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After closing at a fresh all time high on Wednesday, its 70th high for the year, which is the most new highs for the index since the 77 it set in 1995 (it’s unlikely to surpass that cumulative total in the year’s remaining two sessions), S&P futures are rising again on very light volume, up 0.2% or 8.50 to 4,793 and on pace for yet another all time high. Nasdaq futures were up 0.24% and Dow futures were higher by 50 points, or 0.14% to 36,432, on pace for a new all time high after the index set its first record close since Nov. 8 on Wednesday. Treasury yields trimmed an advance as did the dollar; oil was lower while cryptos rebounded from post-Christmas tax-loss mauling.

Stocks rose after federal health officials, who suggested omicron may cause less suffering than other strains, said virus deaths are declining even as cases increase. In premarket trading, Biogen shares fell more than 6% after Samsung Group denied a Korean media report that the drugmaker was in talks to sell itself to the company. Some other notable premarket movers include:

  • Meme stock Naked Brand (NAKD US) extended gains in post- and pre-market trading, adding to its 15% gain from Wednesday’s session.
  • FuelCell (FCEL US) traded lower in premarket, adding to losses after the company posted fiscal fourth-quarter results. Craig-Hallum analyst Eric Stine raised the recommendation on the stock to hold from sell.
  • Tesla (TSLA) dipped as much as 1.5% premarket after the EV-car maker filed a recall of 356,309 U.S. vehicles saying the rearview camera cable harness may be damaged by the opening and closing of the trunk lid, preventing the rearview camera image from displaying, increasing the risk of a crash, NHTSA says in a statement dated December 21, 2021.

With just two trading sessions left and as the year draws to a close, investors are contemplating the implications of the fast-spreading omicron coronavirus variant, decreasing stimulus and elevated inflation stoked by supply-chain bottlenecks which may get much worse if China is again forced to lock down its key ports. Key questions include whether Treasury yields will push higher and how much impetus is left in the equity bull market.

“Despite global surges in Covid cases, the markets are reflecting the new reality that Covid is here to stay albeit more on our terms than its,” Kevin Philip, managing director at Bel Air Investment Advisors, said in an email. Next year, “we are facing less of a Covid-influenced world, and a return toward normalcy,” he said.

In other covid news, the number of Covid-19 cases soared 32% to a record 1.73 million on Wednesday, marking the third day in a row with more than a million new infections worldwide. Cathay Pacific Airways plans to scrap Hong Kong flights as the city tightens quarantine rules for aircrew. Meanwhile, countries including Italy and Australia are dialing back their Covid curbs in an effort to keep essential services running, support their economies and allow people to connect. More evidence is emerging that omicron may be less dangerous, particularly in vaccinated people, as virus deaths in the U.S. declined.

In Europe, the Stoxx Europe 600 gauge was little changed, with technology shares bouncing back to pare some of Wednesday’s drop. Volumes remain dismal: according to Bloomberg, volume in the Stoxx 600 was 42% below the 100-day average on Wednesday – and that despite the reopening of U.K. markets. On the data front, U.K. house prices again surprised to the upside, with a 1% m/m rise according to Nationwide.

China’s CSI 300 index climbed on expectations of more steps to bolster economic growth amid an extension of some personal income-tax breaks and calls for policy easing. In Hong Kong, artificial intelligence giant SenseTime Group Inc. jumped on its first day of trading. MSCI Inc.’s overall Asia-Pacific index edged lower.

Asian stocks edged lower on the last trading day this year for several markets as investors weighed the spread of the coronavirus.  The MSCI Asia Pacific Index fell as much as 0.3%. The consumer discretionary sector was the biggest drag on the measure, with Alibaba and Sony among those contributing the most to the drop. Japan, South Korea, Taiwan, Thailand and Indonesia will be shut Friday for new year holidays. “There’s no reason to dump stocks but then, not much reason to buy them either,” said Yasuhiko Hirakawa, head of an investment department at Rakuten Investment Management in Tokyo. “What will happen to virus infection figures in January is on people’s minds while worry over China Evergrande’s problems continues to linger.”   Cathay Pacific Airways said it plans to scrap some passenger flights to and from Hong Kong as the city tightens quarantine rules for aircrew. Australia’s most populous state posted a record number of daily infections, while severe cases reached a high in South Korea. Benchmarks in South Korea and Japan were among the region’s biggest losers for the day, while China’s CSI 300 outperformed. “Liquidity is thin with not a lot of participants in the market and prices are likely to be swayed by futures trading,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. Solid performance in Chinese equities will support investor appetite amid a lack of any other fresh leads, he added. 

