European, Asian stocks and S&P futures all declined amid collapsing volumes, after the Wednesday drop in the S&P 500, and after oil prices held losses amid an unexpected increase in supplies, as traders close out trades ahead of the holidays. Top overnight news include the imminent nationalization of Monte Paschi, the ongoing manhunt for the German Christmas market terrorist, Uber halting its self-driving car test in San Francisco, and the anti-China, anti-regulation moves in the Trump administration. 

European stocks edged lower, led by miners, and U.S. stock futures stagnated after the Dow Jones Industrial Average failed to make progress toward 20,000 Wednesday. The MSCI Asia-Pacific Index headed for a one-month low and oil traded below $53 a barrel after data showed U.S. stockpiles expanded for the first time in five weeks. The Bloomberg Dollar Spot Index recovered from Wednesday’s decline. Global stocks are "resting" after the tremendous Trumflation rally, with trading volumes ebbing as year-end holidays approach. The Treasuries market has steadied following a selloff that took the 10-year yield to the highest since 2014, with the rate holding in a 7 basis point range this week.

“Moderate losses on Wall Street, underpinned by the fall in oil prices, are providing little inspiration for Asian markets today,”said Jingyi Pan, a strategist at IG Asia in Singapore. “Thin volumes are also providing little momentum for trade into the end of the year.”

Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.5 percent with the Nikkei finishing 0.1 percent lower having hit one-year highs this week. Japan's cabinet approved a record $830 billion spending budget for fiscal 2017 that counts on low interest rates and a weak yen to limit borrowing, underscoring the challenge Tokyo faces in curbing the industrial world's heaviest debt burden. Hong Kong's Hang Seng index was down 0.7 percent after touching its lowest levels since July, though Australian shares finished up 0.5 percent, extending their gains into a fourth straight session.

A quick snapshot of the major markets shows the Stoxx Europe 600 Index down -0.2% percent at 6:00am in New York, retreating from the year’s highest intraday level on Wednesday. Japan’s Topix and Nikkei indexes also slid 0.1 percent at the close in Tokyo, with both down for a second day. S&P 500 Index futures were likewise down -0.1%. The underlying gauge dropped 0.3% on Wednesday in New York, while the Dow was off 0.2 percent and closed at 19,941.96, unable to hit Dow 20,000 for over a week.

In rates, 10Y Treasuries were little changed at 2.54 percent. Japan’s 10-year rate was 1 basis point lower at 0.05 percent. German bunds of the same maturity were at 0.25 percent Wednesday. Benchmark 10-year Italian and Spanish yields rose 1-2 basis points (bps) to 1.84 percent and 1.34 percent respectively and broadly in line with the wider bond market. Greek 2-year yields saw the biggest jump meanwhile with familiar concerns about its debts now returning.

In keeping with the nearly decade-old upside down market, shares in Milan climbed 0.3% on "hopes" for the insolvent Monte Paschi would be bailed out by the government imminently."This situation has dragged on for years without a clear solution. Now a solution is in sight," LC Macro Advisors head, Lorenzo Codogno, said. "My perception is that the government backstop will be welcomed by financial markets and it will be a plus for the (Italian) economy as well."

The Monte dei Paschi saga is one of the reasons why Rome's government bonds have been the worst performing in the euro zone this year, losing roughly 4 percent

The dollar, which has been on a tear since Donald Trump's election win stoked hopes of a fiscal boost for the U.S. economy, was flat as traders booked profits before a batch of U.S. data including revised GDP figures. "You could see the dollar continue higher next year, maybe mid-single digit for the DXY index, but we would be surprised if it was another 10 percent," JP Morgan Asset Management global market strategist, Mike Bell, said.

Crude oil prices made modest gains, recovering from pressure from a report showing a surprise build in U.S. crude inventories last week, as well as news that Libya expects to boost production over the next few months. U.S. crude was steady at $52.44 per barrel, Brent crude ticked up to $54.49, spot gold edged down to $1,130.44 an ounce while industrial metals copper, zinc and tin continued their recent decline.

