Daily market review

United States

Cyclical/value stocks outperformed Wednesday as expectations for economic recovery came back into focus. The Dow Jones industrial index rose 0.4 percent, the S&P 500 firmed 0.1 percent, and the NASDAQ 100 eased 0.3 percent.

Major stock indexes gave up most of the day's gains late in the session as traders trimmed risk positions headed into the weekend.

News that the US government had struck a deal with Pfizer to buy more Covid-19 vaccines and news that President Trump was pressing for a bigger stimulus check as part of the Covid-19 relief package bolstered expectations for a better recovery in 2021. Rising energy prices and a steepening yield curve showed investors anticipating faster growth.

Among sectors, financials, energy, industrials, and materials outperformed while lagging were technology, consumer discretionary, and consumer staples. Financials JP Morgan, up 2.8 percent, and American Express, up 2.1 percent, were among the day's leaders. Homebuilders depressed consumer discretionary stocks on news of an unexpected 11 percent decline in US new home sales in November.

Among companies in focus, Disney rose 1.8 percent after an upgrade at Wells Fargo. General Motors, up 3.8 percent, benefited from a report that it will introduce a plug-in pickup truck. Lennar, the homebuilder, was off 2.2 percent on the bearish housing news.

US economic data came in mixed and left expectations intact for more stimulus to boost the recovery. Personal income fell 1.1 percent in November, weaker than expectations for a 0.3 percent decrease. Personal spending also posted a weaker-than-expected 0.4 percent decline on the month that ended a six-month streak of gains. New home sales also came in well below expectations at an annual rate of 841,000, while weekly jobless claims showed better news with an unexpectedly large decline. Lower mortgage applications in the latest week added to perceptions that the housing market is pulling back from record highs.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.18 to US$51.17 while spot gold rose US$10.78 to US$1,871.71. The US dollar fell against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.69 percent while the 10-year note rose 3 basis points to 0.95 percent.


Positive signs from Brexit talks sparked a rally in risk assets Wednesday. The Europe-wide STOXX 600 gained 1.1 percent, the German DAX rose 1.3 percent, the French CAC rose 1.1 percent, and the UK FTSE-100 was up 0.7 percent.

Investors reacted to an array of reports that the talks were close to an accord, even though officials warned no final deal had been struck. Gains on Wednesday and Tuesday offset Monday's drop triggered by news of a more contagious Covid-19 mutation in the UK. UK markets lagged the rest of Europe as exporters were hurt by sterling's rise on the positive Brexit news.

The reopening of UK-French borders was another market positive after their brief closing in response to the virus situation. Positive sentiment was limited by more negative Covid-19 news as more UK regions were placed under lockdown but risk appetite appeared to recover on reports existing vaccines were likely to be fine with the new Covid mutation.

Among sectors, best performers on the better Brexit news were travel and leisure, banks, and real estate. Energy stocks got a boost from rising oil prices. Lagging were health care, technology, and food and beverage.

Among companies in focus, Daimler rose 3.6 percent on a report it will list its profitable truck unit.

Asia Pacific

Major Asian markets closed higher Wednesday after a US fiscal relief package passed Congress and EU officials expressed confidence that a Brexit trade deal will be reached. Hong Kong's Hang Seng index closed up 0.9 percent, the Shanghai Composite index rose 0.8 percent, and Australia's All Ordinaries index rose 0.7 percent. Japan's Nikkei and Topix indices advanced 0.3 percent and 0.2 percent respectively.

Singapore's headline consumer price index fell 0.1 percent on the year in November after dropping 0.2 percent in October, reflecting offsetting but generally small moves among the major components. The Monetary Authority of Singapore's preferred measure of core inflation, which excludes the cost of accommodation and private road transport, showed little change in underlying price pressures, with this index also down 0.1 percent on the year after dropping 0.2 percent previously. MAS officials continue to expect price pressures to remain subdued in coming months and through 2021.

The Bank of Japan published the minutes of its October meeting Wednesday. Officials left policy settings on hold at this meeting, and the minutes show that they considered that Japan's economy "had picked up" after the initial impact of the Covid-19 pandemic and "was likely to continue picking up for the time being". Officials also noted that underlying price pressures have been weak and will likely remain so for some time. These policy settings were also left on hold at the BoJ's subsequent policy meeting, held last week, with officials again advising that they will not hesitate to ease policy further if considered necessary.

Looking ahead*

On Thursday in Asia, the Singaporean industrial production report is due. Activity will be light ahead of the Christmas holiday on Friday, Dec. 25, though attention will focus on last-minute maneuvering over the US fiscal stimulus package.

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