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Dec 17, 2019

World Business | Economics: Global Stock Rally Stalls as U.S. Futures Struggle: Markets Wrap

By Todd White



U.S. stock futures dropped along with European shares on Tuesday as the global rally in equities eased. With the sugar rush of a partial trade deal between the two largest economies fading, investors pushed up the dollar and Treasuries.
Contracts on the S&P 500 index slipped from a record high close fostered by the partial U.S.-China trade agreement. Boeing Co. fell in pre-market trading after it decided to halt production of the grounded 737 Max model in January. The Stoxx Europe 600 likewise dropped from Monday’s record close, as Unilever tumbled in the wake of a sales-growth warning and led a slump in personal goods makers. U.K. shares were particularly volatile. Earlier in Asia a benchmark gauge rose to the highest level since mid-2018.
Sterling sank the most since July versus the euro after newly elected Prime Minister Boris Johnson proposed a legal change that revived the chances of a no-deal Brexit. European government bonds drifted higher. The dollar advanced against most of its biggest peers.

Record-breaking rally has turned global stocks overbought once again
Investor sentiment won a boost from the U.S. suspending its planned Dec. 15 tariff hike on Chinese imports. While a $44 trillion global gauge of stocks is close to an all-time high and benchmarks in Europe and the U.S. are also hovering near record levels, concerns linger over the strength of a China accord whose full details aren’t public. The warning by personal-goods bellwether Unilever also took some of the shine from improved forecasts for the global economy.
“We are in danger of peak optimism because we don’t have a trade deal signed and there are still some things that can go wrong,” Kristina Hooper, chief global market strategist at Invesco, said. “There is this general euphoria because economic policy uncertainty has come down, but I do think it could lead to frothy markets that could be made vulnerable if something goes wrong.”
Elsewhere, West Texas-grade oil held near a three-month high. In the metals market, palladium surged through $2,000 an ounce to a record, though it went on to erase the move and edge lower.
Here are some key events to watch for this week:
  • Policy decisions are due Thursday from the Bank of Japan and the Bank of England.
  • Federal Reserve district bank presidents including Robert Kaplan of Dallas, Eric Rosengren of Boston and John Williams of New York are scheduled to speak this week.
  • Revised U.S. GDP data are due Friday.
  • Friday brings quadruple witching in the U.S., the simultaneous expiration date of stock index futures, stock index options, stock options and single stock futures. Expect elevated trading volume, particularly in the last hour of trading.
These are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index dipped 0.1% as of 6:27 a.m. New York time.
  • The Stoxx Europe 600 Index sank 0.7%.
  • Germany’s DAX Index slumped 0.8%.
  • The U.K.’s FTSE 100 Index dipped 0.1%.
  • The MSCI Asia Pacific Index jumped 0.8%.

Currencies

  • The Bloomberg Dollar Spot Index increased 0.1%.
  • The British pound tumbled 0.9% to $1.3208.
  • The euro gained 0.2% to $1.1161.
  • The Japanese yen was little changed at 109.56 per dollar.
  • The South Korean Won advanced 0.5% to 1,166.10 per dollar.

Bonds

  • The yield on 10-year Treasuries declined two basis points to 1.86%.
  • Germany’s 10-year yield dipped one basis point to -0.29%.
  • Britain’s 10-year yield decreased five basis points to 0.768%.

Commodities

  • The Bloomberg Commodity Index was little changed at 80.22.
  • West Texas Intermediate crude increased 0.1% to $60.25 a barrel.
  • Gold gained 0.3% to $1,479.90 an ounce.
— With assistance by Abhishek Vishnoi, and Andreea Papuc

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