Daily market review

United States

Dip-buying lifted major equities indexes Monday with energy leading as oil prices bounced back from last week's selloff. Growth stocks advanced to help the NASDAQ outperform. The Dow Jones industrial average gained 0.6 percent, the S&P 500 gained 0.9 percent, and the NASDAQ jumped 1.6 percent.

Markets appeared oversold as the new week began. Sentiment got a boost from formal US approval of the Pfizer/BioNTech Covid-19 vaccine, which supported reopening plays, including cruise lines and casinos. A better showing in Asia overnight added to risk appetite.

Communications services advanced, with Google up 1.9 percent and Facebook up 1.1 percent. Amazon, up 2.1 percent, led consumer discretionary higher. Dip-buying in airlines and machinery names helped industrials outperform. Banks, insurers, and asset managers boosted financials.

On the downside, health care lagged on weakness in health care providers, with United Health down 1.0 percent to offset strength in pharma as Pfizer rose 2.5 percent on the positive vaccine news. Defensive sectors trailed, including utilities and consumer staples, with weakness in grocery stores.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rallied US$3.54 to US$68.56 while spot gold rose US$21.66 to US$1,804.33. The US dollar fell vs. major currencies. The US Treasury 30-year bond yield was flat at 1.87 percent and the 10-year note yield declined 1 basis point at 1.25 percent.


Investors bought back some of the stocks they sold last week to help equities recover Monday. The Europe-wide STOXX 600 gained 0.7 percent, the German DAX rose 0.3 percent, and the French CAC gained 0.9 percent. The UK FTSE 100 firmed by 0.3 percent.

Risk appetite and commodities prices drew support from signs that China is progressing in containing its Covid-19 outbreak and the recovery in Asian equities Monday. Oil and gas names rebounded with crude oil prices. Luxury goods makers outperformed, with Richemont up 3.9 percent and Swatch up 1.4 percent after selling off last week on Chinese wealth redistribution plans.

UK retail stocks drew support from M&A activity, with Sainsbury up 15 percent on reports it may be acquired by private equity after WM Morrisons received a similar offer last week. On the downside, utilities lagged after Pennon, the UK water utility, fell 3.4 percent on a downgrade at Credit Suisse.

In economic news, Eurozone purchasing managers reports suggested slowing but still robust economic activity. The 59.5 flash composite output index for August was down from a final 60.2 in July but only 0.2 points short of the market expectation. August's headline decline mainly reflected manufacturing where the sector PMI dropped from July's final 62.8 to 61.5, a six-month low. At 59.7, its services counterpart was barely changed from the previous period's 59.8 and above the manufacturing PMI for the first time since the pandemic began.

Asia Pacific

Better virus news and bargain-hunting after a disastrous week lifted Asian markets Monday, with China reporting no local Covid-19 cases for the first time since July.

China bounced as investors viewed market as oversold, though many of the same negatives remained in place, in particular the regulatory crackdown on tech and other sectors. The CSI 300 rose 1.4 percent and the Shanghai composite gained 1.5 percent, with technology and telecom services outperforming while consumer discretionary and financials lagged.

Hong Kong's Hang Seng rose 1.0 percent. Hard-hit tech and healthcare stocks led the winners, with Tencent up 2.0 percent after buying back shares, and Meituan up 1.0 percent on dip-buying. Investors liked news that China would allow Hong Kong Exchanges, up 5.7 percent, to launch a China A-shares futures contract, as it suggested authorities were readier to liberalize market access than other recent regulatory measures suggested.

Big tech stocks bounced back to lead South Korea higher, with the KOSPI up 1.0 percent. Naver, the search engine leader, rose 1.7 percent, and Kakao, the internet lender, rose 3.1 percent to recover Friday's losses. The Taiwan Taiex jumped 2.5 percent as Taiwan began administering its homegrown anti-Covid 19 vaccine, made by Medigen Vaccine Biologics.

Short-covering lifted Japanese markets, with the Nikkei and broader Topix both up 1.8 percent. Growth stocks topped value. Among sectors, marine transportation and transportation equipment fared best while miners lagged. Autos and parts rose, with Toyota up 3.4 percent after leading the selloff last week, and Denso, the auto parts maker, up 6.6 percent.

Tech stocks led Australia higher with the All Ordinaries index up 0.5 percent. Afterpay, the buy-now-pay-later leader, rose 2.7 percent ahead of its earnings report Wednesday, and Charter Hall, the REIT, rose 6.5 percent after an earnings beat.

Looking ahead*

In Asia/Pacific, New Zealand retail trade figures are due. In Europe, German GDP is scheduled. In North America, US new home sales and the Richmond Fed manufacturing report is on tap.

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