U.S. Futures Rise as Deals, China Bets Lift Mood: Markets Wrap

(Bloomberg) -- U.S. equity futures started the Thanksgiving week on an optimistic note as mergers-and-acquisitions activity perked up and China signaled possible easing measures. European stocks stalled amid concern over a resurgent pandemic. 

Contracts on the S&P 500 and Nasdaq 100 gauges rose 0.4% each after a volatile week that saw the benchmark gauge underperform the technology measure. Vonage Holdings Corp. jumped 26% in premarket trading after Ericsson agreed to buy it. Telecom Italia SpA jumped as much as 30% in Europe after KKR & Co. bid for it. The Stoxx 600 trimmed gains after German Chancellor Angela Merkel called for tighter Covid-19 restrictions. 

U.S. stocks are trading near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation and a persistent pandemic that undermines global recovery. Concerns about high valuations and the potential for the economy to run too hot on the back of loose monetary and fiscal policies have interrupted, but not stopped the rally. In other words, bears are winning the argument, bulls are winning in the market.

“Based on historical data, the Thanksgiving week is a strong week for U.S. equities,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “Black Friday sales will be closely watched. The good news is, people still have money to spend, even though they get less goods and services in exchange of what’s spent.” 

The resilience of the U.S. market contrasted with growing concerns in Asia and Europe, where the continuing spread of Covid-19 threatened to bring more economic closures and undermine a fragile recovery. The MSCI Asia Pacific Index fell to a one-week low despite gains in China’s mainland shares. 

The Stoxx 600 was little changed, after rising as much as 0.4%, after Merkel said the latest surge in Covid cases was worse than anything Germany had experienced.

While global markets remained on the edge amid pandemic worries and expectations for a quicker-than-expected tapering by the Federal Reserve, Monday brought some cheer to traders as China’s central bank dropped language that precluded policy accommodation. 

Investors also focused on whom President Joe Biden will pick as the Fed chair nominee from Governor Lael Brainard and incumbent Jerome Powell. Whoever is chosen may have their work cut out: U.S. inflation is surging at the fastest pace in decades and expectations for price growth are at the highest since 2013.

“Bringing the most dovish of the doves wouldn’t guarantee a longer period of zero rates,” Ozkardeskaya wrote. “If the decisions are based on economic fundamentals, the economy is calling for a rate hike. And it’s calling for it quite soon.”

Treasury yields rose on Monday. The two-, five- and 10-year notes added at least three basis points each.

Vonage jumped 27% in early New York trading. Swedish telecommunications group Ericsson will pay $21 per share for Vonage, representing an enterprise value of about $6.2 billion. Ericsson fell 3.9% as analysts said the deal was “far from cheap.”

Telecom Italia gained from private-equity firm KKR’s $12.2 billion bid for the company.

Hungary’s forint plunged to a record low against the euro as a resurgent pandemic in Europe and growing tensions on Ukraine’s border outweighed back-to-back rate hikes by the central bank.

For more market analysis, read our MLIV blog.

Here are some key events this week:

• Eurozone, U.S. PMI data Tuesday
• Reserve Bank of New Zealand rate decision Wednesday
• U.S. FOMC minutes, consumer income, wholesale inventories, new home sales, GDP, initial jobless claims, U.S. durable goods, University of Michigan consumer sentiment. All Wednesday
• Bank of Korea policy decision Thursday
• U.S. Thanksgiving Day: U.S. equity, bond markets closed Thursday
• Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 rose 0.3% as of 7:09 a.m. New York time
• Futures on the Nasdaq 100 rose 0.4%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 was little changed
• The MSCI World index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.2% to $1.1273
• The British pound was little changed at $1.3443
• The Japanese yen fell 0.1% to 114.16 per dollar

Bonds

• The yield on 10-year Treasuries advanced three basis points to 1.58%
• Germany’s 10-year yield advanced one basis point to -0.33%
• Britain’s 10-year yield advanced three basis points to 0.90%

Commodities

• West Texas Intermediate crude fell 0.1% to $75.86 a barrel
• Gold futures fell 0.6% to $1,844.10 an ounce

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