Daily market review

United States

Equities advanced broadly on relief over the deal in Congress to push back the debt ceiling expiration until Dec. 3. An early pullback in energy prices added to the risk-on tone, along with news that Pfizer was asking permission to administer its Covid vaccine to children ages 5-11. The Dow Jones industrial average rose 1.0 percent, the S&P 500 gained 0.8 percent, and the NASDAQ advanced by 1.1 percent.

A bigger-than-expected decline in weekly US jobless claims added to the improved mood as the equities market continued its sharp turnaround from its losses on Wednesday. Expectations are upbeat that Friday's employment report will prove strong enough to trigger QE tapering at next month's FOMC meeting; Econoday's nonfarm consensus is 475,000.

Among sectors, materials, financials, and consumer discretionary fared best while utilities lagged. Energy stocks perked up with a rebound in oil prices at midday after the Energy Department said there were no plans to tap the strategic petroleum reserve, in contrast with comments attributed to Energy Secretary Jennifer Granholm Wednesday.

Among companies in focus, Pfizer rose 1.7 percent after its vaccine proposal. Costco, the retailer, rose 0.8 percent after upbeat September same-store sales results. Levi, the clothing maker, rose 8.5 percent after an earnings beat.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.66 to US$82.44 while spot gold fell US$8.16 to US$1,755.72. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield rose 4 basis points to 2.13 percent and the 10-year note yield was up 5 basis points at 1.57 percent.


Equities rallied on positive news about the US debt limit and an easing in fuel prices, with natural gas down about 10 percent on the day. The Europe-wide STOXX 600 jumped 1.6 percent, the German DAX gained 1.9 percent, the French CAC rose 1.6 percent, and the UK FTSE 100 was up 1.2 percent.

European Central Bank news remained broadly supportive, including ECB meeting minutes and comments from governing council member Isabel Schnabel who repeated that inflation will prove transitory though supply chain problems may persist longer than expected. Better news on US-China relations also proved supportive as US and China said their respective presidents would hold a virtual meeting before year end.

Leading sectors were tech, basic resources, construction & materials, and autos & parts. Energy lagged as oil prices fell back. Other laggards, though still higher, were travel & leisure, media, and food & beverages.

Among companies in focus, St. Gobain, the French construction materials maker, rose 4.2 percent and Sika, the Swiss chemicals maker, rose 3.0 percent after both released positive outlooks despite supply disruptions and rising input prices.

In economic news, German industrial production slumped in August, presumably on supply chain disruptions. Following a slightly steeper revised 1.3 percent monthly advance in July, output nosedived fully 4.0 percent, much sharper than the market consensus and its worst performance since April last year.

Asia Pacific

Asian stocks advanced, tracking the recovery in US markets after better news on the US debt ceiling, and a retreat in oil prices after Russia's apparent offer to boost natural gas supplies, though concern over inflation and rising energy prices remains.

Hopes for better US-China relations added to the improved mood after a meeting between the two sides yielded news that presidents Biden and Xi would hold a virtual meeting by year end.

A rebound in tech and other growth stocks propelled Hong Kong with the Hang Seng index up 3.1 percent. Risk appetite got a boost from a reprieve in rising energy prices after Russian President Vladimir Putin's comment that natural gas exports to Europe could reach a record this year. Financials and property stocks rebounded while energy stocks retreated.

Tech stocks strength and US-China hopes lifted South Korea with the KOSPI up 1.8 percent to reverse Tuesday's losses. Taiwan's Taiex index gained 2.0 percent.

Japanese equities were mixed to better as investors finally bought the dip in large cap growth stocks; value lagged, in a reversal of the recent trend. The Nikkei 225 index rose 0.5 percent but the broader Topix declined 0.1 percent. A better showing on Wall Street after positive US debt ceiling news helped. Among sectors, mining, oil & gas, and utilities dropped while marine shipping and auto stocks advanced.

Risk-on sentiment spurred by US news and the reopening trade lifted Australian shares with the All Ordinaries up 0.7 percent. Investors liked news that New South Wales has raised caps on gatherings and will allow more businesses to reopen as vaccination targets are met. Most sectors rose with tech up on gains in buy-now-pay-later stocks. Financials, consumer staples, consumer discretionary, and mining contractors outperformed. On the downside, materials lagged on commodities weakness, along with energy, as oil prices fell back.

Looking ahead*

In Asia/Pacific, Japanese household spending and Chinese PMI composite reports are scheduled. In Europe, the German merchandise trade report is due. In North America, US employment situation, US wholesale inventories, and Canadian Labour Force Survey are on tap.

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