Daily market review

United States

Stocks declined across the board Thursday as focus returned to severe coronavirus numbers and weak economic data. Cyclical stocks lagged growth for a second consecutive day and the FAANGs outperformed on the return of the pandemic trade. The Dow Jones industrial index fell 1.1 percent, the S&P 500 was off 1.0 percent, and the NASDAQ 100 was off 0.7 percent.

Comments from Fed Chair Jay Powell underlining the virus impact on the economy and uncertain outlook despite vaccine prospects added to the market gloom.

Financials, energy, materials, consumer discretionary, industrials, and travel lagged the most. Holding up best were consumer staples, communications services, technology, and health care. Banks came under pressure as the yield curve flattened after soft US CPI figures and after strong gains earlier in the week.

Among financials, money center banks suffered, with BankAmerica off 2.5 percent to give up much of the week's gains. Among industrials, airlines dropped after Southwest (down 3.0 percent) warned that the improving trend through October was faltering in November. On the positive side, UnitedHealth rose 0.8 percent as it continues to benefit from supportive election results.

In US economic data, consumer prices were flat and softer than expected, unchanged in October both overall and for the ex-food ex-energy core. The data pulled down Econoday's consensus divergence index to minus 40, a sharply negative reading that indicates recent economic data, on net, have not been meeting expectations.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 47 cents to US$43.40 while spot gold rose US$10.84 to US$1,875.37. The US dollar declined against most major currencies. The US Treasury 30-year bond yield dropped 10 basis points to yield 1.64 percent as did the 10-year note to 0.88 percent.


Worries about the pandemic and a faltering recovery returned to weaken equities Thursday. The Europe-wide STOXX 600 declined 0.9 percent, the German DAX fell 1.2 percent, the French CAC fell 1.5 percent, and the UK FTSE-100 slipped 0.7 percent.

Markets focused on rising coronavirus cases across Europe and the US, and the likelihood of more lockdowns. German Chancellor Angela Merkel is reportedly considering extending Germany's lockdown, in contrast with prior expectations for an easing by the year-end holidays.

Weaker-than-expected UK growth figures added to the sense of fragility. Real GDP expanded by 1.1 percent in September, its fifth consecutive increase but the smallest rise of the sequence and well below expectations. Quarterly growth rebounded from a record minus 19.8 percent in April-June to an unprecedented 15.5 percent rise but remained down 8.2 percent from pre-pandemic levels.

Cyclical shares which rallied on recovery hopes this week, fell back to lead decliners. Among sectors, telecom technology, health care, and media outperformed, while laggards included banks, basic resources, retail, insurance, personal & household goods, oil & gas, real estate, chemicals, and autos.

Among companies reporting earnings misses, Siemens AG fell 3.3 percent, Merck declined 3.2 percent, Pirelli lost 6.3 percent, and Tag Immobilien lost 2.8 percent. On the positive side, Tod's the Italian shoemaker, rose 9.6 percent, Poste Italiane rose 2.2 percent, and Burberry's rose 1.9 percent on positive earnings surprises.

Asia Pacific

Most major Asian markets closed lower Thursday, though moves were mixed across sectors, with shares of many tech companies rebounding after gains on the NASDAQ Wednesday. The Shanghai Composite index and Hong Kong's Hang Seng index closed down 0.1 percent and 0.2 percent respectively, while Australia's All Ordinaries index fell 0.5 percent. Japan's Nikkei and Topix indices rose 0.7 percent and fell 0.2 percent respectively, with the Nikkei's increase reflecting solid gains for tech companies including Softbank Group and Nintendo.

Japan's private sector machinery orders (excluding volatile items) fell 4.4 percent on the month in September after increasing 0.2 percent in August, much weaker than the consensus forecast for an increase of 0.2 percent, and fell 11.5 percent on the year after a decline of 15.2 percent in August. Officials expect these orders to drop 1.9 percent on the quarter in the three months to December after they fell 0.1 percent in the three months to September. Japan's producer price index fell 2.1 percent on the year in October after dropping 0.8 percent in September, with this bigger decline largely reflecting weaker growth in transportation and energy prices.

India's index of industrial production rose 0.2 percent on the year in September after dropping 7.4 percent in August. India's consumer price index rose 7.61 percent on the year in October, picking up from 7.34 percent in September and moving further above the top of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. The RBI left policy rates on hold at its most recent policy meeting last month, with officials arguing that recent increases in inflation mainly reflect supply shocks associated with the impact of the pandemic and that price pressures will likely begin to moderate in coming months.

Looking ahead*

On Friday in Asia/Pacific, the Indian wholesale prices and Hong Kong GDP reports are scheduled. In Europe, Swiss producer and import prices, French CPI, Eurozone GDP flash, and Eurozone merchandise trade reports are due. In North America, PPI-FD and consumer sentiment reports are on tap.

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