Tech shares weigh on Wall St; Brent crude at 16-month high

Dollar index slips as euro, pound gain

NEW YORK, Dec 1, (Agencies): Brent crude futures surged to a 16-month high on Thursday on the heels of OPEC’s agreement a day earlier to cut output, while Treasury yields continued to climb following the weakest monthly performance for global bonds in almost 13 years.

The benchmark 10-year US Treasury yield jumped to its highest since July 2015 to start the month, after Bank of America Merrill Lynch’s Global Broad Market Index fell 1.76 percent in November. That was its steepest monthly percentage drop since a 2.06 percent fall in July 2003.

Bets on faster inflation in the United States, on the back of higher oil prices and the expected policies of the incoming Trump administration, have sent Treasury yields soaring.

The dollar index, which closed its second consecutive month of gains above 3 percent, slipped 0.32 percent. The British pound strengthened against the greenback for the seventh time in nine sessions.

The euro rose 0.43 percent to $1.0631.

On Wall Street, declines in technology shares weighed on the Nasdaq Composite index but the benchmark S&P 500 was little changed and not far from a record intraday high set Wednesday.

“What you are seeing is people moving out of names that have been winners in the past couple of years and from companies that have predictable growth such as Facebook, Alphabet and Apple,” said Michael Scanlon, managing director of Manulife Asset Management.

The Dow Jones industrial average rose 69.31 points, or 0.36 percent, to 19,192.89, the S&P 500 lost 2.47 points, or 0.11 percent, to 2,196.34 and the Nasdaq Composite dropped 52.83 points, or 0.99 percent, to 5,270.85.

The pan-European FTSEurofirst 300 index fell 0.69 percent, while MSCI’s gauge of stocks across the globe fell 0.04 percent.

Emerging market stocks fell 0.3 percent.

The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, finally taking action after global oil prices fell by more than half over the last two years.

Non-OPEC member Russia will also join output reductions for the first time in 15 years.

US crude last rose 4.5 percent to $51.66 a barrel and Brent traded at $54.39, up 4.9 percent on the day.

Spot gold sank to its lowest in nearly

10 months.

US

Losses in technology stocks dragged down the Nasdaq and the S&P 500 in choppy trading on Thursday, while bank and energy shares propped up the Dow.

Declines in Facebook, Microsoft and Apple pushed the Nasdaq to a two-week low, while setting the S&P 500 technology index for its worst day since August.

While Wall Street has rallied since the November election on hopes that President-elect Donald Trump’s policies would be market friendly, technology stocks have gained the least, rising by a mere 0.6 percent.

Facebook fell 3.2 percent to $114.73 after Canaccord Genuity cut its price target on the stock, while Microsoft, Apple and Alphabet fell between 1.5 percent and 2.2 percent.

However, the Dow moved higher, powered by a more than 4 percent rise in oil prices and gains in bank stocks.

Brent futures hit a six-week high of $53.98. The commodity rallied nearly 9 percent on Wednesday after major oil producers agreed to cut output and support prices - the first of such a move since 2008.

The S&P 500 energy index rose 1.55 percent, with shares of Exxon and Chevron leading the gainers.

Investors are now turning their attention to economic data to assess whether the Federal Reserve could raise interest rates at its meeting on Dec 13-14.

The central bank has been preparing the markets for a rate increase amid improving economic conditions. Some Fed officials have said President-elect Donald Trump’s policies could boost inflation, pushing it closer to the central bank’s 2 percent target.

Financial index rose 1.5 percent on Thursday. The sector has risen 12.3 percent since the November election on prospects of an interest rate hike this month.

Traders have currently priced in a 90 percent chance of a rate increase in December.

At 11:11 am ET the Dow Jones Industrial Average was up 68.01 points, or 0.36 percent, at 19,191.59.

The S&P 500 was down 2.58 points, or 0.12 percent, at 2,196.23.

The Nasdaq Composite was down 51.45 points, or 0.97 percent, at 5,272.24.

Seven of the 11 major S&P sectors were trading lower, with bond proxies such as utilities and real estate being the worst hit.

Bluebird Bio shares soared 23 percent to $75 after the gene-therapy developer said patients undergoing its multiple myeloma treatment showed strong benefits. Shares of Celgene , which is developing the therapy with Bluebird, was up less than 1 percent.

Skechers surged 13.7 percent after Buckingham Research upgraded the shoemaker’s stock to “buy” from “neutral”.

