Daily market review

United States

Major equity indexes ended a turbulent week lower with sentiment dented by worries about the fast-spreading Omicron variant, and the Federal Reserve's hawkish policy shift, with selling exacerbated by heavy options expiration. The Dow Jones industrial average fell 1.5 percent, the S&P 500 lost 1.0 percent, and the NASDAQ declined 0.1 percent.

Value/cyclicals stocks lagged but growth stocks fizzled too. Sectors were mixed, with dip-buying in beaten-down reopening stocks, while energy, financials, materials, and industrials lagged. Banks and other financials were hurt by the flattening US yield curve. Autos, homebuilders, industrial conglomerates, and retailers also lagged. Energy stocks suffered from falling oil prices. Technology and communications services saw continuing selling pressure after Thursday's losses.

On the positive side, biotechs bolstered health care, including Moderna, up 4.5 percent, and Novovax, up 11 percent on positive Covid vaccine news. Among reopening stocks, airlines and travel/tourism/hotels outperformed as their beaten-down stocks attracted buyers. Delta rose 2.1 percent a day after raising its profits guidance for 2022. Real estate outperformed the market but still ended lower.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.60 to US$73.16 while spot gold eased 53 cents to US$1,797.77. The US dollar rose vs. most major currencies. Yields on the US Treasury 30-year bond declined 4 basis points at 1.82 percent, and the 10-year note declined 2 basis points to 1.41 percent.


Equities slipped with investors focused on negative Covid news and hawkish central banks, plus spillover from bearish price action on Wall Street. The Europe-wide STOXX 600 declined 0.6 percent, the German DAX lost 0.7 percent and the French CAC fell 1.1 percent. The UK FTSE 100 edged up 0.1 percent on a weaker sterling.

Many cyclicals were hurt by concern that the pandemic will dampen demand again as governments impose renewed restrictions. A weak German Ifo sentiment report weighed on risk appetite.

Worst off were autos & parts, oil & gas, banks, chemicals, construction, industrials, and technology. Weak European auto sales figures and an analyst downgrade hurt automakers, including Daimler, down 3.7 percent after a downgrade at HSBC. Oil price declines depressed energy stocks, including Royal Dutch Shell, down 1.8 percent.

UK markets outperformed as travel & leisure rebounded, with a boost from IAG, up 4.0 percent, as the owner of British Airways saw bargain hunting after a rough week on Covid worries. Basic resources also outperformed with metals prices higher. Other outperformers included real estate, food & beverage, and utilities.

In German economic news, Ifo Institute said economic sentiment deteriorated for a sixth successive month in December. The headline climate indicator dropped nearly 2 points to 94.7, short of the market consensus and its weakest print since February. It now stands 1.6 points below its pre-pandemic level in February last year.

Asia Pacific

A selloff in US tech and growth stocks pushed down equities with Japan lagging as investors eyed tightening from major central banks, including the Bank of England's unexpected rate increase. Fallout from global increases in Covid cases depressed risk assets too.

Tech losses paced a selloff in Japanese equities with the Nikkei 225 down 1.8 percent and the Topix off 1.4 percent. Most sectors declined, with metals, autos, and precision makers lagging. Holding up better were natural resources and utilities stocks. Markets saw minimal reaction to the Bank of Japan policy announcement that its basic easing stance is unchanged and it is extending its program to support lending to pandemic-hit small businesses.

China's CSI 300 index lost 1.6 percent and the Shanghai composite index fell 1.2 percent with consumer stocks off the most, along with tech. Hong Kong's Hang Seng index declined 1.2 percent as tech stocks continued to suffer from worries over China's regulatory crackdown and the US blacklisting of several Chinese tech firms. Biotech stocks were notable winners after they did not appear on the US blacklist.

South Korea's KOSPI rose 0.4 percent and Taiwan's Taiex rose 0.2 percent, with equities seeing better demand headed into year end.

Australia's All Ordinaries index firmed 0.1 percent with materials, energy, and financial stocks better while tech stocks dropped after a US regulator launched an investigation into Afterpay, down 7.6 percent, and other buy-now-pay-later names.

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