Global stocks tread water ahead of Italy referendum; oil steadies

Bond yields fall on US jobs data; euro flat

NEW YORK, Dec 2, (Agencies): Bond yields fell on Friday as solid US jobs data reinforced the view that the Federal Reserve would raise interest rates gradually, while stock and currency markets were cautious ahead of an Italian constitutional reform vote on Sunday.

Crude futures rebounded on a weaker dollar, resuming a rise sparked by a cut in oil output agreed this week by the Organization of Petroleum Exporting Countries, the first since 2008. Russia also agreed to reduce production for the first time in 15 years.

The strength of the US November payrolls report had been seen as critical for the Fed to lift rates again for the first time in nearly a year.

The US unemployment rate slipped to 4.6 percent last month, its lowest in more than nine years, but wages unexpectedly fell 0.1 percent, dashing expectations of faster growth in household income that would fire up inflation.

The benchmark 10-year Treasury note yield was down 5 basis points at 2.387 percent and the German 10-year Bund yield fell 6 basis points to 0.293 percent.

As bond markets took a breather from their massive selloff since Donald Trump’s US presidential win, global equities were on the back foot as investors took profits on a run-up on bets that tax cuts and less regulations which Trump campaigned on would be enacted and spur faster economic growth.

The Dow Jones industrial average was up 1.33 points, or 0.01 percent, to 19,193.26, the S&P 500 was up 6.24 points, or 0.28 percent, to 2,197.32 and the Nasdaq Composite was up 23.40 points, or 0.45 percent, to 5,274.50.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.73 percent to 430.75.

The MSCI world equity index, which tracks shares in 45 nations, rose 0.15 percent to 413.08.

Anxiety over the possibility of Italians rejecting Prime Minister Matteo Renzi’s referendum, which could fuel political instability in euro zone’s thirdbiggest economy, has caused choppy trading across European markets.

Europe’s broad FTSEurofirst 300 index dropped 0.16 percent at 1,340.65.

The euro was down as much as 0.3 percent at $1.0626 before recovering following the November US jobs report. The euro zone common currency was last up 0.1 percent at $1.0670.

The dollar index was down 0.3 percent at 100.74.

A weaker greenback helped reversed the oil market’s initial losses. Brent crude was last up 0.4 percent at $54.16 a barrel. US crude was last up 0.6 percent, at $51.34 per barrel.

Spot gold prices rose 0.4 percent to $1,175.86 an ounce.

US

The S&P and the Nasdaq rose for the first time in three days, helped by gains in healthcare and consumer staples stocks, but the Dow was weighed down by Goldman Sachs.

Major Wall Street indexes have hit a series of record highs after Donald Trump won the US presidential election as investors bet that his policies would be market friendly.

The post-election rally was led by bank and industrial sectors, which would benefit from simpler regulations and higher fiscal spending.

The S&P 500 financial index has risen 13 percent since the Nov. 8 vote, while industrials rose 7.5 percent.

In contrast, defensive sectors such as utilities and consumer staples as well as technology stocks have struggled.

However, investor reaction to Friday’s jobs report was muted as investors appeared to have already priced in a hike this month. Wall Street believes that the Fed is going to raise interest rates in December regardless of Friday’s jobs data, given the sustained growth in the labor market, said Mark Cabana, head of US short rates strategy at Bank of America Merrill Lynch in New York.

At 11:06 am ET the Dow Jones industrial average was down 6.26 points, or 0.03 percent, at 19,185.67.

The S&P 500 was up 5.19 points, or 0.24 percent, at 2,196.27 and the Nasdaq Composite was up 13.21 points, or 0.25 percent, at 5,264.32.

Eight of the 11 major S&P 500 sectors were higher, while financials took the biggest hit, with a 0.68 percent drop.

Goldman Sachs fell for the first time in four days, weighing the most on the Dow, while Bank of America, Citigroup and Wells Fargo were the top drags on the S&P. “The move in financials is nothing more than people taking some profits after a strong run,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

Starbucks fell 2.4 percent to $57.11 after the coffee chain operator said Howard Schultz would step down as chief executive officer.

Pandora surged more than 10 percent after CNBC reported the internet radio company was in talks to sell itself to Sirius XM. Advancing issues outnumbered decliners on the NYSE by 1,780 to 1,026. On the Nasdaq, 1,504 issues rose and 1,113 fell.

The S&P 500 index showed 11 new 52-week highs and five new lows, while the Nasdaq recorded 54 new highs and 36 new lows.

Europe

World stocks fell Friday in nervy trade before Italy’s crunch referendum and Austria’s elections, amid fears that both could send shockwaves reverberating across markets.

In Europe, Milan shares shed 0.9 percent ahead of Sunday’s vital vote in Italy.

London gave up 0.8 percent and Paris fell 1.2 percent, with Frankfurt down 0.6 in afternoon trading.

