Daily market review

United States

Dip-buying and a rally in bank stocks helped major equity indexes recover from a steep morning drop to end flat to weaker Monday. The Dow Jones industrial index firmed 0.1 percent, the S&P 500 eased 0.4 percent, and the NASDAQ 100 was off 0.1 percent.

After a big selloff in European hours on news of a new faster-spreading virus mutation in the UK, investors bought the dip as US trading got under way. Strength in bank stocks helped markets recover on the Federal Reserve's announcement that big banks would be allowed to resume dividends in the first quarter. Reaction was limited to news of a deal on US fiscal stimulus, as the news appeared largely priced in.

Financials were the only sector in positive territory, with JP Morgan, up 3.8 percent, and Goldman Sachs, up 6.1 percent, among the best performers. Worst off were consumer staples, utilities, health care, and energy, as oil prices fell.

Among other sectors, communications services lagged as weakness centered in Facebook, down 1.3 percent, and Netflix, down 1 percent. Declines in Intel, down 2.3 percent, depressed tech stocks on news that Microsoft would join Apple in working on its own microchips. Retail stocks and the Dow were bolstered by a quarterly earnings beat from Nike, which rose 4.9 percent.

In mergers & acquisition news, Aerojet Rocketdyne soared 26 percent after it was acquired by Lockheed, which slipped 1.9 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.42 to US$50.70 while spot gold declined US$4.76 to US$1,876.10. The US dollar rose against most major currencies. The US Treasury 30-year bond yield declined 2 basis points to 1.67 percent while the 10-year note declined 1 basis point to 0.93 percent.


Fears linked to a new faster-spreading virus mutation hit stocks Monday, with losses across the board. The Europe-wide STOXX 600 fell 2.3 percent, the German DAX dropped 2.8 percent, the French CAC fell 2.4 percent, and the UK FTSE-100 slipped 1.7 percent.

News of several EU countries banning travel from the UK spooked investors and raised worries about wider lockdowns and disruptions. The travel ban is expected to hurt supply chains that are already being disrupted by uncertainty around Brexit talks, which remained unresolved. Investors reacted badly to news that the new virus strain had already been reported in Italy.

Among sectors, worst off were banks, oil & gas, insurance, travel, telecom, autos, retail, and media. Holding up best but still lower were chemicals, industrials, technology, food, and basic resources.

Among companies in focus, Royal Dutch Shell fell 5.6 percent on a gloomy update to its fourth quarter, and a write-down on the value of its oil assets. Ryan Air was off 5 percent in response to the travel restrictions and Marks & Spencer fell 4 percent on the UK lockdown. Carnival, the cruise operator, fell 6 percent on the poor travel outlook.

Asia Pacific

Most Asian markets closed lower Monday after mixed Covid-19 news over the weekend, though moves were generally moderate. New cases have continued to rise strongly in Tokyo, while an outbreak in Sydney has prompted a local lockdown and a resumption of internal border controls across Australia. The approval of Modena's vaccine by US authorities, however, has likely provided some support to regional investor sentiment

Japan's Nikkei and Topix indices both closed down 0.2 percent on the day, while Australia's All Ordinaries index fell a modest 0.1 percent. Hong Kong's Hang Seng index underperformed, closing down 0.7 percent, with shares of Chinese semiconductor producer SMIC again falling sharply after US authorities last week deemed it to be controlled by the Chinese military and therefore subject to export restrictions. The Shanghai Composite index closed up 0.8 percent after offices left the main lending rate unchanged.

The People's Bank of China left the one-year loan prime rate unchanged at 3.85 percent at its monthly review, with the equivalent five-year rate also unchanged at 4.65 percent. These rates have been on hold since they were reduced by 20 basis points and 10 basis points respectively in April. Today's decision is in line with comments made last week by officials advising that policy will be kept steady and continue to be aimed at supporting economic recovery. Activity data published last week also indicated that China's economy continued to recover in November from the initial impact of the Covid-19 pandemic earlier in the year.

Hong Kong's headline consumer price index fell 0.2 percent on the year in November, as it did in October, and was unchanged on the month after rising 2.3 percent previously. Excluding the impact of various government measures, mainly aimed at providing support to low-income households, Hong Kong's underlying inflation rate eased from 0.4 percent in October to 0.3 percent in November. Officials expect price pressures to remain subdued in coming months in response to ongoing weakness in global and domestic economic conditions.

Looking ahead*

On Tuesday in Asia, Europe, Germany Gfk, UK public sector borrowing, and UK GDP reports are due. In North America, US GDP, US consumer confidence, US existing home sales, and US Richmond Fed manufacturing reports are on tap.

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