United States
More positive noises from US fiscal talks and hopeful vaccine news helped equities recover from initial losses Tuesday. The Dow Jones industrial index rose 0.4 percent, the S&P 500 firmed 0.3 percent, and the NASDAQ 100 gained 0.5 percent.
In the fiscal talks, Republican and Democratic leaders made comments that investors judged as more positive on prospects for a deal. On the vaccine front, the Food and Drug Administration said it saw no safety concerns to prevent issuing emergency use authorization for the Pfizer/BioNTech vaccine. Separately, a published peer review showed the AstraZeneca/Oxford vaccine to be effective and safe. Markets generally welcomed news that the UK began administering Covid-19 vaccines.
Among sectors, outperformers included energy, materials, and health care, while laggards included communications services, consumer discretionary, and utilities.
Among companies in focus, Stitch Fix, the custom clothing business, surged 39 percent on an earnings beat and better guidance. United States Steel rose 13 percent after announcing it will move ahead with its acquisition of Big River Steel. John Wiley, the publisher, rose 14 percent on an earnings and revenues beat.
On the downside, builder Toll Brothers fell 8 percent on disappointing guidance. Auto parts supplier AutoZone fell 5 percent on declining gross margins.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 22 cents to US$48.90 while spot gold rose US$7.28 to US$1870.19. The US dollar was mostly better against major currencies. The US Treasury 30-year bond yield fell 1 basis point to 1.67 percent while the 10-year note fell 1 basis point to 0.92 percent.
Europe
Equities recovered initial declines to end flat to marginally higher Tuesday as markets awaited Brexit news and reacted to mixed virus news. The Europe-wide STOXX 600 rose 0.2 percent, the German DAX firmed 0.1 percent, the French CAC eased 0.2 percent, and the UK FTSE-100 edged up 0.1 percent.
News that the UK and EU had reached a side-deal on Northern Ireland as part of Brexit talks gave risk appetite a lift, but prospects for a wider Brexit pact remained uncertain, and focus turned to Prime Minister Boris Johnson's last-minute talks with European Commission President Ursula von der Leyen.
On the pandemic front, news that the UK began mass Covid-19 vaccinations was a plus, but weighing against it were reports that Germany might extend lockdown restrictions, a distinct negative for travel & leisure stocks, the day's worst performers.
Among sectors in the STOXX 600, outperforming were media, industrials, personal & household goods, health care, utilities, and chemicals. Lagging were travel & leisure, retail, banks, technology, autos, instance, oil & gas, and food & beverages.
Asia Pacific
Most major Asian markets closed lower Tuesday, though moves were generally moderate, with the regional data calendar relatively busy but investors focus still on other factors, including global Covid-19 developments and Brexit negotiations. Japan's Nikkei and Topix indices fell 0.3 percent and 0.1 percent respectively, while the Shanghai Composite index closed down 0.2 percent. Hong Kong's Hang Seng index closed down 0.8 percent despite a huge first-day gain in the shares of the newly-listed JD Health, the health-care subsidiary of Chinese e-commerce firm JD.com. Australia's All Ordinaries index outperformed with a modest 0.2 percent increase.
Revised GDP data for the three months to September confirm that the Japanese economy expanded at a record rate as activity rebounded from the record contraction that took place in the three months to June during the initial impact of the Covid-19 pandemic. Japan's gross domestic product grew 5.3 percent on the quarter, up from the preliminary estimate of an increase of 5.0 percent published last month. This compares with a decline of 8.3 percent in the three months to June. All components of domestic demand were revised up, though net export's contribution to headline growth was revised slightly lower. In year-on-year terms, Japan's GDP fell 5.7 percent in the three months to September, little changed from the preliminary estimate of a fall of 5.8 percent but confirming an improvement compared with the decline of 10.3 percent recorded in the three months to June. These data are consistent with the forecast of officials at the Bank of Japan that annual GDP will contract sharply this year and then rebound strongly in 2021.
Household spending in Japan rose 2.1 percent in October after increasing 3.8 percent in September, with solid growth in spending on utilities and housing, partly offset by a drop in spending on food. Total spending rose 1.9 percent on the year after falling 10.2 percent previously, though this acceleration in year-on-year growth largely reflects the impact of an increase in consumption tax rates in October 2019 which resulted in a sharp drop in spending that month. Core spending rose 3.6 percent on the month in October after advancing 3.5 percent in September, and rose 3.8 percent on the year after dropping 11.9 percent previously. Retail sales data published lat week also showed a month-on-month increase and a rebound in year-on-year growth in October.
Australia's residential property price index rose 0.8 percent on the quarter in the three months to September after dropping 1.8 percent in the three months to June, and rose 4.5 percent on the year after advancing 6.2 percent previously. The easing of public health restrictions put in place to curb the spread of Covid-19 during these months are likely the main factor driving this modest quarter-on-quarter increase in property prices. Prices increased on the quarter in all cities covered in the survey with the exception of the nation's second-largest city, Melbourne, where tight public health restrictions remained in place for most of the quarter. Prices there fell 0.3 percent on the quarter. Prices rose 1.0 percent on the quarter in Sydney and 1.5 percent in Brisbane.
Looking ahead*
On Wednesday in Asia/Pacific, Japanese machinery orders, Chinese CPI, and Chinese PPI reports are due. In Europe, the German merchandise trade report is scheduled. In North America, the Bank of Canada policy announcement, US JOLTS, and US wholesale trade reports are on tap.