Japanese equities fell in the last trading session of 2021 but managed to lock in their third-straight annual gain. Electronics makers and service providers were the biggest drags on the Topix, which closed 0.3% lower, paring an earlier loss of as much as 0.9%. Fast Retailing and Terumo were the largest contributors to a 0.4% loss in the Nikkei 225. The Topix finished the year with a gain of 10%, while the Nikkei 225 advanced 4.9%. While far behind the 28% jump in the S&P 500, Japanese stocks outperformed regional peers, with the MSCI Asia Pacific Index headed for a loss of over 4% on the selloff in Hong Kong shares

In rates, Treasuries advanced, led by the belly and European bonds were mostly higher; the 10-year Treasury yield pared an advance to drop back toward its 50-day moving average; the benchmark bond remained higher after retracing a portion of Wednesday’s selloff, though 7- to 30-year yields remain above 50-DMA levels which they closed above for first time in weeks. Euro-area bonds also gained, even as most European stock benchmarks and U.S. equity index futures advanced. Japanese government bonds decline across the curve on the last trading day of the year. The yen dropped a second day to touch a one-month low.

In FX, a dollar gauge rose only to reverse all gains as the US session neared. The euro dropped from a one-month high, to touch $1.13, ahead of phone talks between U.S. and Russian leaders amid tensions over Ukraine. Cable dropped after earlier touching an almost six-week high; gilts advanced in line with Treasuries. The Australian dollar steadied near a five-week high against the greenback. Australia’s yield curve bear-steepened following a sell-off of in Treasuries. Iron ore halted a three-day decline and resurfaced above $120 a ton on potential support from restocking by China’s steel mills.

In commodities, iron ore halted a three-day decline and resurfaced above $120 a ton on potential support from restocking by China’s steel mills. Crude oil edged lower after its longest run of gains since February, as the market weighed a series of supply outages against smaller quotas in China, the world’s largest crude importer. West Texas Intermediate traded near $76 a barrel after a 12% jump over six sessions. Brent is heading into the end of the year near $80 a barrel, though volumes over the holiday period have been subdued. Crude was pressured Thursday as China cut the amount of import quota awarded to private refiners and favored complex processors as it seeks to reform the sector. Beijing granted 109 million tons, 11% less than last year, in the first batch for 2022, according to officials from companies that received notification of the allowances. The dollar also climbed, at least initially, making commodities priced in the currency relatively more expensive.

On today’s calendar we get initial and continuing claims as well as the Chicago PMI.

Market Snapshot

  • S&P 500 futures up 0.1% to 4,790.75
  • STOXX Europe 600 up 0.3% to 489.37
  • MXAP down 0.3% to 191.84
  • MXAPJ down 0.1% to 623.75
  • Nikkei down 0.4% to 28,791.71
  • Topix down 0.3% to 1,992.33
  • Hang Seng Index up 0.1% to 23,112.01
  • Shanghai Composite up 0.6% to 3,619.19
  • Sensex little changed at 57,803.64
  • Australia S&P/ASX 200 little changed at 7,513.37
  • Kospi down 0.5% to 2,977.65
  • Brent Futures down 0.4% to $78.91/bbl
  • German 10Y yield little changed at -0.20%
  • Euro down 0.4% to $1.1302
  • Gold spot down 0.3% to $1,800.04
  • U.S. Dollar Index up 0.29% to 96.21

Top Overnight News from Bloomberg

  • “All switches are on track to end the remaining bond buying by the end of next year. And when that is done, the policy rate can go up early 2023,” ECB Governing Council member Klaas Knot is cited as saying in interview with Dutch Trouw newspaper
  • “We are careful” on inflation and the risks to the forecasts “are not only upwards,” ECB Governing Council member Ignazio Visco says in an interview with La Stampa daily on Thursday
  • Mario Draghi’s government has won lawmakers’ support for a 32 billion-euro ($36 billion) budget plan for next year aimed at supporting Italy’s growth
  • Italy has eased coronavirus quarantine rules and imposed a vaccine mandate for most activities in a bid to keep essential services running, after the country recorded a record number of cases for consecutive days.
  • Spain’s consumer price inflation rose 6.7% from a year earlier in December, faster than the 5.7% predicted by economists in a Bloomberg survey
  • Two doses of Johnson & Johnson’s Covid-19 vaccine slashed hospitalizations caused by the omicron variant in South Africa by up to 85%, a critical finding since the shot is being increasingly relied upon across the continent, researchers said
  • Hungary delivered the seventh interest-rate increase in as many weeks in a monetary tightening campaign that has so far failed to shore up the country’s battered currency. The forint rose
  • The cost of borrowing money in Turkey is surging, a sign that President Recep Tayyip Erdogan’s policy of driving down interest rates is starting to backfire
  • China faces “unprecedented” difficulty in stabilizing trade next year as favorable conditions that boosted export growth this year won’t be sustainable, according to a commerce ministry official

US Event Calendar

  • 8:30am: Dec. Continuing Claims, est. 1.87m, prior 1.86m
  • 8:30am: Dec. Initial Jobless Claims, est. 206,000, prior 205,000
  • 9:45am: Dec. MNI Chicago PMI, est. 62.0, prior 61.8

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