It has come down to this: a year in which the US stock market (led by a handful of shares even as the vast majority of stocks has dropped) has gone nowhere, but took the longest and most volatile path to get there, is about to close either red or green for 2015 based on what happens in today's low-volume session following yesterday's unexpected last half hour of trading "air pocket" which brought the S&P back to unchanged for the year.
With oil below $37 and with many markets around the globe closing early (shortened trading hours in U.K., France, Spain, Netherlands, Portugal, Belgium; markets closed in Italy, Denmark, Sweden, Norway, Finland, Switzerland, Austria, Germany) the US may well be alone: European equities pared an annual gain and stocks fell as much as 0.2 percent, heading for the worst December since 2002. Even as the Stoxx 600 headed for a third weekly advance, it has fallen 4.9 percent in December, reducing its gain this year to 7.2 percent.
U.S. index futures are little changed, with the difference between a red and green close determined by just 5 S&P points; equities in China dropped for the first time in three days. Brent climbed as much as 0.9 percent, still headed for the biggest two-year drop since at least 1988. The South African rand, Canadian dollar and Norwegian krone were among the biggest currency losers. Ramiro Loureiro, an analyst at Banco Comercial Portugues SA’s Millennium unit in Lisbon told Bloomberg that "It has not been a good end to 2015, with low liquidity making market weakness even more pronounced. Even though we had all types of risks and concerns thrown at markets, such as the collapse in oil prices and key central bank decisions, Europe still managed to end the year higher."
This is where we stand as of this moment:
- S&P 500 futures up less than 0.1% to 2056
- Stoxx 600 down 0.2% to 367
- FTSE 100 down 0.2% to 6260
- DAX closed
- German 10Yr yield unchanged at 0.63%
- Italian 10Yr yield down 4bps to 1.6%
- Spanish 10Yr yield down 4bps to 1.77%
- MSCI Asia Pacific up 0.1% to 132
- Nikkei 225 closed
- Hang Seng up 0.1% to 21914
- Shanghai Composite down 0.9% to 3539
- S&P/ASX 200 down 0.5% to 5296
- US 10-yr yield up less than 1bp to 2.3%
- Dollar Index up 0.13% to 98.39
- WTI Crude futures up 0.2% to $36.69
- Brent Futures up 0.5% to $36.63
- Gold spot up less than 0.1% to $1,062
- Silver spot down less than 0.1% to $13.89
And this is where the year is ending for some key markets: for the S&P the year was a wash, but for EMs it was a bloodbath leading to an ugly year for the MSCI World index.
As Bloomberg points out, global equities are poised for their first decline in four years as a slowdown in the Chinese economy fueled the biggest retreat in raw materials prices since 2008 just as the Federal Reserve ended its zero interest-rate policy. The Bloomberg Commodity Index is down 25 percent in 2015. The Standard & Poor’s 500 Index clung to a 0.2 percent annual gain, while emerging-market equities have plunged 17 percent.
Looking closer at regional markets, we start in Asia where we find Indian, Taiwanese equities outperform with Japanese, Korean markets closed. 9 out of 10 sectors rise with info tech, utilities outperforming and energy underperforming. Surprisingly in overnight Chinese markets, the PBOC did not offer reverse repos for first time in six months, in the process soaking up CNY60 billion in liquidity. As a result the SHCOMP dropped by 0.9% on the last trading day of the year. This happens as the Chinese Yuan dropped again, and after the August devaluation has now seen its worst year since 1994.
Top Asian News
- China Fires a Warning Shot at Yuan Speculators With Bank Bans: Offshore yuan erases 0.5% drop on intervention speculation
- Battered Yuan Posts Worst Year Since 1994 as HSBC Preaches Calm: Top forecaster says weakness result of new flexible policy
- Singapore’s Advance GDP Reading May Belie Actual Economic Growth: Deviation has averaged 4.3 ppts since early 2010
- 1MDB to Sell Malaysian Property Project Stake for $1.7 Billion: Iskandar Waterfront-China Railway Group to buy 60% of project
In Europe, the Stoxx 600 is currently down -0.2% and although it is headed for a third weekly advance, it has fallen 4.9 percent in December after the Mario Draghi shocker in the start of the month, reducing its gain this year to 7.2 percent. Spanish, French equities underperform with German, Swiss, Italian markets closed. Germany’s DAX may be closed today, but the index has climbed 9.6 percent in 2015, with strategists seeing more gains for 2016. Italy’s FTSE MIB Index was among the best performers in western Europe, rallying 13 percent. The U.K.’s FTSE 100 Index fell 4.7 percent. Greece’s ASE Index plunged 25 percent.
Top European News
- Vodafone Rises to 4-Week High on Liberty Global Merger Report: Shares rise as much as 2.3%, after Daily Mail reports co. in new merger talks with Liberty Global.
