Daily market review

US, Europe off after mixed US jobs report; Asia mixed

United States

A selloff in technology and other growth stocks pushed down equities after the US jobs report fueled expectations for faster removal of Federal Reserve stimulus. The Dow Jones industrial average fell 0.2 percent, the S&P 500 slipped 0.8 percent, and the NASDAQ lost 1.9 percent.

Investors looked past the downside miss in US nonfarm payrolls to focus instead on falling unemployment and rising participation rates. St. Louis Fed President James Bullard, a noted hawk, called the jobs report "strong across the board," and predicted the economy will reach full employment in early 2022, on top of continued inflation pressures. Bullard has urged the Fed to complete its taper by the end of the first quarter, and to consider rate increases thereafter.

Leading the day's selloff were momentum stocks including the FANMAG complex, plus Tesla down 6.4 percent, software maker Nvidia, down 4.5 percent, Google, down 0.7 percent, and Facebook off 1.1 percent. These stocks did recover from the day's lows just before the close.

Cyclical and reopening plays suffered too on uncertainty over the impact of Omicron, and concern that withdrawal of policy stimulus will slow the recovery, along with labor scarcity and supply chain trouble. US bond yields dropped on expectations for slower growth. Banks, automakers, retailers, steel, and entertainment were notable decliners. Holding up better were energy, consumer staples, utilities, and materials.

Among companies in focus, Docusign plunged 42 percent on much weaker guidance. Smith & Wesson, the gunmaker, fell 28 percent on earnings and revenue misses. On the positive side, Big Lots, the retailer, rose 5 percent after topping earnings expectations. Zillow Group, the housing broker, rose 6 percent after reporting progress in winding down its house-flipping business.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 35 cents to US$69.79 while spot gold rose US$14.37 to US$1,782.97. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond fell 8 basis points to 1.68 percent and the 10-year note dropped 9 basis points to 1.35 percent.

Europe

A selloff in US stocks spilled over to Europe and uncertainty over the Omicron weighed on risk appetite headed into the weekend. The Europe-wide STOXX 600 and the German DAX both fell 0.6 percent, the French CAC declined 0.4 percent, and the UK FTSE 100 dipped 0.1 percent.

European stocks turned lower after US markets reacted badly to a mixed US employment report. Weaker-than-expected payroll growth and Omicron worries hurt risk sentiment, while concern that the Federal Reserve will proceed with rate increases hurt tech and other highly-valued growth stocks after more comments from Fed officials underlined their inclination to speed up tapering to allow a more aggressive move on interest rates next year if needed. European Central Bank officials, on the other hand, have doubled down on their contention that inflation is likely to recede as the reopening unfolds.

Among sectors, basic resources were the biggest loser, along with banks, on concern over weakening demand and lower market interest rates. Holding up better were energy stocks, with oil prices rising during European hours, plus travel & leisure, on bargain-hunting after recent losses.

Among stocks in focus, BP rose 1.3 percent, and Royal Dutch Shell gained 0.9 percent after an analyst upgrade.

Asia Pacific

Equities were mixed to better with a boost from rising energy prices and bargain hunting after recent weakness.

Mainland Chinese markets advanced with China's CSI 300 index and the Shanghai composite index both up 0.9 percent. Most sectors rose, paced by a rally in energy stocks following reports that Chinese authorities may raise coal prices next year after supply shortages this year. Consumer staples and financials showed good gains.

Weakness in tech stocks offset strength elsewhere in Hong Kong equities, with the Hang Seng index off 0.1 percent. Tech giant Didi dropped 19 percent after the ride-sharing app said it would delist from the New York Stock Exchange, apparently in response to pressure from Chinese regulators.

South Korea's KOSPI gained 0.8 percent. Taiwan's Taiex eased 0.2 percent.

Japanese markets recovered with value/cyclicals leading on perceptions that recent losses were overdone. Risk assets rose on news that Merck had applied for permission to sell its Covid-19 pill in Japan. The Nikkei 225 gained 1.0 percent and the Topix advanced by 1.6 percent. Most sectors rose, with transportation stocks leading, along with materials, financials, and textiles.

Australia's All Ordinaries index edged up 0.1 percent but risk-taking was limited by uncertainty over Omicron and caution before the monthly US jobs report. Most sectors edged up, led by energy on rising oil prices. Industrials, financials, consumer discretionary outperformed while consumer staples, tech, and telecom lagged.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

Looking forward

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