Global stocks rebound, lifting Wall Street futures
Global stock markets posted solid gains Monday at the start of a trading week that's likely to see trading levels depressed by Christmas. But Spanish stocks fell sharply after an election saw the ruling party lose its overall majority amid a groundswell of support for two upstart parties.
In Monday trading, Britain's FTSE 100 rose 0.9 percent to 6,107, Germany's DAX advanced 0.6 percent to 10,670, and France's CAC 40 rose 0.3 percent to 4,638. On Friday, the DAX lost 1.7 percent, the CAC 40 fell 1.5 percent and Britain's FTSE 100 was down 0.7 percent.
Wall Street looked set for gains, with the Dow Jones industrial index futures up 0.7 percent and that for the Standard & Poor's 500 index up 0.8 percent.
In Asia, the Shanghai Composite gained 1.8 percent to 3,642.47, and Hong Kong's Hang Seng advanced 0.2 percent to 21,792. Tokyo's Nikkei 225 shed 0.4 percent to 18,916, while Bangkok and Singapore also declined. Seoul's Kospi advanced 0.3 percent to 1,981.19, India's Sensex added 0.85 percent to 25,735, and New Zealand also rose. Sydney's S&P/ASX 200 was unchanged at 5,109.00.
One market that wasn't faring well Monday was Spain's IBEX, which was down 2.8 percent after Sunday's election saw the far-left Podemos and the business-friendly Ciudadanos parties win a number of seats. The ruling conservative Popular Party received the most votes but fell far short of a parliamentary majority and is at risk of being booted from power.
Although Spain's economy has been growing strongly over the past year, its public finances remain strained amid unemployment levels of around 20 percent. Though Spain didn't need a financial bailout like others in the 19-country eurozone, such as Greece and Portugal, the Popular Party government has been pursuing relatively tough budgetary policies and wide-ranging economic reforms. The fear in the markets is that the election results may reduce the impetus for austerity and reform.
"We could now be facing an era of political paralysis and instability in Spain," said Craig Erlam, senior market analyst at OANDA.
If forced out of government, Prime Minister Mariano Rajoy and his Popular Party would become the third European victim this year of a voter backlash against austerity following elections in Greece and Portugal seen as rebellions against unpopular tax hikes and spending cuts.
Monday's rise in Asia and Europe stands in contrast to Friday's action, in which stocks plunged across all sectors in the heaviest trading of the year as enthusiasm over a U.S. rate hike faded. Bank stocks fell the most after investors had bid them up in hopes they would become more profitable as lending rates climbed.
Technology shares suffered more declines as a bad December got worse for Apple (AAPL). The world's most valuable publicly traded company sank again, bringing its monthly loss to 10 percent. On Friday, the Dow Jones industrials index dropped 367.29 points, or 2.1 percent, to 17,128.55. The S&P 500 index fell 36.34 points, or 1.8 percent, to 2,005.55. The Nasdaq composite sank 79.47 points, or 1.6 percent, to 4,923.08. All 10 Standard & Poor's 500 sectors fell.
"Friday's sell-off underscores the difficulty the U.S. stock market currently has in playing its traditional role as leader of world market rallies. U.S. valuations are full already. This makes the U.S. market vulnerable to risk off moves," Ric Spooner of CMC Markets said in a report.
With the trading week curtailed in much of the world because of Christmas, moves in the market can be more pronounced than usual.
"Today's calendar is relatively light, and with liquidity getting thinner over the course of the week, the potential for exaggerated moves is very real," said Chris Beauchamp, senior market analyst at IG. "The default direction is still likely to be up, given past performance."
Benchmark U.S. crude fell 33 cents to $34.40 per barrel in early electronic trading on the U.S. Mercantile Exchange. The contract closed on Friday at $36.06. Brent crude, used to price international oil, lost 73 cents to $36.15 per barrel in London.