➤ 10-year Treasurys stable ahead of expected Fed rate hike.
➤ Italian bonds yields fall amid budget deal with the EU.
➤ Oil recovers; dollar continues decline.
➤ SoftBank unit plunges in trading debut; GSK soars nearly 8%.
Wall Street looks set to open higher and Treasurys were broadly stable at 2.82% amid prospects of a dovish hike from the Federal Reserve and as markets look for clues on the interest rate path next year.
The central bank is expected to again raise its benchmark interest rate by 25 basis points later today, as it has done three times this year. But investors' focus will also be on the Fed's policy path in 2019 amid fears of a global economic growth slowdown.
"The [Federal Open Market Committee]'s statement language should lose the last vestiges of forward guidance, making policy even more data-dependent," wrote analysts at TD Securities, adding that Fed Chair Jerome Powell is likely to deliver a "cautiously optimistic" stance during his press conference to calm concerns about over-tightening.
U.S. President Donald Trump renewed criticism of the Fed yesterday, warning policymakers in a tweet not to "make yet another mistake" and to "feel the market."
Meanwhile, 10-year Italian government bond yields fell nearly 15 basis points to 2.80% as of 7 a.m. ET, as Italy's government secured a deal with the EU over the former's proposed budget for 2019, avoiding the need to launch an excessive deficit procedure against the country.
Italian stocks rallied amid the budget developments, with the FTSE MIB index up 1.87% as banks UniCredit SpA, Intesa Sanpaolo SpA and Banco BPM SpA rose about 4% each. Germany's DAX rose 0.63% and France's CAC 40 was up 0.59%.
The FTSE 100 index added 0.91%, with GlaxoSmithKline PLC rising nearly 8% after the company announced that it will combine its consumer health business with that of Pfizer Inc. in an all-equity deal.
In mixed Asian trading, the Shanghai SE Composite index slipped 1.05% while Hong Kong's Hang Seng edged 0.20% higher and the Nikkei 225 closed 0.60% lower, with SoftBank Group Corp. down 0.91%. Shares in the group's mobile unit, SoftBank Corp., plunged more than 14% on its Tokyo trading debut.
Overnight, U.S. equities picked up, with the Nasdaq Composite rising 0.45% and the S&P 500 eking out a 0.01% gain. Futures point to a higher open today.
In currencies, the euro rose 0.35% to $1.14 as the dollar continued to weaken against majors, while the pound ticked up 0.09% after briefly dropping against the greenback. Annual inflation in the U.K. eased to a 20-month low of 2.3% in November from 2.4% a month ago, on the back of falling petrol prices.
The Japanese yen gained 0.17% versus the dollar as the Bank of Japan is expected to hold rates this week. With the looming sales tax hike and muted core inflation data, "any tightening measures still seem far away," according to Danske Bank analysts.
In commodities, gold dipped 0.11% to $1,252.20 per ounce, while Brent crude oil halted its descent to rise 0.05% to $56.29 per barrel. Hans van Cleef, senior energy economist at ABN Amro, said in a note that while oil prices are still expected to see a modest recovery in 2019, the recent decline "created a new reality in which oil prices have less upside potential than expected a few months ago."
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The day ahead:
8:30 a.m. ET – U.S. current account (Econoday consensus: $-125.0 billion)
8:30 a.m. ET – Canada consumer price index (Econoday consensus: -0.4% month over month, 1.8% year over year)
10 a.m. ET – U.S. existing home sales (Econoday consensus: 5.190 million)
10:30 a.m. ET – EIA Petroleum Status Report
2 p.m. ET – FOMC meeting announcement
2 p.m. ET – FOMC forecasts
2:30 p.m. ET – Fed Chair press conference
11:30 p.m. ET – Japan all-industry index