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S&P 500 futures point to softer open after flat session, Europe stocks resist declines

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October 18th, 2018

S&P 500 futures point to softer open after flat session, Europe stocks resist declines  

The dollar held near a one-week high on Thursday and stocks were mixed after minutes showing the Federal Reserve may favour more rate hikes next year.

S&P 500 futures pointed to a softer open after a flat session on Wednesday, while stocks in Europe resisted earlier declines in Asia to rise on the back of strong earnings.

The 10-year Treasury yield rose to as high as 3.21 per cent after minutes showed Fed officials appeared to favour an eventual move in rates above the level they see as neutral for the U.S. economy.

China's stock markets were hit hard in a gloomy session for Asian equities. The yuan fell to a two-month low as the U.S. Treasury refrained from naming China a currency manipulator, while at the same time increasing scrutiny of Beijing's exchange-rate policy.

China's premier warned of risks to the economy from an escalating tariff war with the United States.

European shares, though, largely shrugged off the disappointment in Asia. Frankfurt's DAX and Paris's CAC both rose 0.3 per cent and London's FTSE traded 0.1 per cent lower. A pan-European equity index rose 0.6 per cent.

Minutes of the Federal Reserve's Sept. 25-26 meeting showed every Fed policymaker backed raising interest rates last month and also generally agreed that borrowing costs were set to rise further.

That reinforces expectations that U.S. yields will rise further despite President Donald Trump's view that the Fed is tightening too much.

"Corporates have done incredibly well but it's clear we are going into monetary tightening in the U.S. and that makes people worried about global debt having gone up so much in recent years," said Peter Lowman, CIO at Investment Quorum, a UK wealth manager.

At a time of simmering trade war tensions, "people are perhaps taking chips off (the) table and maybe going into cash and short-dated bonds," he said.

Overall, third-quarter earnings for S&P 500 companies are seen growing 21.8 per cent, according to I/B/E/S Refinitiv.

The greenback held on to gains on Thursday. Against a basket of its rivals, the dollar rose for a third consecutive day, trading broadly flat at 95.517. That checked emerging-market gains.

"The last thing emerging markets, or the U.S. yield curve or equities, want is a reminder that U.S. rates are going to keep going up," Rabobank analysts told clients in a note.

The euro changed hands at $1.1518, holding steady versus the greenback, after losing 0.65 per cent on Wednesday. The euro has lost just under 3 per cent of its value versus the dollar over the last three weeks.

Major currencies have shown a limited reaction after the U.S. government late on Wednesday refrained from naming China as a currency manipulator.

In its semi-annual currency report, the U.S. Treasury Department said a recent depreciation of China's yuan currency will likely exacerbate the U.S. trade deficit, and U.S. officials found Beijing appeared to be doing little to directly intervene in the currency's value.

"The U.S. refrained from labelling China a currency manipulator, but dialled up the rhetoric against its currency practices," said Sue Trinh, Head of Asia FX Strategy, RBC Capital Markets.

The yuan fell 0.2 per cent to 6.9443 per dollar in offshore trade. That is the weakest level since a 1-1/2-year low of 6.9587 touched in August.

STERLING SUPPORTED

In Europe, an EU leaders' summit with British Prime Minister Theresa May yielded little obvious progress on a Brexit deal being negotiated between Britain and the bloc.

Sterling did, however, turn positive on Thursday after May confirmed she was open to discussing an extension of the transition period after Brexit.

Oil steadied on Thursday as support from ongoing tensions over the disappearance of a prominent Saudi journalist offset a big drop overnight due to a jump in U.S. crude stockpiles.

U.S. West Texas Intermediate crude for October delivery was up 1 cent at $69.56 a barrel by 0840 GMT, after falling 3 per cent in the previous session to settle below $70 for the first time in a month.

 - Devdiscourse News.

