Daily market review

United States

News of the first confirmed Omicron case in the US knocked equity indexes down Wednesday after a risk-on rebound lifted value/cyclicals through the morning. The Dow Jones industrial average dropped 1.3 percent, the S&P 500 lost 1.2 percent and the NASDAQ fell 1.8 percent.

Airline stocks reversed their morning gains to lead the market lower in the afternoon, with American Airlines down 8.0 percent after being up about 3 percent earlier. Airlines and other reopening stocks were among the day's best performers early in the day on bargain hunting following Tuesday's losses on virus fears.

A range of value/cyclical sectors that rose through the morning faltered and ended lower, including energy, materials, and financials. Financials tracked higher yields through midday but they fell back with much of the market on news that the US Centers for Disease Control had identified a first US Omicron case in California. The patient, who returned from South Africa on Nov. 22, was fully vaccinated, and suffered mild symptoms.

Autos held up relatively well, paced by Ford, up 2.0 percent, on positive analyst commentary on its electric car progress. Communications services and consumer discretionary stocks lagged. Technology lagged too, with Salesforce, the software company, off 12 percent after downgrading is guidance.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil dropped US$1.87 to US$68.70 while spot gold rose US$5.25 to US$1,778.08. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond fell 4 basis points to 1.76 percent, and the 10-year note fell 3 basis points to 1.41 percent.


A rebound in value/cyclical stocks lifted equities as concerns over the omicron variant were seen as overdone. The Europe-wide STOXX 600 rose 1.7 percent, the French CAC gained 2.4 percent, the German DAX rose 2.5 percent, and the UK FTSE 100 was up 1.6 percent.

A recovery in oil and commodities prices lifted energy and miners, along with beaten-down travel & leisure, autos, industrials, retailer, banks, plus technology. Airlines were among the day's best performers, with RyanAir up 4.5 percent, after its steep decline over the last week. Lagging but still higher were food & beverage, real estate, health care, and utilities.

Among stocks in focus, Drax, the electricity generator, jumped 9.3 percent after raising its guidance. Husqvarna, the outdoor tool maker, rose 5.4 percent on better guidance on the stay-at-home trend. Sanofi, the big pharma, rose 2.4 percent on upbeat guidance linked to its vaccine business.

Asia Pacific

Equities recovered on bargain-hunting after steep losses Tuesday, with value/cyclicals leading the rebound on perceptions they were especially oversold.

Dip-buying lifted mainland Chinese markets, with support from Chinese Premier Liu He's assurance that China would exceed its 6 percent growth target this year, despite Covid and other problems. China's CSI 300 index firmed 0.2 percent and the Shanghai composite index rose 0.4 percent. Gains were limited by a surprisingly weak PMI manufacturing reading showing business activity contracted in November.

Hong Kong equities improved on strength in financials and tech stocks, with the Hang Seng index up 0.8 percent. South Korea's KOSPI rallied 2.1 percent, with a boost from consumer discretionary stocks. Taiwan's Taiex gained 0.9 percent.

Japanese markets edged back up as risk appetite recovered. The Nikkei 225 and the Topix both rose 0.4 percent. Most sectors rose, led by marine shipping, machinery, autos, banks, and real estate. Pharma, tech, and communications services lagged.

Australia's All Ordinaries index declined 0.4 percent as markets tracked US markets lower after hawkish comments from Fed Chair Jerome Powell. Most sectors declined, with consumer staples and discretionary stocks lagging, along with real estate, utilities, and telecom. Materials held up relatively well on rising iron ore prices. Health care managed gains.

In economic news, the Markit China manufacturing PMI fell from 50.6 in October to 49.9 in November, well below expected. The official CFLP manufacturing PMI survey, published earlier, showed that conditions were stagnant, with its headline index increasing from 49.2 in October to 50.1 in November. Separately, Australia's GDP contracted 1.9 percent on the quarter in the three months to September, weakening from an increase of 0.7 percent in the three months to June but stronger than the consensus forecast for a decline of 2.9 percent.

Looking ahead*

In Asia/Pacific, the following reports are due: South Korean CPI, South Korean GDP, and Australian goods & services trade. In Europe, Swiss retail sales, Eurozone PPI, and Eurozone unemployment. rate reports are due. In North America, US jobless claims and US motor vehicle sales reports are on tap.

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