Daily market review

United States

Equities sank Wednesday with losses accelerating into the close as investors shed risk amid concerns over excessive speculation and worries that some big US funds face losses from massive short squeezes in stocks like GameStop and AMC Entertainment. The Dow Jones industrial average fell 2.1 percent, while the S&P 500 and NASDAQ 100 both dropped 2.6 percent.

With markets trading near recent peaks and uncertainty high over the timing of recovery from the pandemic, de-risking spurred corrective pressure. Strong quarterly results didn't give sentiment much support, whether from Microsoft, which edged up 0.3 percent, or from Advanced Micro Devices, down 6.2 percent, but markets did react badly to an earnings miss and disappointing guidance from Boeing, which dropped 4 percent.

Institutional investors took off risk positions as they saw excessive speculation in the frenzy of buying by online retail day-traders that pushed GameStop up another 135 percent and AMC up 300 percent Wednesday, in the face of heavy short positioning from prominent hedge funds and others.

Markets didn't respond to the Fed's as-expected policy announcement or its modest downgrade of economic conditions, or to comments from Fed Chair Jay Powell, who repeated that the Fed is a long way from considering a tapering of its asset purchases.

Among sectors, worst off were industrials, financials, materials, and communications services, while energy stocks held up best.

In US economic data, durable goods orders rose for the eighth consecutive month, recording a 0.2 percent gain in December, but they were far below expectations, and their growth pace slowed from a 1.2 percent advance in November.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil eased 21 cents to US$55.61 while spot gold fell US$10.28 to US$1,841.23. The US dollar rallied sharply against most major currencies. The US Treasury 30-year bond yield declined 3 basis points to 1.77 percent while the 10-year note fell 3 basis points to 1.01 percent.


Equities slipped Wednesday on concerns that a slow rollout of Covid-19 vaccines and prolonged lockdowns will delay the recovery. The Europe-wide STOXX 600 fell 1.2 percent, the German DAX slipped 1.8 percent, the French CAC lost 1.2 percent, and the UK FTSE-100 was off 1.3 percent.

The dispute between European Union, its members, and AstraZeneca over vaccine deliveries added to negative sentiment as vaccine rollouts have been slow across Europe. News that the UK and other countries were stepping up quarantine measures for travelers compounded negative sentiment.

Among sectors, worst off were basic resources, technology, banks, and autos. Holding up best were real estate, telecom, and media. Among companies in focus, Hapag-Lloyd, the German shipper, fell 8.3 percent on an earnings miss. Tullow Oil, the UK driller, fell 8.1 percent on disappointing production figures. LVMH, the French luxury conglomerate, slipped 0.3 percent despite earnings and revenues beats.

In economic news, the German GfK survey confirmed another deterioration in consumer sentiment in January and anticipated marked worsening in February. January's provisional consumer climate indicator was trimmed 0.2 points to minus 7.5, down from minus 6.8 in December.

Asia Pacific

Major Asia/Pacific markets were mixed Wednesday with Japan moderately higher on hopes for positive corporate earnings, and China edging up on strong economic data. Australia lagged as commodity prices retreated while Hong Kong slipped as corrective selling continued, especially for recently high-flying technology shares.

Japan's Nikkei 225 rose 0.3 percent while the broader Topix improved by 0.7 percent. The day's best performer was Nitto Denko, up 7.9 percent after the electronics maker raised its guidance. Canon, the optical products maker, rose 6.7 percent.

Hong Kong's Hang Seng index eased 0.3 percent, with Geely Automotive Holdings a notable decliner, down 5 percent. Materials and tech stocks remained under profit-taking pressure.

In China, the Shanghai Composite index edged up 0.1 percent, with a boost from Chinese industrial profits which rose 20.1 percent year-on-year in December, after rising 15.5 percent in November. Equities gains were limited by concerns about resurgent Covid-19, and worries that Chinese monetary policy was shifting toward a tighter stance.

Australia's All-Ordinaries index fell 0.7 percent, paced by declines in mining shares as iron ore prices dropped. Rio Tinto was off 3.9 percent and BHP fell 3.4 percent. In macroeconomic developments, investors focused on news that Australian inflation remained muted in the fourth quarter, which suggested the Reserve Bank of Australia could retain its accommodative policy.

Australia's headline consumer price index rose 0.9 percent on the year in the three months to December, picking up from an increase of 0.7 percent in the three months to September but still well below the Reserve Bank of Australia's target range of 2.0 percent to 3.0 percent. The CPI rose 0.9 percent on the quarter after increasing 1.6 percent previously.

Among companies in focus, Baozun, the Chinese e-commerce giant, rallied 30 percent on news of a tie-up with iClick. On the downside, LG Display, the Korean transistor display panel maker, fell 5 percent despite topping earnings expectations.

Looking ahead*

On Thursday in Asia/Pacific, New Zealand merchandise trade and Japanese retail sales are scheduled. In Europe, Swiss merchandise trade, Eurozone EC economic sentiment, Italian business and consumer confidence, and German CPI reports are due. In North America, US GDP, US international trade in goods, US jobless claims, US new home sales, and US leading indicators are on tap.

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