Daily market review

United States

Dip-buying after weakness last week gave equities a boost Tuesday, along with hopes for more federal spending and more vaccines. The Dow Jones industrial firmed 0.4 percent, the S&P 500 rose 0.8 percent, and the NASDAQ 100 gained 1.5 percent.

Markets focused on incoming US Treasury Secretary Janet Yellen's renewed call for the US to go "big" on fiscal stimulus. Meanwhile, bulls liked top health official Anthony Fauci's comment that two new vaccines were likely to be approved for US use within weeks, while other incoming administration officials pledged to meet President-elect Biden's plan to administer 100 million vaccines within 100 days.

Most stock sectors showed similar gains, with energy faring best on top of its gains last week. Mega-cap internet stocks boosted communications services, with Google up 3.2 percent and Facebook up 3.9 percent.

Financials matched the market despite weakness in Bank America, down 0.8 percent after reporting disappointing quarterly revenues, and Goldman Sachs, down 2.3 percent despite big quarterly earnings and revenues beats. Technology and health care were in line. Defensive sectors lagged the most, with real estate, utilities, and consumer staples down.

Among companies in focus, General Motors rallied 9.7 percent after announcing a partnership with Microsoft, up 1.8 percent, to build autonomous cars. Johnson & Johnson rose 1.6 percent on expectations for near-term rollout of its Covid-19 vaccine.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 97 cents to US$55.85 while spot gold rose US$13.96 to US$1,839.68. The US dollar fell against most major currencies. The US Treasury 30-year bond yield was unchanged at 1.84 percent while the 10-year note was unchanged at 1.09 percent.


More bad pandemic news and expectations for longer lockdowns weakened equities Tuesday. The Europe-wide STOXX 600 eased 0.2 percent, the German DAX was down 0.2 percent, the French CAC eased 0.3 percent, and the UK FTSE-100 was down 0.1 percent.

Cyclical stocks in particular reacted poorly to reports that Germany was likely to extend its lockdowns into February. On the positive side were reports that the UK is making progress in its immunization drive; on the negative side, other European countries appeared to lag.

In other macro news, the government of Italian Prime Minister Conte appeared poised to survive a no-confidence motion but the Italian FTSE-MIB index edged down 0.3 percent.

Among sectors in the STOXX 600, worst off were retailers, basic resources, travel leisure, media, banks, personal; & household goods, autos, financials, and insurance. Holding up best were health care, oil & gas, technology, utilities, and real estate.

Among companies in focus, Biophytis, the French biotech, rose 21 percent after filing for an IPO in the US. Alstom, the French manufacturer, rose 6 percent on positive quarterly results. HSBC, the bank, rose 2.1 percent on a report it intends to restore its dividend soon. On the downside Superdry, the UK retailer, dropped 16 percent on a Covid hit to sales. OHB, the German aerospace company, fell 10 percent after a report it's losing the contract for the Galileo satellite.

Asia Pacific

Most major Asian markets rose Tuesday though Chinese markets were a notable laggard as China faced resurgent Covid-19 and new shutdowns. The Shanghai composite was off 0.8 percent, with cyclical shares off the most, as China confronted its worst virus outbreak since March 2020.

On the positive side, Hong Kong's Hang Seng rallied 2.7 percent on heavy flows out of Mainland China, with financial and technology sectors leading, especially semiconductors. Japan's Nikkei 500 rose 1.4 percent on bargain-hunting following recent declines. Australia's All Ordinaries Index gained 1.2 percent, powered by gains in mining and financial shares.

On the downside, in addition to virus worries, Chinese markets reacted negatively to reports that China would impose retaliatory sanctions on US officials and US defense contractors who engage in trade with Taiwan. This followed new US sanctions against Chinese officials and companies accused of links to China's military. Some analysts noted a wider shift in sentiment away from Mainland China toward other Asian markets.

Among companies in the news, Korean automaker Kia rose 17 percent after dropping the word "motors" from its brand, and after unveiling new electric vehicles. Bingo Industries, the Australian waste hauler, rallied 20 percent on news it would be acquired by a private equity firm. Fast Retailing, the Japanese owner of the Uniqlo clothing brand, rose 3.1 percent after adding its own payment function on its app.

On the downside, China's Guangzhou Automobile declined 5 percent amid skepticism over prospects for its new electric battery. Tencent Holdings, the huge Chinese internet services company, eased 0.3 percent as investors reacted to the IPO pricing of Kuaishou, a Tencent video-making property.

Looking ahead*

On Wednesday in Asia/Pacific, the Bank of Japan policy announcement is scheduled. In Europe, German PPI, UK CPI, UK PPI, and Eurozone HICP figures are due. In North America, the Bank of Canada policy announcement, BOC Monetary Policy Report, Canadian CPI, and US housing market index.

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