Daily market review

United States

Equities slipped Wednesday with losses accelerating into the close as investors fretted over surging coronavirus cases, hospitalizations, and deaths across the US and Europe, and widening restrictions. The Dow Jones industrial index and the S&P 500 both fell 1.2 percent, and the NASDAQ 100 was down 0.8 percent.

The declines came despite more good news from Pfizer and BioNTech on their vaccine clinical trials and word they would ask the Food and Drug Administration to grant quick use of the vaccine. Pfizer rose 0.8 percent on the news. Investors reacted badly to news that New York City public schools would shut Thursday, and a warning from New York Governor Andrew Cuomo that New York City might resume its lockdown while cases soared in Western New York.

Among sectors, small caps continued to outperform on the vaccine trade. Consumer discretionary shares outperformed on positive earnings at TJX, the clothing retailer, which rose 1.9 percent. Laggards included communications services, with Google down 1.2 percent and Facebook off 1.1 percent.

Among companies in focus, Boeing ended down 3.2 percent after giving up initial gains spurred by news the Federal Aviation Administration cleared the 737 Max to fly again. Target rose 2.2 percent on an earnings beat powered by strong sales growth; Tesla advanced 10 percent on an analyst upgrade after news it would join the S&P 500. On the downside, Lowes sagged 8 percent on an earnings miss and disappointing guidance.

In US economic data, housing starts jumped 4.9 percent in October to a much higher-than-expected annual rate of 1.530 million. Permits, which had been rising especially sharply, came in on the low side of expectations, at a 1.545 million rate which is unchanged from a slightly downward revised September.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 46 cents to US$44.29 while spot gold fell US$11.70 to US$1,870.00. The US dollar was mixed against most major currencies. The US Treasury 30-year bond yield was flat at 1.61 percent while the 10-year note rose 1 basis point to 0.88 percent.


Positive vaccine news from Pfizer and BioNTech helped equities edge up Wednesday but surging Covid-19 cases in Europe and the US limited the advance. The Europe-wide STOXX 600 rose 0.4 percent, the German DAX gained 0.5 percent, the French CAC also rose 0.5 percent, and the UK FTSE-100 was up 0.3 percent.

Pfizer and BioNTech said that final analysis of their vaccine trial showed 95 percent effectiveness and they will ask for emergency authorization soon from the US Food and Drug Administration. Meanwhile, reports suggested major European countries were likely to extend their month-long lockdowns.

Mergers and acquisitions gave markets a boost, with UK insurer RSA Insurance up 4.2 percent after agreeing to be acquired by Intact Financial, a Canadian insurer, and Tryg, a Danish insurer. Deutsche Boerse, the German stock exchange, would buy a controlling stake in Institutional Shareholder Services.

Among sectors, best performers were banks, autos, basic resources, technology, oil & gas, real estate, and travel & leisure. Laggards included health care, food & beverage, industrials, construction, and utilities. Among companies in the news, Maersk, the Danish shipper, slipped 1.0 percent on disappointing earnings. Schaeffler, the German manufacturer, fell 7.2 percent on disappointing guidance. Among winners, SAF Holland, the auto parts supplier, rose 17.3 percent on better quarterly results. Micro Focus, the UK software company, rose 31 percent on its latest trading update.

Asia Pacific

Major Asian markets posted mixed results, with Covid-19 developments and weakness in the US dollar among factors driving regional investor sentiment. Japan's Nikkei and Topix indices closed down 1.1 percent and 0.8 percent respectively, with reports suggesting authorities may tighten public health restrictions in response to a recent surge in Covid-19 cases.

Shares of major Japanese exporters were among the weaker performers as the yen continued the strengthening trend seen in recent days. Hong Kong's Hang Seng index and Australia's All Ordinaries index closed up 0.5 percent and 0.4 percent respectively, while the Shanghai Composite index rose 0.2 percent.

Japanese trade data show ongoing but moderating weakness in both exports and imports in October, with the trade surplus widening from a revised ¥687.8 billion in September to ¥872.9 billion in October, well above the consensus forecast for a surplus of ¥250 billion. Exports fell 0.2 percent on the year in October but follow a 4.9 percent drop in September, a much smaller decline than the consensus forecast with solid demand from China, the US, and regional trading partners offset by another year-on-year decline in exports to the European Union. Imports fell 13.3 percent on the year after dropping 17.4 percent previously.

Australia's wage price index rose 0.1 percent on the quarter in the three months to September, down from growth of 0.2 percent in the three months to June, while year-on-year growth dropped from 1.8 percent to 1.4 percent, its weakest growth since the index was introduced in 1998. Officials expect wage pressures to remain subdued for the foreseeable future as the economy recovers from the impact of the Covid-19 pandemic. New Zealand producer output prices fell 0.3 percent on the quarter in the three months to September, as it did in the three months to June, with year-on-year growth slowing sharply from 1.5 percent to 0.1 percent.

Looking ahead*

On Thursday in Asia/Pacific, the Australian labour force survey is scheduled. In Europe, Swiss merchandise trade and UK CBI industrial trends are due. In North America, US jobless claims, Philadelphia Fed manufacturing, US existing home sales, US leading indicators, and Kansas City Fed manufacturing economic data are due.

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