Daily market review

United States

Hopes for heavy US fiscal stimulus under the incoming Biden administration gave equities a lift Friday as markets looked past a weak US jobs report. The Dow Jones industrial index gained 0.4 percent, the S&P 500 rose 0.6 percent, and the NASDAQ 100 was up 1 percent.

Markets seesawed through the day on headlines suggesting more or less spending under Biden. Reports that the Biden administration would introduce a $3 billion spending package gave markets a boost in the morning but equities retreated from the best levels amid concern that some Democrats would not support such an aggressive stimulus effort.

Among sectors, best performers were technology, consumer discretionary, utilities, and real estate. Among tech stocks, Apple was up 0.9 percent, and Microsoft gained 0.6 percent. Cyclicals, including materials, industrials, and financials lagged, with materials hit by a drop in precious metals prices. Communications services were hurt by relative weakness in Facebook, down 0.4 percent.

Among companies in the news, Union Pacific, the railroad, gained 2.8 percent after raising its guidance. Tesla continued its remarkable run, rising 7.8 percent, with a new tailwind from expectations for subsidies for electric vehicles with Democratic control of Congress and the White House.

In US economic news, nonfarm payrolls fell 140,000 in December, ending a seven-month streak of gains. After three months of declines, the unemployment rate remained steady at 6.7 percent, with the participation rate stabilizing at 61.5 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.72 to US$56.23 while spot gold plunged US$67.78 to US$1846.50. The US dollar rose against major currencies. The US Treasury 30-year bond yield gained 2 basis points to 1.87 percent while the 10-year note rose 3 basis points to 1.12 percent.


Positive expectations for 2021 linked to vaccine hopes and market-supportive policies from the incoming Biden administration underpinned equities again Friday. The Europe-wide STOXX 600 rose 0.5 percent, the German DAX gained 0.6 percent, the French CAC rose 0.7 percent, and the UK FTSE-100 edged up 0.2 percent.

On the week, the conclusion of the Brexit process took away a huge overhang for markets, and UK markets in particular outperformed on the week. On the negative side, Covid-19 concerns remained in focus as case numbers remained high and lockdowns continued.

Among sectors, technology, travel & leisure, and utilities were the best performers while lagging were banks, telecom and autos.

Among companies in the news, Sodexo, the French food services company, rose 10 percent after raising its guidance. Marston's, the UK pub company, rose 7 percent on news of a joint venture with Carlsberg, the brewer. On the downside, Credit Suisse fell 3.7 percent after issuing an earnings warning. Marks & Spencer, the UK retailer, fell 2.3 percent after a disappointing trading update.

Asia Pacific

Most major Asian markets closed higher Friday, with markets across the region also recording strong gains on the week as Wall Street rose to new highs. Regional sentiment was supported by indications that Covid-19 vaccines will be effective against new strains of the disease and hopes that US political turmoil will soon abate. Japan's government declared late Thursday a state of emergency for Tokyo and surrounding areas for the next month to in an attempt to curb a recent spike in Covid-19 cases, but this decision was already well anticipated by markets. The South China Morning Post reported Friday that Hong Kong authorities have released all but one of the 53 opposition politicians and activists arrested earlier in the week under national security laws.

Japan's Nikkei and Topix indices rose 2.4 and 1.6 percent respectively on the day and 2.5 percent and 2.4 percent respectively on the week, while Australia's All Ordinaries index advanced 0.6 percent on the day and 2.5 percent on the week. Hong Kong's Hang Seng index also posted solid gains, up 1.2 percent on the day and 2.4 percent on the week, with the gain Friday coming despite further falls in shares of Chinese telecom firms that are being delisted on the New York Stock Exchange. The Shanghai Composite index underperformed on the day, closing down 0.2 percent, but finished the week up 2.8 percent.

Household spending in Japan fell 1.8 percent on the month in November after increasing 2.1 percent in October, with year-on-year growth moderating from 1.9 percent to 1.1 percent. Weaker year-on-year growth in November was largely driven by the impact of an increase in consumption tax rates in October 2019 which resulted in a sharp decline in spending that month and an associated spike in year-on-year growth 12 months later. Retail sales data published last week also showed a month-on-month decline and weaker year-on-year growth in November.

Rising 9.7 percent for its best weekly gain in 13 years, the Kospi got a a lift from strong earnings at Samsung and buying in Hyundai on reports it's in talks with Apple to work together on electric cars and batteries.

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