Sharp Rise in European 10-Year Sovereign Debt Yields

February 7, 2022

Ten-year sovereign debt yields posted daily jumps this Monday of 27 basis points in Greece, 12 basis points in Italy, 8 basis points in Spain and Portugal, 4 bps in France, 3 bps in Germany, 2 bps in the U.K. and just a single basis point to 1.92% in the United States. The 10-year Japanese JGB yield held steady at 0.19%.

The dollar is lower but only marginally so against the main components of the weighted dollar index: (0% versus the euro, -0.2% against the yen and +0.1% relative to sterling. The dollar also lost 0.5% against the Australian dollar, 0.4% versus the Mexican peso, and 0.3% relative to the Canadian dollar.

With lunar new year celebrations now behind, stock markets rose 2.0% in China and 1.3% in Taiwan but stayed unchanged in Hong Kong. Some stock exchanges in Asia fell such as India (-1.8%) and Japan (-0.7%). European markets thus far also show mixed results (Italy down 1.3% but Germany and U.K. up 0.3% and 0.5%). U.S. futures are flat.

The price of West Texas Intermediate oil slipped back 0.6%. Any Russian invasion of Ukraine is thought likely to be put off until after the Olympic Games wrap up. Gold edged up 0.3% overnight.

New Zealanders are observing Waitangi Day. It’s been a light session from a data release standpoint.

Japan’s leading, coincident, and lagging economic indicators in December rose to five-month highs, but officials characterized the trend in the coincident index as “weakening,” marking the fourth straight such designation.

Japanese international reserves tumbled $19.8 billion in January to $1.386 trillion, while Chinese foreign exchange reserves last month dropped $28 billion to $3.222 trillion.

In spite of a solid 2.5% advance in capital goods, German industrial production didn’t rise in December as had been expected but instead dipped 0.3%, which reversed November’s small uptick. Production was 4.1% less than in December 2020 and managed to rebound just 3.0% on average in 2021 as a whole.

Irish industrial production fell 4.3% year-on-year in December. The decline was significantly smaller than a tumble of 28.9% in November but still a big contrast against September’s 25.9% on-year increase.

Czech industrial production fell 2.9% on month and 2.1% on year in December.

Norwegian industrial production posted the smallest 12-month increase (1.8%) in five months during December.

The Caixin services and composite Chinese purchasing manager indices printed at 5-month lows in January of 51.4 and 50.1. Inflationary pressure was significant, and forward-looking sentiment fell to a 16-month low on Covid concerns as Beijing officials continue to counter the pandemic with extreme prejudice.

Australia’s AIG-compiled service-sector purchasing managers index leaped 6.6 index points to a 6-month high in January of 56.2.

According to the Sentix gauge, investor sentiment toward the euro area improved to a 3-month high this month but at 16.6 remained weaker than results last year from May through November.

Britain’s Halifax house price index recorded its smallest monthly rise in January since a drop last June, but the 12-month rate of increase matched December’s 9.7%. No month in 2021 saw a larger advance.

U.S. Covid deaths broke above the 900,000 level over the weekend, and their 7-day average is 18% larger than two weeks ago. However, just 596 deaths were reported yesterday, and cases are running 57% lower than two weeks ago. Global cases will soon reach 400 million people.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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