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Friday, March 29, 2024

Global Stocks Rise, Copper Soars In Thin Holiday Volumes

Courtesy of ZeroHedge. View original post here.

European stocks are steady in post-Christmas trading if struggling for traction after a mixed session in Asia, amid trading thinned by a holiday-shortened week and ongoing worries about the tech sector; however a strong rally in commodities – including copper and oil – buoyed expectations for a strong 2018 and helped offset concerns over the technology sector triggered by reports of soft iPhone X demand. 

The dollar weakened against most G-10 peers as investors await the release of U.S. consumer-confidence data, with much of the spotlight falling on commodity currencies; the OZ dollar holds onto gains as copper surges to a three-year high; oil retreats after reaching the highest close in more than two years following a pipeline explosion in Libya on Tuesday. Treasuries and core European core bond yields are a touch lower.

The Stoxx Europe 600 Index edged lower, with tech stocks hit for the third day amid rumors of weak iPhone demand and leading the decline as chipmakers slumped after analysts lowered iPhone X shipment projections, sending the Nasdaq Composite Index lower overnight. While mining and oil stocks strengthened due to a surge in copper prices to a 3.5 year high (see below), the European STOXX 600 index slipped 0.1% as European tech stocks tumbled on reports that demand for Apple’s iPhone X may be weaker than expected. The equity benchmark index is poised for an annual gain of 8.1%, the best advance in four years. Elsewhere, Volvo rose as China’s Geely bought Cevian’s stake in the truckmaker, making it Volvo AB’s largest stakeholder. IWG surged the most since 2009 after confirming it has received a a non-binding takeover offer from a consortium backed by Brookfield Asset Management and Onex.

U.S. equity-index futures nudged higher.

In Asia earlier Japanese equity benchmarks posted slight gains, Australian stocks were flat and China’s domestic shares dropped.  Asian shares climbed 0.3% to near a recent one-month high, though it was more of a mixed picture in European stock markets. Shares of China’s new-energy automakers surged after the government announced it will extend purchase-tax exemption for another three years, through Dec. 31, 2020. BYD climbed as much as 5.9% on the mainland to the highest since Nov. 24; Zhongtong Bus & Holding Co. rises by 10% daily limit.

Shares of new energy vehicles #NEVs makers are surging, after the Ministry of Finance said #China will continue to exempt the purchase tax on new-energy vehicles through 31 Dec 2020 pic.twitter.com/R5QhIZK1uU

— YUAN TALKS (@YuanTalks) December 27, 2017

As the chart below shows, the recent dip in Emerging Asian stocks has been largely bought, and the selloff gap has been mostly filled.

In commodities, oil and copper prices rocketed to multi-year highs, pushing the MSCI world equity index 0.1% higher. While oil prices were strengthened largely because of an attack on a crude pipeline in Libya, the surge in copper was particularly eye-catching as the metal is seen as a proxy for global growth. Miners gained as copper climbed to a three-year high after China ordered its top producer to halt output to combat winter pollution.

“The rally in copper supports expectations that 2018 is going to be a strong year for synchronised global growth,” said Greg McKenna, chief strategist at AxiTrader. That, or at least until the artificial production shortage is resolved.

Meanwhile, rising oil prices – WTI hit $60 a barrel for the first time since mid-2015 – boosted currencies that trade in line with commodities prices.

In currencies, the dollar eased against a basket of currencies and fell against the euro on Wednesday in thin holiday trading, while a rally in commodity prices helped push the Canadian and Australian dollars to their highest levels in two months. The EUR/USD made a session high after London came into the market, with the pair remaining above the 21-DMA; the USD/JPY is little changed while USD/JPY cross- currency basis swaps hit widest spread in more than a year. Cable rose to a one-week high amid broad dollar weakness while Aussie extended opening gains buoyed by flows against kiwi, which itself rose on outright short-covering against the U.S. dollar; traders report that ranges extended on thinning year-end liquidity.

As Reuters points out, while world stocks were up on the day, there was still an undercurrent of nervousness in the market which saw some safe haven flows into high-rated euro zone government bonds, pushing their yields a touch lower. “Geo-political risks have notched a little higher, supporting rates markets,” said Mizuho’s head of rates Peter Chatwell, referring in particular to a renewal in tensions around North Korea.

The United States announced sanctions on two North Korean officials behind their country’s ballistic missile program on Tuesday after the U.N. Security Council unanimously imposed new sanctions on North Korea last week. “The North Korean statement that U.N. sanctions are an act of war is, as tends to be the case, an exaggeration, but nevertheless the market has no choice but to price it. Some safe haven positioning is a natural reaction,” said Chatwell.

Today investors await the release of U.S. consumer-confidence and pending home sales data.

Market Snapshot

  • S&P 500 futures up 0.07% to 2,689
  • US 10Y yield down 0.1 bp to 2.47%
  • STOXX Europe 600 down 0.02% to 390.22
  • German 10Y yield fell 1.4 bps to 0.406%
  • Euro up 0.2% to $1.1880
  • Brent Futures down 1% to $66.37/bbl
  • Italian 10Y yield rose 0.6 bps to 1.645%
  • Spanish 10Y yield unchanged at 1.473%
  • Brent Futures down 1% to $66.37/bbl
  • Gold spot up 0.2% to $1,285.23
  • U.S. Dollar Index down 0.1% to 93.13
  • MSCI Asia Pacific up 0.3% to 172.69
  • MSCI Asia Pacific ex Japan up 0.3% to 562.82
  • Nikkei up 0.08% to 22,911.21
  • Topix up 0.2% to 1,829.79
  • Hang Seng Index up 0.07% to 29,597.66
  • Shanghai Composite down 0.9% to 3,275.78
  • Sensex down 0.3% to 33,905.60
  • Australia S&P/ASX 200 unchanged at 6,069.87
  • Kospi up 0.4% to 2,436.67

