Daily market review

United States

The pandemic trade returned Friday on bearish Covid news from Europe, with investors rotating into highly liquid growth stocks and ultra-safe US Treasuries while value stocks sold off. The Dow Jones industrial average fell 0.8 percent. The S&P 500 lost 0.1 percent and the NASDAQ gained 0.4 percent.

Recovery hopes took a hit on Austria's announcement that it was reimposing a nationwide lockdown, starting Monday, and would require the whole population to be vaccinated from Feb. 1. Investors worry that other European countries may soon follow suit. With US vaccination rates relatively low, the concern is that the US may see surging case counts and anti-Covid restrictions over the winter. Markets appeared vulnerable to consolidation after the S&P 500 and NASDAQ set record high closes Thursday.

Comments from Federal Reserve officials added to the risk-off tone, as a chorus of Federal Open Market Committee members expressed willingness to consider faster tapering of asset purchases – and an earlier interest rate liftoff – in response to more rapid growth and rising inflation concerns.

Among sectors, energy stocks lagged the most as oil prices sank. Financials came off as US Treasury yields fell. A selloff in airlines weakened industrials as markets worry the travel recovery will be aborted.

On the positive side, megacaps and recession-proof technology stocks outperformed, with Facebook up 2.0 percent, Apple up 1.7 percent, Microsoft up 0.5 percent, and Nvidia up 4.1 percent. Tesla gained 3.7 percent after an analyst upgrade. Household & personal care stocks rose on Covid concerns, with Kimberly-Clarke and Church & Dwight both up 1.1 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.26 to US$78.38 while spot gold fell US$13.14 to US$1,847.33. The US dollar rose vs. most major currencies but declined vs. the safe-haven yen. Yields on the US Treasury 30-year bond fell 9 basis points to 1.90 percent and the 10-year note fell 6 basis points to 1.53 percent.


Falling commodities prices and new restrictions to counter spreading coronavirus undercut European equities. The Europe-wide STOXX 600 declined 0.3 percent, the German DAX and the French CAC both slipped 0.4 percent, and the UK FTSE 100 was down 0.5 percent.

With Covid case counts rising across much of Europe, markets expect more restrictions and lockdowns. Austria mandated vaccines for adults and imposed a lockdown for a maximum of 20 days for unvaccinated people. German Health Minister Jens Spahn declined to rule out lockdowns even for people who have been vaccinated. Defensive sectors plus stay-at-home plays like personal & household goods, technology, and health care, held up best while reopening plays sank.

Oil & gas stocks lagged the most as oil prices dropped on expectations for a release of oil stockpiles from the US and Chinese strategic reserves, and concern about the impact of rising Covid cases. Autos & parts were hit as markets anticipate factory shutdowns to curb the pandemic, with Renault off 4.7 percent. Travel & leisure stocks were hit, with RyanAir off 4.3 percent and Whitbread, the hospitality company, down 2.3 percent. Banks suffered, with Austria's Raffeisen off 6.9 percent on Austria's lockdown.

Among companies in focus, Kingfisher, the retailer, fell 4.4 percent, and Bekaert, the manufacturer, fell 7.8 percent after disappointing trading updates. On the positive side, Hermes, the luxury goods retailer, rose 5.2 percent on reports it may be added to the CAC. Gesco, the manufacturer, gained 3.5. percent on an earnings beat.

Asia Pacific

Asian equities were mixed with a boost from overnight gains on Wall Street and with company news in focus.

China's CSI 300 index rose 1.1 percent, and the Shanghai composite gained 1.1 percent, with support from a better showing from property stocks and financials including developers China Evergrande, up 5.3 percent, and Country Garden, up 5.5 percent.

More losses in tech and internet stocks hurt Hong Kong, with the Hang Seng index off 1.1 percent. Alibaba, the e-commerce leader, fell 11 percent to bring its losses to 14.7 percent on the week, after disappointing quarterly results and bearish guidance.

A positive lead from Wall Street and generally favorable reaction to Japan's fiscal stimulus plans helped Japanese equities, with the Nikkei 225 up 0.5 percent and the Topix up 0.4 percent.

South Korea's KOSPI gained 0.8 percent with a boost from LG Electronics, up 2.0 percent, on a report it is working with Apple on autonomous cars. Taiwan's Taiex benchmark eased 0.1.

Australia's All Ordinaries index rose 0.2 percent with a boost from Crown Resorts, up 17 percent, after Blackstone's improved takeover offer. Sectors were mixed with health care, consumer staples, miners, and energy outperforming. Industrials lagged while other sectors were nearly flat.

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