Daily market review

US flat to better; Europe off on virus, Asia mostly weaker

United States

Equities edged back into positive territory late Wednesday after spending most of the day lower on mixed US economic data and earnings news, and Federal Reserve news supporting expectations for faster withdrawal of policy stimulus. The Dow Jones industrial average was flat, the S&P 500 firmed 0.2 percent and NASDAQ gained 0.4 percent.

Megacaps and growth tech stocks staged a late recovery on dip-buying after lagging this week on rotation into value/cyclicals. Sectors were mixed, with energy shares outperforming despite weaker oil prices. Real estate stocks also outperformed as the sector extended its recovery from last year's lows.

On the downside, consumer staples, utilities, and materials lagged. Walgreens, the pharmacy, fell 1.6 percent, and Kroger, the grocery chain, off 1.2 percent. Materials suffered from weakness in steel and precious metals.

The day's batch of economic reports featured a surprising drop in jobless claims, plus as-expected faster increases in prices for personal consumption expenditures, and better-than-expected personal income and spending. These data points tended to bolster expectations for more rapid Fed tapering and rate hikes next year. The market focused less on separate reports showing weaker-than-expected durable goods orders and new home sales.

Meanwhile, the minutes from the latest Federal Open Market Committee meeting on Nov. 2-3 conformed with recent public comments from Fed officials, including Wednesday's remarks from San Francisco Fed President Mary Daly, who is regarded as a dove. Daly reportedly said she would support accelerating the tapering process if economic data continue to come in hot.

Among companies, disappointing earnings from Gap, down 24 percent, and Nordstrom, down 29 percent, undercut consumer retail stocks, as both reported supply chain trouble. Autodesk, the software company, dropped 16 percent after warning on supply chain problems and pandemic effects on business conditions. On the positive side, John Deere rose 5.3 percent on an earnings beat despite labor strikes.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 44 cents to US$82.13 while spot gold fell US$1.78 to US$1,788.61. The US dollar rose vs. most major currencies. Yields on the US Treasury 30-year bond fell 7 basis points to 1.96 percent, and the 10-year note declined 4 basis points to 1.64 percent.

Europe

Concern over rising coronavirus cases across much of Europe weighed on equities Wednesday. The Europe-wide STOXX 600 firmed 0.1 percent, the French CAC was flat, the German DAX dipped by 0.4 percent, and the UK FTSE 100 gained 0.3 percent.

A weaker-than-expected reading from Germany's Ifo survey weighed on risk appetite. The Ifo business climate index declined from 97.7 in October to 96.5 in November, equaling its lowest reading since February. Meanwhile, investors viewed the day's US data releases, including a surprising drop in jobless claims, as tending to confirm expectations that the Federal Reserve will withdraw stimulus relatively soon as the economy continues to beat expectations.

Among stock sectors, autos and travel & leisure suffered from concern that rising Covid case counts across Europe will spur new restrictions on movement. Among the worst performers was Cineworld, the movie chain, down 6.2 percent.

On the positive side, basic resources fared best, with a boost from rising metals prices. Energy stocks outperformed, with BP up 1.8 percent, and Royal Dutch Shell up 1.3 percent. Telecom gained with support from Telecom Italia, up 16 percent, on reports that KKR may raise its offer to acquire the telecom.

Asia Pacific

Asian equities were mostly weaker with spillover from US growth and tech stock weakness hitting Japan in particular.

Japan sold off on carryover from Tuesday's ugly close for growth/tech stocks on Wall Street and steep increases in US long-term bond yields on rising inflation and Fed Chair Jerome Powell's renomination. The Nikkei 225 slumped 1.6 percent and the Topix declined 1.2 percent. On the positive side, the weaker yen bolstered automakers and other exporters, including Nissan Motors, up 4.4 percent.

In mainland Chinese markets, strength in energy stocks kept the major indexes in barely positive territory, offset largely by declines in tech and industrials. China's CSI 300 index and the Shanghai composite both rose 0.1 percent.

Hong Kong's Hang Seng index firmed 0.1 percent, with energy stocks advancing amid higher oil prices, while property and tech stocks lagged. Property stocks were hurt by comments from China's top economic policy official Vice Premier Liu He, who said China will continue its effort to rein in speculation in housing markets.

South Korea's KOSPI and the Taiwan Taiex both eased by 0.1 percent with tech stocks tracking US tech stock weakness. Another uptick in Covid cases weighed on South Korea too.

Australia's All Ordinaries index declined 0.2 percent as rising bond yields and inflation concerns undercut growth stocks. Most sectors slipped with industrials, consumer discretionary, and financials down. Holding up best were energy and utilities.

Looking ahead*

In Asia/Pacific, the Bank of Korea policy announcement, New Zealand merchandise trade, and Australian capital expenditures reports are scheduled. In Europe, German Gfk consumer climate, German GDP, UK distributive trades, and ECB policy meeting minutes are due.

US markets are closed Thursday for the Thanksgiving Day public holiday. Trading will resume Friday but the stock markets will close earlier at 1300 EST (1800 GMT) and bond markets at 1400 EST (1900 GMT). Canada's financial markets will stay open.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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