile category. Growth was mixed in other categories, with stronger services exports offset by weaker exports of non-rural and rural goods. Imports fell 5.9 percent on the month in September after advancing 1.3 percent in August, with weakness broad-based across major categories.

The Markit PMI Composite Index for Japan rose to 48.0 in October, above the flash estimate of 46.7 and confirming an increase from 46.6 in September. This indicates that Japan's economy continued to contract in October but to a progressively lesser extent than in the initial months of the Covid-19 pandemic. The business activity index for Japan's services sector, also published Thursday, rose to 47.7 in October, also above the flash estimate of 46.6 and up from 46.9 in September, while the manufacturing PMI survey, released earlier in the week, showed an increase in its headline index from 47.7 to 48.7.

Looking ahead*

On Friday in Asia/Pacific, the Reserve Bank of Australia monetary policy statement will be posted. In Europe, German industrial production, French merchandise trade, UK Halifax house prices, and Italian retail sales reports are on tap. In North America, US employment, US wholesale inventories, US consumer credit, Canadian labour force survey, and Canadian Ivey PMI reports are due.

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