Global Stocks Rise; US Traders Gives Thanks For Higher Equity Futures

While US floor markets are closed for the Thanksgiving holiday (equity, rates and energy futures are open until 1pm Eastern), Europe and Asia (as well as US equity futures) were busy rebounding overnight on strength in the commodity complex following yesterday's news that China's metals producers have asked for a wholesale government bailout or the "QEmmodity" as we have dubbed it, for the first time since 2009, which together with news that China would soon start arresting "malicious metal sellers" has provided a push for commodity prices across the board.

Even if China does bailout its metals producers, some wonder if it is worth it: "Any policy support from the government and smelters, including the reported investigation on short-selling, subsidies to smelters or joint production cuts, will be short-lived forces and won’t change the bigger picture of a market glut. Prices may be impacted temporarily" said Qi Ding, Beijing-based analyst at Essence Securities

Carrying over the Asian momentum, Europe’s Stoxx 600 is up 0.83% with autos, primarily Volkswagen, and basic resources outperforming, real estate and media sectors underperforming. Copper, nickel, zinc gain as China’s suppliers plan to meet this week to weigh response to price rout pushing copper and aluminum up by 2.2% and 1.5% respectively. Oil halts gain after three days.

The Euro remains near 7-month low vs dollar as investors speculate about the ECB's potential stimulus expansion next Thursday, and whether one will even come now that the EUR is where Draghi wants it to be without having done a single thing.

The rest of the day will be fairly light in terms of data, however highlights will come in the form of potential comments from ECB's Linde and Visco.

Market Wrap:

• DJIA Futs +62 to 17,864, +0.37%
• S&P Futs +9.75 to 2.098, +0.47%
• 10 Year 2.23%, Unch
• Stoxx 50 +41.30 to 3,503, +1.19%
• Stoxx 600 +3.19 to 384, +0.84%
• FTSE +42.96 to 6,380, +0.68%
• DAX +174.77 to 11,344, +1.56%
• Nikkei + 96.83 to 19,944; +0.49%
• Shanghai Composite -12.38 to 3,635, - 0.34%
• HSI -9.06 to 22,488, -0.04%
• EURUSD 1.0615, -0.14%
• USDJPY 122.56, -0.12%
• Nymex Crude -0.10 to $42.94, -0.23%
• Brent -0.44 to $45.73, - 0.95%
• Copper +4.45 to 209.35, +2.17%
• Aluminum +21.50 to 1,481, +1.47%

Looking at regional markets, Asian stocks tracked their global counterparts higher following further speculation of easing by the ECB. This supported the ASX 200 (+0.3%) and Nikkei 225 (+0.5%) with gains in the latter capped by a stronger JPY. There were reports that Apple are to introduce OLED displays in iPhones which saw the KOSPI (+1.1%) index outperform amid gains in LG and Samsung Electronics, as Co.'s are expected to be suppliers of the OLED screen. Shanghai Comp. (-0.3%) was lifted by materials following the rally in prices however later came off highs, while Hang Seng (0.0%) was bolstered by energy stocks after energy giant PetroChina said it will consolidate its Kunlun units, but weakened as European participants came to market. 10yr JGBs tracked the gains in bunds and USTs on the back of the aforementioned ECB speculation, while the BoJ also entered the market to purchase JPY 780b1n government bonds.

In Europe, equities have spent the morning is positive territory with volumes across asset classes expected to be light today. Euro Stoxx (+0.9%) have benefitted from strength in material names this morning, while Volkswagen (+3.7%) has led the DAX to outperform (+1.2%) after reports overnight that California have told the Co to assembler recall plans, with hopes being that the fix could be relatively simple compared to first thought and could cost EUR 500m1n, as oppose to the originally provisioned EUR 6.7bln.

Amid the light volumes, fixed income markets have been relatively subdued with Bunds flat on the day. Of note, Goldman Sachs forecast USD 2.48bln of equities for sale for Nov after equities outperformed fixed income, with the S&P 500 outperforming U.S. T-notes by +1.52%.

FX markets see USD reside in positive territory (+0.1%) amid light fundament news behind the move higher, with the strength weighing on the likes of EUR and GBP , with the former residing around the 1.0600 level and the latter breaking below the 1.5100 level.