Meanwhile, analyst Ipek Ozkardeskaya at London Capital Group warned that “the outcome of the (Italian) referendum could have a significant impact on the short-term euro volatility.”

Worries over Italy had hit banking shares hard at the start of week.

Italy goes to the polls on Sunday for a referendum on constitutional reform, with Prime Minister Matteo Renzi saying he will resign if his government loses, leading to a possible general election.

Austria’s presidential election, also due Sunday, pits far-right hopeful Norbert Hofer against Greens-backed candidate Alexander Van der Bellen. Key figures around 1430 GMT London — FTSE 100: Down 0.8 percent at 6,700.58 points

Frankfurt — DAX 30: Down 0.6 percent at 10,467.70

Paris — CAC 40: Down 1.2 percent at 4,507.92

Milan — FTSE MIB: Down 0.8 percent at 16,952.24

EURO STOXX 50: Down 1.0 percent at 3,000.62

Asia

Asian stocks turned negative Friday and oil prices retreated along with the dollar as investors took a step back from a recent rally, while caution set in ahead of a crunch referendum in Italy at the weekend.

Japan’s Nikkei, which on Thursday closed at its highest level this year, slipped 0.5 percent, while Hong Kong gave up 1.4 percent and Shanghai slipped 0.9 percent.

Sydney fell one percent and Seoul shed 0.7 percent, while Singapore gave back 0.3 percent. Wellington and Taipei were also down.

Japanese exporters retreated on the back of a strengthening yen. In afternoon trade the dollar bought 114.05 yen, having flirted with 115 yen earlier this week, which was a nine-month high. Key figures around 0800 GMT Tokyo — Nikkei 225: Down 0.5 percent at 18,426.08 (close)

Hong Kong — Hang Seng: Down 1.4 percent at 22,564.82 (close)

Shanghai — Composite: Down 0.9 percent at 3,243.84 (close)

Oil

Oil prices steadied above $51 a barrel on Friday, with Brent crude on track for its biggest weekly rally since 2009, following OPEC’s decision to cut crude output in order to rein in a global glut.

After the deal was announced on Wednesday, the market’s focus now shifts to the implementation and impact of OPEC’s first production agreement since 2008, which will be joined by non-OPEC producers.

Crude prices on Friday were pressured by data showing oil output in Russia rose in November to a post-Soviet high and news that Moscow would use its record November oil production as its baseline when it cuts output.

Front-month Brent crude futures rose 24 cents to $54.18 a barrel, a 0.4 percent gain, by 10:14 am. EST (1514 GMT). The contract was up nearly 15 percent for the week, its biggest gain since early 2009. US crude rose 26 cents to $51.32 per barrel and was on track for its biggest weekly gain since August 2015.

Traders said profit-taking ahead of the weekend kept a lid on any more significant price gains.

A weak dollar, however, helped offset some of that pressure. The greenback slipped against a basket of currencies after the US November jobs report.

The Organization of the Petroleum Exporting Countries, which accounts for a third of global oil supply, will reduce production starting in January by 1.2 million barrels per day, or over 3 percent, to 32.5 million bpd.

Russia also agreed to cut output by 300,000 bpd. Russia and other nonOPEC producer are set to meet with OPEC on Dec. 9.

“There are still several open questions regarding compliance and the role of so-called ‘key non-OPEC countries’ in deepening the OPEC cut by a further 600,000 barrels per day (bpd),” JBC Energy said in a note.

Gold

Gold edged higher on Friday, shrugging off data showing rising US job numbers, with analysts saying that an expected rise in interest rates had already been priced in.

US employers boosted hiring in November, pushing down the the unemployment rate to a more than nine-year low of 4.6 percent and increasing the likelihood that the Federal Reserve will raise interest rates this month.

Bullion is highly sensitive to rising interest rates, which make the nonyielding asset less attractive while boosting the dollar, in which it is priced.

“The data was a non-event for gold. The market is still thinking a December hike is very likely, which has already factored in, and that’s why gold is not really moving today,” said Natixis’ precious metals analyst, Bernard Dahdah.

In thin trade, spot gold rose by 0.3 percent to $1,174.88 an ounce by 1454 GMT. The metal fell to its lowest since Feb. 5 at $1,160.38 in the previous session and is on track to record a fourth straight week of losses.

US gold futures gained 0.3 percent to $1,173.

Capital Economics commodities economist Simona Gambarini said that US president-elect Donald Trump is uppermost in investors’ minds.

“Most investors are now looking at 2017 to see what’s going to happen with Trump, what policies he will implement and the inflationary impact of those policies,” Gambarini said.

The dollar index, which measures the greenback against a basket of major currencies, slipped by about 0.13 percent.

“With a rate rise in a couple of weeks almost certain, the dollar will remain firm and gold will remain pressured, although we could see a bit of booksquaring in the run-up,” said Marex Spectron’s head of precious metals, David Govett.