Bitcoin futures steal spotlight, momentum keeps pushing stocks up

A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration
A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration  

By Helen Reid

LONDON (Reuters) - World stocks climbed and equity volatility neared a record low on Monday as investors focused on signs of strong economic growth ahead of a slew of central bank rate decisions, while the launch of bitcoin futures fed the market's cryptocurrency obsession.

European stocks drew strength from a positive Asian session to trade higher across the board in early deals, nearing four-week highs as bank stocks boosted benchmarks.

MSCI's main European Index <.MSER> rose 0.1 percent while the index of leading European companies <.STOXX50> gained 0.2 percent. Britain's FTSE climbed 0.6 percent thanks to a boost from a weaker sterling.

Stealing the spotlight was the debut of bitcoin futures contracts, allowing investors to bet on the price of the cryptocurrency in one, two or three months.

The one-month contract, the most-traded on the Chicago-based CBOE Global Markets exchange <XBTc1> opened at $15,850 on Sunday night - a gain of 21 percent.

It was last quoted at $18,600, while bitcoin itself hovered at $16,431.76. <BTC=BTSP>

Bitcoin has rocketed up a gravity-defying 1,600 percent since the start of the year, attracting institutional interest - and concerns that it is a bubble in the making.

"The one-month contract is trading at around an 11 percent premium to the underlying bitcoin, and for me that's a clear indication that there's no connection between the two markets," said Lukas Daalder, chief investment officer at Robeco.

Several online brokerages have not yet allowed trading of the new futures.

"I can understand you don't see that many people who are willing to offer this contract, because you can't hedge your underlying risk if you can't short it," Daalder added.

"This only adds to the bitcoin phenomenon. It's interesting to watch, but not a market that I would like to touch."

While frantic trading kept bitcoin volatility dizzying, a gauge of S&P 500 volatility <.VIX> dipped below 10 to its lowest in more than two weeks, nearing the record low hit in November.

World stocks rose, flirting with their most recent record highs, boosted by more benign Asian trading after Friday's strong U.S. employment data and Chinese trade figures cemented optimism on the global economy.

Global stocks <.MIWD00000PUS> rose 0.3 percent to 505.35, nearing last week's intraday record of 507.09.

"Momentum behind stock markets has been pretty solid, supported in part by good numbers on the economic front and not bad earnings. I don't see anything happening right now that could break the momentum," said Daalder.


Currency and bond markets were cautious ahead of a big week of policy meetings globally, although the Federal Reserve is the only major central bank expected to raise interest rates.

The Bank of England and the European Central Bank are widely seen holding rates steady.

"Global growth has strengthened but there is very little evidence yet that inflation pressures are picking up, which continues to favor only a gradual pace of monetary policy normalization," Lee Hardman, strategist at MUFG, told clients.

Sterling <GBP=> edged lower after a volatile week, last at $1.3375.

The dollar index, which measures the greenback against a basket of currencies, eased 0.1 percent, hovering near a three-week high after five straight sessions of gains. <.DXY>

Sluggish U.S. wage growth and inflation have sparked some concern over rate rises, and traders will zoom in on the Fed's future rate projections on Wednesday.

"It's a tall order for the median Fed dots to shift lower, but we may see a slight downshift in the distribution," said ING forex strategists in a note, adding that the dollar index could fall back below 93 as the Fed's 25bp rate rise is already priced in.

Data out on Friday showed average hourly earnings in the United States came in lower than economists forecast, despite stronger-than-expected non-farm payrolls, which rose by 228,000 in November.

Most high-grade euro zone bond yields were lackluster in early trading, with 10-year Bund yields, the benchmark for the region, edging below 0.30 percent. <DE10YT=TWEB>

"Bunds have drifted lower in recent weeks," said Robeco's Daalder. "I would say there's some complacency for sure, but I don't see any major moves until the new year."

The gap between U.S. and German bond yields came close to its widest since April as the monetary policy paths of the two central banks diverged.

In commodities, signs of increased drilling activity after the latest rise in the U.S. rig count weighed on oil prices.

U.S. crude <CLc1> fell to $57.13 a barrel and Brent crude <LCOc1> inched 21 cents lower to $63.16, slipping from a recent 2-1/2 year peak of $64.65.

Spot gold was slightly firmer at $1,249.41 an ounce XAU=.

(Reporting by Helen Reid, additional reporting by Sujata Rao and Abhinav Ramnarayam, editing by)


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