Daily market review

United States

Major stock indexes edged up to close at fresh record highs on Monday, with value stocks catching up after under-performing last week, while a few megacaps lagged to restrain the advance. The Dow Jones industrial average rose 0.3 percent, the S&P 500 firmed 0.2 percent and the NASDAQ was up 0.6 percent.

Energy fared best as oil prices advanced, with industrials, materials, and consumer discretionary shares outperforming too. Among energy shares, oil servicers Haliburton rose 2.4 percent and Schlumberger gained 3.2 percent. On the downside, communications and tech stocks suffered, with Google down 3.0 percent, Microsoft off 0.7 percent, and Apple down 0.6 percent. Health care lagged too, with UnitedHealth off 1.5 percent.

Tesla, up 8.5 percent, extended its recent extraordinary momentum to lift consumer discretionary, though Amazon dipped 1.6 percent.

In US economic news, the manufacturing sector index compiled by the Institute of Supply Management slipped to 60.8 in October from 61.1 in September. It was firmer than the consensus call of 60.3 and still above 59.9 seen in August.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 16 cents to US$84.54 while spot gold rose US$9.95 to US$1,792.80. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond rose 4 basis points to 1.97 percent, and the 10-year note was up 2 basis points at 1.54 percent.


US-European Union trade news and a better showing for bank stocks underpinned equities. The Europe-wide STOXX 600 rose 0.7 percent, the German DAX gained 0.8 percent, the French CAC rose 0.9 percent, and the UK FTSE 100 was up 0.7 percent.

Among sectors, industrials got a lift on news the EU and US had settled their metals trade dispute. Thyssenkrupp, the industrial conglomerate, rose 3.1 percent, and ArelorMittal, the steelmaker, rose 1.1 percent.

Bank stocks rose too on expectations for strong earnings and in response to rising bond yields on expectations for central bank tightening this year and next. Erste Bank rose 2.2 percent ahead of its earnings due Tuesday while Banco Santander rose 2.0 percent and Bankinter rose 3.1 percent amid reports they are in merger talks. Lloyds Bank rose 1.8 percent after an analyst upgrade.

Among other companies in the news, Ryanair rose 1.8 percent after positive quarterly results. Howden Joinery, the construction supplier business, rose 0.7 percent after its trading update. Volkswagen rose 0.4 percent after news it will reopen its Skoda facility after a closure due to chip shortages.

Pandora, the jeweler, dropped 5.8 percent after an earnings miss. Coloplast, the medical devices business, fell 1.7 percent on a disappointing quarter. Barclays fell 0.9 percent after news its CEO will resign.

Asia Pacific

Asian equities were mostly higher with Japan rallying to outperform the region as markets reacted favorably to Japanese election results.

Investors put on risk positions after news that Japan's ruling coalition led by the Liberal Democratic Party had secured a big enough majority to control parliament. Markets judged the victory would enhance prospects for fiscal stimulus and political stability. The Nikkei 225 index rallied 2.6 percent and the broader Topix rose 2.2 percent with gains nearly across the board. Best sectors were machinery, electrical appliances, banks, and transportation equipment.

Chinese markets lagged, with mainland healthcare names weaker while technology shares held up better. Soft Chinese purchasing managers data dampened sentiment. China's CSI 300 index declined 0.4 percent and the Shanghai composite eased by 0.1 percent. Hong Kong's Hang Seng index slipped 0.9 with modest gains in banks and other financials offset by a selloff in health care and biotech. Big internets fell, including Alibaba, down 2.2 percent, and Tencent, down 2.4 percent.

Separately, South Korea's KOSPI gained 0.3 percent and Taiwan's Taiex benchmark rose 0.5 percent.

Australian equities tracked US markets higher, with the All Ordinaries index up 0.7 percent. Tech stocks outperformed, along with industrials including airlines, infrastructure, and logistics, plus energy, biotech, and consumer staples. Financials lagged after disappointing earnings from Westpac, down 7.4 percent.

In economic news, official Chinese PMI survey data indicate that the manufacturing sector contracted for the second month in a row in October, with the headline index for the CFLP manufacturing PMI falling to 49.2 from 49.6 in September. The CFLP non-manufacturing PMI showed slower but solid growth elsewhere in the economy, with its headline index falling from 53.2 in September to 52.4 in October.

Looking ahead*

In Asia/Pacific, South Korean CPI, Bank of Japan September meeting minutes, and the Australian rate announcement are scheduled. In Europe, Swiss CPI, Swiss retail sales, French PMI manufacturing final, German manufacturing PMI final, and Eurozone PMI manufacturing final reports are due. In North America, the two-day Federal Open Market Committee meeting gets under way.

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