What a rollercoaster ride for the US stock market yesterday, where major benchmark indices caught the 'flu bug', triggered by a bout of risk-off behaviour that had kick-started in the Asian session and extended to the European session, due to the heightened risk of a new mutated strain of coronavirus that was reported to be spreading rapidly in UK over the weekend.
The FTSE 100 tumbled by 1.73%, with the greater loss of -2.8% seen in the German DAX. In contrast, Asian stock markets fared better; China’s CSI 300 gained +0.9%, Japan’s Nikkei 225 was down -0.18%, South Korea’s KOSPI 200 added +0.17%, Hong Kong’s Hang Seng Index fell -0.7%, Australia’s ASX 200 lost -0.08% and Singapore’s Straits Times Index fell -0.09%.
Yesterday’s intraday movement of the US benchmark stock indices recorded almost a -2.0% loss in the first half and staged a bullish reversal thereafter to trim most of the earlier losses. The Dow Jones ended the session with a minor gain of +0.12% (30,216), while the S&P 500 and Nasdaq 100 shed -0.4% (3,694 & 12,690), as Russell 2000 was almost unchanged at +0.02% (1,970).
The mid-session bullish reversal had been led by financials and information technology-related stocks, where the S&P sectors performance scorecard had indicated a gain of +1.24% and +0.07% respectively. The remaining nine sectors were in the red, with energy being the worst performer, tumbling -1.8%.
The stellar gains seen in financials had been reinforced by the US Federal Reserve’s decision to allow the six biggest US banks, such as JP Morgan, Citigroup and Goldman Sachs, to resume the share buyback programme, worth as much as US$11bn in Q1 2021. Mega big tech stocks Apple and Microsoft led in the tech sector; Apple soared +1.2% (to 128.23) after Reuters reported that it is targeting 2024 to produce passenger vehicles with self-driving capabilities and a breakthrough in battery technology, a potential strategic business plan for Apple to prepare its next stage of growth after close to 10 years of earnings that has been heavily weighted on its iPhones product.
Microsoft advanced by +1.8% after an upgrade by Citigroup from 'neutral' to 'buy'. Meanwhile, the historical inclusion of enormous market-cap stock Tesla into the S&P 500 ended with a whimper, as it tumbled by -6.6% (649.86).
In the foreign exchange market, the initial gain of the US dollar has been futile, as earlier gains seen in the Asian and European sessions almost evaporated during the US session. The US Dollar Index rallied as much by 1% earlier in the day, but gains were trimmed to only 0.3% and the close of the US session. The intraday's worst performer, GBP/USD shed -329 pips to print an intraday low of 1.3186 in the European session, and reversed to the upside to close the US session at 1.3464. Interestingly, the bounce on GBP/USD was just a whisker away from its 1.3130 key medium-term support level, to maintain the medium-term uptrend in place since the 25 September low of 1.2675.
Overall, yesterday’s negative coronavirus headline newsflow has not altered the risk-on behaviour in the financial markets, where the medium-term uptrend remains intact for US stock indices, and with no change for the US dollar as it continues to evolve within a medium-term downtrend phase.