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Global Markets: U.S. Futures Higher, European Stocks Down

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01/02/2018 | 03:21pm CET
By Christopher Whittall and Kenan Machado 

U.S. futures rose while European stocks fell in the first trading session of 2018, following steep price increases across global indexes last year.

Futures markets pointed to a 0.3% opening gain for the S&P 500 on Tuesday. The Stoxx Europe 600 slipped 0.4%, dragged down by declines in auto stocks. Markets in the Asia-Pacific region mostly ended higher.

Investors were also watching a continuing slide in the U.S. dollar as the WSJ Dollar Index fell 0.4%, putting it on track for its sixth straight session decline.

Many investors head into 2018 confident that the yearslong market rally can continue amid a strengthening global recovery and corporate earnings growth. Hefty share price gains across the globe added more than $9 trillion in market value to equity markets in 2017. The Dow Jones Industrial Average surged 25% last year, while the S&P 500 rose over 19%.

Those steep gains have made some investors cautious. But many are penciling in further stock price rises in 2018 thanks to firming global growth.

"We'd expect the global expansion to continue and drive equities to new highs in the process," said Shoqat Bunglawala, head of the global portfolio solutions group for EMEA at Goldman Sachs Asset Management.

But Mr. Bunglawala said he expected stock price rises "to moderate given the strong pace we've seen recently" and to be punctuated with short periods of volatility as the Federal Reserve continues to raise interest rates.

In Europe, declines in auto shares helped drag down Germany's DAX index 0.8% and France's CAC 40 index 0.6%, while also weighing on the Stoxx Europe 600. Shares in BMW AG and Renault SA declined 1.6% and 1.2% respectively.

The Stoxx Europe 600 auto subindex was 1.2% lower. The exporter-heavy sector wasn't helped by a 0.4% gain in the euro against the dollar to $1.2060, hovering around levels last seen in September.

Equities in Hong Kong and mainland China led gains in the Asia-Pacific region Tuesday. The Hang Seng Index rose 2%, thanks in part to gains by Chinese messaging-and-gaming heavyweight Tencent Holdings Ltd. Tech stocks broadly notched gains after suffering steep declines last year amid a global pullback from the sector.

Solid Chinese manufacturing data showed the sector remained healthy, said Krystal Tan of Capital Economics. Global economic growth "and accommodative domestic monetary policy should help keep Asian manufacturing sectors in good shape," she said.

China's Shanghai Composite Index rose 1.2%. Elsewhere, Australia's S&P ASX 200 fell 0.1%, while markets in Japan were closed.

The U.S. dollar started 2018 as it ended last year - lower. The greenback fell against a range of developed and emerging market currencies Tuesday. Last year, the WSJ Dollar Index slid 7.5%, its largest percentage decline since 2007.

In bond markets, the yield on the 10-year Treasury note was at 2.432% Tuesday, according to Tradeweb, from 2.409% on Friday.

In commodity markets, Brent crude oil fell 0.3% to $66.69 a barrel. Gold was up 0.3% at $1313.80 an ounce amid the dollar weakness.

Write to Christopher Whittall at [email protected] and Kenan Machado at [email protected]

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