Daily market review

US, Europe rebound on hopes for milder virus; Asia weaker

United States

Risk appetite recovered and the reopening trade revived amid hopes that the Omicron variant will turn out to be relatively mild, with drastic restrictions less likely. The Dow Jones industrial average rose 1.9 percent, the S&P 500 gained 1.2 percent, and the NASDAQ was up 0.9 percent.

Gains were across the board with value stocks leading as investors while highly valued momentum stocks lagged on expectations for more rapid Federal Reserve rate increases. Most sectors rose, led by energy, industrials, materials, and consumer staples, while health care and tech trailed.

Reopening stocks led the winners, including restaurants, airlines, cruise lines, hotels, railroads, and department stores. Among the day's best performers were Hertz, up 9.5 percent after several analyst upgrades, and Spirit Airlines, gained 6.0 percent on an upgrade by Evercore. Among financials, analyst upgrades lifted Wells Fargo by 2.2 percent, and Goldman Sachs by 1.7 percent. Grocery stores led consumer staples higher, with Kroger up 3.9 percent. Strength in Apple, up 2.2 percent, bolstered the major averages.

On the downside, Tesla slipped 0.6 percent on a news report that the U.S. Securities and Exchange Commission opened an investigation into Tesla over whistle-blower claims on solar panel defects. Health care stocks lagged on receding virus concerns and profit-taking, with Pfizer off 5.1 percent, and Moderna off 13.4 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rallied US$3.63 to US$73.42 while spot gold fell US$3.84 to US$1,779.13. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond rose 9 basis points to 1.77 percent, and the 10-year note rose 9 basis points to 1.44 percent.

Europe

Equities recovered on reports suggesting the Omicron variant may be relatively mild. The Europe-wide STOXX 600 rose 1.3 percent, the German DAX was up 1.4 percent and the French CAC and the UK FTSE 100 both gained 1.5 percent.

Among sectors, best were travel & leisure, food & beverage, utilities, construction & materials, oil & gas, and banks. Lagging were technology, financial services, health care, and personal & household goods.

Among stocks in focus, TotalEnergies gained 2.6 percent, Royal Dutch Shell rose 2.0 percent, and ENI gained 2.4 percent as crude oil rose. Construction stocks rose on an upbeat PMI construction report from the UK. Banks got a boost from an upgrade at JP Morgan, with Deutsche Bank up 5.1 percent, and Unicredit up 3.3 percent. Anheuser-Busch rose 4.1 percent on positive guidance. On the downside, Just Eat Takeaway fell 5.4 percent after a downgrade at Bernstein.

Asia Pacific

Equities were mostly weaker with Hong Kong underperforming on a selloff in technology and other growth stocks.

Mainland Chinese markets ended lower, with China's CSI 300 index down 0.2 percent and the Shanghai composite index down 0.5 percent. Property and banks held up relatively well, despite losses in China Evergrande, down 20 percent, after the troubled developer said it might not be able to keep making its debt payments.

Investors expect Chinese authorities to ease lending standards to keep other developers afloat and to take other steps to limit contagion. Market declines were limited by Premier Li Keqiang's comment late last week that the People's Bank of China would lower banks' reserve requirement ratio at the appropriate time. The PBOC later Monday announced a 50-basis-point cut in the RRR.

Fallout from Didi Global's announcement that it would delist in the US continued to hit Hong Kong tech stocks, with the Hang Seng index off 1.8 percent. On the positive side, Aluminum Corp of China rose 4.1 percent on reports China will form a large state-owned rare earths business.

South Korea's KOSPI rose 0.2 percent. Taiwan's Taiex eased 0.1 percent.

Coronavirus worries depressed Japanese markets, with the Nikkei 225 down 0.4 percent and the Topix off 0.5 percent. Growth stocks tracked Wall Street's Friday selloff. Softbank fell 8.2 percent on bearish headlines related to its investments in Didi and other Chinese tech firms.

Australia's All Ordinaries index declined 0.2 percent as risk appetite was dampened by expectations for tighter US monetary policy after the US employment report, and uncertainty over how Australia's reopening will unfold in light of Omicron and Delta variant concerns. Sectors were mixed with utilities holding up best and tech stocks lagging.

Looking ahead*

In Asia/Pacific, the following are due: Japanese household spending, Australian residential property prices, Reserve Bank of Australia policy announcement. In Europe, Swiss unemployment, German industrial production, UK Halifax House Price Index, Germany ZEW Survey, and Eurozone GDP reports are due. In North America, US international trade in goods & services, US productivity & costs, US consumer credit, Canadian Ivey PMI, and Canadian merchandise trade reports are on tap.

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Commodities and currencies

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