In commodities, WTI has come off highs reached yesterday, after DoE inventories showed a weaker than expected build (W/W 961 K vs. Exp. 1000K Prey. 252K). Brent is a notable laggard today, underperforming WTI after comments from Libya's NOC suggesting that the situation is better in regards to reopening the El Sharara oil fields. Elsewhere, NatGas has slid in recent trade, as EIA showed stockpiles rising for the 34th consecutive week, with mild weather predicted in the US over the holiday. In early European trade, the USD has seen some mild strength, forcing gold to come off best levels, the yellow metal now trading flat in the session. In China base metals were bid, amid speculation of possible production cuts and reports of a probe into malicious short-sales at Chinese metal exchanges. However copper and other base metals have come off highs overnight, having been weighed by the firmer USD. Iran have boosted the terms of 50 oil and gas contracts, with some potential contracts now extended to 20 years in order to get majors to invest USD 100bIn in projects.

And just as China crushed its equity market, so it will do the same for commodities next: Bloomberg reports that China regulators said to investigate malicious short sellers at metal exchanges, according to sources.

As mentioned, the rest of the day will be fairly light in terms of data, however highlights will come in the form of potential comments from ECB's Linde and Visco.

As is customary, we conclude with a wrap by DB's Jim Reid

The most notable price action in markets over the last 24 hours was the sharp reversal across risk assets in Europe, as fears of a potential escalation following the Russia fighter jet incident subsided as world leaders tried to calm matters. The Stoxx 600 (+1.38%) closed up near its highs for the session to wipe out Tuesday’s losses, while the Dax finished up a solid +2.15%. The performance in European credit, while tighter, was a bit less impressive with Xover closing the session just the 4bps tighter. The bigger news in credit though involved the headlines on Spanish renewable group and European HY issuer Abengoa after insolvency concerns escalated with the company forced to seek creditor protection (more on that shortly).

Meanwhile, in the final session before Thanksgiving in the US, the S&P 500 failed to hold onto very modest gains for most of the session, falling a couple of points into the close which was enough for the index to close -0.01% and just in the red. Unsurprisingly volumes were very light and some 30% below average, while the 7pt range for the index intraday was the second smallest this year. In the oil space, despite more bearish US stockpile data, WTI roared back off the day’s lows (3.5% swing) in the afternoon to finish up +0.40% and back above $43, closing higher for the second consecutive day for the first time since the end of October.
The main focus in the US yesterday was the bumper set of data released before Thanksgiving, which all-in-all was a bit of a mixed bag. Before we review that, it’s been a pretty decent start for markets in Asia this morning, seemingly supported by that rally back off the lows in Oil yesterday. There’s been decent gains for the Nikkei (+0.55%), Hang Seng (+0.76%), Kospi (+0.91%) and ASX (+0.33%), while in China it’s been a bit more of a choppy start there but the Shanghai Comp is currently +0.46%. The positive tone is being reflected in credit indices this morning where markets are generally a basis point or two tighter.

Back to that US data. There was a positive take away from the latest preliminary October durable goods orders which, boosted by aircraft orders, were up a sharp +3.0% mom (vs. +1.7% expected) with the ex-transportation also up a better than expected +0.5% mom (vs. +0.3% expected). Impressive also were core capex orders which were up sharply last month (+1.3% mom vs. +0.2% expected), with September revised up seven-tenths to a +0.4% gain. Last month was the biggest monthly gain in 3 months, driven in particular by higher orders for machinery and computers. Meanwhile, last month’s personal income reading was up +0.4% which has now helped to lift the savings rate to 5.6% which is the highest since December 2012. Personal spending (+0.1% mom vs. +0.3% expected) was a bit lower than expected. It was hard to get too excited about the latest inflation data where the October PCE deflator printed at +0.1% mom last month and a tenth below expectations, keeping the YoY rate unchanged at +0.2%. The PCE core was also a tenth below expectations at 0.0% mom, which kept the YoY rate at +1.3%.

