U.S. & European stock futures rise, oil bounces

Sydney, Dec. 6 (BNA): US and European stock futures rose on Monday as Asian markets slowed, while bonds gave up some of their recent gains and oil rose as Saudi Arabia raised crude prices.

The mixed US jobs report for November did little to shake market expectations of more aggressive tightening by the Federal Reserve, leaving a week to wait for a consumer price report that could make the case for an early pullback.

Omicron has remained a concern as the variant has spread to about a third of US states, although there have been reports from South Africa that cases there have had only mild symptoms.

Early trade was cautious as MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.5%.

Japan’s Nikkei fell 0.5%, although the government is considering raising its economic growth forecast to calculate a record $490 billion stimulus package.

China’s blue-chip stocks managed to gain 0.6% after state media quoted Premier Li Keqiang as saying that Beijing would cut bank reserve requirement ratios “at the appropriate time”.

Shares of property developer China Evergrande Group plunged 11% after the company said there was no guarantee it had enough money to pay debt payments.

Wall Street was eyeing a rally after Friday’s late dip, with S&P 500 futures adding 0.4% and Nasdaq futures adding 0.1%. EUROSTOXX 50 futures are up 1.1% while FTSE futures are up 0.8%.

While US payrolls were weak in November, the household survey was much stronger with a 1.1 million jump in jobs bringing the unemployment rate down to 4.2%.

“We think the Fed will look at the economy much closer to full employment than previously thought,” said Michael Gaben, economist at Barclays.

“Hence, we expect an accelerating tapering at the December meeting, followed by the first rate hike in March. We continue to expect three hikes of 25 basis points in 2022.”

Almost the entire futures market is priced to rise to 0.25% by May and 0.5% by November.

The optimistic outlook is one reason Bank of America chief investment strategist Michael Hartnett is bearish in equities for 2022, anticipating an “interest rate shock” and tightening financial conditions.

It favors real estate assets, real estate, commodities, volatility, cash and emerging markets, while bonds, credit and stocks may suffer.

For now, short-term Treasury yields are being pushed higher, but the longer term is up as investors bet that an early start to the rally will mean slower economic growth and inflation over time and a lower peak money rate.

US 10-year yields fell about 13 basis points last week and were last at 1.38%, narrowing the two-year spread to the smallest this year.

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Higher short-term interest rates have helped support the US dollar, particularly against the leveraged currencies that are seen as vulnerable to the Omicron variable spread.

The US dollar reached its highest levels in 13 months against the Australian and New Zealand dollars, but its index was relatively flat on the major currencies at 96.214.

The euro slipped slightly to $1.1294, still well above its recent low of $1.1184, while the dollar settled on the safe-haven yen at 113.00.

Bitcoin shed a fifth of its value on Saturday as profit-taking and macro-economic concerns caused nearly $1 billion to be sold across cryptocurrencies.

Bitcoin price was finally at $48,954, after dropping to $41,967 over the weekend.

In commodities, gold found some support from the decline in long-term bond yields, but it has been trading sideways for several months in the $1,720/1,870 range. Early Monday, it was flat at $1,784 an ounce.

Oil prices rebounded after Saudi Arabia, the largest oil exporter, raised the selling prices of its crude to Asia and the United States, and as indirect talks between the United States and Iran on reviving the nuclear deal appeared to have reached a dead end.

Brent crude rose $1.34 to $71.22 a barrel, while US crude rose $1.39 to $67.65 a barrel.

HF