Sovereign Debt Yields Lower on Last Business Day Before Christmas

December 23, 2016

Ten-year sovereign debt yields retreated four basis points in Germany and Italy, three bps in U.K., France and Canada and two bps in the United States. Japan’s market is shut to commemorate the Emperor’s birthday.

The dollar slipped 0.2% overnight against the euro and yen but climbed against commodity-sensitive currencies and sterling. The greenback is up 0.4% relative to the loonie, 0.7% vis-a-vis the Australian dollar and 0.6% versus the kiwi. The yuan and Swiss are steady.

Stocks are little changed in Europe but fell 0.9% in China, 0.4% in Taiwan and Singapore, and 0.3% in Australia and India. Chinese President Xi expressed acceptance of growth below the 6.5% target.

Comex gold is trading 0.3% higher on the day at $1,133.30 per ounce but is headed for its seventh straight weekly decline. West Texas Intermediate crude oil slipped 0.4% to $52.75 per barrel.

Britain, France, Canada and The Netherlands reported GDP.

  • British on-quarter growth in 3Q was revised up a tenth of a percentage point to 0.6%, while growth in the second quarter was revised down 0.1 percentage point to 0.6% as well. GDP last quarter was 2.2% greater than a year earlier, beating the 1.8% increase between 3Q14 and 3Q15.
  • A 0.2% on-quarter uptick in French GDP┬áduring 3Q was confirmed, but on-year growth was revised a tenth percentage point (ppt) lower to 1.0%. Net exports subtracted 0.6 ppts of GDP growth, but inventories augmented GDP by 0.6 ppts.
  • Monthly Canadian GDP fell 0.3% in October, the worst result since May, and was just 1.5% higher than a year earlier. Industrial production sank 1.6% due to broad-based manufacturing losses.
  • Dutch 3Q growth got revised up 0.1 ppt to 0.8% and was associated with a 2.4% GDP increase from a year earlier.

The U.K. current account widened 15.5% in the third quarter to GBP 25.494 billion, equivalent to 5.2% of British GDP.

German consumer confidence rose 0.1 point to a three-month high reading of 9.9.

In the twelve months to November, consumer prices in Singapore were unchanged, Finnish producer prices climbed 0.6%, and Spanish producer prices increased 0.8%. Industrial production rose 11.9% in Singapore but a mere 0.2% in Austria. French consumer spending increased 3.3%.

The Reuters/U. Michigan U.S. consumer sentiment index for December, which was initially reported with a reading of 98.0 versus 93.8 in November and 87.2 in October, got revised even higher to 98.2.

592 thousand U.S. new home sales were reported by the Commerce Department for December, up 5.2% from 563K in November and the best level since July. New home sales were also 16.5% greater than in the final month of 2015.

China’s business indicator improved to a score of 55.9 in December from readings of 53.1 in November and 52.2 in October.

The Swiss index of leading economic indicators stagnated in December at 102.2 instead of rising as analysts were projecting.

European bank shares were aided by the Italian government’s indicated willingness to help out that sector.

Brazilian consumer sentiment sank sharply lower in December, dropping from a reading of 79.1 the month before to 73.3.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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