Daily market review

United States

Equities fell back Thursday as dip-buying faded and investors sold into early strength for a second straight day despite another decline in bond yields. Growth stocks outperformed early but lagged late as the market retreated broadly. The Dow Jones industrial average declined 0.9 percent, the S&P 500 fell 1.1 percent, and the NASDAQ lost 1.3 percent.

Financial stocks bolstered value stocks with Morgan Stanley up 4.3 percent and Travelers, after an earnings beat, up 3.1 percent. Early gains in consumer stocks gave way to losses with McDonalds down 0.8 percent and Chipotle off 3.2 percent.

FANMAG stocks faded badly with Apple and Facebook down 1.0 percent and Netflix off 1.5 percent ahead of its earnings release which was due after the close. Automakers gave up early gains with Ford ending down 3.6 percent and GM down 2.8 percent. Airlines sank, with United Airlines off 3.4 percent and American Airlines down 3.2 percent after mixed quarterly results. Homebuilders suffered after weak US existing home sales results, with Lennar down 1.3 percent and DR Horton falling 2.1 percent. Metals, chemicals, machinery, and entertainment lagged too.

Among companies in focus, Peloton plunged 24 percent after CNBC reported the company would suspend production of exercise equipment due to weak demand. Peloton, a huge momentum stock during the pandemic, has seen its fortunes turn following last year's product recall and amid investor preference for value/cyclical stocks.

On the positive side, video game giant Electronic Arts popped up 1.4 percent as video game makers appear set to attract more takeover interest after Microsoft's blockbuster acquisition of Activision.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 62 cents to US$87.39 while spot gold fell US$4.29 to US$1,838.13. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond fell 3 basis points to 2.13 percent, and the 10-year note fell 5 basis points at 1.81 percent.


Early gains on Wall Street and rising reopening hopes helped European equities recover a bit. The Europe-wide STOXX 600 gained 0.5 percent, the German DAX rose 0.7 percent, the French CAC firmed 0.3 percent, and the UK FTSE 100 eased 0.1 percent.

Reopening stocks led the winners, including travel & leisure, after the UK lifted most restrictions and France was expected to announce a similar easing in anti-Covid steps. Investors look for the current coronavirus wave to peak soon. Other winners included technology, as the market saw the sector oversold, plus utilities. On the downside, auto & parts and oil & gas lagged.

Among companies in focus, EasyJet rose 3.3 percent after saying bookings have picked up, and RyanAir gained 4.2 percent after an analyst upgrade. Exasol, the software company, rallied 17 percent after a revenues beat. 2G Energy, maker of electrical generators, rose 9.3 percent on strong sales.

On the downside, Associated British Foods fell 4.4 percent and Alstom, the transportation equipment maker, lost 1.1 percent after both reported revenues short of expectations. BMW slipped by 1.0 percent after the market disliked its sales results.

Asia Pacific

Equities bounced back Thursday amid bargain hunting with support from Chinese rate cuts, though sentiment remains fragile given weakness in US markets and higher US bond yields.

On Thursday, the People's Bank of China cut its one-year loan prime rate by 10 basis points to 3.70 percent, and its five-year rate by 5 basis points to 4.60 percent. The moves matched expectations that the PBoC would act to support the economy against Covid-induced weakness and ongoing turmoil in the property sector.

Japanese stocks rose on dip-buying after the Nikkei 225 closed on Wednesday below 27,500 for the first time since August. The Nikkei 225 gained 1.1 percent and the Topix rose 1.0 percent. Video game stocks led the recovery as investors judged Wednesday's losses were overdone. Sony bounced back by 5.8 percent after dropping 13 percent on Wednesday.

South Korea's KOSPI rose 0.7 percent and the Taiwan Taiex declined 0.1 percent.

Chinese equities improved with China's CSI 300 index up 0.9 percent and the Shanghai composite down 0.1 percent. Consumer staples and financials fared best while materials and property stocks lagged.

China's rate cuts helped Hong Kong‘s Hang Seng index surge 3.4 percent. Property stocks were among the main beneficiaries as the lower PBoC five-year rate will push down mortgage lending rates. Growth sectors outperformed on the cuts, led by internet and tech stocks.

Australian equities ended slightly higher with the All Ordinaries up 0.2 percent but sentiment remained shaky given US equity losses and inflation worries. Most sectors declined, paced by financials, telecoms, consumer stocks, and industrials. Materials rallied with miners leading, along with energy and utilities stocks.

In economic news, Australian employment figures came in stronger than expected, with unemployment falling to 4.2 percent in December compared with expectations for no change at 4.6 percent. The data added to market worries about overheating and labor shortages but were not a major factor as the early December survey period preceded the recent surge in coronavirus cases.

Looking ahead*

In Asia/Pacific, Japanese CPI and Bank of Japan meeting minutes are scheduled for release. In Europe, UK retail sales and Eurozone EC consumer confidence figures are on tap. In North America, Canadian retail sales and US leading indicators are due.

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