- Banks Ask Bondholders to Help in Abengoa Rescue: Economista: Banks have asked bondholders to participate in helping to provide Abengoa’s future liquidity needs.; Abengoa Seeking to Sell Stalled Brazil Projects: Reuters
- John Lewis Sets Holiday Tone for U.K. Retailers With Sales Gain: Sales rose 2.3% to GBP129.2m, employee-owned U.K. retailer said in statement Thursday.
- U.K. Financial Regulator Drops Review of Banking Culture: FCA said it won’t deliver the overarching report on the industry and will instead work with banks on an individual basis.
In Commodities, West Texas Intermediate crude was poised for a second annual loss, exceeding the slump following the Asian economic crisis of 1997 to 1998. The gap between Brent and WTI has vanished after U.S. lawmakers cleared the way for American crude exports. U.S. natural gas futures jumped 6.2 percent to $2.351 per million British thermal units, rebounding after the first drop in five days Wednesday on milder weather forecasts for January.
Gold was poised for its third straight annual loss, the longest retreat in 15 years, as the surge in the dollar following the Fed’s monetary-policy tightening compounded the broader collapse in commodity prices. Bullion for immediate delivery traded for $1,062.87 an ounce, little changed on the day and down 10 percent this year.
Metals in London were heading for the first monthly gain since April amid speculation demand conditions in China may stabilize into next year as some producers start to scale back output. Nickel added 1 percent to $8,785 a metric ton and copper was little changed. The LME Index remained 24 percent lower for the year.
Commodity currencies weakened as trading wound down at the end of a year dominated by rising U.S. interest rates, slumping raw materials prices and Chinese stock-market volatility.
Top Global News
- Berkowitz’s Fairholme Signals Active Role at Sears Holdings: Representatives of Fairholme “will be in contact” with Sears management, board, other significant shareholders regarding its views on co.’s long-term prospects.
- Microsoft to Warn E-Mail Users About Government Hack Attacks: Co. will tell users of its e-mail and cloud storage services when government-backed hackers may have targeted them.
- Bill Miller Is Misfiring on Twitter Options After Boon on Amazon: Leeg Mason having less success on Twitter wager with options allowing fund to buy $350m.
- Amazon Investors Emboldened by 3 Million New Prime Members: shareholders cheering co.’s big push to accommodate last- minute holiday orders, with coinciding shift of consumer spending from brick-and-mortar stores to websites, smartphones applications.
- Chimerix Rises Post-Mkt After Point72 Takes Passive Stake: Shares up 4.6% post-market on 975k shrs after Point72 Asset reports initial 5.3% passive stake.
- Bommer Is Returning Money From Hedge Fund SAB After 17 Years: Manager to focus on managing own wealth.
- Williams Cos. May Be Cut by S&P after ETE Transaction: Rating expected to be cut to BB from BB+ by S&P after merger with Energy Transfer Equity closes in 1H 2016.
- Cheniere Begins LNG Production at Sabine Pass Terminal: ING: Investor has discussed start-up with developer, receives periodic notices on plant’s status.
- Lockheed Gets $1.06b U.S. DOD Pact Definitization Modification: awarded definitization modification for 32 C-130J aircraft.
- Apple Says Users May Be Unable to Access Some Services: App Store, iTunes Store, Apple TV among services that may be “unavailable to some users.”
Overnight Headline Summary from Bloomberg
- Treasuries little changed on the last trading day of 2016, with UST futures set to close at 1pm ET, cash at 2pm. Treasuries have gained 0.7% this year, according to Bloomberg indexes.
- The worst flooding across the U.S. Midwest in four years has shut some oil pipelines and terminals near St. Louis, potentially swelling a glut of crude and extending this year’s price slide
- The U.S. is close to announcing sanctions against several companies and individuals for their ties to Iran’s ballistic missile program, a person familiar with the matter said
- Scott Bommer, founder of SAB Capital Management LP, is returning all client money from his hedge fund after 17 years so that he can focus on managing his own wealth
- Puerto Rico will default on about $37m in bond payments due Jan. 1 and divert revenue to make others, escalating a conflict with investors as Governor Alejandro Garcia Padilla seeks to restructure a $70b debt burden
- A U.K. regulator dropped a review of banking culture, signaling that the Financial Conduct Authority is continuing to shelve projects initiated by former CEO Martin Wheatley
- $1.5t IG priced in 2015, $247b HY. BofAML Corporate Master Index OAS -1bp to +172, YTD range 180/129. High Yield Master II OAS tightens 1bp to +695; YTD range 733/438
- European government bond markets are closed. Asian stocks mostly higher, European stocks fall, U.S. equity-index futures gain. Crude oil and gold higher, copper falls
US Event Calendar
- 8:30am: Initial Jobless Claims, week of Dec. 26, est. 270k (prior 267k); Continuing Claims, week of Dec. 19, est. 2190k (prior 2195k)
- 9:00am: ISM Milwaukee, Dec., est. 48.5 (prior 45.34)
- 9:45am: Chicago PMI, Dec., est. 50.0 (prior 48.7); Bloomberg Consumer Comfort, week of Dec. 27 (prior 42.2)