Daily market review

United States

Strength in mega-caps offset weakness elsewhere to keep major stock indexes flat to higher Wednesday as investors remained hopeful that US negotiators would agree on a fiscal stimulus package. The Dow Jones industrial index eased 0.2 percent, the S&P 500 firmed 0.2 percent, and the NASDAQ 100 gained 0.5 percent.

Weak US retail sales data undercut sentiment in the morning but markets improved later as the market absorbed Fed Chair Jerome Powell's latest reassurance that the Fed will be in no rush to remove its extraordinary policy accommodation, specifically its asset purchases, even when inflation starts to perk up.

Among sectors, consumer discretionary stocks led the way higher, propelled by Amazon, which rose 2.4 percent, and Chipotle, the Mexican food chain which rose 3.9 percent after an analyst upgrade. Technology stocks also outperformed, with Microsoft up 2.4 percent to lead software stocks. Twitter was another winner in the communications services sector, up 2.3 percent after an analyst upgrade. On the downside, lagging sectors were energy, industrials, and materials. Among industrials, United Airlines fell 3.1 percent after a downgrade at JP Morgan.

In US economic data, retail sales dropped 1.1 percent on the month to fall below the bottom end of Econoday's consensus range, as did all the major components: ex-vehicles down 0.9 percent, ex-vehicles & gas down 0.8 percent, and the control group down 0.5 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 34 cents to US$51.06 while spot gold rose US$9.88 to US$1,864.06. The US dollar was weaker against major currencies. The US Treasury 30-year bond yield rose 1 basis point to 1.67 percent while the 10-year note also rose 1 basis point to 0.92 percent.


Positive Brexit news and upbeat economic data lifted equities across the board Wednesday. The Europe-wide STOXX 600 rose 0.8 percent, the German DAX rose 1.5 percent, the French CAC firmed 0.3 percent, and the UK FTSE-100 gained 0.9 percent.

Risk assets rose on European Commission President Ursula von der Leyen's comment that there is "a path to an agreement now," though she said the UK and EU remained at odds over fisheries. Markets also reacted favorably to better-than-expected purchasing managers data as the Eurozone flash composite rose to 49.8, beating the market consensus and November's 45.3. Separately, at 50.7, the UK flash composite was up from November's 49.0 and was back on the right side of the 50-expansion threshold.

Best performers included insurance, health care, autos & parts, utilities, real estate, personal & household goods, and technology. Lagging sectors included construction & materials, retail, chemicals, and basic resources; news that the ECB had asked banks to limit dividends until late 2021 hurt bank stocks.

Among companies in focus, Bang & Olufsen, the Danish sound equipment company, rose 18 percent on an earnings beat and better guidance. Altice Europe, the telecom, rose 23 percent after its founder raised his offer to take the company private. AB Science, the French pharma, rallied 38 percent on positive results in its Alzheimer's drug trial.

Asia Pacific

Most Asian markets closed higher Wednesday after solid gains on Wall Street Tuesday, with sentiment boosted by progress on US fiscal stimulus and reports that Apple plans to boost mobile phone production in 2021. Hong Kong's Hang Seng index was among the stronger performers, closing up 1.0 percent despite a sharp decline in shares of Chinese semiconductor producer SMIC after an announcement that it will be removed from a major investable index. The Shanghai was flat on the day, with several other major Chinese firms also to be removed from the investable index. Australia's All Ordinaries index advanced 0.7 percent, while Japan's Nikkei and Topix indices both rose 0.3 percent.

Flash PMI data for Japan, headlined by a sub-50 composite score of 48.0, indicate that the impact of the pandemic has extended into December, with aggregate activity contracting at a pace similar to that recorded in each of the two previous months. Japanese trade data showed ongoing weakness in imports and a bigger and unexpected drop in exports in November, with the trade surplus narrowing to ¥366.8 billion from ¥872.9 billion in October.

Looking ahead*

On Thursday in Asia, Australia labour force, New Zealand GDP, and Singapore merchandise trade reports, and the Bank of Japan policy announcement are scheduled. In Europe, Swiss merchandise trade, French business climate indicator, and Eurozone HICP reports are due, plus policy announcements from both the Bank of England and the Swiss National Bank. In North America, US housing starts, US jobless claims, Philadelphia Fed manufacturing, and Kansas City Fed manufacturing reports are on tap.

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