Stock markets show pre-Christmas cheer

Commentary, News, Stocks

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Wednesday 12:30 GMT. Stock markets are enjoying some pre-Christmas cheer, helped by strength in commodities.

Moves are relatively mild in forex and fixed income, however. The dollar index, which measures the buck against a basket of its peers, is up just 0.1 per cent at 98.29. Ten-year Treasury and Bund yields are 2 basis points firmer apiece at 2.25 per cent and 0.62 per cent, respectively.

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The Euro Stoxx 600, a pan-European equity gauge, is jumping 2.1 per cent as miners try to end a poor 2015 on a strong note, the sector surging 6.5 per cent to leave it down 46.6 per cent for the year.

Copper is up 0.2 per cent to $4,690 a tonne, while aluminium, zinc and lead are all gaining more than 1.5 per cent in a base metals sector supported by hopes of better demand from China, after Beijing pledged to act to boost growth.

US index futures indicate the S&P 500 will open later at 2,053, adding 14 points to the 18 gained in the previous session.

Wall Street’s stock benchmark has recovered its poise since last week’s late sell-off — when the S&P 500 fell to a two-month closing low of 2,005 — as greater stability in commodity prices encourages a seasonal bullish trend.

The CBOE Vix index, a measure of implied volatility known as Wall Street’s fear gauge, which last week hit an intraday high of 26.8, is back down to 16.6 as relative calm returns.

Activity is wan, however, as the festive season has already started thinning out dealing rooms.

London’s FTSE 100 saw trading volume on Tuesday that was 43 per cent below the 2015 average, according to Bloomberg data. The volume of Eurex Bund futures contracts in the previous session was also 43 per cent below that of last week’s average.

Japanese markets were closed on Wednesday for the Emperor’s Birthday public holiday, adding to the year-end torpor.

Still, the underlying tone is gently upbeat, helped by a rally for oil prices. Brent crude, the global benchmark, is climbing 1.6 per cent to $36.68 a barrel.

US West Texas Intermediate is up 1.6 per cent at $36.70 a barrel; the contract having lost its discount to Brent following the decision by Washington lawmakers to end US restrictions on exporting crude.

Kit Juckes, strategist at Société Générale said that, in spite of the supply glut, he expects oil prices to stabilise next year and this may support so-called commodity currencies.

“While the risk of yet another spike lower in spot oil prices hasn’t gone away, I would be very surprised if the Norwegian krone and Canadian dollar aren’t both a fair bit stronger by the end of 2016. I’d guess that they will both do better than the New Zealand and Australian dollars, for that matter,” he said

However, the Aussie, which last week fell to a one-month low of $0.7091, is easing 0.2 per cent at $0.7220. The kiwi dollar is off 0.5 per cent to $0.6764, despite data showing the nation’s trade deficit narrowed from NZ$905m in October to NZ$779m in November. The New Zealand stock market rose 0.8 per cent to a new record closing high of 6,195.

Australia’s S&P/ASX 200 was up 0.9 per cent, while Hong Kong’s Hang Seng rose 1 per cent. The Shanghai Composite dipped 0.4 per cent after technology stocks saw profit-taking.

Slightly lower that forecast UK third quarter GDP data can’t prevent sterling climbing 0.4 per cent off a 10-month low to $1.4891 as short positions are closed. Ten year gilt yields are up 4bp to 1.92 per cent as this week’s news of a bigger than expected UK fiscal deficit continues to be felt.

Gold is up $1 to $1,073 an ounce.

Additional reporting by Peter Wells in Sydney.

 

Read the full Financial Times article in its original format at FT.com


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