OVERNIGHT MARKETS AND NEWS

December E-mini S&Ps (ESZ15 +0.25%) are up +0.24% and European stocks are up +1.13% as markets shrug off the geopolitical risks from the Middle East and focus on signs that the U.S. economy is strong enough to handle the first Fed interest rate increase since 2006. NATO and U.S. President Obama called on Russia and Turkey to deescalate tensions and focus instead on destroying jihadist groups. Commodities moved lower as the dollar index strengthened to an 8-1/4 month high, while the yield on the German 10-year bund fell to a 3-1/2 week low of 0.463% on the prospects of additional stimulus from the ECB. Asian stocks settled mostly lower: Japan -0.39%, Hong Kong -0.40%, China +0.88%, Taiwan -0.17%, Australia-0.63%, Singapore -1.09%, South Korea -0.38%, India closed for holiday. Weakness in commodity prices undercut most Asian miners and raw-material producers, while Japanese exporters fell as geopolitical risks from the Middle East fueled increased safe-haven demand for the yen and reduced the profit outlook for Japanese exporters.

The dollar index (DXY00 +0.48%) is up +0.50% at an 8-1/4 month high on the outlook for a Fed rate hike next month. EUR/USD (^EURUSD) is down-0.44% at a 7-1/4 month low as speculation mounts that the ECB will boost monetary easing when it meets next Thursday. USD/JPY (^USDJPY) is up +0.11%.

Dec T-note prices (ZNZ15 +0.05%) are up +3.5 ticks on carryover support from as a rally in 10-year German bunds to a 3-1/2 week high.

In its bi-annual Financial Stability Review, the ECB warned that “highly indebted foreign-currency borrowers may be vulnerable to a prospective normalization of financial conditions in the U.S. and other advanced economies” and that “a faster than expected withdrawal of monetary policy accommodation in other major advanced economies could trigger a reversal of global term premia, which may also spill over to the Eurozone.”