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- Asian shares unwound early gains on Wednesday, as investors turned cautious following renewed selling in recently battered crude oil futures. On Wall Street, major U.S. indexes each gained more than 1 percent. All 10 major S&P sectors ended with gains, led by a 1.34 percent rise in the technology sector .SPLRCT, which lifted the S&P 500 .SPX to a modest increase for the year. Higher U.S. Treasury yields underpinned the dollar overnight, although yields were off highs in Asia. The dollar index, which tracks the greenback against a basket of six rival currencies, was up 0.1 percent at 98.207. The index rose to nearly a one-week high of 98.413 on Tuesday, from a nearly two-week low earlier in the session. It is up 8.8 percent for the year, though down nearly 2 percent for the month as investors pare their dollar-long positions after the U.S. Federal Reserve’s widely anticipated interest rate increase earlier in December.
- Annualized U.S. single-family home prices rose in October at a slightly faster pace than in September and above market expectations, a closely watched survey showed on Tuesday. The S&P/Case Shiller composite index of 20 metropolitan areas gained 5.5 percent in October on a year-over-year basis compared with 5.4 percent in the year to September. It was just above the 5.4 percent estimate from a Reuters poll of economists. Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts. Inventories of existing homes have averaged around a five month supply for the past year, a level that suggests a fairly tight market with limited supplies.
- The dollar held steady against a basket of currencies on Wednesday following a rise in U.S. debt yields, while the Canadian and Australian dollars trimmed gains after a rebound in crude oil prices fizzled. The euro was almost flat at $1.0932 EUR= after slipping 0.4 percent overnight. A weak five-year auction and bounce in oil prices pushed U.S. Treasury yields higher on Tuesday, favoring the greenback. The dollar is generally expected to gain against peers such as the euro and yen in 2016 on expectations that U.S. monetary policy will diverge further from those in the euro zone and Japan, with the Federal Reserve poised to raise interest rates further next year after tightening for the first time in nearly a decade this month. But crude oil instability, made worse by prospects of a warm global winter, was seen clouding the dollar’s near-term outlook. The dollar was steady at 120.49 yen JPY=, moving within a tight 120.63-120.17 range so far this week. The U.S. currency rose to 123.59 after the Fed’s rate hike this month but has since lost momentum. The loonie hit an 11-year low of C$1.4003 to the dollar earlier this month, dogged by weak prices of oil, Canada’s main export, and the dollar’s relative strength against other currencies. The dollar has gained about 4.6 percent versus the yuan so far in 2015. The yuan tumbled after devaluation by the People’s Bank of China in August and has retreated since, guided steadily lower by a succession of weakly set official midpoints.
- Crude oil futures fell around half a dollar early on Wednesday as the market remained under pressure from slowing demand and high supplies, while forecasts that a cold snap in Europe and the United States would be short-lived also hurt prices. Crude prices have plunged by two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States led to a global surplus of between half a million and 2 million barrels per day. More recently, a slowing demand outlook, especially in Asia but also Europe, has started dragging on prices. Traders said the price falls were largely a result of a weak outlook for next year and the closing of 2015 trade books. Forecasts that an upcoming cold weather in Europe will only be short-lived could also hurt crude prices. U.S. crude and Brent had both rallied about 3 percent in the previous session on hopes that a drop in temperatures would buoy demand for oil for heating purposes. But weather data in Thomson Reuters Eikon shows that average continental European temperatures are expected to drop from around 5 degrees Celsius currently toward and slightly below the seasonal norm of 2.4 degrees by Jan. 3 before rising to as high as 6-8 degrees by Jan. 7.