Europe

Britain’s top equity index slid on Thursday, pulled down by more evidence of the weak pound damaging consumer goods companies and by some stocks trading without rights to their latest dividend payouts.

The blue-chip FTSE 100 index was down 0.5 percent, its lowest close since Nov 17. The benchmark index is still up 8 percent so far in 2016.

Consumer stocks suffered after the Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) showed prices paid by factories for materials and energy had shot up in November at a rate just shy of October’s near six-year high, due to the slump in the value of sterling after Britain voted to leave the European Union.

Coca Cola HBC and Unilever were among the biggest fallers, down 3.9 percent and 3.1 percent respectively.

The index also came under pressure from several stocks that traded without rights to their latest dividends.

Water utility Severn Trent fell 3.4 percent, while Land Securities slipped 3.2 percent and British Airways-owner IAG was down 2.6 percent.

A constitutional reform vote in Italy also kept investors cautious. Prime Minister Matteo Renzi has said he would resign if he loses the referendum, opening up policy uncertainty.

“Sentiment is neutral - however, there might still be some position squaring to take place ahead of Sunday’s Italian referendum,” said Markus Huber, a trader at City of London Markets.

Electronics retailer Dixons Carphone rose 3.8 percent after upbeat assessments from analysts at Credit Suisse and UBS.

Asia

Energy shares led a rally across Asian markets Thursday and oil built on the previous day’s near 10 percent surge after OPEC hammered out a last-minute deal to cut oil output for the first time in eight years.

Adding to the buying sentiment was a better-than expected reading on Chinese factory output that provided fresh hope the world’s number two economy was stabilising after years of slowing growth.

Still, the deal lit a fire under energy firms. Tokyo-listed Inpex was the big gainer, piling on 10 percent, while Woodside Petroleum soared more than six percent. CNOOC ploughed 6.1 percent higher in Hong Kong and PetroChina almost five percent.

Among stock markets, Japan’s Nikkei ended up 1.1 percent at its highest close this year, while Hong Kong added 0.4 percent and Shanghai closed up 0.7 percent.

Sydney gained 1.1 percent, Seoul was flat and Manila added 1.2 percent. There were also healthy advances in Singapore, Jakarta, Taipei and Wellington.

The removal of uncertainty provided fresh support to the dollar, which rallied towards 115 yen, its highest mark since February, before easing back slightly. And gold suffered a sell-off, sinking 1.7 percent to $1,167 as investors walked away from safehaven assets that are popular in times of uncertainty.

In China, official figures showed a gauge of manufacturing activity had hit its highest level since mid-2014, although analysts pointed out the reading was a mixed blessing.

“While this may prop up growth in the short term, it is clearly not rebalancing or deleveraging.” Key figures around 0800 GMT Tokyo - Nikkei 225: UP 1.1 percent at 18,513.12 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 22,878.23 (close)

Shanghai - Composite: UP 0.7 percent at 3,274.07 (close)

Oil

Oil prices rose more than 4 percent on Thursday, with Brent crude at its highest in about 16 months, extending gains after OPEC and Russia agreed to restrict output to speed up the rebalancing of a long-oversupplied market.

The Organization of the Petroleum Exporting Countries agreed on Wednesday its first oil output reduction since 2008 after de-facto leader Saudi Arabia accepted “a big hit” and dropped a demand that arch-rival Iran also slash output.

The deal also included the group’s first coordinated action with nonOPEC member Russia in 15 years. On Thursday, Azerbaijan said it was also willing to engage in talks on cuts.

Despite the historic deal, doubts were widespread in the market.

Benchmark Brent futures for February delivery jumped as much as 4.8 percent to $54.36 a barrel, the highest since July 30, 2015. By 11:43 am EST (1643 GMT), Brent was up $2.21, or 4.3 percent, at $54.05.

Gold

Gold hit its lowest since February on Thursday, extending losses after its biggest monthly decline in more than three years, as a surge in oil prices boosted bond yields, denting interest in non-yielding gold as an alternative investment.

The precious metal fell more than 8 percent in November, hurt by a jump in the dollar and Treasury yields after Donald Trump’s surprise election to the US presidency last month, and by expectations that the Federal Reserve is gearing up to lift interest rates for only the second time in a decade in December.

Spot gold was down 0.8 percent at $1,163.31 an ounce at 1505 GMT, having earlier reached a 10-month low of $1,160.38.