Daily market review

United States

Equities rebounded Wednesday to end in positive territory as risk appetite recovered on a dip in natural gas prices and a hopeful turn in the US debt limit saga. The Dow Jones industrial average firmed by 0.3 percent, the S&P 500 gained 0.4 percent, and the NASDAQ gained 0.5 percent.

Investors reacted well to reports that Senate Minority Leader Mitch McConnell said Republicans would not block passage of a short-term extension in the US debt limit to allow the US to head off a catastrophic default. And markets also got a boost from a precipitous drop in natural gas prices after Russian President Vladimir Putin reportedly said Russia would boost supplies to a market that saw natural gas prices surged this week.

Among sectors, defensives fared best, and the FANMAG complex outperformed, with technology, consumer discretionary, and communications services leading. Laggards included energy, materials, and health care.

Among companies in focus, RPM, the paint company, rose 2.6 percent after a revenues beat, despite cautious guidance. Facebook saw dip-buying after an ugly start to end up 0.2 percent. Google rose 0.9 percent, and Amazon rose 1.3 percent as the megacaps returned to favor.

In US economic news, the ADP national employment report showed private payrolls increased 568,000 in September after an upward revision to 340,000 in August. The headline topped market expectations and will lift expectations for a strong employment report when it is released at 8:30 ET on Friday.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.01 to US$80.78 while spot gold rose US$3.78 to US$1,763.88. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield fell 2 basis points to 2.08 percent and the 10-year note yield was flat at 1.53 percent.


Risk-off sentiment due to an extraordinary two-day rise in fuel prices hurt equities though major indexes recovered from the day's lows as natural gas prices fell back late. The Europe-wide STOXX 600 fell 1.0 percent, the German DAX lost 1.5 percent to underperform the region, the French CAC dipped 1.3 percent, and the UK FTSE 100 was down 1.2 percent.

News of an unexpected plunge in German manufacturers' orders in August added to the risk-off mood as orders slumped 7.7 percent, their steepest fall since April 2020, just after the arrival of Covid.

Among stock sectors, retail, autos & parts, and travel & leisure lagged the most while banks and food & beverage stocks held up best. Automakers have come under pressure as a result of supply chain disruptions while retailers and travel stocks suffered on perceptions that rising inflation and fuel prices will hurt consumer discretionary spending. Banks got a lift as yields continued to rise on surging fuel costs.

Among companies in focus, Deutsche Telecom was a notable decliner, down 4.5 percent after a big share placement. Mediobanca, the Italian investment bank, fell 3.3 percent after an analyst downgrade. On the positive side, Tesco, the UK retailer, rose 6 percent after a strong first half result and better guidance.

Asia Pacific

Asian markets mostly weakened Wednesday with rising prices for energy and other commodities fueling inflation concerns and tech stocks under pressure again.

Renewed losses in tech stocks depressed Hong Kong, offset in part by gains in energy stocks as oil rose again. The Hang Seng index ended down 0.6 percent. Biotech, health care, and financials also lagged. Uncertainty over China's property sector remained a big overhang for markets. Alibaba rose 1.5 percent on news US investor Charlie Munger had added to his stake in the e-commerce giant.

Weakness in big tech stocks on rising US bond yields hit South Korea with the KOSPI down 1.8 percent. Taiwan's Taiex index declined 0.4 percent.

Japanese equities slipped with the Nikkei 225 index off 1.1 percent and the broader Topix down 0.3 percent. Growth stocks lagged as inflation worries pushed up bond yields. Value stocks fared better as investors anticipate additional fiscal stimulus with the incoming government of Prime Minister Fumio Kishida. Higher energy and other input prices raised concern about corporate profitability. Among sectors, commodity-linked stocks advanced along with utilities and banks. Lagging were automakers, airlines, pharma, and shipping.

Australian shares slipped with the All Ordinaries down 0.5 percent as markets resumed their focus on rising inflation, higher bond yields, and slower Chinese growth. A rate increase by the Reserve Bank of New Zealand focused attention on prospects for more central banks to scale back policy accommodation. Most sectors declined, with banks hit after regulators tightened standards for mortgage lending. Consumer discretionary lagged as travel companies retreated. Tech stocks outperformed as buy-now-pay-later stocks ticked up, while energy stocks gained with rising oil prices.

Looking ahead*

In Asia/Pacific, the Reserve Bank of India policy announcement is scheduled. In Europe, reports are scheduled on: Swiss unemployment, German industrial production, UK Halifax house prices, French merchandise trade, Italian retail sales, plus the European Central Bank's policy meeting minutes. In North America, Canadian Ivey PMI, US jobless claims and US consumer credit reports are due.

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