S&P 500 Futures Signal Rally Ebbing; Bonds Decline in Europe

Bloomberg.- Stock-index futures signal U.S. equities will stabilize after climbing to record highs against a backdrop of commodities ending the longest rally in a month and oil holding near $48 a barrel.

S&P 500 futures were little changed after the gauge reached all-time highs for two straight days, while shares in Europe retreated from a one-month high. German bonds declined after Reuters reported that the European Central Bank is looking at ways to lend out more bonds and avert a market freeze. Italian debt sank with bank shares. Oil fluctuated after OPEC left participation by Iraq and Iran in the group’s plan to cut output unresolved.

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Investors look toward U.S. reports including jobless claims, durable goods orders and consumer confidence for indications on Fed policy in the last day of trading before America’s Thanksgiving holiday on Thursday. Developed-market shares and the dollar have been among the biggest winners since Donald Trump’s surprise election victory fueled speculation of more fiscal stimulus in the U.S., while government bonds and emerging markets have slumped.

“The reflation theme in the U.S. is dominating all markets,” said Christian Stocker, a strategist at UniCredit Bank AG in Munich, Germany. “In Europe, the picture is a bit more complicated.”

Stocks

Futures on the S&P 500 Index slipped less than 0.1 percent at 6:49 a.m. in New York. U.S. equities extended all-time highs on Tuesday, with the Dow Jones Industrial Average topping 19,000 for the first time and small caps clocking the longest rally in 20 years.

The Stoxx Europe 600 Index dropped 0.3 percent. Italian financial companies fell, while miners extended gains after a gauge of metals rose to the highest since June 2015 on Tuesday.

Assicurazioni Generali SpA fell 4.3 percent after Italy’s biggest insurer mapped out plans to cut costs and exit its less-profitable businesses, while Intesa Sanpaolo SpA dropped 3.2 percent.

Banco Popolare SC retreated 3.2 percent and Banca Popolare di Milano Scarl slid 5.7 percent. Il Sole 24 Ore reported the inspection carried-out by the ECB on Banco Popolare’s loan book could find it to be under-covered with regard to certain exposures, for as much as 2 billion euros ($2.1 billion). Ten-year bond yields rose 10 basis points to 2.12 percent.

Foxtons Group Plc sank 7.7 percent after the British government decided to scrap letting-agent fees.

Commodities

The Bloomberg Commodity Index, which measures returns on raw materials, headed lower for the first time in four days, ending the longest bullish run in a month.

Brent crude fluctuated after a three-day rally, trading little changed at $49.09 a barrel. Preliminary talks in Vienna ended without finalizing how OPEC’s second- and third-largest producers will participate in the deal to reduce production, deferring the matter until the group’s formal meeting on Nov. 30, two delegates said Tuesday. West Texas Intermediate slipped 0.1 percent to $47.97.

U.S. crude stockpiles fell last week, the industry-funded American Petroleum Institute was said to report. Government data due Wednesday is forecast to show a gain.

The London Metal Exchange LMEX Index of base metals on Tuesday reached the highest level since June 2015. Copper was little changed Wednesday after the highest close in more than a year. Zinc fell while lead and tin rose.

Currencies

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was steady after climbing 4 percent since the election. Minutes of the Fed’s November policy meeting are expected to confirm officials were creeping closer to their first rate increase in a year even before Trump’s victory.

“A December Fed funds 25 basis-point rate hike is fully priced in,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney. “The dollar will continue to be driven by the pace of the Fed’s tightening cycle beyond December.”

The pound fell for a second day, slipping 0.2 percent to $1.2396. In his Autumn Statement, Chancellor of the Exchequer Philip Hammond said the economy is forecast to grow 1.4 percent in 2017, down from 2.2 percent.

The Australian dollar strengthened 0.4 percent, buoyed by a 7.3 percent gain in iron-ore futures in China.

Malaysia’s ringgit fell 0.5 percent against the dollar, declining for an 11th day in the longest losing streak since December 2013 even as the central bank said it will continue providing liquidity for an orderly currency market. Bank Negara Malaysia held its overnight policy rate at 3 percent, a sign that policy makers have shifted their focus from spurring economic growth to supporting the ringgit.

Russia’s ruble weakened for the first time in four days, losing 0.9 percent.

China’s yuan declined to a record in offshore trading, sliding as much as 0.1 percent to 6.9222 per dollar. The extra cost of options to sell the yuan against the dollar over contracts to buy rose to the highest since June 30.

Bonds

The yield on two-year German notes opened at a record low of minus 0.74 percent, before trading at minus 0.69 percent after the Reuters report. The rate on 10-year bunds jumped four basis points to 0.26 percent.

Yields on 10-year U.S. notes were little changed at 2.31 percent. Japanese markets were for closed for Labor Thanksgiving Day.

Banca Monte dei Paschi di Siena SpA said it expects holders of junior bonds to swap about a quarter of available notes for equity in the first crucial stage of its 5 billion-euro ($5.3 billion) rescue plan.

New Zealand’s 10-year bonds led a retreat in Asia, with yields increasing seven basis points to 3.13 percent. Rates on similar-maturity Australian notes rose three basis points to 2.71 percent.

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