Daily market review

United States

Negative headlines on US fiscal talks gave investors an excuse to pare risk positions Wednesday after major indexes traded at record highs in the morning. The Dow Jones industrial index eased 0.4 percent, the S&P 500 declined 0.8 percent, and the NASDAQ 100 fell 1.9 percent.

Stocks retreated after Senate Majority Leader Mitch McConnell was quoted saying Republicans and Democrats were still looking for a way forward in the fiscal talks, and that he favors a bill which omits aid to state and local governments, a key Democratic requirement.

Mega-caps showed distinct weakness, with Netflix off 3.7 percent and Google down 1.9 percent. Facebook declined 1.9 percent after state and federal regulators sued the social network for anti-competitive practices. Concerns about cyber-security weighed on internet stocks after an egregious hack at FireEye, the internet security company.

Among sectors, information technology, communications services, and real estate lagged while energy and industrials outperformed.

Among companies in focus, FireEye fell 13 percent after disclosing it was hacked in a state-sponsored attack; Zoom Video fell 7 percent on an analyst downgrade; and United Natural Foods dropped 1.1 percent on an earnings and revenues miss. On the positive side, Lowes rose 6 percent after the retailer announced share buybacks; Omnicell rose 5 percent on news that Baxter International, a medical supply company, expressed interest in buying the medication management company.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 5 cents to US$48.95 while spot gold fell US$33.04 to US$1,837.15. The US dollar was slightly better against major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.69 percent while the 10-year note rose 2 basis points to 0.94 percent.


Equities gave up early gains to end flat to higher Wednesday as investors awaited Brexit news. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX gained 0.5 percent, the French CAC eased 0.3 percent, and the UK FTSE-100 firmed 0.1 percent.

The UK FTSE-100 retreated from a gain of 1.0 percent as sterling perked up on hopes for a last-minute Brexit pact as Prime Minister Boris Johnson and his top negotiators were set to meet the EU counterparts late Wednesday. Meanwhile, positive vaccine news vied with negative news on Covid-19 cases in Europe and the US. On the supportive side, markets anticipate additional monetary policy support from the European Central Bank at its Governing Council meeting Thursday.

Among sectors in the STOXX 600, outperformers included autos, insurance, chemicals, utilities, retail, and personal & households goods. Lagging were construction, real estate, technology, industrials, financial services, and health care.

Among companies in focus, Just Eat Takeaway rose 7 percent and Delivery Hero rose 5 percent in response to stronger-than-expected IPO pricing for DoorDash, their US food delivery rival. On the downside, STMicro fell 13 percent after saying the US-China trade war was hurting its sales prospects.

Asia Pacific

Most major Asian markets closed higher Wednesday, with regional sentiment supported by news that the UK's Covid-19 vaccine rollout has begun and signs a US fiscal deal seemed near. Japan's Nikkei and Topix rose 1.3 percent and 1.2 percent respectively, Hong Kong's Hang Seng index advanced 0.8 percent, and Australia's All Ordinaries index closed up 0.6 percent. The Shanghai Composite index, however, fell 1.1 percent on the day, with tech shares underperforming after Chinese authorities banned more than one hundred mobile apps found to have included illegal content.

China's headline consumer price index fell 0.5 percent on the year in November, the first negative showing in 11 years and compared against an increase of 0.5 percent in October and well below the consensus for a 0.8 percent increase. This was largely driven by weaker year-on-year growth in food prices, down 2.0 percent which in turn mainly reflected the impact of a sharp rise in pork prices in 2019. The change in non-food prices, in contrast, was much more stable at a 0.1 percent dip, suggesting that underlying price pressures remain steady and subdued.

Japan's private sector machinery orders (excluding volatile items) rose 17.1 percent on the month in October after falling 4.4 percent in September, and advanced 2.8 percent on the year after falling 11.5 percent previously, much stronger than the consensus for a year-on-year decline of 11.6 percent. Growth improved for both manufacturing and non-manufacturing orders. Despite this improvement in October, officials still expect orders to drop 1.9 percent on the quarter in the three months to December after they fell 0.1 percent in the three months to September.

Looking ahead*

On Thursday in Asia/Pacific, the Japanese PPI report is due. In Europe, the ECB will make its policy announcement, plus UK industrial production, UK merchandise trade, UK monthly GDP, and French industrial production reports are scheduled. In North America, US jobless claims, US CPI, and US Treasury statement reports are on tap.

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