By Christopher Whittall
Stock markets got off to a mixed start in the final month of the year and a selloff in government bonds gathered pace, as investors remained cautious ahead of a series of political votes and central bank meetings that are expected to dominate sentiment in the coming weeks.
U.S. futures were little changed Thursday, while European stocks slipped, after Asian shares gained overnight on the back of Wednesday's surge in crude prices. Brent crude was last up 2.1% at $52.94 a barrel as traders took stock following a deal from the Organization of the Petroleum Exporting Countries to cut production.
The selloff in government debt continued following solid U.S. data released Wednesday. The yield on the 10-year Treasury note climbed to 2.402% from 2.365% at Wednesday's close, according to Tradeweb, after U.S. Treasurys saw their worst month in seven years in November. Yields rise as prices fall.
Futures markets pointed to a small opening gain for the Dow Jones Industrial Average after the benchmark recorded its largest monthly gain in November since March.
The election of Donald Trump sparked major moves across financial markets last month. Expectations that Mr. Trump's policies will spur higher U.S. growth and inflation sent cyclical stocks soaring, the U.S. dollar racing higher and government bonds tumbling.
Now, many investors are switching their focus to Europe ahead of a series of key events in the continent.
European shares lagged behind a rally in U.S. stocks last month as investors have remained cautious ahead of Italy's constitutional referendum on Sunday -- the first of a series of important votes in Europe in the coming months.
Many analysts expect Italy's reform-minded government to lose that vote, potentially unseating Prime Minister Matteo Renzi.
Chris Jeffery, an asset allocation strategist at Legal & General Investment Management, said there is "market agitation about political risk," but added this "is happening against a backdrop where the global economy has surprised positively."
"On equities, we're pretty close to neutral because of these offsetting pressures: political risks on the one hand, but the economic data not looking too bad on the other hand," he said.
A string of eurozone data releases showed promising signs for the local economy on Thursday. The eurozone manufacturing purchasing managers index hit is highest level in November since January 2014, according to IHS Markit.
Energy shares gained in Europe Thursday, but weakness across most othersectors dragged the Stoxx Europe 600 down 0.5% recently. So-called bond proxies such as utilities and real-estate stocks were among the worst performing sectors.
Eurozone government bonds were also weaker Thursday, with the yield on the 10-year German government bond up around 0.04 percentage point at 0.298%.
Bond investors are looking ahead to the European Central Bank's meeting next week. Most analysts expect the ECB will extend its vast bond-buying program beyond March.
The recent move higher in global bond yields has mainly been driven by expectations of higher U.S. growth and inflation that could cause the Federal Reserve to raise interest rates faster than previously expected. Higher oil prices, which should also boost inflation, have further fueled the selloff.
"The move in Treasurys has been very significant. It does capture a degree of optimism around the growth outlook for next year," said Andrew Wilson, globalco-head of fixed income management at Goldman Sachs Asset Management, who thinks it is highly likely the Fed will raise rates in December.
Still, Mr. Wilson said "we'd need to see validation of that optimism in economic data" for yields to move higher from here.
The U.S. dollar has also gained on expectations of higher interest rates, which tend to boost the attractiveness of a currency. The WSJ Dollar Index, which measures the buck against a basket of 16 other currencies, fell 0.3% Thursday, after closing at its second highest level of the year Wednesday.
The British pound jumped after the minister responsible for the country's exit from the European Union said the U.K. would consider making payments to the E.U. budget to secure the best access to the bloc for trade. The pound was up 0.9% against the dollar at $1.2647.
In Asia, Australia's S&P ASX 200 closed up 1.1%, while Japans's Nikkei Stock Average also rose 1.1% toclose at its highest level of the year.
In other commodities, gold prices were down 0.3% at $1,171 an ounce.
--Jenny Gross contributed to this article.
Write to Christopher Whittall at firstname.lastname@example.org
(END) Dow Jones Newswires
December 01, 2016 09:08 ET (14:08 GMT)
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