Daily market review

United States

Equities gave back some of last week's gains as concern over the fast-spreading Omicron Covid-19 variant prodded investors to take profits and scale back risk. The Dow Jones industrial average and the S&P 500 both fell 0.9 percent, and the NASDAQ lost 1.4 percent.

Worst hit were reopening plays, especially travel & leisure, plus other consumer discretionary stocks, including restaurants and department stores. Losses in momentum stocks, including Tesla, down 5.0 percent, and Nvidia, down 6.8 percent, weighed on the market. Energy stocks retreated after last week's advance. Banks suffered as interest rates declined. Industrials were hurt by a selloff in airlines on the Covid scare, plus weakness in Boeing, off 3.7 percent.

On the positive side, materials outperformed on strength in precious metals. Consumer staples held up better on the stay-at-home trade. Health care outperformed as the pandemic trade lifted vaccine- and drug-makers. High-yielding real estate and utilities stocks, considered alternatives to bonds, rose with falling market interest rates.

The de-risking impulse took down some popular meme stocks, including Gamestop, down 14 percent, and AMC, down 15 percent.

Among companies in focus, Pfizer gained 4.6 percent after saying it will buy Arena Pharmaceuticals. Clear Channel Outdoor, the media company, rose 7.9 percent after raising its guidance. Harley Davidson rose 4.7 percent after the iconic motorcycle company announced plans to list its electric motorcycle unit. On the downside, IGM Biosciences, the biotech, plunged 41 percent on disappointing clinical trial results.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 85 cents to US$74.49 while spot gold rose US$3.85 to US$1,786.86. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield dropped 7 basis points to 1.81 percent, and the 10-year note declined 7 basis points to 1.41 percent.


Resurgent worries over the Omicron variant weakened equities with reopening stocks hit hardest and health care faring best. The Europe-wide STOXX 600 dipped by 0.4 percent, the French CAC lost 0.7 percent, the German DAX was flat, and the UK FTSE 100 fell 0.8 percent.

Risk assets reacted badly to UK Prime Minister Boris Johnson's statement that Britain faces "a tidal wave" of Omicron cases, and his call for people to work from home.

Among sectors, travel & leisure sold off the most, followed by banks, oil & gas, retail, construction, and real estate. Basic resources held up relatively well, with commodities lifted by expectations for more expansive Chinese fiscal and monetary policies.

Among companies, vaccine maker BioNTech rose 4.7 percent. Vifor Pharma rose 18 percent after the Swiss pharma said it was in talks to be acquired by Australia's CSL. Among tech shares, SAP rose 2.5 percent after an analyst upgrade.

Attention is focusing on European Central Bank and Bank of England policy meetings on Thursday. Investors generally expect no policy change but are watching for signals on subsequent meetings. The Fed, by contrast, is expected to accelerate the pace of its taper in asset purchases at its meeting Wednesday, with rate increases to come in mid-2022.

Asia Pacific

Equities were mixed with tech and property stock weakness weighing against positive momentum from US gains on Friday.

China's CSI 300 index rose 0.6 percent and the Shanghai composite index firmed 0.4 percent with a boost from expectations for more fiscal and monetary policy support after the government's Central Economic Work Conference. Property stocks were hurt after the post-work conference statement repeated that housing is not for speculation. Utility stocks outperformed.

Hong Kong's Hang Seng index fell 0.2 percent, with sentiment hurt on news that Chinese artificial intelligence startup SenseTime pulled its Hong Kong IPO after the firm was placed on a US investment blacklist.

South Korea's KOSPI and Taiwan's Taiex both slipped 0.3 percent, as tech stocks were under selling pressure.

Wall Street gains Friday bolstered Japanese markets, with the Nikkei 225 up 0.7 percent and the Topix up 0.1 percent. Gains were limited as investors limited risk ahead of central bank policy announcements due this week, including the Bank of Japan on Friday. Best sectors were marine shipping, insurance, and banks, while automakers lagged.

Commodity price strength boosted Australian equities but the morning rally faded and the All Ordinaries index ended up only 0.4 percent. Energy, miners, and industrials outperformed, along with real estate investment trusts after Charter Hall, the REIT, up 5.6 percent, raised its guidance. Lagging were financials, health care, and consumer discretionary stocks.

Looking ahead*

In Asia/Pacific, the Australian NAB Business Survey and Indian wholesale price report are scheduled. In Europe, the UK labour market report, Swiss producer & import prices, and Eurozone industrial production reports are due. In North America, US NFIB business sentiment and US producer price-final demand reports are on tap.

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