Significant Rise in Long-Term Sovereign Debt Yields to Start the Week
February 5, 2024
The popular U.S. TV investigative new show 60 Minutes scored a journalistic scoop with a rare private interview of the Federal Reserve chairman, including a comment that moved world financial markets overnight. Most of the interview rehashed ground that Chairman Powell had included in his press conference last week, but a remark that that he believed markets had been over-discounting the coming pace of rate reductions lifted the 10-year U.S. Treasury futures yield by nine basis points. Other key sovereign debt yields took that cue as well, with 10-year yields jumping 12 basis points in Australia, 9 bps in the U.K., 7 bps in Germany and Italy, and 6 basis points in Switzerland, Spain and France.
Equity markets in the Pacific Rim closed down 1.4% in Singapore, 1.0% in Australia, 0.9% in South Korea, 0.6% in Indonesia, but just 0.1% in China where tighter restrictions on investment flows have been introduced. Japan’s Nikkei rose 0.5%, and European stock exchanges have displayed comparative resilience with gains of 1.1% in Italy and 0.5% in the U.K. so far and no net overnight movement in Germany or France. U.S. stock futures are in the red but by less than a half percent.
The U.S. dollar has been well bid, appreciating by 0.4% against the euro, Swiss franc, and the Canadian, Australian and New Zealand dollars. There’s been a 1% dollar drop against the yuan related to the aforementioned regulatory changes by the government in Beijing.
Gold and oil prices show declines of 0.4% and 0.3%, whereas bitcoin has jumped 1.9%.
Producer prices in the euro area fell 0.8% in December, resulting in the greatest 12-month rate of decline (-10.6%) since -12.4% recorded in September. The Sentix reading of investor sentiment toward the Euroland economy improved 2.9 index points to -12.9 this month, which is its least negative score in ten months.
The seasonally adjusted EUR 22.2 billion German trade surplus in December was its widest in 61 months. The unadjusted surplus grew from EUR 88.6 billion in 2022 to EUR 209.4 billion in 2023, with imports declining 9.7% but exports falling just 1.4% last year.
Australia recorded trade surpluses of A$ 11 billion in December and A$ 94 billion in 2023.
Turkish consumer price inflation accelerated in January to a 14-month high of 64.9%, having bottomed last June at 38.2%. Producer price inflation remained at 44.2%, down from the peak high of 157.7% in October 2022 but above October 2023’s 29-month low of 39.4%.
There’s been another big round of January purchasing manager survey releases today.
- Euroland’s composite PMI improved to a 6-month high despite a 3-month low in the services sector. Moreover, the composite index remained in contractionary sub-50 territory at 47.9, and inflation (whose reduction remains the top monetary policy priority of the ECB) accelerated somewhat. The Spanish and Italian economies are currently doing better than the German and French ones.
- The British composite and service sector PMI readings improved to 8-month highs of 52.5 and 53.8, and each was above preliminary indications. In contrast to the euro zone, inflation strains were not as elevated as in December.
- Sweden‘s composite and service sector indices of 50.5 and 51.8 were its best readings since July 2023.
- Japan‘s composite and service sector PMIs of 51.5 and 53.1 were likewise upwardly revised and represent the fastest positive growth since September.
- China‘s composite and service sector PMI scores (52.5 and 52.7, respectively) slid back to 2-month lows after December’s 7- and 5-month highs.
- India‘s economy has outshined China’s for some time. The January composite and services PMI readings in India were 61.2 and 61.8. Each indicated the fastest growth since last July.
- Russia‘s composite purchasing managers index of 55.1 in January printed between December’s 6-month high and and November’s 10-month low. The services index showed positive but slightly slower growth than in the prior month.
- Australia‘s composite and service sector indices of 49.0 and 49.1 reflected the slowest decline in activity since September.
- Brazil‘s composite PMI improved to a 15-month high of 53.2, lifted by an 18-month high in manufacturing and the 7-month high in the service sector.
- Non-oil private PMI January readings for Saudi Arabia of 55.4, the United Arab Emirates of 56.6, and Egypt of 48.1 were the lowest in 24, 5, and 3 months. That not surprising given the current geopolitical turmoil in the Mideast.
- But Lebanon‘s private PMI reading rebounded from December’s 11-month low of 48.4 to a 2-month high of 49.4.
- The South African private purchasing managers index compiled by Standard Bank edged up 0.2 points to a 2-month high of 49.2.
- Singapore‘s private PMI fell to a 3-month low of 54.7.
- Hong Kong‘s PMI slid 1.4 points to a 3-month low of 49.9.
- