U.S.: Treasury Yield Hits 2.6%; Europe Stocks Mixed: Markets Wrap
U.S. bonds extended a drop, with the 10-year Treasury yield climbing above 2.6 percent for the first time since March to help the dollar hold Wednesday’s gain. The euro strengthened while European stocks were mixed. The bond move was small but took the benchmark through the psychological level, while the dollar held firm amid speculation Congress will avert a government shutdown. European stocks pared an earlier advance but managed to stay in the green even as the euro climbed against most peers, shrugging off ECB attempts to talk it down earlier this week. West Texas oil was flat on signs U.S. crude stockpiles continued to shrink, and base metals advanced following strong Chinese growth data. U.S. equity futures traded little changed in the wake of big gains in the benchmarks yesterday.
Japan and Europe Start the Central Bank Reset
Yes, the global economy really is improving. And yes, officials are going to respond accordingly. This is going to be an exciting year for monetary policy. In fact, it already is, thanks to Europe and Japan. Investors were taken aback last week when the Bank of Japan bought fewer bonds and the European Central Bank revealed — shock, horror — its language would have to evolve with the euro region’s economy. Both developments, and the reaction, were welcome. They say a lot about the strength of global growth and how it still surprises many people. First to Japan: Investors were wrong to interpret the reduced purchases as a sign that a policy shift is imminent. They were, however, right about the long-term direction of policy. It isn’t going to get looser. Will it remain accommodative as far as the eye can see? Yes. With Japan’s economic sunny patch extending and inflation headed in the right direction — if still way too low — it’s not a stretch to see Governor Haruhiko Kuroda or his successor ease up a little on the stimulus. Just not right now.
China Heads for First Full-Year GDP Acceleration Since 2010
China’s economy is poised for its first full-year acceleration since 2010, the year its gross domestic product surpassed Japan’s to become the world’s second-largest .Data due Thursday at 3 p.m. in Beijing will show the economy expanded by 6.8 percent in 2017 from a year earlier, according to Bloomberg’s survey Other estimates show:
- Fourth-quarter growth ticked down to 6.7 percent year-on-year from 6.8 percent in the prior three months
- Retail sales increased 10.2 percent in December from a year earlier, the same pace as the prior month
- Industrial production rose 6.1 percent, also unchanged from November
- Fixed-asset investment climbed 7.1 percent for the year, the slowest pace since 1999
U.K. House Prices Eke Out Gains
U.K. house prices are edging higher, but the market remains subdued. A survey by the Royal Institution of Chartered Surveyors showed a national gauge climbed to eight last month — a result that was the highest since June but only consistent with a marginal increase in prices. London remains a weak spot with a reading of minus 32, though that’s the capital’s least negative measure since April. The U.K. housing market has been hurt by slower economic growth and a squeeze on consumers’ incomes since the referendum to leave the European Union in 2016. RICS’s measure was as high as 58 in 2013, and averaged 29 during the past five years.