Daily market review

United States

Another nasty US inflation reading spooked an equities market already on edge ahead of the Federal Reserve's policy announcement due Wednesday. Growth/momentum stocks most exposed to rising interest rates led Tuesday's selloff, though bond yields only edged higher. The Dow Jones industrial average eased 0.3 percent, the S&P 500 lost 0.8 percent, and the NASDAQ was down 1.1 percent.

US producer prices rose 0.8 percent in November, far above expectations centering on a gain of 0.5 percent. The 12-month rate rose to 9.6 percent from 8.8 percent, also above what was expected and the largest since November 2010. Excluding food and energy, prices jumped 0.7 percent on the month and 7.7 percent year-over-year, again all well above the high end of forecasts.

Among stock sectors, worst hit were technology, communication services, consumer discretionary, and real estate. Megacaps sold off, with Microsoft ending down 3.3 percent. Several other megacaps recovered from early steep losses on late bargain hunting, with Apple ending down 0.8 percent, Google off 1.2 percent, and Amazon, down 0.3 percent. Separately, Nike, off 0.9 percent, depressed consumer discretionary stocks, along with Tesla, down 0.8 percent.

Value stocks held up best, with financials and energy outperforming, along with consumer staples and materials. Coronavirus concerns weighed on value stocks, and some investors worry the Fed will torpedo the recovery if it pulls back policy stimulus as expected, with rates rising next year.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.16 to US$73.36 while spot gold fell US$15.64 to US$1,771.22. The US dollar rose d vs. major currencies. Yields on the US Treasury 30-year bond rose 2 basis points to 1.83 percent, and the 10-year note gained 3 basis points to 1.44 percent.


Covid-19 and inflation worries depressed equities along with caution ahead of central bank policy meetings. The Europe-wide STOXX 600 declined 0.8 percent, the German DAX lost 1.1 percent, the French CAC declined 0.7 percent, and the UK FTSE 100 eased 0.2 percent.

Investors see the central banks torn between pressure to limit inflation on the one hand and downside risks on the other, with the fast-spreading Omicron variant threatening renewed economic disruptions and weaker demand. Reports that the Omicron variant may be relatively mild offered some reassurance.

Among the day's mixed signals: the International Energy Agency projected lower global oil demand due to rising Covid-19 cases. Germany's Ifo Institut Tuesday downgraded its growth forecast for Germany in 2022 due to expected supply disruptions flowing from the next wave of coronavirus infections. At the same time, UK employment figures showed a much larger than expected drop in unemployment, and US producer prices surged in November.

Among sectors, tech, industrials, autos, and travel & leisure lagged. Travel & leisure faced selling pressure from pandemic effects. Tech stocks suffered from rising bond yields and inflation fears ahead of several monetary policy announcements due this week. Media stocks were hurt by a decline in MediaSet, down 5.6 percent, on news it has raised its stake in Prosiebensat.1 Media, which fell 1.5 percent.

On the positive side, basic resources fared best on strong metals prices to help UK markets outperform. Telecom beat the market, along with retail. Among companies, Ocado, the grocery business, rose 7.3 percent on rising customer orders. Lloyds Bank rose 1.9 percent after passing a BOE stress test.

Asia Pacific

Equities weakened with liquidity trouble at Chinese property developers back in focus, along with virus worries. Activity was thinned by caution before central bank policy announcements due this week.

Hong Kong's Hang Seng index dropped 1.3 percent, with property stocks falling again as liquidity concerns intensified at Shimao, which is considered one the stronger Chinese developers. Tech stocks dropped too with Weibo off 9.6 percent after Chinese authorities fined the social media giant and signaled further tightening of government control over the internet.

China's CSI 300 index declined 0.7 percent and the Shanghai composite index eased by 0.5 percent. Tech and property stocks lagged. Sentiment was hit by worries over the spread of the Omicron variant in the region and as China tightened restrictions in its Zhejiang province, a key industrial center.

South Korea's KOSPI lost 0.5 percent and Taiwan's Taiex declined 1.0 percent, as Chinese tech stock weakness and virus worries weighed.

A selloff in US markets carried over to Japan with the Nikkei 225 off 0.7 percent and the Topix down 0.2 percent. Many investors were sidelined ahead of the Fed policy announcement Wednesday and other central bank policy meetings this week.

A split sector showing left the Australian All Ordinaries index flat. Growth sectors, including tech, underperformed as investors scaled back positions ahead of the Fed's policy announcement, amid concern the Fed will signal faster rate increases. Consumer staples were hurt by a selloff in Woolworths, down 7.7 percent, after the retailer warned about surging costs. Materials outperformed on rising metals prices.

Looking ahead*

In Asia/Pacific, Chinese house prices, Chinese fixed asset investment, Chinese industrial production, and Chinese retail sales are scheduled. In Europe, UK CPI, UK PPI, French CPI, and Italian CPI reports are due. In North America, the Federal Open Market Committee will announce its policy decision and Fed Chair Jerome Powell will hold a press conference. Additionally, the following reports are due: Canadian housing starts, Canadian CPI, Canadian manufacturing sales, US retail sales, US Empire State manufacturing, US import and export prices, US business inventories, US housing market index, and US Treasury TICS.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies