Treasuries Rise, U.S. Stocks Mixed Before Holiday: Markets Wrap

  • European banks lift equities, dollar resume its advance
  • Gold set for seventh weekly decline, crude falls below $53

Treasuries headed for the first weekly gain since the election, while U.S. stocks fluctuated in thin trading before the holidays. European equities halted a two-day slide and Italy’s bonds climbed as the nation pledged to provide support for its ailing lenders.

The yield on the 10-year Treasury note edged lower as China signaled it’s open to slower growth in its economy. The S&P 500 Index was little changed about 0.5 percent below a record. The Dow Jones Industrial Average churned near 19,910. The Stoxx Europe 600 Index held this month’s 5.3 percent rally that has taken it within 1.6 percent of wiping out its losses for the year. Italian bonds gained as Banca Monte dei Paschi di Siena SpA said it will ask for a “precautionary” capital increase. Deutsche Bank AG rose after the lender agreed to settle U.S. mortgage probes. Gold headed for a seventh consecutive weekly decline, the longest run since August 2015.

Financial markets showed little movement on the last trading day before the Christmas holidays as investors assess the post-election rally that’s added trillions to the value of American equities and lifted the dollar to a multiyear high. Chinese President Xi Jinping indicated he’s open to economic growth slowing below the government’s 6.5 percent target. While trading in European equities was 40 percent lower than the 30-day average, the removal of a legal cloud over Deutsche Bank and rescue of Monte Paschi lifted banks in the region.Read More: Markets live blog here.


  • The S&P 500 rose less than one point to 2,260 at 11:25 a.m. in New York. The index is flat in the week. Trading was 54 percent below the 30-day average at this time of day.
  • Strong data on housing and consumer confidence did little to alter perceptions of the economy.
  • The Stoxx Europe 600 Index fell less than a point and is little changed in the five days.
  • Deutsche Bank climbed 0.8 percent as it agreed to pay $7.2 billion to resolve a years-long U.S. investigation into its dealings in mortgage-backed securities. Its Tier 1 notes, the first to take losses in a crisis, gained about 4 cents cents on the euro to 86.5 cents, the highest since Jan. 28, according to data compiled by Bloomberg


  • Treasuries gained as the 10-year yield fell one basis point to 2.54 percent.
  • Italian 10-year yields declined five basis points to 1.80 percent, while German bund yields slid three basis points to 0.22 percent.


  • The dollar gained against eight of its Group of 10 nation peers.
  • The pound fell 0.4 percent to $1.2240, the lowest level versus the greenback since Nov. 2, even after data showed the U.K. economy expanded more than initially reported in the third quarter.


  • Gold for immediate delivery edged higher in London trading, adding 0.2 percent to $1,130.50 an ounce. It’s still set for a seventh week of declines.
  • West Texas Intermediate crude for February delivery in New York fell 0.3 percent to $52.79 a barrel.

Source: Treasuries Rise, U.S. Stocks Mixed Before Holiday: Markets Wrap

Someone Bought a ‘Relatively Cheap Lottery Ticket’ That Will Pay Off If Oil Hits $100

  • December 2018 call single most-traded Brent option on Tuesday
  • Investor optimism returning to oil markets after OPEC deal

Is the Oil Market Wrong to Rely on Increased Demand?

Call it a pre-Christmas lottery ticket, but someone in the oil market has been busy making a bold bet, buying contracts that will be profitable if oil surges again to $100 a barrel.

The $100 December 2018 call option — a contract that gives the right to buy Dec. 2018 futures at $100 per barrel — was the most traded contract on Tuesday across the whole ICE Brent market, the latest sign of resurgent optimism in oil.

The deal doesn’t mean the market believes $100 a barrel will happen, but as traders start to buy bullish options, it indicates that some are increasingly confident that the Organization of the Petroleum Exporting Countries can succeed in its quest to rebalance supply and demand.

“That’s a relatively cheap lottery ticket,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by phone. “It’s clearly not the consensus in the market that we’re going to see a return to those prices any time soon, so it’s more likely a hedge against unforeseen geopolitical events during that time.”

The options probably cost a little more than $1 million, according to data compiled by Bloomberg. They would be worth multiple times that if futures prices spiked any time soon. It’s also possible the trades were part of a wider hedging program.

Confidence in higher prices has returned since OPEC, Russia and other producers signed their first production cut deal in 15 years earlier this month. The International Energy Agency says that if the producers don’t cheat on their commitments, oil demand could overtake supply in the first half of next year, a significant change after three consecutive years of oversupply.

Still, the bet is tiny put in the context of the global oil market. Despite elevated trading in December 2018 $100 calls, the number held by investors didn’t rise much. Open interest in the options rose by 500 to almost 11,000, while options trading volumes fell to the lowest in about a month.

Hedge fund positioning data has showed renewed faith in higher oil prices recently. Bets that Brent crude prices will increase rose to the highest since 2011, when ICE’s public data began, in the week to Dec. 13. At the same time, bets that prices will decline fell to the lowest since October.

Options activity surged this month as OPEC and non-OPEC nations finalized a deal to cut production levels early next year. Investors bought more contracts to profit from higher WTI prices than ever before as analysts said options trading had “entered a new dimension.”

Source: Someone Bought a ‘Relatively Cheap Lottery Ticket’ That Will Pay Off If Oil Hits $100 – Bloomberg