European Stocks Grind Higher After Holiday Break: Markets Wrap

(Bloomberg) -- Shares in Europe posted a modest advance to the highest level since January 2022 as trading resumed after the Christmas holiday break.

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The benchmark Stoxx Europe 600 index is set to end the year with a gain of more than 12% after rallying in the past two months amid speculation the European Central Bank and Federal Reserve are moving closer to rate cuts. Trading volumes were light on Wednesday, with only three trading sessions left in 2023.

Vestas Wind Systems A/S led energy stocks higher, rising as much as 6.9% after the Danish wind-power manufacturer said it received large orders for projects in the US and Australia. Technology stocks were among the biggest gainers as Prosus NV rebounded from a slump triggered by a selloff in Tencent Holdings Ltd. Anglo American Plc climbed as much as 4.3% after a report that it’s selling a minority stake in Britain’s $9 billion Woodsmith fertilizer mine.

On the downside, AP Moller-Maersk AS fell 4.7% after saying it’s preparing to resume shipping through the Red Sea. Container-shipping peer Hapag-Lloyd AG slumped 4.3%. The stocks had rallied on expectations that the disruption caused by attacks on Red Sea container traffic would allow companies to raise the prices.

US futures were virtually flat after the S&P 500 closed Tuesday within 0.5% of its record high, achieved early last year when interest rates remained at pandemic lows. The 10-year Treasury yield fell three basis points after Tuesday’s auctions drew buyers as the market prices in an aggressive path of Fed easing in 2024. Bond yields across Europe also fell. The dollar was steady against most major currencies.

“S&P 500 buyers will certainly not back down before sending the index to a fresh high this week, or the next,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank SA. Still, “the market optimism is overstretched. The Fed will probably cut rates but not at the speed that’s currently priced in. Once the Santa high fades, the hangover will hit,” she said.

Australia’s S&P/ASX 200 index rose to its highest since April 2022, fueled by gains in miners. Mainland China equities rebounded from earlier losses, after data showed a quickening speed of growth in the country’s industrial profits, helped by favorable base effects.

Japan’s Nikkei 225 index gained over 1%, hovering slightly below its previous high in July, after Bank of Japan board members discussed the potential timing of ending the negative rate policy during their meeting last week, with several members indicating they see no rush to make the move. The yen weakened and Japanese government bond yields fell after the release of the summary.

“Bullish views prevail among investors towards year end as there are no particular blind spots in Japanese equities,” said Masanari Takada, a derivatives strategist at JPMorgan Securities Japan Co. “While an earlier-than-expected BOJ policy change and yen appreciation may be a risk to top-down traders, the results from BOJ summary today provided a sense of relief.”

In Hong Kong, major tech stocks partially recovered from Friday’s $80 billion rout, after authorities signaled a willingness to dial back controversial new gaming restrictions. Tencent climbed as much as 6.2% while smaller rival NetEase jumped more than 14%.

US stocks have risen 4.5% this month so far, with the gain since the start of the year now 24%. While the US and Australian indexes near record highs and Indian gauges hover near all-time peaks from earlier this month, MSCI’s all-country index is 4.5% off its November 2021 record. Asia is a laggard region, with the MSCI Asia-Pacific Index still 25% off its February 2021 high.

Oil reversed gains fueled by concerns about Red Sea shipping traffic, while gold slipped. Bitcoin rose slightly after a retreat as traders assessed how crypto markets might react if regulators meet expectations by approving the first US exchange-traded funds investing directly in the token.

Key events this week:

Japan industrial production, retail sales, Thursday

US wholesale inventories, initial jobless claims, Thursday

UK Nationwide house prices, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.2% as of 10:21 a.m. London time

S&P 500 futures were little changed

Nasdaq 100 futures were little changed

Futures on the Dow Jones Industrial Average were little changed

The MSCI Asia Pacific Index rose 1.2%

The MSCI Emerging Markets Index rose 1.1%

Currencies

The Bloomberg Dollar Spot Index was little changed

The euro was little changed at $1.1053

The Japanese yen fell 0.1% to 142.55 per dollar

The offshore yuan fell 0.1% to 7.1523 per dollar

The British pound was little changed at $1.2717

Cryptocurrencies

Bitcoin rose 0.9% to $42,733.21

Ether rose 1.5% to $2,256.55

Bonds

The yield on 10-year Treasuries declined three basis points to 3.87%

Germany’s 10-year yield declined four basis points to 1.94%

Britain’s 10-year yield declined three basis points to 3.47%

Commodities

Brent crude fell 0.3% to $80.85 a barrel

Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Winnie Hsu and Richard Henderson.