US flat to better as mega-caps rebound; Europe firms; Asia mixed

United States

A recovery in mega-caps and growth stocks kept major equity indexes flat to slightly higher Wednesday while cyclicals weakened, in a reversal of the recent pattern. The Dow Jones industrial index was flat, the S&P 500 rose 0.2 percent, and the NASDAQ 100 rose 0.4 percent.

Movement in the US House of Representatives toward impeaching President Trump for a second time, and news that Senate Majority Leader Mitch McConnell would not schedule Senate action before January 20 had limited impact on markets. Investors instead are focusing on vaccine distribution and awaiting Thursday's announcement from President-elect Biden on his economic stimulus plans.

Markets generally reacted favorably to a batch of comments from Federal Reserve officials, including Fed Governor Lael Brainard who suggested the Fed will not reduce the pace of asset purchases for a long time. Brainard spoke of the possible need to increase Fed bond buying from the current $120 billion per month.

Utilities and real estate joined the FAANGs and technology in perking up Wednesday as interest rates retreated from recent highs. Lagging were cyclicals including energy, financials, industrials, materials, plus telecom. A retreat in oil prices pushed down energy stocks.

Among companies in focus, Intel rose 7 percent after replacing its CEO. Apple rose 1.6 percent on positive comments from Wedbush. Stay-home plays Peloton rose 7 percent and Zoom Video gained 2.2 percent as both extended recent rebounds. On the downside, Party City, the retailer, fell 7.8 percent on gloomy guidance. Urban Outfitters fell 5.2 percent on disappointing sales results. Dow Chemical, down 1.7 percent, and IBM, down 1.8 percent, weighed on the Dow.

In US economic news, consumer prices rose 0.4 percent in December, up from 0.2 percent in November and in line with expectations, lifting the annual rate to 1.4 percent from 1.2 percent. Core prices, which exclude food and energy, rose only 0.1 percent and were steady on the year at 1.6 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil slipped 44 cents to US$56.10 while spot gold declined US$8.06 to US$1,848.32. The US dollar rose against major currencies. The US Treasury 30-year bond yield fell 5 basis points to 1.82 percent while the 10-year note declined 4 basis points to 1.09 percent.

Europe

A mixed performance among sectors left equities narrowly mixed Wednesday with concerns about a resurgent virus and European lockdowns in focus. The Europe-wide STOXX 600 rose 0.1 percent, the German DAX firmed 0.1 percent, the French CAC rose 0.2 percent, and the UK FTSE-100 was down 0.1 percent.

Among sectors, telecom and real estate outperformed while travel and leisure, banks, and auto stocks lagged.

Among companies in focus Spanish telecom Telefonica rose 9.7 percent after a sale of phone towers. Carrefours, the French retail chain, rose 13 percent on news it is in merger talks. On the downside, Persimmon, the UK homebuilder, fell 6 percent after reporting sales slowed with expiration of the UK stamp duty holiday. Orsted, the Danish power company, fell 4.9 percent on disappointing guidance.

In economic data, Eurozone industrial production climbed 2.5 percent in November, its best performance since July and well above expectations. Annual workday adjusted growth rose from minus 3.5 percent to minus 0.6 percent and production is now just 0.8 percent below February's pre-lockdown level.

Asia Pacific

Major Asian markets again posted mixed results with a bare regional data calendar again keeping the focus on Covid developments and US political news. Reports indicate that the Japanese government will extend the state of emergency imposed last week in Tokyo to other areas as cases remain at alarming levels, while concerns are also building about the recent increase in cases in parts of China ahead of lunar new year holidays.

Japan's Nikkei and Topix indices closed up 1.0 percent and 0.3 percent respectively, while Australia's All Ordinaries index advanced 0.2 percent. The Shanghai Composite index and Hong Kong's Hang Seng index closed down 0.3 percent and 0.2 percent respectively.

Looking ahead*

On Thursday in Asia/Pacific, the Indian wholesale price index report is scheduled. In Europe, ECB policy meeting minutes are due. In North America, Fed Chair Jay Powell is scheduled to speak, and US jobless claims and import & export prices reports are on tap.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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