See Also: S&P 500 News Blog Dow Jones Industrial Average

 

Stocks in U.S. Fluctuate as S&P 500 Heads for Its Best December Since 1991

December 31st, 2010

U.S. stocks swung between gains and losses, with the Standard & Poor’s 500 Index heading for its second straight annual advance and its best December since 1991.

Hewlett-Packard Co. and Microsoft Corp. fell at least 0.7 percent to lead losses in the Dow Jones Industrial Average. CVS Caremark Corp. gained 0.1 percent after the drugstore operator agreed to buy a unit of Universal American Financial Corp. Borders Group Inc. slumped 19 percent after suspending payments to some publishers. Alcoa Inc. rose 1.6 percent for the biggest gain in the Dow.

The S&P 500 fell less than 0.1 percent to 1,257.69 as of 11:21 a.m. in New York. The index has climbed 13 percent this year and 6.5 percent this month. The Dow slipped 1.66 points, or less than 0.1 percent, to 11,568.05 today, and is up 11 percent this year. The 2010 advance follows a 23 percent rise in the S&P 500 in 2009, making it the biggest two-year advance since the Internet-bubble rally of 1998 and 1999.

“This year has been like a long road trip. It wasn’t always pleasant while on the way, but it was good once we reached the destination,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $340 billion. “Today we have skeleton crews at investment houses and trading shops so it’s likely going to be a very light day.”

Earnings, Fed Moves

The S&P 500 advanced 23 percent from its July low through yesterday as companies reported better-than-estimated earnings and the Federal Reserve pledged to buy up to an extra $600 billion in Treasuries to stimulate the economy. Its rally to a two-year high has pushed its valuation to 15.7 times reported profits, the most since June.

This year’s increase for the benchmark index for U.S. equities means the gauge has risen for seven of the past eight years. The index’s 86 percent surge from a 12-year low on March 9, 2009, is the biggest for a comparable time period since 1955, according to Howard Silverblatt, senior index analyst at S&P.

The S&P 500’s advance sent the gauge above 1,251.70 on Dec. 21 for the first time since Sept. 12, 2008, the last trading day before Lehman Brothers Holdings Inc. filed the world’s biggest bankruptcy and prompted a 46 percent drop for the benchmark gauge through March 2009. The December rally for the benchmark index comes after it lost 0.2 percent in November and posted a combined gain of 13 percent in September and October, the biggest increase during those months since 1998.

‘Optimistic’ on 2011

“I’m quite optimistic about the performance of equity markets in the year ahead,” said Andrew Popper, chief investment officer at SG Hambros Bank Ltd. in London. “We have the conditions in place for seeing this rally continuing. The economy is recovering at a global level.”

The benchmark gauge for American equities will rise 9.2 percent from yesterday’s close of 1,257.88 to 1,374 in 2011, bringing the increase since 2008 to 52 percent, according to the average of 11 strategists in a Bloomberg News survey.

Hewlett-Packard, the world’s largest computer maker, retreated 0.9 percent to $41.89 and Microsoft fell 0.7 percent to $27.67 as technology companies led declines in the S&P 500, dropping 0.4 percent as a group.

CVS Caremark gained 0.1 percent to $35.04. The drugstore operator said it will acquire the Medicare Part D business of Universal American Financial for about $1.25 billion. Universal American surged 37 percent to $20.

Clearwire Corp., a company creating a nationwide high-speed wireless network using WiMax technology, slumped 1.3 percent to $5.15 after it said Chairman Craig McCaw will step down today.

Borders slumped 19 percent to 93 cents. The bookstore chain has suspended payments to some publishers as refinancing talks continue, the Wall Street Journal reported, citing Publishers Marketplace.

Alcoa, the largest U.S. aluminum producer, rose 1.6 percent to $15.44.

Imax Corp. rallied 11 percent to $29.79. Sony Corp. may be preparing to bid more than $40 a share for the company that designs and makes giant-screen movie theaters, the Daily Mail reported, citing London traders. Walt Disney Co. may also be interested in bidding for Imax, the newspaper said.

 - Nikolaj Gammeltoft in New York at Bloomberg.