Thursday December 31st

31-12-2015

Futures lower; Street eyes oil, S&P on last day of year

U.S. stock index futures pointed to lower open on Wall Street on Thursday, the last day of 2015, which will determine whether the benchmark S&P 500 squeezes out any gains for the year. As of the market close on Wednesday, the index was up 0.2 percent for 2015, while the Dow Jones Industrial Average was down 1.2 percent for the year and the tech-focused Nasdaq Composite was nearly 7 percent higher. The direction of trade on Thursday may depend on how oil moves, with the strong correlation between stock and energy prices a feature of 2015. Brent and U.S. West Texas Intermediate (WTI) crude futures fell on Thursday, and remained just above $36 a barrel in early morning trade. Oil fell more than 3 percent Wednesday to below $37 a barrel, pressuring the Dow Jones industrial average to triple-digit losses on Wednesday. Trade volume this week so far has been among the lowest of the year, and will likely remain thin Thursday ahead of Wall Street's closure on Friday for the New Year's Day holiday. Several major European stock indexes are closed, including those of Germany, Italy, Switzerland and Russia. The Tokyo Stock Exchange is also shut, as is Sao Paulo's exchange in Brazil. Other European exchanges will close early, including in the U.K., France and Spain. In a light day of economic news, weekly jobless claims came in at 287,000, up from 267,000 the week before. Treasury yields held lower, with the 2-year yield around 1.06 percent and the 10-year yield near 2.28 percent as of 8:33 a.m., ET. The U.S. dollar traded higher against major world currencies, with the euro falling below $1.09. Later, the Chicago Purchasing Managers' Index (PMI) will be released at 9:45 a.m. ET, followed by natural gas inventories at 10:30 a.m. Consensus forecasts indicate that the Chicago PMI will read 49.5 for December, suggesting that business activity continues to wane, but at a slower rate than in November when the index read 48.7. The 2016 annual meeting of the American Economic Association (AEA) will open on Sunday in San Francisco. There will be speeches from several senior members of the Federal Reserve during the day, including San Francisco Fed President John Williams, Vice Chairman Stanley Fischer and Cleveland Fed President Loretta Mester. The U.S. dollar is set to post gains of around 8.8 percent on the year against a basket of major currencies. It was one of 2015's top-performing currencies, along with the Swiss franc and the Japanese yen, and its strength helped propel the stark losses seen in commodities (which are usually denominated in the U.S. dollar.) The major events for Wall Street this year were the long-awaited hike to interest rates by the U.S. Federal Reserve in December and the global market turmoil that followed China's equity market collapse during the summer. "A major uncertainty hanging over the FOMC (Federal Open Market Committee) and the markets is that no-one can be confident what effects even a small rise in short-term interest rates will have. All territory is now uncharted territory. The Fed and other major central banks have maintained emergency policy-settings for so long that the global economy cannot be presumed to react in standard fashion to a rise in interest rates, however small that might be," Stephen Lewis, chief economist at ADM Investor Services International, said in a research note on Thursday. Asian markets had an uninspired finish on the final trading day of 2015, as investors kept an eye on oil prices for further clues going into 2016, after a turbulent year for stocks. In China, markets were mostly down as both the Shanghai and the Shenzhen Composite ended in the red. Oil prices headed for a second year of steep losses, despite inching up fractionally in the last trading hours of 2015, as record OPEC supply created an unprecedented global glut that may take another year to clear. U.S. West Texas Intermediate (WTI) crude futures traded 25 cents lower at $36.35 a barrel at 7:16 a.m. EDT (1216 GMT) on Thursday and Brent was 14 cents higher at $36.32 a barrel. Gold was flat on Thursday as the dollar rally paused but the metal was set to post a third straight annual loss ahead of what is likely to be another tough year with the prospect of higher U.S. rates and dollar strength. Largely influenced by U.S. monetary policy and dollar flows, the price of gold has fallen about 10 percent in 2015 as some investors sold the precious metal to buy assets that pay a yield, such as equities. Spot gold inched up 0.03 percent to $1,061.36 an ounce during the last trading session of the year. Volumes were thin ahead of the New Year holiday on Friday. Prices were set to end 2015 close to a near-six-year low of $1,045.85 hit earlier in December. We wish you a happy New-Year!