US, Europe advance on recovery trade; Asia gains

United States

Risk-on momentum continued Tuesday on news that the US General Services Administration would release funds to help President-elect Joe Biden's administration make the transition into office. The Dow Jones industrial index rose 1.5 percent, the S&P 500 gained 1.6 percent, and the NASDAQ 100 was up 1.3 percent.

Cyclical stocks led the winners on recovery hopes as US political uncertainty eased. Markets greeted news that former Fed Chair Janet Yellen would be named Treasury secretary, as it appeared to signal moderate economic policy, and reassured investors the administration and the Federal Reserve would collaborate to boost the economy, and that 2021 would see a strong rebound. Markets continued to react favorably to Monday's news of a third effective vaccine against Covid-19, with the latest from AstraZeneca/Oxford University.

Among sectors, financials, energy, industrials, and materials led the winners, while lagging were consumer staples.

Small cap stocks out-performed large caps on the recovery/reopening trade, but attention focused on the Dow industrials topping 30,000 for the first time, with big industrial companies advancing. Hopes for a recovery in travel helped American Airlines rise 9.3 percent, while United Airlines was up 9.9 percent. Boeing gained 3.3 percent to add to its recent advance. General Electric rose 3.7 percent after an upgrade at Oppenheimer.

Some notable momentum stocks also made big moves Tuesday, with Tesla up 6.4 percent, Apple up 1.2 percent, and Facebook rising 3.1 percent. Analysts said gains reflected fear of missing out on the rally.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.99 to US$47.92 while spot gold fell US$28.78 to US$1807.61. The US dollar fell against major currencies. The US Treasury 30-year bond yield rose 5 basis points to 1.61 percent while the 10-year note rose 3 basis points to 0.88 percent.

Europe

Companies pegged to the reopening trade led equities higher Tuesday. The Europe-wide STOXX 600 rose 0.9 percent, the German DAX gained 1.3 percent, the French CAC gained 1.2 percent, and the UK FTSE-100 was up 1.6 percent.

Risk appetite improved on news that the US presidential transition was proceeding, alongside optimism over the rollout of Covid-19 vaccines. Among sectors, best performers included oil & gas, banks, basic resources, autos, travel & leisure, insurance, and telecom. Lagging were personal & household goods, health care, utilities, industrials, retail, technology, and media.

Among notable movers, oil supermajors Royal Dutch Shell rose 5.7 percent and BP gained 8.4 percent. In the hospitality category, Accor, the French hotel group, was up 4.6 percent, and Whitbread, the UK hotel and restaurant chain, gained 6.7 percent.

Among companies in the news, Enel, the Italian power company, rose 4.2 percent after revealing its latest green energy initiatives. Entra, the Norwegian real estate company, soared 21 percent on takeover speculation. On the downside, HelloFresh, the German meal kit company, fell 5.7 percent as the market digested its acquisition of Factor75, a smaller US rival.

Asia Pacific

Most major Asian markets closed higher Tuesday, with regional investor sentiment supported by further positive news on Covid-19 vaccines. Japan's Nikkei and Topix indices both recorded strong gains as trading resumed after Monday's holiday, closing up 2.5 percent and 2.0 percent respectively. Australia's All Ordinaries index rose 1.2 percent, while Hong Kong's Hang Seng index gained 0.4 percent. The Shanghai Composite index underperformed, closing down 0.4 percent.

Hong Kong's merchandise trade deficit widened from HK$12.7 billion in September to HK$36.8 billion in October, the biggest deficit since February. Exports fell 1.1 percent on the year after advancing 9.1 percent previously, while imports rose 0.6 percent after increasing 3.4 percent previously. Exports to both mainland China and the United States fell on the year after increases in September, offset by stronger growth in exports to the European Union. Officials continue to expect the recovery of the Chinese economy to support Hong Kong's exports in the near term, but cite the recent increase in Covid-19 cases in other major trading partners as a downside risk.

Looking ahead*

On Wednesday in North America, the following US figures are due: durable goods orders, GDP, international trade in goods, jobless claims, corporate profits, retail and wholesale inventories, new home sales, consumer sentiment, personal income and outlays, and FOMC minutes.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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