Daily market review

United States

Cyclicals and small caps led equities higher Tuesday as the recovery trade returned, with help from upbeat US manufacturing purchasers data. The Dow Jones industrial index gained 0.6 percent, the S&P 500 rose 0.7 percent, and the NASDAQ 100 gained 0.9 percent.

In US economic news, ISM's manufacturing index jumped to 60.7 in December, well above expectations, with support from the key new orders component, which suggested strength ahead.

Markets were keying on the outcome of runoffs for Georgia's two US Senate seats, with results expected as early as Wednesday. On Monday, the market saw a late risk-off move linked to concerns about possible Democratic control of the Senate, but those concerns eased Tuesday as markets saw bigger fiscal stimulus if Democrats sweep, and analysts argued that Democrats would remain hamstrung in implementing big changes to the business-friendly US economic regime.

Energy stocks rallied on news Saudi Arabia would cut an additional 1 million barrels a day in February, in contrast to the existing deal to keep output steady. Other outperformers included industrials and materials. Lagging were defensives – utilities, consumer staples, and health care.

Among S&P 500 leaders, Wynn Resorts rose 3.1 percent and General Electric gained 2.9 percent. Chevron led energy winners, up 2.7 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.98 to US$53.63 while spot gold rose US$4.53 to US$1,948.70. The US dollar fell against major currencies. The US Treasury 30-year bond yield jumped 4 basis points to 1.70 percent while the 10-year note rose 3 basis points to 0.95 percent.


Equities were mixed to lower Tuesday with mining stock strength offset by weakness in defensive stocks even as Covid worries remained in focus. The Europe-wide STOXX 600 eased 0.2 percent, the German DAX declined 0.6 percent, the French CAC fell 0.4 percent, but the UK FTSE-100 gained 0.6 percent.

UK markets outperformed on gains in energy stocks as oil prices rallied on news of planned Saudi output cuts, with BP up 7.1 percent and Royal Dutch Shell up 7.2 percent. UK markets also reacted favorably to UK plans to subsidize businesses hit by the latest UK lockdown. In Covid news, focus remained on widening lockdowns and slower-than-expected rollout of vaccines in Europe.

Among sectors, best were oil & gas, retail, basic resources, travel & leisure, and real estate. Lagging were utilities, media, chemicals, personal & household goods, autos, construction, food & beverage, industrials, and health care.

Among companies in the news, Dialog Semiconductor rose 2.9 percent after raising its fourth-quarter guidance. Bank of Ireland was another winner, up 3.5 percent after an analyst upgrade. On the downside, Ebro, the Spanish food company, fell 2.9 percent, and EasyJet declined 1.8 percent after analyst downgrades.

Asia Pacific

Major Asian markets posted mixed results Tuesday, with a bare regional data calendar keeping the focus on company-specific news and global Covid developments.

The Shanghai Composite index and Hong Kong's Hang Seng index closed up 0.7 percent and 0.6 percent respectively, with major Chinese telecom firms surging after the New York Stock Exchange revoked its decision to delist their shares. The decision was made last week to comply with US sanctions against firms deemed to have links with the Chinese military, but the NYSE has since determined that this action is not required after consulting with US authorities. Shares of tech manufacturer Foxconn also rose strongly after announcing a partnership with Chinese electric vehicle producer Byton.

Japan's Nikkei and Topix indices fell 0.4 percent and 0.2 percent respectively on news the government is considering declaring a state of emergency in Tokyo and other areas in response to ongoing high numbers of Covid cases. Australia's All Ordinaries index closed flat on the day.

Looking ahead*

On Wednesday in Asia/Pacific, PMIs from Hong Kong and Singapore are due as well as PMI composite finals from Japan, China, and India. In Europe, PMI composite finals from France, Germany, UK, and Eurozone, plus French CPI, Eurozone PPI, and German CPI figures are scheduled. In North America, US ADP, US PMI composite final, and US factory orders reports are due, plus FOMC minutes will be released.

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