US equity futures traded flat in muted pre-holiday trading, signaling another subdued open on Wall Street after Monday’s tech-led rally. As of 8:00am, contracts on the S&P 500 gained about 0.1% and those on the Nasdaq 100 were 0.2% higher. American Airlines shares fell as much as 5.5% in premarket trading after the company grounded all flights nationwide, however the stock then rebounded after the grounding was promptly lifted. European bourses, at least those that are open, and Asian markets both gained. 10Y yields rose 2 basis points to trade above 4.60% for the first time since May, while the US dollar also gained. Oil was flat and bitcoin reversed some of yesterday's losses. It's a quiet calendar with just the Richmond Fed mfg index and the Philadelphia Fed non-mfg activity update.
In premarket trading, American Airlines shares fall 3.1% after the company grounded all flights nationwide, according to an FAA advisory. Arcadium Lithium shares gain 4% after the chemicals company said it obtained all shareholder approvals for a proposed acquisition by Rio Tinto. Chip stocks also rose following a strong session for the sector on Monday, and as US President Joe Biden’s administration launched a probe into Chinese-made chips. NeueHealth shares surged 61% after news of the health clinic company’s acquisition by New Enterprise Associates and other investors.
With just a few sessions left in 2024, the S&P 500 is on its way to record a stellar annual return and back-to-back years of more than 20% gains. The index has risen about 25% since the end of 2023 with the top seven biggest technology stocks accounting for more than half of the advance.
European stocks, by contrast, have lagged amid lackluster economic growth and political upheaval in France and Germany. The Stoxx 600 has dropped more than 4% since a September high, heading for its biggest quarterly loss in two years.
"The year is ending with a renewed strength in the US market, thanks to an increase in breadth," said Alberto Tocchio, a portfolio manager at Kairos Partners. “The reality is that US growth has surprised everybody as it’s been very resilient, while unfortunately Europe is closing very downbeat as it still struggles to get some growth."
European stocks follow Asian shares higher in subdued pre-holiday trading after a Wall Street rally fueled by megacap tech shares. All subindexes are up, with energy and travel and leisure leading the ascent. The Stoxx 600 added 0.3%, with many major markets closed including Germany, Switzerland and Italy; London, Amsterdam and Paris close early. France’s CAC40 is up 0.47%, and outperforming as investors seem to be taking well to the appointment of Eric Lombard as finance minister. Lombard is tasked with passing a 2025 budget and lowering the deficit. Prime Minister Bayrou said he aimed to reduce the country’s budget deficit to near 5%; he also provided a little relief in an interview following the appointment of the new cabinet saying the biggest companies shouldn’t take on all the burden of the deficit. China proxies in Europe are also finding a bit of support reports China plans more treasury issuances in 2025 with an emphasis on supporting the Chinese consumer. Among individual movers in Europe, Vistry Group plunged as much as 20% after the UK homebuilder lowered its earnings guidance for the third time in as many months. Renault shares rose as much as 1.9%. Oddo says the agreement between Nissan and Honda for a joint holding company is a positive for the French automaker, which is Nissan’s largest shareholder.
Earlier in the session, Asian stocks rose, with shares in Mainland China and Hong Kong among the best performers, while those in Japan were mixed. The MSCI Asia Pacific Index rose as much as 0.4%, with Alibaba and Samsung among the biggest boosts while Taiwan Semiconductor touched a new record high. Chinese stocks bounced after Reuters reported that policymakers are planning to sell 3 trillion yuan ($411 billion) in special treasury bonds in 2025, an increase from 1 trillion yuan this year. Honda Motor climbed as much as 14% after saying it will buy back as much as ¥1.1 trillion ($7 billion) of its stock. Nissan Motor shares slid as much as 7.3% in Tokyo after the company confirmed it’s in talks with Honda over a possible business integration. MSCI’s Asian equity benchmark is still headed for its first quarterly loss since September 2023, losing 6.8% over the period, even as the S&P 500 has risen 3.7%. Sentiment has soured in Asia in recent months due to concerns over higher global tariffs threatened by US President-elect Donald Trump, a stronger dollar and China’s lackluster economic recovery. Australian stocks edged higher after minutes from the central bank’s latest policy meeting showed it is more confident that inflation is moving toward its target, but will await additional data before making a decision on interest rates. Most Asian markets will be closed Wednesday except mainland China and Japan.
In Fx, Bloomberg’s gauge of the dollar was steady. The yen fluctuated amid meager volumes as Japanese finance minister Katsunobu Kato warned about excessive foreign-exchange moves.
In rates, treasuries extended Monday’s bear steepening move with yields cheaper by up to 2bp across the long-end, steepening 2s10s spread by an additional 1bp on the day and adding to Monday’s 3.5bp widening move. 10-year yields traded around 4.60%, cheaper by 1.5bp on the day with gilts lagging by an additional 4bp in the sector. Treasury spreads wider on the day, with the 2s10s topping at 26bp and just inside last week’s multi-month highs at 27.6bp. The US session includes early 11:30am New York 5-year note auction, which follows a decent 2-year result seen Monday. SIFMA recommend early 2pm New York close for the cash Treasuries market.
In commodities, oil climbed in subdued trading ahead of the holidays after a three-day selloff, with focus on a strengthening dollar and President-elect Donald Trump’s roiling of international politics. Gold edged higher.
Bitcoin is on the backfoot and holds around the USD 94k mark, whilst Ethereum edges higher after a run of losses this week.
US economic data calendar includes December Philadelphia Fed non-manufacturing activity (8:30am) and Richmond Fed manufacturing index (10am)
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APAC stocks traded mostly firmer in choppy trade following a similar session on Wall Street, where stocks experienced volatility with low volumes amid the Christmas period. ASX 200 swung between modest gains and losses with earlier downside led by gold miners. The ASX showed little reaction to RBA minutes, which offered no significant new information. Nikkei 225 was initially supported by recent JPY weakening, but gains were shortlived as USD/JPY slipped back to session lows and eventually under 157.00. Hang Seng and Shanghai Comp were firmer and outperformed regionally despite a lack of significant macro newsflow, although China convened a national fiscal work conference in Beijing, according to the Ministry of Finance, and said they will step up fiscal spending and accelerate spending speed in 2025.
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European bourses, Stoxx 600 +0.3% are slightly firmer today, in holiday-thinned conditions and with newsflow light. European sectors hold a strong positive bias, in-fitting with the sentiment seen in Europe. Travel & Leisure takes the top spot, paring some of the hefty losses seen in the prior session. Insurance is found at the bottom of the pile, joined closely by Consumer Products and Services. US equity futures are mixed and lack any firm direction, ultimately trading on either side of the unchanged mark.
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