Overnight Media Digest

  • Copper in London surged to the highest level since 2014 after China ordered its top producer to halt output to combat winter pollution, adding further impetus to a rally that’s been driven by optimism about demand as well as supply disruptions at mines
  • ETFs linked to raw materials attracted about $450 million this month as of Dec. 21, on track for a third straight annual inflow, as investors are betting on synchronized global growth to improve the outlook for commodities from copper to natural gas in 2018
  • Recent economic data offer a “warning for 2018” now that Chinese leaders are less motivated to prop up growth in the wake of their Congress in October, according to the China Beige Book
  • German Social Democratic Party won’t agree to renew coalition with Chancellor Angela Merkel unless she backs EU reform, acting Foreign Minister Sigmar Gabriel quoted as saying in interview with Bild newspaper
  • Spain November seasonally adjusted retail sales rose 2% y/y vs est. +0.8% y/y
  • The United States imposed sanctions Tuesday on two North Korean officials who are considered key to their country’s development of ballistic missiles.
  • A pipeline blast in Libya and a bullish budget forecast in Saudi Arabia boosted crude prices to levels not seen since mid-2015.
  • Recent economic data offer a “warning for 2018” now that Chinese leaders are less motivated to prop up growth in the wake of their Congress in October, according to the China Beige Book.
  • Fitch Downgrades AXA Financial, Inc.; Removes Ratings from Watch
  • Daily Mail & General Trust Cut to Junk by S&P

In Asian markets, Japanese equity benchmarks posted slight gains, Australian stocks were flat and China’s domestic shares dropped.  Asian shares climbed 0.3% to near a recent one-month high, though it was more of a mixed picture in European stock markets. Shares of China’s new-energy automakers surged after the government announced it will extend purchase-tax exemption for another three years, through Dec. 31, 2020. BYD climbed as much as 5.9% on the mainland to the highest since Nov. 24; Zhongtong Bus & Holding Co. rises by 10% daily limit. 

Top Asian News

  • Nomura Says Japanese Investors Should Buy Unhedged Dollar Bonds
  • India Is Said to Propose Easing Rules on Debt Default Disclosure
  • China to Discuss Changing Constitution for First Time Since 2004
  • WeWork’s Chinese Rival Nixes ‘UrWork’ Label in Global Makeover
  • Prosecutors Affirm Push for Samsung Heir to Get 12-Year Sentence
  • DBS Hires Andy Yung as Vice President at Loans Team in Hong Kong
  • 1MDB Makes Final Payment to IPIC in $1.2 Billion Settlement

In Europe, the Stoxx Europe 600 Index edged lower, with tech stocks hit for the third day amid rumors of weak iPhone demand and leading the decline as chipmakers slumped after analysts lowered iPhone X shipment projections, sending the Nasdaq Composite Index lower overnight. While mining and oil stocks strengthened due to a surge in copper prices to a 3.5 year high (see below), the European STOXX 600 index slipped 0.1% as European tech stocks tumbled on reports that demand for Apple’s iPhone X may be weaker than expected. The equity benchmark index is poised for an annual gain of 8.1%, the best advance in four years. Elsewhere, Volvo rose as China’s Geely bought Cevian’s stake in the truckmaker, making it Volvo AB’s largest stakeholder. IWG surged the most since 2009 after confirming it has received a a non-binding takeover offer from a consortium backed by Brookfield Asset Management and Onex

Top European News

  • IWG Soars After Bid Approach From Canada’s Onex, Brookfield
  • Russia Nuclear Power Output Reaches Post-Soviet Record This Year
  • Bank of Spain Sees Growth Continuing But Losing Intensity
  • Norway Oil Fund Says Taxes Should Be Paid Where Value Generated

In FX, the Bloomberg Dollar Spot Index decreased 0.2 percent to the lowest in almost two weeks, in thin holiday trading, while a rally in commodity prices helped push the Canadian and Australian dollars to their highest levels in two months. The EUR/USD made a session high after London came into the market, with the pair remaining above the 21-DMA and advancing 0.2% to $1.1884, the strongest in almost four week; the USD/JPY is unchanged at 113.25 per dollar, the strongest in more than a week while the USD/JPY cross- currency basis swaps hit widest spread in more than a year. Cable rose to a one-week high amid broad dollar weakness while Aussie extended opening gains buoyed by flows against kiwi, which itself rose on outright short-covering against the U.S. dollar; traders report that ranges extended on thinning year-end liquidity.

In commodities, WTI dropped 0.6% to $59.59 a barrel, the first retreat in more than a week and the biggest dip in two weeks.  Gold increased 0.2% to $1,286.01 an ounce, hitting the highest in more than four weeks with its sixth consecutive advance. LME copper advanced 0.8 percent to $7,185.00 per metric ton, reaching the highest in about four years on its ninth consecutive advance and the biggest gain in a week.

US Event Calendar

  • 10pm: U.S. Conf. Board Consumer Confidence, Dec., est. 128, prior 129.5; Present Situation, Dec., no est., prior 153.9; Expectations, Dec., no est., prior 113.3
  • 10pm: U.S. Pending Home Sales MoM, Nov., est. -0.5%, prior 3.5%; NSA YoY, Nov., no est., prior 1.2%
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