Daily market review

United States

Equities sagged into the close Monday with value/cyclicals off on renewed virus worries while growth/FAANG stocks held up better. The Dow Jones industrial index fell 0.6 percent, the S&P 500 eased 0.4 percent, and the NASDAQ 100 firmed 0.5 percent.

News that US virus deaths passed 300,000 and expectations for New York City to resume its lockdown hurt sentiment, especially stocks pegged to the reopening trade. Among Dow stocks hurt by virus worries, Chevron was down 3.2 percent, American Express was down 2.4 percent, and Walt Disney was off 3.6 percent. On the positive side were hopes for progress in US fiscal stimulus talks and the US rollout of vaccines, which started Monday.

Among sectors, health care got a boost from Alexion's 30 percent rise on news it will be acquired by AstraZeneca. Technology was lifted by gains in semiconductors and computer hardware. Strength in Amazon, up 1.5 percent, and in homebuilders bolstered consumer discretionary. Materials and energy lagged, with oil stocks retreating from good gains last week.

Among companies in focus, cybersecurity leader SolarWinds dropped 17 percent on news of ongoing hacks by a state actor into government agencies and leading corporations using the SolarWinds service. Separately, Virgin Galactic declined 17 percent after its test space flight was aborted. Snowflake, the data warehousing service, fell 7 percent ahead of the expiration of its post-IPO sales lockup.

On the positive side, Mercury General rose 7.8 percent after a positive mention in Barron's which listed the insurer as an acquisition target. PluralSight, the education company, rose 6.4 percent on news it will be taken private.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 24 cents to US$50.26 while spot gold declined US$10.45 to US$1,828.55. The US dollar was weaker against major currencies. The US Treasury 30-year bond yield rose 1 basis point to 1.64 percent while the 10-year note rose 1 basis points to 0.90 percent.


Equities edged up Monday after the UK and EU agreed to extend Brexit talks rather than letting negotiations fail at Sunday's deadline. The Europe-wide STOXX 600 rose 0.4 percent, the German DAX gained 0.8 percent, the French CAC rose 0.4 percent, but the UK FTSE-100 eased 0.2 percent.

Positive vaccine news supported markets, as the US rollout of the Pfizer/BioNTech vaccine began Monday, and a second vaccine from Moderna is expected to receive US emergency use authorization soon.

UK stocks lagged as sterling's rise undercut the export-oriented FTSE-100. A selloff in AstraZeneca (down 5.9 percent) also depressed the UK market as investors disliked the $36 billion price the UK pharma is paying to acquire Alexion, a US drug maker. AstraZeneca has also suffered by contrast with other pharma firms that have seen quicker success with their Covid-19 vaccines.

In other M&A news, UK video game company Codemasters rose 20 percent on news it will be acquired by the US giant video game company Electronic Arts.

Among sectors, banks outperformed on news the Brexit talks would continue. Germany's decision to extend its anti-Covid lockdown into January gave online retail stocks a boost, along with expectations the UK and the Netherlands will implement similar restrictions.

Asia Pacific

Most major Asian markets closed higher Monday after positive Covid-19 vaccine news and Japanese data showed some improvement in business sentiment. Japan's Nikkei and Topix indices rose 0.3 percent and 0.5 percent respectively, Australia's All Ordinaries index closed up 0.2 percent, and the Shanghai Composite index outperformed with an increase of 0.7 percent.

Hong Kong's Hang Seng index, however, fell 0.4 percent, with shares of online retailers Alibaba Group and Tencent Holdings dropping after Chinese authorities fined related companies for breaches of anti-trust regulations.

Japan's Tankan survey improved in the fourth quarter but remained weak in both the manufacturing and non-manufacturing sectors, clearly reflecting the ongoing economic impact of the pandemic. The business conditions index for firms of all sizes and in both sectors increased but remained in negative territory, broadly in line with PMI survey data that have shown less pronounced but still ongoing contraction in both the manufacturing and services sectors in recent months.

Indian inflation data published Monday showed some moderation in price pressures, though headline consumer inflation remained above the Reserve Bank of India's target range of 2.0 to 6.0 percent. The consumer price index was up 6.93 percent on the year in November, moderating from 7.61 percent in October, with smaller price key increases in key categories, including food and beverages, housing, and fuel and light. The wholesale price index rose 1.55 percent on the year in November, up slightly from 1.48 percent in October, but also showed weaker prices increases for food.

Looking ahead*

On Tuesday in Asia, the Reserve Bank of Australia will release its meeting minutes, plus Chinese fixed asset investment, Chinese industrial production, and Chinese retail sales reports are scheduled. In Europe, UK labour market, Swiss producer and import prices, French CPI, Italian CPI, and Italian merchandise trade reports are due. In North America, Canadian housing starts, Canadian manufacturing sales, US Empire State manufacturing, US import and export prices, US industrial production, and the US Treasury international capital reports are on tap.

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