From Tyler Durden: European and Asian stocks rose after the early scare from the latest Fukushima quake dissipated when all Tsunami warnings were cancelled.
The global risk on mood was spurred by another jump in crude, which was up 1% in early trading, with the commodity complex now enjoying its biggest three-day rally since May, after Nigeria signaled optimism that OPEC will agree a supply-cut deal next week in Vienna. S&P futures are up 0.3%, with the cash index set to open at new record highs.
With OPEC jawboning having become a daily fixture ahead of the cartel’s now almost monthly summits, today was no exception, and earlier in the session, a Nigerian OPEC delegate said he expects details of the Vienna accord to be finalized Tuesday (and if they are not, this will just serve as a basis for a similar headline tomorrow, and then day after, and so on).
“Everyone is on board,” delegate Ibrahim Waya said in Vienna, where OPEC members are meeting to discuss output quotas ahead of the November 30 summit. Brent and WTI both extended gains following the headlines, pushing index futures higher with them.
The commodity story – on hopes of a global fiscal stimulus push – dominated as miners led the MSCI All-Country World Index higher while S&P500 futures on the S&P 500 Index advanced 0.3 percent. On Monday, the American gauge reached a record for the first time since Aug. 15, just as the Dow Jones Industrial Average, Russell 2000 Index and Nasdaq Composite Index hit fresh all-time highs.
Oil reached the strongest level in more than three weeks. Copper headed for its highest close since July 2015. Euro-area bonds rose on optimism the region’s central bank will extend stimulus.
American shares have been buoyed as companies ended a five-quarter profit slump and Donald Trump’s election to the U.S. presidency fueled speculation of a boost to manufacturing and infrastructure spending. Goldman Sachs Group Inc. said Monday that a renewed acceleration of global factory activity suggests commodity markets are entering a cyclically stronger environment. JPM echoed as much saying in a note that “our regional (U.S., Europe, EM) business cycle indicators are all showing either recovery or expansion phases of the intra-cycle. Across regions, our strongest style conviction for both these phases is overweight Value.”
“The market is a lot more sure of itself now,” said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn, Germany. He predicts the S&P 500 will rise another 9.2 percent by the end of 2017. “Stocks are no longer stuck in that frustrating range and we’ve finally broken through to new records. We can move on to pricing in the improving outlook: there are strong signs that the U.S. economy is in good shape and that bodes well for corporate earnings.”
The Stoxx Europe 600 Index added 0.5 percent. A gauge of miners extended its highest level since June 2015, while energy producers advanced with oil on optimism OPEC will agree to reduce output. Enel SpA led an advance in utilities after announcing a plan to cut costs and dispose assets of about 3 billion euros ($3.2 billion). Swiss stocks were lower after Swatch Group lost 2.6% and Richemont fell 2.6% as Swiss watch exports plunged the most in seven years. Banco de Sabadell SA dropped 4.3 percent as its largest shareholder reduced its stake in Spain’s fifth-largest lender. French ophthalmology company Essilor International SA sank 6.8 percent after cutting its 2016 revenue target. The MSCI Emerging Markets Index rose 1.2 percent, trimming this month’s slide to 5.3 percent. The Hang Seng China Enterprises Index gained 2.2 percent to a two-week high, while the Philippine benchmark gauge sank 2.5 percent to the lowest since March 1.
According to Bloomberg, global funds sold about $11 billion of equities and bonds in Asia’s emerging markets after Trump’s victory as Treasury yields climbed, spurring the dollar’s strongest rally in eight years. India suffered the biggest outflows between Nov. 9 and Nov. 18, followed by Thailand, according to calculations by Bloomberg using official data.
Meanwhile Trumpflation took a breather, with both bond yields and the dollar declining for the second consecutive day. Sovereign debt securities advanced across the euro area, with the yield on Italian 10-year bonds sliding eight basis points to 1.99 percent. Yields on similar-maturity Spanish bonds fell six basis points to 1.55 percent, set for the biggest decline since Nov. 2. The region’s highest-rated bonds also advanced as European Central Bank officials have sought in recent speeches to reassure investors that policy divergence with the Fed will be maintained as U.S. interest rates begin to rise. Benchmark German 10-year bonds fell three basis points to 0.24 percent.
Demand for collateral also boosted demand for shorter-dated securities, with the German two-year note yield down three basis points to minus 0.71 percent. The securities do not qualify for purchase under QE because they yield less than the ECB’s deposit rate, which is currently at minus 0.4 percent.
Treasuries advanced for a second day, pushing the 10-year yield down two basis points to 2.29 percent, after sliding four basis points on Monday. Two-year notes declined before a sale of $13 billion of floating notes with that maturity, and $28 billion in five-year securities. That will be followed Wednesday by an offering of $34 billion in seven-year debt securities. the Bloomberg Dollar Spot Index dropped 0.1%, adding to Monday’s 0.4 percent slide, paring an advance that has still left it about 4 percent stronger since the Nov. 8 election. The dollar was little changed at 110.78 yen, after falling earlier by as much as 0.5 percent as a magnitude 7.4 earthquake struck Japan, boosting demand for the nation’s currency as a haven.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.43 (+0.23%) to $189.77 per share in premarket trading Tuesday. Year-to-date, the only ETF tied to the DJIA has gained 8.82%.
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