Elsewhere, new home sales were up a solid +10.7% mom (+6.8% expected) clip in October, although the steep fall in September was revised lower still. The September FHFA house price index was up +0.8% mom (vs. +0.4% expected). Initial jobless claims were down 12k last week to 260k and near the recent lows. The flash November services PMI was up a robust 1.7pts to 56.5 (vs. 55.1 expected) which, along with the manufacturing print, helped nudge the composite up 1.1pts this month to 56.1 which would be the highest since April if it stays there. Finally the last read of the University of Michigan consumer sentiment number for November was revised down 1.8pts to 91.3 but still a bit higher than that seen in October and September. The 1y and 5-10y inflation expectations were revised up however, by two-tenths and one-tenth to 2.7% and 2.6% respectively.

Accounting for the latest personal income and PCE data, the Atlanta Fed GDPNow model downgraded its forecast for Q4 GDP in the US to 1.8% from 2.3%. The bumper set of releases did little to nudge Fed Funds expectations however with the probability of a December move sitting at 72% which is a tad lower than the 74% we were at 24 hours ago.

Back to that Abengoa news. The company’s share price closed over 50% lower yesterday, while its bonds due in March next year (which total €500m) tumbled to a record low 22c from 64c the day prior and as high as 94c earlier this month after a potential white knight backed away from a rescue and injection of funds into the cash-stricken group, raising the prospect of what looks set to be a messy restructuring ahead. The company has taken the decision to seek preliminary protection from lenders as a result and based on Spanish law has up to four months to find a solution with creditors. In the event that no such agreement is reached, insolvency proceedings will commence. Significantly, both Bloomberg and Reuters are highlighting that a bankruptcy by the company could be the largest on record in Spain. It’s worth putting this into perspective relative to the European HY market also. The company has just shy of €9bn of debt and four bonds which are in the Bloomberg Euro HY corporate bond index, making up 0.65% of the overall index. So not a huge amount but at the same time not insignificant and the wider implications are how this would test the overall tone for the HY market. It of course comes at a time where we’ve seen a couple of recent deals pulled in credit markets recently and sparked a bit of concern around the fragility into year end. So one to keep an eye on. It’s also worth noting that the group has a number of other Euro and US bonds outstanding, so may well occupy a bigger percentage in other indices.

Elsewhere yesterday, European sovereign bond yields edged lower as 10y Bund yields in particular closed just shy of 5bps lower at 0.470%, while 2y Bunds (-3.9bps) extended their move deeper into negative territory at -0.424% with the one week countdown now on until the ECB meeting. The ECB’s Constancio reiterated that no decision has been made on possible QE expansion yet and that ‘it will be a totally independent decision based on data and information’ but that it ‘will not by itself change dramatically the environment because we have been in this environment of very accommodative policy for long’.

With Thanksgiving Day in the US today it’s an unsurprisingly quiet calendar for us today with markets across the pond closed. In Europe the only data of note is the ECB’s credit and money aggregates for October, German consumer confidence and some jobseeker numbers out of France..

Comments

[Anonymous User]

Gobble gobble gobble.

Looks like the banksters are hunting for a sexy unicorn:

http://goo.gl/ux0c3r

[buzzsaw99]

capitalism in action, lulz

[FranSix]

I wonder if it occurs to anyone that both th Dow and the S&P have not seen new highs this year, and that no amount of liquidity added will achieve new highs.

Added to this, central banks are heavily vested in the markets, meaning they've become the biggest holders of mortgage backed securities,ETFs and stocks.

[cossack55]

Yes, which is why I hold the minumum amount of paper possible and still survive in the USSA

[mijev]

"both th Dow and the S&P have not seen new highs this year"

I think the Fed is more concerned about not breaking below certain levels rather than hitting new highs. If the dow went below 16K for more than a couple of days it would put insurance companies, pension and mutual funds etc in a bad position, espcially as they're using margin loans to buy up shitty stocks. Which is one of the reasons I still can't see a hike coming without a massive back door QE IV injestion.

[FranSix]

The irony in a liquidity trap is that everyone looking to divest will have done so and are no longer accumulating.

[new game]

cash up ass, i assume...

[slaughterer]

The Blow-Out (fake) "data" from Black Friday / Cyber Monday should push the indices to new highs.  It is part of the unicorn Santa script for EOY 2015.  

