Daily market review

United States

Weakness in mega-caps and growth stocks held back equities Thursday while cyclicals out-performed on the recovery trade and hopes for more stimulus. The Dow Jones industrial index eased 0.2 percent, the S&P 500 was off 0.4 percent, and the NASDAQ 100 eased 0.1 percent.

Major indexes slipped headed into the close as some investors focused on unexpectedly poor US jobless claims figures, which suggested a new breakdown in the labor market.

News that Johnson & Johnson's one-shot vaccine showed good results in clinical trials helped underpin the recovery trade, led by gains in airlines and other travel stocks. Markets were keying on expectations for President-elect Biden to announce a sizable stimulus package in a range of $1.5-$2 trillion after the US market close Thursday night. Stimulus expectations got support from Fed Chair Jay Powell's comments repeating that the Fed was far from achieving its targets which suggested that any tapering of its asset purchases remained far off.

Among sectors, energy was the leader as it continued its January gains, followed by industrials, financials, and consumer discretionary. Communications services were depressed by weakness in the big internet companies. Consumer staples lagged, and Apple weakness (down 1.5 percent) hurt technology despite strength in chipmakers.

Among companies in focus, J&J rose 1.7 percent on its vaccine trial news. Taiwan Semiconductor rose 6.1 percent on strong demand for its chips. Among FAANGs, Amazon was down 1.2 percent, and Facebook was off 2.4 percent.

In US economic news, initial jobless claims in the January 9 week swelled by 181,000 to a 965,000 level that far exceeded Econoday's consensus range and marked the highest total since mid-August. The surge lifted the 4-week average by nearly 20,000 to 834,250 for the worst showing since early October.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 26 cents to US$56.36 while spot gold declined 48 cents to US$1,847.84. The US dollar fell against most major currencies. The US Treasury 30-year bond yield rose 5 basis points to 1.87 percent while the 10-year note rose 4 basis points to 1.13 percent.


Hopes for vaccine progress and US fiscal stimulus helped equities edge up Thursday. The Europe-wide STOXX 600 rose 0.7 percent, the German DAX firmed 0.4 percent, the French CAC gained 0.3 percent, and the UK FTSE-100 gained 0.8 percent.

Italian stocks lagged, with the FTSE-MIB down 0.5 percent after the Italian coalition government collapsed in a dispute over deploying European aid. UK markets outperformed as the UK appeared to make headway on rolling out vaccines.

Among sectors, travel stocks were buoyed by reports of vaccine progress, including news that Johnson & Johnson's one-shot vaccine appeared effective in clinical trials. Basic resources also advanced on unexpectedly strong Chinese trade figures, with Chinese exports and imports well above expectations.

Other outperforming sectors included autos, real estate and technology while lagging were utilities, construction, food & beverage, and chemicals.

Among companies in focus, EasyJet, the budget airline, rose 8.1 percent. Nokia, the telecom manufacturer, rose 6 percent after announcing deals to sell equipment to T-Mobile and Google. Peugeot, the French automaker, rose 3 percent on better-than-expected sales results. On the downside, Carrefour fell 3 percent after a French official criticized its proposed takeover by a Canadian chain store. Geberit, the Swiss plumbing supplier, fell 5.6 percent on the impact of Swiss franc strength on its business.

Asia Pacific

Most major Asian markets closed higher Thursday, with regional investor sentiment generally supported by solid Chinese trade data, positive vaccine news, and expectations for additional US fiscal stimulus.

Hong Kong's Hang Seng index outperformed with an increase of 1.0 percent, Japan's Nikkei and Topix rose 0.8 percent and 0.5 percent respectively, and Australia's All Ordinaries index advanced 0.4 percent. The Shanghai Composite index was the main outlier, falling 1.0 percent on the day after Chinese authorities reported the first Covid fatality in more than six months.

China's trade surplus in US dollar terms widened from $75.42 billion in November to $78.17 billion in December. This is the biggest monthly trade surplus on record and well above the consensus forecast for a surplus of $70 billion. Exports rose 18.1 percent on the year in December, moderating only slightly from an increase of 21.1 percent in November, while imports rose 6.5 percent on the year, picking up from an increase of 4.5 percent.

Japan's private sector machinery orders rose 1.5 percent on the month in November, slowing sharply from an increase of 17.1 percent in October, and fell 11.3 percent on the year after increasing 2.8 percent previously. Japan's producer price index fell 2.0 percent on the year in December after dropping 2.3 percent in November. This is the 10th consecutive year-on-year decline in producer prices.

Looking ahead*

On Friday in Asia/Pacific, the Chinese house price index report is scheduled as is Indian merchandise trade. In Europe, UK industrial production, UK merchandise trade, UK monthly GDP, French CPI, and Eurozone merchandise trade figures are due. In North America, US PPI-FD, US retail sales, US Empire State manufacturing, US industrial production, US business inventories, and US consumer sentiment reports are on tap.

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