US Futures Hit New All-Time High Following Asian Shares Higher; European Stocks, Dollar Mixed

U.S. equity index futures pointed to early gains and fresh record highs, following Asian markets higher, as European shares were mixed and oil was little changed, although it is unclear if anyone noticed with bitcoin stealing the spotlight, after futures of the cryptocurrency began trading on Cboe Global Markets.

In early trading, European stocks struggled for traction, failing to capitalize on gains for their Asian counterparts after another record close in the U.S. on Friday. On Friday, the S&P 500 index gained 0.6% to a new record after the U.S. added more jobs than forecast in November and the unemployment rate held at an almost 17-year low. In Asia, the Nikkei 225 reclaimed a 26-year high as stocks in Tokyo closed higher although amid tepid volumes. Equities also gained in Hong Kong and China. Most European bonds rose and the euro climbed. Sterling slipped as some of the promises made to clinch a breakthrough Brexit deal last week started to fray.

“Strong jobs U.S. data is giving investors reason to buy equities,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “The better-than-expected jobs number supports the outlook that there is a synchronized global economic upturn led by the U.S.”

The dollar drifted and Treasuries steadied as investor focus turned from US jobs to this week’s central bank meetings. Europe’s Stoxx 600 Index pared early gains as losses for telecom and utilities shares offset gains for miners and banks. Tech stocks were again pressured, with Dialog Semiconductor -4.1%, AMS -1.9%, and Temenos -1.7% all sliding. Volume on the Stoxx 600 was about 17% lower than the 30-day average at this time of day, with trading especially thin in Germany and France.

The dollar dipped 0.1 percent to 93.801 against a basket of major currencies, pulling away from a two-week high hit on Friday.

“I think this is being driven by the softer earnings data we saw in the payrolls report on Friday which reinforces the Fed’s current policy dilemma, where yes we have solid growth but so far a lack of inflation pressure,” said MUFG currency strategist Lee Hardman. “It was a continuation of the ‘Goldilocks’ conditions, with stronger global growth but little inflation pressure, no strong pressure on central banks to speed up the pace of tightening.”

The euro inched up 0.1% against a stronger dollar to $1.1791, holding above its nearly three-week low of $1.1730 plumbed on Friday, ahead of a European Central Bank policy meeting this week at which rates are expected to be kept on hold.

Despite the strong US data, JPM calculated that the Fed has roughly 6 more 25bps hikes before its tightening finally hits capital markets, suggesting that the bullish sentiment may continue for some time.

Asian equities rose after better-than-expected U.S. jobs data bolstered investor optimism for global economic growth prospects. Two stocks rose for each that declined on the MSCI Asia Pacific Index, which rose 0.7% at 170.28.  Japan’s shares climbed, sending the Nikkei 225 Stock Average to its highest since 1992. The Nikkei 225 Stock Average climbed to a 26-year high as the yen slid to a one-month low. Hong Kong’s Hang Seng Index and South Korea’s Kospi advanced. 

Consumer stocks led Chinese equities higher, while small caps got a boost from reports that new asset management rules would be delayed and that President Xi has called for a national big data strategy and for innovation in the technology, pushing big data-linked firms higher. Beijing Orient National Communication Science & Technology Co. surges by 10% daily limit, while Hand Enterprise Solutions Co. +5.4%. Small caps were also boosted by news that China may extend a deadline for financial institutions to comply with new rules on asset management products.

“The reported delay for financial institutions to comply with new asset management products rules pushed up the market, especially small caps that are more subject to liquidity risks as they would be dumped first by such products amid any policy tightening,” said Wang Chen, Shanghai-based partner with XuFunds Investment Management Co. “A possible delay, even if just for one year or so, will alleviate the selling pressure on small cap stocks”

Shares in Hong Kong were also stronger. The CSI 300 Index advanced 1.7% at the close, with the gauge gaining 2.5% over the past two sessions, the most since the end of August. The Shanghai Composite Index added 1% after the PBoC resumed liquidity operations, although a miss on inflation data over the weekend somewhat capped the advances; the small-cap ChiNext measure jumped 1.4%. In Hong Kong, Hang Seng China Enterprises Index added 1.5% with the broader Hang Seng Index climbing 1.2%; both are coming off two straight weeks of losses.Strength in commodity-related stocks in Australia kept the ASX index afloat, while the focus was on AWE shares which rallied over 15% after Co. was subject to a takeover offer. Meanwhile, Vietnam’s benchmark index plunged 2.4 percent, the most in two years, after Public Security Ministry said in a Dec. 8 statement that the police arrested Dinh La Thang, a senior Communist Party official and former Politburo member, for alleged wrongdoing

The Bloomberg dollar index looked to snap a five-day rally as Treasuries edged up before the two-day FOMC meeting kicks off. The pound reversed Asia-session gains after London stepped in as fragile Brexit sentiment prevailed. The appointment of a new RBNZ chief, seen as less of a dove, boosted the kiwi, while the Norwegian krone led losses on the back of an inflation miss. Bonds and European equities edged higher.

In overnight geopolitical developments, South Korea, Japan and US began joint missile tracking exercises today. North Korea stated that UN envoy expressed a willingness to reduce tensions. However, over the weekend Yonhap also reported that North Korea warned the US on Sunday over the possible use of a naval blockade, which it said would be considered as a “declaration of war.”.

Meanwhile, in Europe, UK PM May will insist that “nothing is agreed until everything is agreed” on the terms of Brexit after the Irish government claimed that last week’s preliminary deal is binding. This has led the Irish Government to hit back at a British government suggestion that a deal reached on the post-Brexit Border was a “statement of intent” rather than “a legally enforceable thing”, which in turn spooked cable and Gilts. UK Brexit Secretary Davis suggested he wants a bespoke deal with the EU and is seeking an overarching agreement with no tariffs. Further to this, The Times report that Britain could be forced to accept swathes of Brussels red tape if it is to secure the extensive trade deal that David Davis is championing, according to senior European sources.