With memories of last week's high-volume, post-Fed, quad-witching selloff fading fast, overnight the Santa rally defined as no volume, no breadth levitation, has continued for a third day and moments ago European stocks rose to their best level of the day, with the Stoxx Europe 600 Index headed for its biggest advance in a week, while US equity futures ramped on the European open as they traditionally do, and then again hit session highs minutes ago, as holiday volumes are in meltdown mode, and oddlots can move the E-mini by 1 point.
Helping the European move higher was an increase in industrial metal prices as well as a rise in oil prices after yesterday's API oil inventory drawdown report. Still, the Stoxx 600 has declined 5.9% this month, on track for its worst December since 2002. The gauge has gained almost 6 percent this year, poised for a fourth straight annual gain.
“The huge rebound in some oil and basic-material stocks really fuels the rally today and people are buying the laggards of this year.” Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland told Bloomberg. "It’s usual for the market to go higher the day before Christmas holidays, and the volumes are very thin so you can easily move the market."
Sure enough, the volume of shares traded on Stoxx 600 companies was almost a third lower than the 30-day average, as the Christmas holiday neared. Some European markets are closed on Thursday, while others have shorter trading days. Most will reopen on Dec. 28, while U.K. markets do so on Dec. 29.
Chinese brokerage firms soared however while the SHCOMP was set to close at its best level of the day, an unexpected selloff in the last 30 minutes of trading promptly pushed it to the lows.
The Stoxx Europe 600 Index added 1.7 percent to 362.90 at 10:32 a.m. in London, as all 19 industry groups advanced. West Texas Intermediate February oil futures rose 0.9 percent to $36.46 per barrel.
With just a handful of trading sessions left in the year, this is how the major global markets look as 2015 is about to close. As of this moment, and in keeping with the Christmas spirit, the biggest question is whether the S&P500 will close green or red for the year.
That is YTD. This is where the key indices trade as of this moment.
- S&P 500 futures up 0.2% to 2040
- Stoxx 600 up 1.6% to 363
- FTSE 100 up 1.4% to 6168
- DAX up 1.6% to 10657
- German 10Yr yield down less than 1bp to 0.6%
- Italian 10Yr yield unchanged at 1.64%
- Spanish 10Yr yield up less than 1bp to 1.8%
- MSCI Asia Pacific up 0.3% to 131
- US 10-yr yield up less than 1bp to 2.24%
- Dollar Index up 0.13% to 98.36
- WTI Crude futures up 0.9% to $36.46
- Brent Futures up 1.1% to $36.51
- Gold spot down less than 0.1% to $1,072
- Silver spot down less than 0.1% to $14.26
Looking closer at Asian equity markets, stocks tracked the gains seen on Wall St. after US stocks experienced a "Santa Rally", while the continued recovery in commodities also underpinned sentiment with crude climbing on the API drawdown. Large mining names and energy stocks led the ASX 200 (+0.9%) higher while financials outperformed in that China is to remove private equity management licenses from 17 banks. Japanese markets were closed due to the Emperor's Birthday public holiday.
Top Asian News:
- Three More Chinese Companies Face Difficulty in Bond Repayments: China Securities expects more private and SOE defaults
- Noble Group Sells Farm Unit Stake for $750 Million to Avoid Junk: Commodities house may receive further $200m from sale
- Macquarie Fund Said to Near Purchase of Universal Terminal Stake: Deal could value Universal Terminal at ~$3b including debt
- Brotherly Love Adds Bonus to Anil Ambani’s Debt-Reduction Plans: Proposed sale of towers can raise $3.4b, Moody’s says
- Modi Seeks Russian Crown Jewel in Decade’s Biggest Arms Deal: India approves purchase of Russia’s S-400 missile shield
- Taiwan Nov. Industrial Output Falls 4.94% Y/y; Est. 5.55% Fall
- Malaysia Nov. Consumer Prices Rise 2.6% Y/y; Est. +2.3%
The Santa rally has continued today through the European morning after US and Asian equities have been bolstered over the past 24 hours , with Euro Stoxx trading higher by 1.6%. Equities have been bolstered this morning by the likes of ArcelorMittal (+9.0%), Glencore (+6.5%) and Anglo American (+5.8%) due to the recovery in sentiment for mining names and outperformance during Asia-Pacific trade. Elsewhere in Europe, UK supermarkets are performing strongly this morning, with UK press suggesting that this could be the busiest day of the year so far and that supermarkets have performed better than anticipated so far over the Christmas period.
As was the case yesterday, trade in fixed income markets has been particularly light ahead of the Christmas break, with just around 61k contracts having gone through Bund Mar'16 futures by mid-morning.
