CS Credit Suisse Group

By Riva Gold 

Stocks, bonds and currencies were locked in narrow ranges Friday as trading volumes continued to thin ahead of the holidays.

Futures pointed to a flat opening for the Dow Jones Industrial Average, keeping it on track to end the week slightly higher but still shy of the 20000 milestone.

The Stoxx Europe 600 inched up less than 0.1% midday, while European bank shares wavered after the U.S. Department of Justice moved to resolve its crisis-era megabank mortgage cases, striking multibillion-dollar settlements with Deutsche Bank and Credit Suisse.

Shares of Deutsche Bank rose 2%, at one point hovering around their highest level since March, after the Obama administration struck a $7.2 billion settlement with Germany's biggest bank over toxic securities.

Analysts said the news removed an element of uncertainty around the broader banking sector, as shareholders earlier in the year had worried about a much larger penalty.

"Knowing what these fines are going to be, that in itself is a positive, " said Guy Miller, chief market strategist at Zurich Insurance Group. "You didn't know how big the fine was going to be, and the range was huge," he said.

Shares of Credit Suisse Group reversed early gains to trade down 1.2% after the Zurich-based lender said it had settled a U.S. probe into its selling of mortgage-backed securities for about $5.3 billion, a higher total settlement amount than analysts had been expecting.

Barclays shares fell 1.5%, meanwhile, after the U.S. filed a lawsuit against the bank alleging more than $30 billion in fraud-tainted sales. The bank said it would seek the suit's "dismissal at the earliest opportunity" and that it considered the claims "disconnected from the facts."

In Italy, the FTSE Italia All-Share Banks index gained 1.5%, even as Italy's stock market regulator suspended trading of Banca Monte dei Paschi di Siena's ordinary shares, related derivatives and 10 types of bonds.

The decision came after the bank said earlier Friday that it would tap a government rescue fund to shore up its finances, having failed to raise fresh capital from private investors.

"What happens in European banks matters in a global context," Mr. Miller said, pointing to their size and linkages across Europe and the global financial system.

Elsewhere in markets, the euro edged up 0.1% against the dollar to $1.0449, while the broader WSJ Dollar Index slipped 0.1%.

Brent crude oil fell 1.2% to $54.37 a barrel, while copper futures dipped 0.4%, weighing on Europe's energy and mining companies.

Ten-year German bund yields were steady at 0.241% from 0.254% Thursday, while the 10-year U.S. Treasury note edged down to 2.544% from 2.550%. Yields on long-dated government bonds have risen sharply in the second half of this year, particularly since the Nov. 8 election. Yields move inversely to prices.

"It's been almost a continual bull market in fixed income my whole career, but it looks as if we see a turn here, if we see some [fiscal] reforms and see inflation come through," said Rich Sega, chief investment officer for North America at Conning.

While many investors are betting the rise in yields is likely to continue through next year, "the big risk here is trade policy," he said. "We don't know what the reality will be relative to the rhetoric in the [presidential] campaign, but trade-policy rhetoric has been very antigrowth," he said.

Earlier, shares mostly tilted lower in Asian trading hours, with Hong Kong's Hang Seng Index down 0.3%, led lower by property and bank shares. Shanghai stocks fell 0.9% and Australia shares shed 0.3%, while Japanese markets were closed for a holiday.

The moves came after U.S. stocks pulled back Thursday, as a recent rally faded in low-volume trading ahead of the holidays.

Wall Street has climbed to fresh records since the U.S. election, with the Dow on track for its seventh consecutive week of gains. Still, that rally has stalled in recent sessions with the Dow falling on Wednesday and Thursday.

"You have people now assuming there's going to be a substantial fiscal stimulus package that's going to jolt to the economy...but you could well have some wobbling in that positive investor sentiment as the slow wheels of Congress turn," said David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management, noting pro-growth policies could be delayed or watered down next year.

Giovanni Legorano, Willa Plank, John Letzing and Jenny Strasburg contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

December 23, 2016 07:40 ET (12:40 GMT)

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