Major market moves are thin and far between though with many investors already departing ahead of this weekend's Christmas and New Year holiday. Markets in Tokyo will be closed on Friday for the Japanese Emperor's birthday. On Thursday, the United States will release a third revision of U.S. third quarter gross domestic product. Durable goods orders for November and weekly initial jobless claims were also scheduled to be released.

"There's a lot of year-end book-closing and position-squaring, and less in terms of data and events to go on," Barclays Singapore's head of FX strategy, Mitul Kotecha, said.

Market Snapshot

• S&P 500 futures down less than 0.1% to 2259
• Stoxx 600 down 0.2% to 359.7
• FTSE 100 down less than 0.1% to 7040
• DAX down less than 0.1% to 11475
• German 10Yr yield up less than 1bp to 0.26%
• Italian 10Yr yield up 1bp to 1.84%
• Spanish 10Yr yield up less than 1bp to 1.37%
• S&P GSCI Index down 0.1% to 390.1
• MSCI Asia Pacific down 0.4% to 135
• Nikkei 225 down less than 0.1% to 19428
• Hang Seng down 0.8% to 21636
• Shanghai Composite up less than 0.1% to 3140
• S&P/ASX 200 up 0.5% to 5644
• US 10-yr yield up less than 1bp to 2.54%
• Dollar Index down 0.08% to 102.94
• WTI Crude futures up less than 0.1% to $52.53
• Brent Futures up 0.1% to $54.54
• Gold spot up less than 0.1% to $1,131
• Silver spot down 0.2% to $15.91

Top Global News

• Actelion, J&J (JNJ) Are Back in Exclusive Talks a Week After Breakup; this exclusive discussions are about a possible transaction that Actelion called “strategic”
• Trump Summons Contractors to Mar-a- Lago Over Spending; two largest U.S. defense contractors said they would seek to control their costs
• Exxon (XOM) Foe Says Bigger InterOil Offer Still Isn’t Good Enough; says Exxon still not offering shareholders full value for hydrocarbon reserves in Papua New Guinea
• Icahn Named Special Trump Adviser to Roll Back Regulations; Icahn has attacked the EPA repeatedly over costs his refinery investments face complying with renewable-fuel mandates
• Trump Forms Trade Council Led by China Critic Peter Navarro; one of the leading economists on the Trump campaign
• Alibaba (BABA) Again Named ‘Notorious Market’ in Blow to Overseas Push; U.S. Office of the Trade Representative puts Alibaba’s Taobao back on list
• Amazon (AMZN) Eyes Western Europe’s $42 Billion Online Fashion Market; Zalando ruled fashion e-tailing, then you-know-who came along.
• Honda in Talks With Google’s (GOOG) Waymo on Self-Drive Tech; at this point talks are about research, rather than full production vehicles
• Nippon Paint Buys Dunn- Edwards of U.S. Amid Japanese M&A Spree; sale to be completed by end March
• Micron (MU) Rises on Quarterly Sales Forecast, Restored Growth; CEO Durcan sees supply-demand balance persisting in 2017

* * *

Looking at Asian markets, stocks traded mostly lower following the lacklustre lead from Wall Street, where all 3 US majors closed marginally negative amid a lack of demand and drivers heading into Christmas. ASX 200 (+0.5%) outperformed with the index led by strength in financials, although weakness in the energy sector following yesterday's unexpected DoE inventory build capped upside in the index. Nikkei 225 (-0.1%) mirrored the losses in its US counterparts, while both Shanghai Comp. (+0.1%) and Hang Seng (-0.8%) were also pressured as tight liquidity and default concerns dampened sentiment, despite efforts by the PBoC to inject funds and support lending. 10yr JGBs traded higher amid the risk averse tone in Japan, while the curve continued to steepen alongside outperformance in the short-end. Japan's Cabinet approved FY17/18 budget spending plan which is at a record amount of JPY 97.5trl. PBoC injected CNY100bIn in 7-day, CNY 70bIn in 14-day and CNY 50bIn in 28-day reverse repos. (Newswires) PBoC set mid-point at 6.9435 (Prey. 6.9489).

