Opening Bell: Euro Stocks Fall After Asia, U.S. Rally; WTI Slips

Key Events

Stocks in Europe reversed their climb this morning and futures on the S&P 500, Dow and NASDAQ 100 partially trimmed an earlier leap fueled by news that Chinese importers, crucial to the US soybean export business, had resumed buying American crops. The pound extended a rally after UK Prime Minister Theresa May won a confidence vote, warding off an immediate deadlock on Brexit proceedings.

An early gain in the STOXX Europe 600 was led by bank shares, as hopes for a compromise between Italy and the EU over the Southern European country's budget offset the risk to the continent's financial system stemming from Brexit uncertainty. German automakers also helped the pan-European benchmark higher, as the sector stands to gain the most from US and China's tariff cuts. However, an initial, near 0.4% advance turned into a 0.25% drop, where the index was trading at the bottom of the session. A close at this level would form a bearish shooting star candlestick.

Asian indices flashed green across the board thanks to the improved trade outlook, with Chinese stocks outperforming. Hong Kong's Hang Seng jumped 1.29 percent, while the mainland Shanghai Composite sealed a 1.23 percent advance.

Global Financial Affairs

In the US session, the S&P 500, the Dow Jones Industrial Average and the Russell 2000 rebounded and the NASDAQ Composite extended its gains to a second day, as geopolitical developments boosted market confidence—though all majors ended well off their highs.

The SPX gained 0.64 percent supported by a broad market, with eight out of the index's 11 sectors closing higher. Communication Services (+1.07%) and Consumer Discretionary (+1.05%) led the climb, buoyed by a 1.9 percent rally in the FAANGs: Facebook (NASDAQ:FB) (+1.70%, + 0.86% afterhours), Netflix (NASDAQ:NFLX) (+3.6%, +0.59% afterhours) and Alphabet (NASDAQ:GOOGL) (+1.14%, +0.12% afterhours) pulled XLC higher, while Amazon (NASDAQ:AMZN) (+1.24%, +0.93% afterhours) boosted XLY.

CNBC's Mad Money host Jim Cramer said Facebook stock has bottomed, thanks to the social media company's guidance for additional spending on digital media and its recent $9 billion share buyback announcement. Technically, Facebook formed a shooting star at the top of a descending channel, guarded by the 50 DMA, suggesting it would retest its $126.25 trough, posted November 20, its lowest level since Jan. 12, 2017.

The risk-on mood meant investors shunned the three main defensive sectors, with Real Estate (-1.89%) underperforming, followed by Utilities (-0.63%) and Consumer Staples (-0.13%)

The Dow Jones Industrial Average edged 0.64% higher, but it was the NASDAQ Composite (+0.95%) that outperformed, as risk and technology stocks moved once again to the forefront.

This morning, the yield on 10-year Treasurys tumbled between 3:00 and 4:30 EDT, from 2.915 to 2.90, paring the gains of the previous three-day climb, when investors rotated out of government bonds and into equities. Are they backpedaling today, underpinning the bearishness signaled by US stock futures?

Meanwhile, the dollar rebounded around 4:00, suggesting foreign investors bought the US currency to purchase Treasurys—a move that coincided with the decline of both European stocks and US futures in the early European session.

WTI crude slipped below $51 a barrel today, after turning yesterday’s gains into losses, per our forecast based on the technicals, as a smaller-than-expected decline in U.S. crude stockpiles renewed fears of a global glut.

Up Ahead

• Canadian ADP Nonfarm Employment Change is released Thursday.

• Canada’s New Housing Price Index for October is released Thursday.

• The European Central Bank is expected to end asset purchases at its final policy meeting of 2018 on Thursday.
• China industrial production, retail sales data for November is due Friday.

Market Moves

Stocks

• Canada’s S&P/TSX Composite closed up 0.79 percent Wednesday.

• Italy’s FTSE MIB Index jumped 1.3 percent to the highest in more than a week.
• The MSCI All-Country World Index climbed 0.2 percent to the highest in a week.

Currencies

• The Canadian loonie was down 0.20 percent against the U.S. greenback early Thursday, trading at 0.7476.

• The Bloomberg Dollar Spot Index dipped 0.1 percent.
• The euro gained 0.2 percent to the strongest in two weeks.
• The British pound rose 0.2 percent to $1.2651.
• The Japanese yen dipped 0.1 percent to 113.41 per dollar, the weakest in more than a week.

Bonds

• Canada’s 10-year yield was down early Thursday at 2.114, a 0.94-percent decrease.

• The yield on 10-year Treasuries slipped less than one basis point to 2.91 percent.
• Italy’s 10-year yield fell six basis points to 2.94 percent, the lowest in 11 weeks.
• Germany’s 10-year yield gained one basis point to 0.29 percent, the highest in more than a week.
• Britain’s 10-year yield increased less than one basis point to 1.279 percent, the highest in more than a week.

Commodities

• Brent crude gained 0.1 percent to $60.22 a barrel.
• Copper climbed 0.8 percent to $2.79 a pound, the highest in more than a week.
• Gold increased less than 0.05 percent to $1,246.23 an ounce.