NVDA gained a massive 197% since our AI first added it in November - is it time to sell? 🤔Read more

GLOBAL MARKETS-World stocks and oil scramble higher after plunge

Published 2018-12-19, 08:42 a/m
© Reuters.  GLOBAL MARKETS-World stocks and oil scramble higher after plunge
US500
-
BAC
-
FDX
-
CBKG
-
BNPP
-
LCO
-
ESU24
-
CL
-
US10YT=X
-
STOXX
-
MIWD00000PUS
-
DXY
-
DE10IT10=RR
-

* All eyes on Fed meeting, markets wager on a "dovish" hike

* World stocks inch off 19-mth low, Brent oil up half a percent

* Oil plunge drags on inflation outlook (Updates throughout, adds quote)

By Sujata Rao

LONDON, Dec 19 (Reuters) - Global equity and crude oil markets attempted on Wednesday to claw their way out of a three-day long plunge that saw investors seek out the safety of bonds amid mounting pessimism over world growth.

Oil's spectacular fall - down almost 10 percent since last Thursday - and world stocks' plunge to 19-month lows have prompted speculation the U.S. Federal Reserve might be done with tightening after its policy meeting later in the day.

There was also some support from China which announced an additional $14.5 billion medium-term lending facility to finance small private businesses focus is now firmly on the U.S. Federal Reserve which is widely expected to deliver a rate rise but could signal a pause next year. Futures are pricing less than one rise in 2019, down from three not long back.

"Financial market volatility, falling inflation expectations, and pockets of slowing growth will likely combine to produce a dovish hike in December", BNP Paribas (PA:BNPP) told clients.

While Brent crude inched up 0.5 percent to $56.5 a barrel after plunging 6 percent overnight, its 35 percent fall since October is sending a disinflationary pulse through the world just as trade and economic activity are cooling LCoc1 .

The latest jolt on the growth front came from Japan which said its export growth slowed to a crawl in November, an ominous signal for the trade-focused economy. logistics and delivery firm FedEx (NYSE:FDX), considered a bellwether for the world economy, has slashed 2019 forecasts, noting "ongoing deceleration" in global growth. shares added to earlier tentative gains, rising 0.5 percent by 1300 GMT .STOXX while MSCI's global equity index rose 0.2 percent.

However the global benchmark has fallen 6 percent since the start of this month .MIWD00000PUS , given the fragile Sino-U.S. tariff truce and signs of slower company earnings worldwide.

Wall Street appears set for a stronger opening, with the S&P500 index futures up 0.8 percent. But U.S. stocks are set for their worst December since 1931, the depths of the Great Depression. https://tmsnrt.rs/2A3z5ML

"It's a confluence of several important factors: the market is adjusting its outlook on growth and there is a consensus we will see a slowdown. More importantly, the market is adjusting to the idea this will translate into lower earnings growth," said Norman Villamin, chief investment officer for private banking at Union Bancaire Privee in Zurich.

"It's being complicated by the tightening liquidity situation with the Fed expected to move today and the ECB having signalled the end of its (stimulus)".

Expectations of a Fed pause and the equity sell-off have sent 10-year Treasury yields to the lowest since August at 2.799 percent US10YT=RR - down 20 basis points in December - though the equity recovery lifted yields off those troughs.

Yields in Japan and Australia also reached multi-month lows. for the bond rally were easy to find. Bank of America (NYSE:BAC) Merrill Lynch's closely watched monthly survey found more than half of its participants now flagging a global economic slowdown next year. It also showed the third biggest decline in inflation expectations on record.

The poll also revealed the largest ever one-month rotation into fixed-income assets, their gains coming at the expense of equities. steep drop in Treasury yields undermined one of the U.S. dollar's major props and pulled its index back 0.3 percent to 96.8 .DXY , from a recent top of 97.711.

Villamin of UBP said that while uncertainty had grown about the Fed's rate rise path, other currencies from the yen to the euro still lacked interest rate support.

"Why the dollar won't be too weak is that the alternatives are not attractive," he said. "The only real attractive currency out there is the dollar ... we think dollar strength will stay another 3-6 months."

U.S. futures pointed to a firmer Wall Street opening ESc1 .

The bright spot on world markets is Italy where bond yields continued their fall after Rome struck a deal with the EU Commission over its contentious 2019 budget, signalling an end to weeks of wrangling.

The Italian/German 10-year bond yield gap - a measure of Italian risk - narrowed to 251 bps, the tightest since late September DE10IT10=RR . That spread had been over 300 bps as recently as end-November.

"Everyone was expecting an agreement to be reached, but many people were expecting this to come in Q1 or Q2 next year," said Commerzbank (DE:CBKG) rates strategist Michael Leister.

"With risk sentiment stabilising this morning, it looks like the momentum can increase in Italian bonds."

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Down Decembers for the S&P 500 png

https://tmsnrt.rs/2A3z63h Italy/German bond yield gap tightens

https://tmsnrt.rs/2GrjqfS

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.