Top Asian News

• Taiwan Holds Discount Rate at Six-Year Low as Anniversary iPhone, Rising Oil Buoy Outlook; rate kept at 1.375 percent for second straight quarter
• China Stocks’ Worst Year Since 2011 Seen Becoming 21% Rally; analysts say 2017 will be brighter
• Hong Kong Stocks Enter Correction as Energy Firms, Insurers Fall; Hang Seng slumped more than 10 percent since its Sept. 9 high
• Abe Government 2017 Budget Rewards Companies That Play Ball; offers incentives for companies that help meet policy objectives such as raising wages
• Top Picks for 2017 in EM Asia Are India, Indonesia; Avoid Korea; according to most popular picks for investors and strategists next year
• Singapore Court Metes Out Toughest Sentence in 1MDB-Related Case; ex-BSI banker Yeo gets 30 months for obstruction of justice

In Europe, it has been one of the quietest sessions of the year so far in terms of newsflow, and stocks are modestly down on the day (Euro Stoxx 600: -0.2%); 4 of 19 Stoxx 600 sectors rise, 51% of Stoxx 600 members decline, 46% gain. Outperformers include healthcare, while Sanofi and Actelion are both among the notable movers after the latter decided to enter discussions with J&J as oppose to Sanofi. Elsewhere, bunds have done little this morning to trade modestly lower with no notable price action in the periphery.

European Top News

•  Monte Paschi Said Headed for Nationalization After Sale Failure; that would be the country’s biggest bank nationalization in decades
•  Brexit and Politics Cast Shadow Over U.K. After Tumultuous 2016; long-predicted Brexit slump may finally arrive
•  U.K. Consumers Are Feeling Gloomy About the Economic Outlook; excluding sharp drop after Brexit referendum, its at lowest reading in almost four years
•  Wilbur Ross Seen Cutting Bank of Cyprus Ties to Work for Trump; private equity firm that bears his name is under no obligation to sell its stake
•  Trash-to- Treasure Train Keeps Austrians Warm at Rome’s Expense; Roman garbage will help generate more than 550,000 megawatt-hours power 
•  Rally in U.K. Inflation-Linked Bonds Seen Losing Steam in 2017; U.K. linkers have returned about 21 percent this year, set for the biggest gain since 2011

In currencies, the Bloomberg Dollar Spot Index was little changed after falling 0.1% Wednesday, but is still on course for a gain of more than 3 percent this year. The yen was unchanged percent at 117.52 per dollar after appreciating 0.3 percent Wednesday.The euro climbed 0.3 percent to $1.0450. The New Zealand dollar was up 0.1 percent after the country’s gross domestic product report, while the Swedish krona added another 0.3 percent after gaining in Wednesday after the Riksbank extended its quantitative easing program into next year.

In commodities, West Texas Intermediate crude oil stabilized at $52.50 a barrel Thursday after dropping Wednesday by 1.5 percent, its first slide in a week. Ever tightening trade seen in all markets, but we see Gold prices softening slightly in line with the USD bid. Base metals are doing very little as anticipated, while Oil prices have stabilised after yesterday's post DOE hit. Modest losses seen here, with a little more downside seen in am London, but front month WTI is still only a touch over 1 USD off better levels seen at the start of the week.

US Event Calendar

• 8:30am: GDP Annualized QoQ, 3Q T, est. 3.30% (prior 3.20%)
• 8:30am: Durable Goods Orders, Nov P, est. -4.80% (prior 4.60%); Cap Goods Orders Nondef Ex Air, Nov P, est. 0.40% (prior 0.20%)
• 8:30am: Initial Jobless Claims, 17-Dec, est. 257k (prior 254k)
• 9am: FHFA House Price Index MoM, Oct., est. 0.50% (prior 0.60%)
• 9:45am: Bloomberg Consumer Comfort, 18-Dec., (prior 45.5)
• 10am: Personal Income, Nov., est. 0.30% (prior 0.60%)
• 10am: Leading Index, Nov., est. 0.10% (prior 0.10%)
• 10am: Freddie Mac mortgage rates
• 10:30am: EIA natural-gas storage change
• 11am: Kansas City Fed Manf. Activity, Dec., est. 4 (prior 1)