State of the art for calculating the current and conductance for atomic- and molecular-size junctions consists in combining ab initio electronic structure calculations on the level of Density Functional Theory (DFT) with the Landauer formalism. This approach works quite well e.g. for metallic nanocontacts predicting zero-bias conductances that are in general in good agreement with the experiments. However, this static mean-field approach cannot capture dynamical electron correlations that lead e.g. to the Kondo effect observed in STM experiments with magnetic adatoms and molecules on metal surfaces and more recently in nanocontacts made from ferromagnetic transition metals. In order to describe the dynamical correlations originating from the strongly interacting 3d-shells of transition metal atoms we have developed a new method that combines DFT based electronic structure calculations with a fully dynamical treatment of the 3d-shells of the magnetic atoms in the so-called One-Crossing Approximation. I will present results for Cu nanocontacts containing one or more magnetic impurities in the contact region. The strong dynamic correlations of the 3d electrons lead to quasi-particle resonances near the Fermi level that in turn give rise to Fano lineshapes in the conductance characteristics similar to those observe in recent experiments.