Daily market review

United States

Cyclical/value stocks returned to favor Friday to lead equity indexes higher, with energy stocks leading, as vaccine hopes outweighed near-term virus fears. The Dow Jones industrial index and the S&P 500 both rose 1.4 percent, and the NASDAQ 100 gained 1.0 percent.

The rotation from momentum/growth stocks into cyclicals/value resumed Friday after news at the start of the week that Pfizer/BioNTech's vaccine was showing a high 90 percent efficacy rate.

Earnings also supported markets Friday, with Dow component Walt Disney up 2.2 percent after beating earnings and subscriber expectations for its new streaming service. Cisco, another Dow stock, gained 7.1 percent on a positive earnings surprise and much better than expected guidance. Applied Materials rose 4.3 percent on an earnings beat and improved guidance.

Growth shares lagged, with weakness in mega-cap names depressing communications services and technology. Strength in cyclicals reflected a rally in energy despite lower oil prices. Trucking and airlines boosted industrials. Other outperformers included financials, materials, and health care.

In US economic data, producer prices rose 0.3 percent in October for a subdued year-over-year increase of 0.5 percent, both 1 tenth over Econoday's consensus forecasts. Separately, falling expectations pulled the consumer sentiment index sharply lower in the preliminary reading for November, to 77.0 and 3 points below Econoday's consensus.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 66 cents to US$42.74 while spot gold rose US$11.59 to US$1,886.96. The US dollar declined against most major currencies, but not the Canadian dollar. The US Treasury 30-year bond yield was down 1 basis point at 1.64 percent while the 10-year note rose 1 basis point to 0.89 percent.


Equities ended narrowly mixed Friday as markets weighed vaccine prospects against near-term worries about surging Covid-19 cases and widening lockdowns. The Europe-wide STOXX 600 firmed 0.1 percent, the German DAX edged up 0.2 percent, the French CAC gained 0.3 percent, and the UK FTSE-100 dipped 0.4 percent.

In addition to vaccine hopes, markets were bolstered by comments from European Central Bank officials suggesting more monetary support is coming. ECB Executive Board member Isabel Schnabel said the board would reassess how it meets its policy objectives and stressed the flexibility of its asset purchase program. On the negative side for risk assets, German Chancellor Angela Merkel raised the prospect of extending coronavirus restrictions for longer, as cases remain too high.

UK markets lagged as sterling perked up after the resignation of UK Prime Minister Boris Johnson's advisor Dominic Cummings, as some saw the departure signaling a less militant Brexit stance. Weakness in UK energy stocks also weighed on the FTSE-100, with index heavy-weight Royal Dutch Shell off 0.8 percent.

Among sectors, insurance, banks, autos, construction technology, oil & gas, and utilities outperformed while lagging were media, personal & household goods, telecom, food, health care, chemicals, and real estate. Among companies reporting, Engie, the French electric utility, rose 3.2 percent on a positive earnings surprise and announcement that it may sell some of its stake in GTT, the German engineering company. Ageas, the Belgian insurer, rose 2.7 percent on upbeat quarterly results.

Asia Pacific

Most major Asian markets closed lower on the day Friday on renewed concerns about rising Covid-19 cases in the United States, but in most cases held onto solid gains over the week. Japan's Nikkei and Topix indices fell 0.5 percent and 1.3 percent respectively on the day and advanced 4.4 percent and 2.7 percent respectively on the week, while Australia's All Ordinaries index fell 0.2 percent on the day and rose 3.4 percent on the week. Hong Kong's Hang Seng index closed flat on the day and up 1.7 percent on the week, with strong gains for tech firm Tencent after it reported strong profits on Thursday. The Shanghai Composite index closed down 0.9 percent on the day and underperformed with a small 0.1 percent decline on the week.

Revised Hong Kong GDP data showed headline growth rates for the three months to September were little changed from initial estimates published late last month, confirming a strong rebound in activity from the initial impact of the Covid-19 pandemic. GDP grew 2.8 percent on the quarter, down from the advance estimate of 3.0 percent, but up strongly from a drop of 0.1 percent in the three months to June. In year-on-year terms, GDP fell 3.5 percent on the year, slightly weaker than the initial estimate for a fall of 3.4 percent, but again improving significantly from a decline of 9.0 percent previously. Officials also released updated and more precise growth forecasts, with the economy now expected to contract by 6.1 percent in 2020, compared with the previous forecast for it to contract by between 6.0 percent and 8.0 percent.

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