US Stock Futures Fall as Crude Sinks on OPEC; Dollar Gains

(Bloomberg) -- U.S. stock futures fell after crude oil tumbled below $40 a barrel as OPEC increased its output ceiling. Gains in the dollar spurred by a strong payrolls report were tempered by an unexpected widening of the U.S. trade gap.

The U.S. currency rebounded from its steepest drop since March as the odds for a rate hike in two weeks remained above 70 percent. European stocks and bonds extended losses on disenchantment with the European Central Bank’s stimulus decision. Oil erased gains, dropping 2.7 percent at 9:15 a.m. in New York, as OPEC agreed to set a new oil-output ceiling of 31.5 million barrels a day, according to a delegate with knowledge of the decision.

“Saying oil took the air out of the balloon is an understatement,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel, Nicolaus & Co., which oversees about $170 billion. “The oil surprise of increased production has scotched the speculative fervor caused by the positive economic data points from the U.S. It was a shot to the solar plexus for investors that were looking for a bullish day.”

Payrolls increased by 211,000 increase following a 298,000 gain in October that was bigger than previously estimated, a Labor Department report showed. More than $500 billion was erased from the value of global bonds and equities worldwide on Thursday amid disillusionment with the ECB’s decision, which involved a rate cut and an extension in asset purchases. 

The announcement spurred the biggest surge in the euro since the Fed announced it was going to start buying Treasuries in March 2009. The flip side of the rally is diminished concern that a strong dollar will cause the Fed to think twice about raising rates.

Friday’s payrolls report and OPEC’s meeting, together with a speech from Mario Draghi in New York, bring to an end three days of economic developments that will help shape the direction of markets into 2016. In two separate speeches this week, Fed Chair Janet Yellen reaffirmed her support for an interest-rate increase as soon as this month.

“This number plus last month’s report really wipes out the stench from the miss we saw in August and September,” Phil Orlando, who helps oversee $360 billion as chief equity market strategist at Federated Investors Inc. in New York., said by phone. “This number ought to clinch it for the Fed in terms of liftoff in December. We should have a spike after yesterday’s overreaction on the Euro and Draghi.”


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