Top European News:
- As Europe Stock Rally Wanes, Forecasters Look to 2016 for Record: Stoxx Europe 600 Index will rally 16% from Tuesday’s close to surpass its April record, according to average of 10 forecasts compiled by Bloomberg.
- U.K. GDP Grew Less Than Estimated in 3Q on Finance: GDP rose 0.4% in 3Q instead of 0.5% previously estimated, Office for National Statistics in London said on Wednesday
- ‘Brexit’ and ‘Brexit’: The Biggest Risks to U.K. Economy in 2016: 43% of economists in Bloomberg News survey said British departure from EU is biggest threat, while 13% chose as main threat buildup to referendum on membership of the bloc.
- German Regulator Bans Booking.Com Best-Price Clause: Co. needs to cut clause from terms that requires hotels to offer best price for rooms exclusively to portal.
- Tobacco Cos. Should Lose Fight Over Stricter EU Law, Court Aide Says: Philip Morris, BAT, Imperial Tobacco should lose challenge against stricter EU laws that force them to cover cigarette packs with anti-smoking pictures, warnings
- U.K. 3Q GDP +2.1% y/y vs survey +2.3%
- Finland Nov. PPI -3% y/y; Finland Nov. preliminary retail sales volume +2.6% y/y
- France 3Q GDP final +1.1% y/y vs survey +1.2%
- Spain Nov. PPI -2.6% y/y
FX markets have seen some relatively choppy price action so far today, with the USD-index coming off intra-day lows to reside in the green and weigh on major counterparts. However GBP did see strength through much of the morning to recover from the significant losses seen yesterday, before softening after the surprise miss on UK Q3 GDP (Y/Y 2.10% vs. Exp. 2.30%). GBP/USD has recovered towards the North American crossover however, residing back above the 1.4850 level.
The euro dropped against all but two of 16 major peers. The common currency slid 0.3 percent to $1.0924, halting a three-day advance. The Bloomberg Dollar Spot index was little changed, still on course for a 0.5 percent drop this month as traders bet the Federal Reserve will wait until at least April to raise interest rates again.
Elsewhere in FX markets, AUD has seen some softness in European trade coming off highs reached yesterday where the antipodean rallied, following the brief reprieve in commodity prices, before finally finding support at 0.7220.
In commodities, West Texas Intermediate February futures climbed as much as 1.2 percent. On Tuesday it rose to a premium over Brent for the first time since January on speculation the U.S. decision this month to end a 40-year ban on exports may ease the nation’s oversupply. The industry-funded American Petroleum Institute was said to report Tuesday that U.S. crude inventories fell by 3.6 million barrels. The commodity is heading for a second yearly loss on signs a global glut will be prolonged after the Organization of Petroleum Exporting Countries effectively abandoned output limits at a meeting earlier this month. Brent, the benchmark for more than half the world’s crude, is poised to end 2015 with the lowest annual average price in 11 years.
Industrial metals rallied, led by increases in zinc. Aluminum climbed to the highest level this month on the London Metal Exchange. The LME index of six industrial metals has fallen 25 percent this year, heading for the biggest drop since 2008.
Gold has dipped below yesterday's lows it reached following the better than expected final US Q3 GDP reading, which supports the outlook of additional Fed rate hikes, while the rally in US and Asian equities also dampened demand for safe-haven assets . Elsewhere, copper prices saw uneventful trade while Dalian iron ore futures declined around 1.5% as prices pulled back from its longest win streak in 3 months.
Top Global News
- Consumer Spending in U.S. Increases by Most in Three Months: Spending advanced 0.3%, matching median forecast in Bloomberg survey, to a $12.43t/y rate, according to Commerce Dept. report yesterday.
- Nike Defies Stagnation in U.S. Retail, China as Orders Surge: Co. posted 2Q results that showed footwear, athletic- apparel giant remains largely immune to the shopper malaise that’s plagued much of retail.
- Blackstone, Citadel Surge in Year When Other Hedge Funds Falter: handful of multibillion-dollar firms including Blackstone Group, D.E. Shaw, Millennium Partners, Citadel have managed to side-step problems, post double-digit returns.
- Chesapeake’s Debt Rating Cut Two Levels by S&P Amid Gas Slump: Co.’s credit rating was lowered 2 notches by Standard & Poor’s Ratings Services on concern that prolonged slide oil & natgas prices will persist.
- Disney Said in Talks to Sell Stake in Fusion to Univision: Co. in talks to sell its half of Fusion cable TV venture to its partner Univision, according to person familiar.
