Most world markets have reopened following the holiday weekend, but trading volumes remain significantly muted. Asian and European shares advance modestly amid low volumes with U.K. and Ireland closed; S&P futures are little changed while the dollar rose and oil extended its longest winning streak in four months.
Crude advanced for a seventh day ahead of the new year when OPEC and other producing nations are expected to start reducing output. European shares edged higher, though volume was two-thirds lower than the 30-day average. Despite the dolllar rising against most peers, gold reached an almost two-week high amid reduced supply during the holidays.
With most carbon-based traders out on vacation this week, do not expect volumes to pick up, although with algos in charge it is possible to have a pickup in volatility due to thin, illiquid markets. As Reuters notes, concerns about Italian banks, Chinese growth and U.S. President-elect Donald Trump's protectionist bent look set to keep investors on edge into the start of 2017.
For now the prevalent theme remains one of Trump and "optimism", as even the president-elect tweeted last night...
The world was gloomy before I won - there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!
— Donald J. Trump (@realDonaldTrump) December 26, 2016
... although that too appears to have peaked and traders are now casting cautious glances at what comes next: “The financial markets seem to have already priced in expectations toward a Trump presidency, and are shifting toward a market that’s waiting to gauge his actual policies,” Hideyuki Ishiguro, a senior strategist at Daiwa Securities told Bloomberg. “We also have a lack of market participants with overseas markets closed.” In addition to the U.K., financial markets in Australia, New Zealand and Hong Kong remained shut on Tuesday.
Tuesday data showed Chinese industry racked up its strongest profit growth in three months in November, suggesting the world's second-largest economy was improving. In Japan, however, core consumer prices fell in annual terms for the ninth month as household spending slumped.
"Markets have calmed down a lot since the U.S. election and the decisions by the ECB and Fed (earlier in December)," said Daniel Lenz, a bond market strategist with DZ Bank in Frankfurt. "There is a feeling that some of the expectations after the Trump election may have been exaggerated and now it is a question of waiting to see what the U.S. government will look like when it finally takes shape."
The Shanghai Composite Index, which has been hovering around the same level since mid-December, slid 0.3 percent. China’s economy is closing out the year on a high note as the earliest December indicators give no signs that the expansion is faltering. Data on Tuesday showed industrial-profit gains accelerated in November. The Jakarta Composite Index rose 1.5 percent, ending its longest losing streak since 2005 and helping send the MSCI Emerging Markets Index up 0.2 percent. Japan’s Topix index gave up earlier gains to finish lower for the fourth straight day, after data showed the nation’s consumer prices dropped in November. Toshiba Corp. sank the most in a year on reports it may book a loss of as much as 500 billion yen ($4.3 billion) on its U.S. nuclear operations.
The Stoxx Europe 600 Index added 0.1%. Despite heading for its biggest monthly rally in more than a year, it’s been hovering around overbought levels. An index tracking volatility expectations jumped 11% on Tuesday, the most in a month.
S&P 500 futures slipped less than 0.1% after closing on Friday just 0.4% shy of a new record, while the Dow Jones Industrial Average is just points away from the 20,000 level.
Top stories also include Toshiba saying it may have to write down its nuclear business; the ECB warning Monte Paschi its capital shortfall has surged by over 75% in a few weeks, Panasonic, Tesla to Start Output at Buffalo Plant Next Summer, Russia caling the U.S. move to supply Syria rebels weapons a hostile act; Russia finding the first black box from the Black Sea crashed jet.
