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GLOBAL MARKETS-Stocks dip as "Christmas rally" proves elusive, oil rises

Published 18/12/2018, 12:48 am
© Reuters.  GLOBAL MARKETS-Stocks dip as "Christmas rally" proves elusive, oil rises
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(adds quotes)

* European shares trade lower

* U.S futures dip

* Asia stocks gain on China stimulus hopes

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

By Danilo Masoni and Julien Ponthus

MILAN/LONDON, Dec 17 (Reuters) - European shares and U.S. stocks futures traded in the red on Monday as concerns over global growth that sent world equity markets to 17-month lows last week failed to dissipate ahead of key policy decisions from the United States and China.

The MSCI world equity index .MIWD00000PUS , which tracks shares in 47 countries, was flat as losses in Europe offset modest gains in Asia .MIAPJ0000PUS overnight.

European stock markets .STOXX lost 0.8 percent by 1313 GMT while futures for the S&P 500 ESc1 on Wall Street were down 0.3 percent.

"If Santa Claus doesn't turn up very soon, U.S. stocks may end this year in negative territory", wrote Rabobank analysts as Wall Street's Nasdaq remained the only benchmark in the black with the Dow Jones and the S&P 500 down between 2 and 3 percent.

In Europe, bourses from London and Milan to Paris and Frankfurt have slipped between 10 and 17 percent year-to-date.

Some investors had hoped for a bounce back before the holidays but the "Christmas rally" has proven elusive so far.

"Some investors whom we have spoken to had positioned themselves for a December rally and the path has been painful," broker Bernstein said in a note.

The Federal Reserve is widely expected to raise U.S. interest rates again at the end of its two-day meeting on Wednesday, but what matters more for investors will be whether it cuts its guidance on rate increases in 2019.

The Fed now projects three more increases before 2020, but recent disappointing data and worries over Washington's protectionist policies have fuelled expectations the central bank will cut its guidance.

"A final key rate hike for 2018 is almost a done deal, but what is more important is how the Fed's dot plots shift in 2019 and beyond. If U.S. monetary policymakers are seeing a serious risk of economic slowdown, those dots should be pulled downwards," said FXTM strategist Hussein Sayed.

On Friday, the S&P 500 .SPX lost 1.9 percent to 2,599.95, its lowest close since April 2.

In China, where the economy has been losing momentum, investors will be looking to a speech by President Xi Jinping on Tuesday marking the 40th anniversary of China's "reform and opening" policy. is also expected to hold its annual Central Economic Work Conference later this week, where key growth targets and policy goals for 2019 will be discussed.

The top decision-making body of the Communist Party, the Politburo, said last week China will keep its economic growth within a reasonable range next year, striving to support jobs, trade and investment while pushing reforms and curbing risks. foreign exchange markets, moves were moderate. The dollar paused near 18-month highs before the Fed meeting, after it gained from a rush into safe-haven assets caused by the economic outlook.

The dollar slipped 0.27 percent to 97.182 against an index of six major currencies .DXY , close to the 19-month high of 97.711 touched last week. The euro nudged up 0.25 percent to $1.1334 EUR= .

The pound traded at $1.2622 GBP= , above Wednesday's 20-month low of $1.2477 that it reached on mounting worries that Britain was heading for a chaotic exit from the European Union.

Prime Minister Theresa May was due to speak in parliament later on Monday and set out her opposition to a second Brexit referendum. gold spot prices rose 0.15 percent.

In bond markets, politics also dominated price moves.

The yield spread between Italian bonds and their German equivalents narrowed further on expectations Rome will reach a compromise with Brussels over its 2019 budget. French bonds were hit as "yellow vest" protests rumbled on in Paris over the weekend. Italian-German yield spread IT10DE10=TWEB stood at 269.70 basis points, above Friday's low of 273.7. French government bond yields FR10YT=RR rose to 0.734 percent from Friday's close of 0.710 percent.

Oil prices rose after a key Middle East oil minister suggested the market was rebalancing, but investor sentiment remained under pressure from oversupply and concern over the prospects for global economic growth and fuel demand.

Brent crude oil LCOc1 was up 60.8 cents a barrel, or 0.9 percent, at $60.83 per barrel by 1330 GMT. U.S.

For Reuters Live Markets blog on European and UK stock markets open a news window on Reuters Eikon by pressing F9 and type in 'LIVE/' in the search bar

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