[ZeroPoint]

They can only hide it until the end of Q1 2016.

[ZombieHuntclub]

TL/DR

[Bernoulli]

Meanwhile, Switzerland is cratering (and therefore SMI is attempting to jump over 9'000 points - maybe on "hopes of ECB stimulus"? ehm wait...):

Construction Industry Production, Orders and Turnover Statistics in 3rd quarter 2015

Production in the secondary sector decreases

Neuchâtel, 26.11.2015 (FSO) – Production in the secondary sector declined by 3.1% in 3rd quarter 2015 in comparison with the same quarter a year earlier. Turnover fell by 6.2%. Orders received declined by 5.1% whereas orders on hand rose by 4.4%. These are some of the provisional results from the Federal Statistical Office (FSO).

Production
Secondary sector production (industry and construction) fell in 3rd quarter 2015, in comparison with the same quarter a year earlier, by 3.1%.

In comparison with the previous year industrial production declined in July by 1.4%, in August by 6.0%, and in September by 1.0%. For the whole of 3rd quarter 2015 production declined by 2.8% in comparison with the same quarter a year earlier.

Construction production declined by 4.9% in 3rd quarter 2015 in comparison with the same quarter a year earlier. Production declined by 7.2% in building, civil engineering also registered a decline (-3.6%). Lastly, specialised construction activities registered a decline of 4.5% in their production.

Turnover
Secondary sector turnover (industry and construction) fell in the 3rd quarter 2015, in comparison with the same quarter a year earlier, by 6.2%.

Industrial turnover fell in July by 4.4% in comparison with the previous year, and also fell in August
(-9.6%) and in September (-5.1%). For the whole of 3rd quarter 2015 in comparison with the same quarter a year earlier, turnover registered a decline of 6.4%.
 
Construction turnover fell by 5.5% in 3rd quarter 2015 in comparison with the same quarter a year earlier. Turnover fell by 8.3% in building, civil engineering registered a decline of 4.1%, specialised construction activities a decline of 4.9%.

http://www.bfs.admin.ch/bfs/portal/en/index/news/medienmitteilungen.html...

[JailBanksters]

Does it make any sense that stock prices are going and the price of Oil is still down in the dumpster and everything that is made in the world needs Oil.

[Bernoulli]

Of course it makes sense.

It's because low oil prices are good for the consumer (whereas rising oil prices would be equally bullish).

Didn't you know that EVERYTHING IS AWESOME??

[margincall575]

Call me crazy but has anyone noticed that that by the very  action of the world ponzi (because no, i refuse to call this a market) the banking criminals only revealed the WHO that is behind the Paris "ISIS" attack? We just Majikally had 2 red days before the Paris attack. The attack or news of, came conveniently about a 1/2 hour after world ponzi closed for the weekend that day , and weve barely had a red hour let alone day since?  Odd huh? Man Wall street is so lucky arent they? ISIS was gracious enough to let everyone load up on their long posistions 2 days prior and then this? I guess thats what so madening about criminals is when they display the audacity to not even try to hide thier crime huh? Maybe thats a signal we are near the end? Kinda like the money announced missing on 9-10-11? Kinda like uh "F%%%k it we know whats ahead and nobody will notice after that "?  As  a very loyal reader of ZH through the years ive kinda felt bad for the person writing all this. One can easily everyday just write "the ponzi will finish whatever they determined it to "...and be right? Every day i wake up and wish that these last 7 years is going to be like a "Dallas" episode. I realize this  is was all just a nightmare and the demoralizing feeling of knowing what this really is and about and were we are being steered was just a product of my imagination and delusion

[new game]

a day off from the shit show on the home front. think not, same show different nation...

[margincall575]

"shit show"? I find you very polite. I call it the most epic white collar crime the planet has ever seen. Its been beyond shit show or laughable years ago IMHO

[Panic Mode]

Sure, eat as much as you can for this Thanks Giving *cough* last supper *cough*.

[silverer]

Yeah. And choke down some copper while you're at it.  Lol.

[Junerberno]

China's transformation must be complete if it wants to pay more for metals despite being the world's largest metals importer and consumer.

[silverer]

Give thanks to.... to.... the printing press!!