- Drugmaker Founded by Shkreli to Cut Jobs, Seek Permanent CEO: Co. will also seek permanent CEO to take over for interim CEO Ron Tilles, closely held Turing said in a statement Tuesday
- SunEdison Said to Work With Bankers on Raising New Debt: WSJ: Co. also marketing its solar, wind project portfolio to potential buyers, WSJ reports.
- ‘Star Wars’ Projected to Lift U.S. Box Office Over $11b: Record Dec. debut of “Star Wars: The Force Awakens,” along with blockbusters like “Jurassic World,” have put U.S. movie industry on track to top $11b in ticket sales for first time ever.
Bulletin Headline Summary From RanSquawk and Bloomberg
- Brent trades in close proximity to WTI, after yesterday's API Crude Oil Inventories (-3600k Prey. 2300k) printed a drawdown and caused WTI to trade higher than its counterpart for the first time since January
- The Santa rally has continued today through the European morning after US and Asian equities have been bolstered over the past 24 hours, with Euro Stoxx (+1.6%)
- Looking ahead, US Personal Income, PCE Deflator, New Home Sales, U. of Mich. Sentiment and Durable Goods, Canadian GDP, DoE Inventories and BoJ Minutes
- Treasuries drift lower as oil, stocks gain, volumes light as Christmas holiday approaches; on pace for a modest gain this year even after Fed raised rates amid signs of uneven U.S. economic growth.
- In Europe, low-volume and range-bound session in bund futures, with peripheral spreads edging wider
- Stung by a spending slowdown, more retailers are offering free online shipping, giving consumers a holiday gift but also cutting into profits
- OPEC said demand for its crude will slide to 2020, though less steeply than previously expected, as rival supplies continue to grow; underlines struggle it faces as it seeks to defend market share against surge in output from U.S., Russia
- U.K. GDP expanded 0.4% in 3Q, less than previously estimated; 2Q revised down by 0.2ppt to 0.5%
- 43% of economists surveyed by Bloomberg said a British departure from the EU is the biggest threat, while 13% chose the buildup to the referendum on membership of the bloc
- China will add monetary stimulus next year, making good on a pledge to support growth as leaders push through policies to cut overcapacity and reliance on credit, according to economists surveyed by Bloomberg
- China Foreign Exchange Trading System will extend yuan trading time to 23:30 Beijing time starting Jan. 4, according to a statement posted on PBOC website; PBOC says China aims to provide more channels for CNY trading which will help converge the onshore and offshore rates
- Surging bankruptcies and joblessness, inflation above 10% and a tumbling currency are doing away with the hard-won gains achieved by Brazil’s middle class over the past decade
- A fist fight in parliament and an expletive-filled clash between a minister and a regional governor underline discord that’s threatening to sink Ukraine’s government and derail a $17.5b IMF rescue
- Sovereign 10Y bond yields increase. Asian stocks mostly higher, European stocks gain, U.S. equity-index futures rise. Crude oil higher, gold little changed, copper falls
US Event Calendar
- 7:00am: MBA Mortgage Applications, Dec. 18 (prior -1.1%)
- 8:30am: Personal Income, Nov., est. 0.2% (prior 0.4%)
- Personal Spending, Nov., est. 0.3% (prior 0.1%, revised 0.1%)
- PCE Deflator m/m, Nov., est. 0.1% (prior 0.1%)
- PCE Deflator y/y, Nov., est. 0.4% (prior 0.2%)
- PCE Core m/m, Nov., est. 0.1% (prior 0%)
- PCE Core y/y, Nov., est. 1.3% (prior 1.3%)
- Durable Goods Orders, Nov. P, est. -0.6% (prior 2.9%)
- 8:30am: Durables Ex Transportation, Nov. P, est. 0% (prior 0.5%)
- Cap Goods Orders Nondef Ex Air, Nov. P, est. -0.2% (prior 1.3%)
- Cap Goods Ship Nondef Ex Air, Nov. P, est. 0.5% (prior -0.5%)
- 10:00am: New Home Sales, Nov., est. 505k (prior 495k)
- New Home Sales m/m, Nov., est. 2% (prior 10.7%)
- 10:00am: UMich Sentiment, Dec F, est. 92 (prior 91.8)
- UMich Current Conditions, Dec F (prior 107)
- UMich Expectations, Dec F (prior 82)
- UMich 1 Yr Inflation, Dec F (prior 2.6%)
- UMich 5-10 Yr Inflation, Dec F (prior 2.6%)
- 11:00pm: Bank of Japan’s Kuroda speaks in Tokyo