Overnight Market Summary
Another day, another low volume overnight meltup to record highs in equity futures. Stocks traded higher in Europe this morning, with tech stocks outperforming following reports that Apple has finally secured a deal to bring the iPhone to China Mobile, which has more than 750 million subscribers. As a result, the likes of ARM Holdings and STMicro traded with gains of over 2% and Apple's German listing traded up around 2.5%. At the same time, French CAC index under performed its peers, with Technip among the worst performing stocks after being removed from Goldman's Sustained Focus List. Addtionally, over the weekend, the ECB's Praet said that the ECB is ready to intervene if credit contracts - and since Euro credit is contracting at a record pace, we wonder what he is waiting for. This happened as Fitch affirmed France at AA+, outlook stable. Looking elsewhere, thin trading conditions resulted in an aggressive spike higher in CME US 30y futures this morning after a large clip was traded, which consequently saw the exchange adjust prices lower, but did not bust any trades.
Overnight headline news bulletin from Bloombeg and RanSquawk
- Stocks traded higher in Europe this morning, with tech stocks outperforming following reports that Apple has finally secured a deal to bring the iPhone to China Mobile.
- Thin trading conditions resulted in an aggressive spike higher in CME US 30y futures this morning after a large clip was traded.
- Going forward, market participants will get to digest the release of the latest U. Michigan Confidence survey, but the price action is expected to remain somewhat muted give the looming holidays.
- Treasury yields rise, led by 5Y and 7Y maturities, as bear-flattening spurred by Fed taper continues; trading likely to be quiet this week with early close tomorrow, Christmas holiday Wednesday.
- Japan unveiled a record budget for the next fiscal year, as Prime Minister Abe boosts spending on social security, defense and public works while trying to contain the growth of the world’s biggest debt burden
- China’s benchmark money-market rate climbed for a seventh day and interest-rate swaps increased as banks hoarded cash to meet year-end regulatory requirements
- The yuan advanced to its strongest level in 20 years as the People’s Bank of China raised the currency’s reference rate by the most in two weeks
- Central bankers from around the world will meet next month to discuss whether to scale back their plans for a debt limit that banks say will force them to rein in lending
- The deadline to enroll in Obamacare health plans that begin Jan. 1 is today for most of the U.S., a cutoff that remains firm even as the Obama administration has urged insurers to allow retroactive sign-ups into next month
- Apple Inc., ending six years of negotiations, struck a deal to sell the iPhone through China Mobile Ltd., giving both companies a means to fight declining share in the market of 1.2 billion wireless subscribers
- Sovereign yields mostly higher. EU peripheral spreads tighten. Asian stocks steady to higher. European stocks and U.S. equity index futures gain. WTI crude and gold fall, copper little changed
Chinese propaganda officials have ordered financial journalists and some media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue when markets reopen today.
EU & UK Headlines
ECB’s Praet said the ECB are ready to intervene if credit contracts.
German Import Price Index (Nov) M/M 0.1% vs. Exp. -0.1% (Prev. -0.7%)
German Import Price Index (Nov) Y/Y -2.9% vs. Exp. -3.1% (Prev. -3.0%)
Italian Consumer Confidence Index (Dec) M/M 96.2 vs Exp. 98.7 (Prev. 98.3, Rev. 98.2)
At 1400GMT there is the budget law confidence vote in the Italian Senate after the Italian government won a confidence vote on the budget law in the lower house on Friday.
Money market rates are continuing to edge higher and the short-sterling curve bear-steepened in what was an extension of the trend seen late last week, after both UK Unemployment and UK GDP came in better than expected. Following this the Sunday Times wrote: "The BoE could face pressure to change its forward guidance policy as early as March due to a faster than expected fall in unemployment".
Barclays pan-Euro agg month-end extensions: +0.03y
Barclays Sterling month-end extensions:+0.06y
IMF’s Lagarde said tapering shows confidence in the economic outlook and the IMF may raise its expectations for US growth next year.
At 0737 there was a spike in the CME US 30y futures. This was not as a result of fundamental news flow but a large clip hitting stops in thin holiday volumes. Later the CME said that all trades in ZBH4 above 131-12 will be adjusted to 131-12, UBH4 above 140-17 will be adjusted to 140-17.
Following on From Apple signing a deal with China Mobile over bring the iPhone to China, the tech sector is leading the way in Europe with the likes of ARM Holdings, STMicroelectronics and Dialog Semiconductors all trading in positive territory. The DAX is the outperforming index this morning, being supported by it's blue-chip names . Whilst the IBEX 35 is the underperformer after Repsol going ex-div and the CAC is being weighed upon by Technip who were removed from Goldman's Sustained Focus List.
FX markets are relatively rangebound amid the light volumes as markets head into the festive period with little in the way of macroeconomic releases or economic commentary to act as a guide for price action.
Overnight, minor USD weakness did lead to some gains in GBP/USD and EUR/USD. However, this move has been pared in European trade. Elsewhere overnight, AUD did see some strength which saw AUD/NZD attempt to climb back above the 1.0900 level. However, this move failed to bear fruition.
WTI and Brent crude futures are trading lower as Iraq crude oil output was reported to have risen to 3.42mln bpd vs. 3.1mln bpd for November. However OPEC ministers met at the weekend and stated that they wont need to cut production in 2014 because growth in demand can absorb any additional crude from Iran or Libya.
Gold continues to head south after stops were tripped on the break of USD 1200. Last week's low seen at USD 1187.13 and then end-June lows at USD 1180.50.
SocGen sees gold falling to USD 1,050 an ounce in 2016
The Iranian Deputy Foreign Minister Abbas Araghchi said Iran will agree on a specific uranium enrichment percentage in the final round of negotiations over its nuclear program.
Workers voted to end a strike over pay at Total's Donges refinery in western France on Sunday, though industrial action continued at three other plants.
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