U.S. Tax Reform Details Extend Rise in Sovereign Debt Yields

September 28, 2017

Ten-year sovereign debt yields climbed additionally overnight by 3 basis points in the U.S., Japan and Germany and 2 bps in Great Britain.

The dollar see-sawed. On balance, it advanced 0.4% against the Australian dollar and Chinese yuan and by 0.2% versus the Swiss franc, but it slipped 0.2% against the euro and 0.1% relative to the yen and sterling. The loonie and peso are unchanged.

Stock markets in the Pacific Rim lost 1.3% in Hong Kong, 0.4% in Indonesia and New Zealand, 0.3% in Singapore and 0.2% in China but rose by 0.7% in Japan and 0.4% in India. The German Dax is up 0.3%, and stocks rose 0.2% in Switzerland and France. British Ftse is flat.

West Texas Intermediate crude oil firmed 1.2% to $52.75 per barrel, while gold edged further lower to $1,286.70 per ounce.

Economic sentiment in the euro area rose 1.1 points to 113.0 in September, which is the highest reading since June 2007. The advance exceeded expectations and was led by strengthening sentiment in the industrial,retail and construction sectors. The economic climate index increased 0.22 points to 1.34, best since April 2011.

The Reserve Bank of New Zealand kept its record low Official Cash Rate level of 1.75% unchanged at the latest policy review. It’s been at that level since a 25-basis point reduction last November. From July 2014 to June 2015, the rate had been twice as high as the current level. A released statement today said “a lower New Zealand dollar would help to increase tradeables inflation and deliver a more balanced growth.”

Austria’s manufacturing purchasing managers index fell back 0.7 points to 59.4, a 4-month low, in September.

Spanish CPI inflation accelerated 0.2 percentage points to 1.8% in September. A preliminary estimate of German CPI data also gets released today and is likely to have picked up marginally as well.

German consumer confidence dipped 0.1 to 10.8 in October.

Spanish 12-month retail sales growth rose 0.4 percentage points to 1.6% in August. In Sweden, retail sales were 2.8% greater in September than a year earlier.

A ton of data get released Friday, which is the final business day of September, the third quarter, and the first half of Japan’s fiscal year.

Revised U.S. GDP figures for 2Q, weekly jobless insurance claims, and the K.C. Fed manufacturing index get reported later today. K.C. Fed President Esther George speaks later.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission. 

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