US off on virus worries; Europe up as commodities gain; Asia mixed

United States

Pandemic worries hurt risk appetite Friday as investors eyed local shutdowns and the prospect of layoffs as state and local governments confront a budget crunch. The Dow Jones industrial index slipped 0.8 percent, the S&P 500 eased 0.7 percent, and the NASDAQ 100 was off 0.4 percent.

Anxiety rose after the Centers for Disease Control warned against Thanksgiving travel. Losses were across the board, with utilities, the defensive play, holding up best. Airlines and building materials led industrials lower on the virus effect. A selloff in credit card companies and banks depressed financials. Energy was off, with oil servicers leading the way down. Weakness in mega-caps hurt communications services, with Facebook off 1.2 percent and Google down 1.3 percent.

Consumer staples sagged on declines in tobacco and food stocks. Entertainment held up best in communications services, with Netflix, the stay-at-home play, up 0.8 percent. Health care held up relatively well, with vaccine makers Pfizer, up 1.3 percent, and Moderna up 5.2 percent.

Among companies in focus, Zoom Video, another stay-at-home play, rose 6.1 percent, and Williams Sonoma, the home goods retailer, was up 6.4 percent, after a huge earnings beat.

Dow heavyweight Boeing declined 2.9 percent as it corrected some of its recent gains. Norwegian Cruise Line dropped 4.9 percent on the virus effect. Intuit, the software company, declined 3.8 percent despite strong quarterly results.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 29 cents to US$44.06 while spot gold rose US$5.42 to US$1872.27. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield fell 2 basis points to 1.53 percent while the 10-year note declined 1 basis point to 0.83 percent.

Europe

Rising commodities prices supported equities Friday, with mining and oil & gas shares leading. The Europe-wide STOXX 600 rose 0.5 percent, the German DAX firmed 0.4 percent, the French CAC gained 0.4 percent, and the UK FTSE-100 was up 0.3 percent.

More good news on Covid-19 vaccine trials bolstered oil prices, with Royal Dutch Shell up 1.5 percent and BP up 0.5 percent Miner Glencore rose 2.4 percent and Rio Tinto gained 1.2 percent. Concerns about surging Covid-19 cases and the prospect of longer European lockdowns limited market gains.

Market sentiment was also hurt by reports suggesting EU-UK Brexit talks remain deadlocked, while EU leaders are struggling to break their impasse over a proposed European recovery package.

Lagging sectors were real estate, food & beverage, and media. Among companies in focus, Sage Group, the UK software company, fell 13 percent after warning new investments will cut its operating profits next year. Smurfit Kappa, the packaging company, declined 2.3 percent as it announced a new placement of shares.

Asia Pacific

Major Asian markets posted mixed results Friday but closed the week higher as confidence about the prospects for a Covid-19 vaccine outweighed concerns about the recent spike in cases around the world. The Shanghai Composite index and Hong Kong's Hang Seng index both rose 0.4 percent on the day and advanced 2.0 percent and 1.1 percent respectively on the week, while Australia's All Ordinaries index was flat on the day and advanced 2.0 percent on the week. Japan's Nikkei and Topix indices underperformed on the day, closing down 0.4 percent and up 0.1 percent respectively, closing the week up 0.6 percent and 1.4 percent respectively, with currency gains weighing on the shares of major exporters.

Flash PMI survey data for Japan published Friday indicate that the ongoing impact of the Covid-19 pandemic on the domestic economy has remained substantial during November, with aggregate activity contracting at a pace greater than that recorded in October. The flash estimate for the headline manufacturing index for November is 48.3, down from the final estimate of 48.7 for October, while the flash estimate for the service sector business activity index is 46.7, also down from the final estimate of 47.7 previously. Together these give a flash estimate for the composite output index for November of 47.0, down from the final estimate of 48.0 for October.

Japanese inflation data showed price pressures weakened in October, with price changes moderating across most major categories of spending. The headline consumer price index fell 0.4 percent on the year in October after no change in September, largely reflecting weaker growth in food prices and transportation and communication prices. Core CPI, which excludes fresh food prices, fell 0.7 percent in October after dropping 0.3 percent in September, while the Bank of Japan's preferred measure of underlying inflation, CPI excluding fresh food and energy prices, declined 0.2 percent on the year after no change previously.

Hong Kong's headline consumer price index fell 0.2 percent on the year in October after dropping 2.2 percent in September. Stronger growth in the headline index in October largely reflects the impact of measures introduced in September that were aimed at providing support to households to offset the impact of the Covid-19 pandemic, particularly public housing rental waivers. Excluding the impact of various government measures, Hong Kong's underlying inflation rate moderated from 0.5 percent in September to 0.4 percent in October.

The People's Bank of China left the one-year loan prime rate unchanged at 3.85 percent at its monthly review Friday, with the equivalent five-year rate also unchanged at 4.65 percent. These rates have been on hold since they were reduced by 20 basis points and 10 basis points respectively in April. This suggests that officials remain comfortable for now with the degree to which monetary policy is supporting domestic activity.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

Looking forward

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