Market Snapshot
- S&P 500 futures down less than 0.1% to 2258
- Stoxx 600 up 0.1% to 360
- DAX up less than 0.1% to 11459
- German 10Yr yield down less than 1bp to 0.22%
- Italian 10Yr yield up 2bps to 1.84%
- Spanish 10Yr yield up 2bps to 1.4%
- S&P GSCI Index up 0.5% to 393.8
- MSCI Asia Pacific up less than 0.1% to 134
- Nikkei 225 up less than 0.1% to 19403
- Shanghai Composite down 0.3% to 3115
- U.S. 10-yr yield up 2bps to 2.55%
- Dollar Index up 0.02% to 102.99
- WTI Crude futures up 0.5% to $53.27
- Brent Futures up 0.1% to $55.24
- Gold spot up 0.8% to $1,144
- Silver spot up 1.7% to $16.01
Global Headline News
- Toshiba Says Nuclear Writedown May Reach Billions of Dollars: Writedowns may be more than company’s projected profit
- Oil Extends Longest Run of Gains Since Aug. Before OPEC Cuts: Prices to recover as output curbs help rebalancing: Al-Falih
- Dollar Gains Amid Japan Importer Buying, Rise in Treasury Yields: Greenback set for first advance versus yen in five days
- Democrats Plotting ‘Collision Course’ With Trump’s Tax Plan: They’ll emphasize benefits for the rich amid populist pitch
- Gold Surges Above $1,150 as Precious Metals Post Year-End Rally: Platinum, palladium, silver also rallying
- Panasonic, Tesla to Start Output at Buffalo Plant Next Summer: Plant’s capacity to reach 1GW by 2019
- Qualcomm Signs 3G/4G China Patent License Pact With Gionee: Qualcomm granted Gionee a royalty-bearing patent license
- Outrage Over Economy Doesn’t Explain Surging Global Populism: Greece’s anti-establishment push shows progress can be slow
- Russia Urges Libya Leadership Role for UN-Defying Military Chief: UN envoy ignoring influential players in Libya: Gatilov
* * *
In Asia, the MSCI index of Asia-Pacific shares ex-Japan was marginally higher while Japan's Nikkei closed little changed. "It is the time of the year when markets trade with hushed tones," Jingyi Pan, market strategist at IG, wrote in a note. "The magnitude of moves could remain capped with thin market trades expected to remain the case. Markets are expected to remain thin today,” Pan added saying that “for Asia, it is likely to be a second day of mixed performance with a lack of leads. Japan could nevertheless experience gains with the dollar climbing against the yen.” 6 out of 11 sectors decline in the MSCI Asia Pacific Index with industrials, telecom services underperforming and health care, consumer staples outperforming. China's CSI 300 index was down 0.1% and the Shanghai Composite slipped almost 0.2 percent, despite the upbeat industrial data.
Asian Eco Data:
- Japan Nov. core consumer prices -0.4% Y/Y; est. -0.3%
- Japan Nov. jobless rate 3.1%; est 3.0%
- Japan Nov. household spending fell 1.5% Y/Y
- China Jan.-Nov. industrial companies’ profit rises 9.4% Y/Y
Top Asian News
- Early China Data Show Economy on Firmer Footing in December: Satellite activity gauge stabilizes near a five-year high
- China Promotes Yin Yong to Deputy Governor of Central Bank: Yin was director of SAFE’s investment center from 2007 to 2015
- Investors Bet on Vietnam as Valuations Top Southeast Asia: Corporate earnings expected to see double-digit growth
- Tepco Seeks Growth With Services as Gas Market Set to Open: Tepco partners with Nippon Gas to supply fuel, gain customers
In Europe, stocks rose in light trading as U.K. and Ireland are closed today. 18 out of 19 Stoxx 600 sectors rise with media, food & beverage outperforming and banks and autos underperforming. 67% of Stoxx 600 members gain, 29% decline. Germany's DAX and France's CAC both gained around 0.1% while Spain's IBEX dipped by a similar amount.
European Eco Data:
- Finland Dec. Consumer Confidence Index 19.5, prior 17.6
- Finland Dec. Business Confidence 1, prior -4
- Switzerland Dec. Total Sight Deposits CHF528.4b, prior CHF527.9b
- Switzerland Dec. Domestic Sight Deposits CHF463.6b, prior CHF457.3b
Top European News:
- Paschi Says ECB Sees the Need for $9.2 Billion of Capital: Paschi seeking further information on ECB calculations
- Nornickel to Buy $1.1 Billion of Copper Ore From Rostec: Rostec, Nornickel agreed on copper contract this week
- Deutsche Bank Says 2017 CET1 Requirement Is at Least 9.51%: ECB lowers 2017 phase-in CET1 ratio from 10.76% in 2016
In currencies, the Bloomberg Dollar Spot Index rose less than 0.1 percent, trading near the highest level in more than a decade. The yen slipped against the dollar for the first time in five days, while the euro was little changed. The South Korean won fell 0.5 percent against the dollar, after strengthening for the first time in nine sessions on Monday. The South African rand strengthened 0.5 percent.
In commodities, crude futures advanced 0.5 percent to $53.26 a barrel in New York. Prices are set to recover next year as production cuts help re-balance an oversupplied market, Saudi Arabia’s Energy Minister Khalid Al-Falih said last week. OPEC and 11 nations from outside the group including Russia have agreed to trim about 1.8 million barrels a day from January. Gold rose 0.9 percent to $1,143.65 an ounce, while silver and platinum climbed more than 1.5 percent.
US Event Calendar
- 9am: S&P CoreLogic Case-Shiller U.S. Home Price Index MoM, Oct. (prior 0.83%)
- 10am: Conf. Board Consumer Confidence, Dec., est. 108.5 (prior 107.1)
- 10am: Richmond Fed Manufact. Index, Dec., est. 5 (prior 4)