European Close Market Briefing – 01/06/2017 – by Arjun Lakhanpal

In European Equity Markets shares inched up on Thursday, with blue chips in Milan taking the lead after better than expected Italian economic growth helped markets shrug off political worries. The pan-European STOXX 600 index gained 0.4 percent, while Italy’s FTSE MIB  rose 1 percent. This contrasted with the mood in Spain, where Banco Popular fell 17.7 percent after a European watchdog warned EU officials the Spanish bank may need to be wound down if it fails to find a buyer. Nokia shares rose 3.2 percent, adding to their gains since last week’s resolution of a long-running patent dispute with Apple. In London, strength in large exporters helped the benchmark FTSE 100 index inch back toward an all-time high.

In Currency Markets the US dollar rallied on Thursday after a report showed the U.S. economy created more private sector jobs than expected in May, bolstering expectations for an interest rate hike this month. The U.S. unit hit session highs against major currencies such as the yen, euro, and Swiss franc following the jobs report, although it already traded higher ahead of the data following losses this week. In late morning trading, the dollar rose 0.4 percent to 111.25 yen, while the euro fell 0.1 percent to $1.1223. Interest rate futures after the data priced in a 96 percent chance the FED would hike rates in June. A report showing U.S. weekly jobless claims rising more than expected to 248,000 hardly mattered as investors focused on the strong ADP data.

In Commodities Markets U.S. crude stocks fell sharply last week, driven by a surge in refining and exports to record highs, while gasoline inventories also dropped sharply ahead of the start of the summer driving season, the Energy Information Administration said on Thursday. The government data boosted oil prices, acting as a salve for the market’s ongoing concerns about a global glut. Crude inventories fell 6.4 million barrels in the week to May 26, far more than analysts’ expectations for a decrease of 2.5 million barrels. U.S. crude futures extended gains after the data and was 1.4 percent, or 68 cents, higher at $49 a barrel, as of 11:30 a.m. EDT. Brent crude futures were up 1.1 percent to $51.31 a barrel.

In US Equity Markets stocks opened higher on Thursday after better-than-expected private sector hiring showed that the labor market continues to strengthen, further boosting chances of a rate hike by the Federal Reserve later this month.  Seven of the 11 major S&P 500 sectors were higher, with the health and materials sectors leading the gainers. Deere’s shares were up 2.5 percent at $125.48 after the farm and construction major said it would buy privately held German road construction company Wirtgen Group for $5.2 billion, including debt. Hewlett Packard Enterprise fell 5.6 percent to $17.76 after the company reported a steep fall in its quarterly revenue.

In Bond Markets U.S. short-dated Treasury yields briefly touched at least one-week highs on Thursday after strong U.S. private payroll data marginally boosted expectations for more Federal Reserve interest rate increases in 2017, while caution ahead of Friday’s jobs report limited the move. The ADP data pushed yields on Treasuries maturing between two and 30 years to session highs. Three-year yields hit a one-week high of 1.465 percent, and the two-year’s  reached an eight-day peak of 1.314 percent. Benchmark 10-year Treasuries were last down 6/32 in price, with the yield rising to 2.218 percent from 2.198 percent late on Wednesday. Yields briefly hit a session high of 2.239 percent after the ADP report.