Daily market review

United States

Month-end profit-taking in cyclicals undercut equities Monday after recent strong gains. The Dow Jones industrial index slipped 0.9 percent, the S&P 500 was off 0.5 percent, and the NASDAQ 100 eased 0.1 percent.

Holding up best were technology and health care, while energy, financials, and consumer discretionary stocks lagged the most. Chevron fell 4.5 percent to lead energy stocks lower. Among other cyclicals, Travelers declined 3.5 percent, and Dow Chemical was off 4.3 percent.

In health care, vaccine maker Moderna rallied 20 percent after it filed for emergency authorization with the Food and Drug Administration for its Covid-19 vaccine. Apple was another big support for the market, up 2.1 percent. In the financial data world, IHS Markit rose 7.4 percent after news it will be acquired by S&P Global, which gained 3.1 percent.

Among other companies in focus, Advanced Micro Devices rose 6.3 percent on reports the Trump administration will impose new curbs on Chinese chipmakers. On the downside, Nikola, the electric carmaker, dropped 27 percent on news its deal to collaborate with General Motors would be scaled back.

In US economic news, strong monthly growth was the signal from November's Chicago PMI, even though the 58.2 headline was at the bottom of Econoday's consensus range. Separately, pending home sales eased back in October, down 1.1 percent but were still up just over 20 percent on the year.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 59 cents to US$47.59 while spot gold fell US$11.97 to US$1,775.82. The US dollar rose against most major currencies. The US Treasury 30-year bond yield was unchanged at 1.58 percent while the 10-year note was flat at 0.85 percent.


Worries about EU-UK Brexit talks hurt equities Monday after reports that the two sides remain far apart as negotiators held last-minute talks in London. The Europe-wide STOXX 600 fell 1.0 percent, the German DAX eased 0.3 percent, the French CAC dropped 1.4 percent, and the UK FTSE-100 was off 1.6 percent.

Despite the day's declines, major stock indexes ended the month of November with gains of 12-20 percent, with cyclicals leading the winners on hopes for recovery spurred by positive vaccine developments.

On the day, banks, autos, miners, and energy stocks took a knock, with ABN AMRO off 8.9 percent after the Dutch bank announced a new round of layoffs. HSBC fell 4.1 percent after a management reshuffle. Featured energy decliners included Royal Dutch Shell, down 5.1 percent, and BP, down 5.8 percent, as oil prices declined ahead of a meeting of OPEC+ oil exporters.

Holding up relatively well were health care, retail, chemicals, and technology. Siltronic, the German silicon wafer supplier, rose 7.6 percent on reports it will be acquired. Recipharm, the drug supplier, rose 7.8 percent after an upgrade at Jefferies.

In economic news, German CPI fell 0.8 percent in November, a slightly steeper decline than expected and sharp enough to reduce the annual inflation rate from October's final minus 0.2 percent to minus 0.3 percent, a level not seen since January 2015. November was the third month in a row in which inflation has been below zero, partly reflecting lower VAT rates.

Asia Pacific

Major Asian markets closed lower Monday despite strong Chinese and Japanese data, with trade tensions between China and the US weighing on regional sentiment. Reports over the weekend indicated that the Trump Administration will add two major Chinese firms, chip-maker SMIC and energy producer CNOOC, to a list of companies designated as being controlled by the Chinese military and subject to trade and investment restrictions. Political and trade tensions between China and Australia have also escalated in recent days. Hong Kong's Hang Seng index closed down 2.0 percent, the Shanghai Composite index fell 0.5 percent, and Australia's All Ordinaries index fell 1.1 percent. Japan's Nikkei and Topix indices closed down 0.8 percent and 1.8 percent respectively.

Official Chinese PMI survey data suggest the activity strengthened in both the manufacturing sector and the services sector in November as China's economy continues to recover from the impact of the Covid-19 pandemic. The CFLP manufacturing PMI index rose from 51.4 in October to 52.1 in November, above the consensus forecast of 51.5 and indicating that the sector is continuing to grow at a pace stronger than that seen before the pandemic. The non-manufacturing PMI index rose from 56.2 to 56.4, also indicating that activity in the sector is strengthening and at a pace well above the average seen in recent years.

Preliminary data for October showed that Japan's industrial production index rose 3.8 percent on the month, little changed from 3.9 percent in September and well above the consensus forecast for an increase of 2.0 percent. Output of motor vehicles and general-purpose and business oriented machinery increased, partly offset by declines in the output of electronic parts and devices and non-auto transport equipment. In year-on-year terms, the index fell 3.2 percent after dropping 9.0 percent in September, with year-on-year declines having now moderated for five consecutive months. Officials expect industrial output to rise 2.7 percent in November but then drop by 2.4 percent in December.

Retail sales in Japan increased 0.4 percent on the month in October after falling 0.1 percent in September, with year-on-year growth picking up sharply from a drop of 8.7 percent to an increase of 6.4 percent. The strong annual rebound largely reflected the impact of an increase in consumption tax rates in October 2019 which resulted in a sharp decline in spending that month. Household spending data for October are scheduled for publication next week.

Looking ahead*

On Tuesday in Asia/Pacific, Japanese unemployment, Japanese final manufacturing PMI, Chinese Caixin manufacturing PMI, Indian manufacturing PMI, and the Australian RBA policy announcement are due. In Europe, Swiss GDP, Swiss SVME PMI, Eurozone HICP flash, and manufacturing PMI finals from France, Germany, the Eurozone, and the UK are scheduled. In North America, Canadian quarterly and monthly GDP reports are due as are US PMI manufacturing final, US ISM manufacturing, and US construction spending. In addition, Fed Chair Jerome Powell is scheduled to speak.

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