While it is still unclear just why the FOMC Minutes which are said to have made a December liftoff “more likely” unleashed a dramatic market rally, one which sent both stocks and TSYs higher (suggesting of a rate cut not a hike, and certainly not more tightening), the sentiment continued overnight, with both Asian stocks surging on the US momentum, as well as Europe, where the DAX gapped solidly above the 200 DMA as most European shares advanced, led by resources, travel stocks. U.S. futures continue their ramp higher, and at last check were another 8 points, or 0.4%, in the green.
DB may have summarized yesterday’s action best: “This positive market response will likely please the Fed and give them more confidence.” Poor Fed, locked in a reflexive nightmare of its own making.
But if the Fed Minutes were enough to unleash the latest leg in this rally, than the ECB’s own minutes due also today, should send futures back over 2100 without much difficult, regardless of their actual content.
Here is where the markets stand at this moment:
Here are some of the main overnight news: shortly after the close we learned that Pfizer is near an agreement to buy Allergan for $380/share in biggest deal, one which however may be scuttled in the last minute by Treasury’s latest anti-inversion crackdown; Square raised less than sought in IPO, Testing Valuations: Raised $243m selling 27 million shares for $9 each, ~1/3 less than sought; Diller’s Match Group Raises $400 Million in Online-Dating IPO, also at the low end of range; Telegram App Blocks Islamic State Channels Over ‘Propaganda’: ISIS used the service for propaganda; Staples’ Customers Said to be Dissatisfied With Asset Sales: NYP: FTC may move within weeks to block the merger; Blackstone, Carlyle, KKR Said Possible Armacell Bidders: Reuters: Charterhouse set Fri. deadline for bids for Armacell; Wal-Mart to Take Minority Stakes in China Ventures: China Daily: Agreed to buy minority stakes in 21 JVs; M&A Leaks Fall to Lowest in Six Years in Regulatory Crackdown: Stronger regulation discouraged gossip, according to a report
Back to markets, overnight Asian equities took an impetus from a Fed inspired rally in US stocks. ASX 200 (+2.1%) led the region after a rebound in the commodities complex saw material names bolster the index. Nikkei 225 (+1.1%) was supported by the outperformance in tech names, however pulled off best levels as the BoJ stood pat on monetary policy, as expected with the central bank also signalling a cautionary note in regards to inflation. The market as usual ignore weakened than expected Japanese trade data, with exports posting their first drop, declining 2.1%, more than the -2.0% expected, and dropping for the first time in over a year.Shanghai Comp. (+1.4%) dipped in and out of gains and losses, amid reports that leveraged bets for Chinese stocks fell from a 2-month high. JGBs yet again traded in tepid fashion.
Top Asian news:
In Europe, much of the price action across asset classes so far in European trade has stemmed from last night’s release of the FOMC minutes. As such, European equities have followed the precedent set by their US and Asian counterparts (Euro Stoxx: +1.2%), trading in positive territory with 91% of Stoxx 600 members gaining after market participants inferred that the Fed believe the US economy is strong enough to withstand a rate hike. As was the case in the US, Financials are among the best performers on the back of the minutes, while equity specific news has remained in focus in Europe towards the back end of earning season with Royal Mail (+5.6%) and Johnson Matthey (+8.3%) both among the best performers after earning updates.
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