Daily market review

United States

Rising bond yields hurt growth stocks Monday while value/cyclicals fared better as investors reversed last week's trade into growth, but the selloff in megacap growth stocks dragged down the major averages into the close. The Dow Jones industrial average edged up 0.1 percent, the S&P 500 slipped 0.3 percent and NASDAQ dropped by 1.3 percent.

President Biden's decision to reappoint Federal Reserve Chair Jerome Powell sparked the rise in bond yields as the market evidently sees him as more hawkish than new Vice Chair Lael Brainard, who was the other likely choice to lead the Fed. Powell's reappointment also spurred an initial relief bid for equities as it removed a source of uncertainty that has limited risk-taking.

Among sectors benefiting from the rotation into cyclicals, energy fared best, with oil prices recovering some of their recent decline amid reports OPEC+ oil exporters may reduce planned output. Oil supermajors fared best with Chevron up 1.8 percent and ExxonMobil up 1.4 percent.

Among other winners, banks outperformed on rising yields, with Wells Fargo up 3.2 percent and Goldman Sachs up 2.2 percent. Consumer staples advanced on strength in health & personal care and grocery stores. Industrials gained, with machinery stocks leading, including Caterpillar, up 0.9 percent

On the downside, communications services trailed, with Google down 1.9 percent and Netflix off 2.9 percent. Other decliners included technology, including Intuit, down 4.4 percent, and Adobe, down 2.2 percent. Amazon, down 2.8 percent, weighed on consumer discretionary.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.01 to US$79.39 while spot gold dropped US$41.82 to US$1,805.51. The US dollar rose vs. most major currencies. Yields on the US Treasury 30-year bond rose 5 basis points to 1.96 percent, and the 10-year note rose 7 basis points to 1.61 percent.


An uptick in telecom stocks on M&A news supported equities while negative coronavirus trends offset the gains. The Europe-wide STOXX 600 and the French CAC both eased 0.1 percent, the German DAX fell 0.3 percent, and the UK FTSE 100 gained 0.4 percent. UK stocks outperformed on strength in miners and energy stocks.

Market confidence has been shaken now that Austria has entered a lockdown and other countries across Europe are reimposing curfews and other restrictions intended to limit the latest wave of infections. Germany, Europe's largest economy, appeared poised to impose lockdowns. German Health Minister Jens Spahn said people who have not yet been vaccinated are likely to catch Covid-19 by the end of the winter.

Travel & leisure stocks extended their recent selloff, including RyanAir, down 2.5 percent, and Carnival, the cruise line operator, down 0.8 percent.

Among other sectors, tech, real estate, health care, financial services, and retail lagged, while outperformers in addition to telecom were basic resources, autos & parts, banks, oil & gas, and chemicals. Miners Antofagasta, up 4.8 percent, and British Petroleum, up 2.4 percent, lifted UK markets.

In M&A, news that KKR was bidding for Telecom Italia, up 30 percent, lifted the entire sector, including British Telecom, up 2.6 percent, and Deutsche Telekom, up 2.3 percent. Separately, Telenor, the Norwegian telecom, rose 1.2 percent on news it will merge its Thai business with Thailand's CP Group. On the downside, Ericsson, the Swedish telecom, fell 5.6 percent on word it will buy Vonage, the US-based cloud communications provider.

Asia Pacific

Asian equities were mixed with South Korea outperforming after supportive trade data, and China getting support from hopes for monetary policy easing. Markets recovered after a weak start on concern over rising Covid case counts in Europe.

Preliminary data showing South Korea's exports rose 28 percent in the first 20 days of November from the year ago period lifted South Korea's KOSPI by 1.4 percent. Samsung Electronics rose 5.2 percent and SK Hynix rallied 7.7 percent.

In Chinese markets, rising expectations for easing from the People's Bank of China bolstered risk appetite after the PBOC adjusted language in its quarterly monetary policy report to remove its reference to "normal monetary policy" and its pledge "to control the valve on money supply." China's CSI 300 index rose 0.5 percent, and the Shanghai composite gained 0.6 percent.

Hong Kong lagged with the Hang Seng index down 0.4 percent, with mainland oil & gas stocks weaker. Taiwan's Taiex benchmark declined 0.1 percent.

Japanese equities opened weaker on Europe's coronavirus worries but dip-buying helped the market recover from its early lows. The Nikkei 225 firmed 0.1 percent and the Topix declined 0.1 percent. Chip-makers were among the day's best performers while energy lagged with declining oil prices.

Australia's All Ordinaries index declined 0.5 percent in a risk-off move with reopening stocks leading the declines on negative coronavirus news from Europe and the US. Stay-at-home stocks fared best, including consumer staples. On the downside, mining contractors, energy, and airlines lagged.

Looking ahead*

In Asia/Pacific, New Zealand retail trade, Singapore CPI, and Taiwan industrial production reports are scheduled. In Europe, PMI composite flash reports are due from France, Germany, Eurozone, and the UK. In North America, US PMI composite flash and Richmond Fed manufacturing reports are on tap.

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