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European stocks struggled for direction on the last day of November, as investors looked toward December and a potential Santa rally, referring to typical late-year gains in the stock market around the holiday period.
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European stocks edged lower early on Monday but remained on track for one of the best months on record. U.S. stock futures were also falling.
The pan-European Stoxx 600 SXXP, +0.09% slipped 0.1%, while the German DAX DAX, +0.40% was 0.1% up, and the French CAC PX1, -0.04% fell 0.3%. The U.K.’s FTSE 100 UKX, +0.33% rose 0.3%, recovering from earlier losses as COVID-19 vaccine optimism remained in investors’ minds.
U.S. stock futures were lower, led by a 0.6% drop for Dow Jones Industrial Average futures YM00, -0.50%, while those for the S&P 500 ES00, -0.33% were off by about 0.4%. The Dow is headed for its best monthly return since January 1987, and both the Dow DJIA, +0.12% and S&P SPX, +0.24% are looking at their best November returns since 1928, according to Dow Jones Market Data.
Some downward pressure on U.S. stock futures came from a report that the administration of President Donald Trump could be ready to blacklist China’s biggest chip maker SMIC SMICY, +1.87% and energy giant CNOOC 883, -13.96%. There are concerns of rising tensions with China just as President-elect Joe Biden takes office.
Investors will continue to watch a strong second wave of COVID-19 in the U.S. Dr. Deborah Birx, coordinator of the White House coronavirus task force, said she was “deeply worried,” about a post-Thanksgiving coronavirus surge, saying those who traveled for the holiday and gathered in big numbers should “assume” they are infected.
Despite the indifferent start on Monday, the Stoxx 600 has climbed 14.8% in November and is set to record its largest monthly point gain since December 1986, according to Dow Jones Market Data, as COVID-19 vaccine developments and the prospect of lockdown easing have buoyed investors. Europe’s major indexes are also set for record percentage gains, with the FTSE 100 on course for its best month since January 1989, the DAX its best since April 2009, and the French CAC the best since February 1988.
“The current trade seems to be about consolidating the rapid gains in November before looking for a potential Santa rally in December. Month-end rebalancing leading to negative flow for stocks may be a factor today, given the record run up in November,” said Markets.com analyst Neil Wilson. A ‘Santa rally’ refers to typical late-year gains in the stock market around the holiday period.
The positive vaccine news kept coming over the weekend but failed to move stocks higher early on Monday. The U.K. regulator could approve the COVID-19 vaccine from drugmaker Pfizer PFE, +1.91% and its partner BioNTech BNTX, +4.79% within days, the Financial Times reported on Saturday, and the first immunizations from Dec. 7. The European Union’s European Medicines Agency is set to consider experimental vaccines from both Pfizer and biotech Moderna MRNA, +16.34% next month, with inoculations beginning before the year-end.
Shares of AstraZeneca AZN, +2.13% rose 1.7%. Analysts at UBS lifted shares to neutral from sell.
Banks were leading on the downside, with shares of HSBC HSBC, +0.52% dropping over 2%. Major energy stocks were also adding pressure, with shares of Royal Dutch Shell RDSA, -1.50% RDS.A, -0.19% down 1.7% and BP BP, -2.37% BP, -1.44% down over 2%.
Energy shares fell as oil prices CL00, -1.62% BRN00, -1.74% were under pressure ahead of a meeting of the Organization of the Petroleum Exporting Countries on Monday.
“An extension to production quotas is expected but the producers’ cartel has confounded expectations in the past,” said AJ Bell investment director Russ Mould, in a note to clients.
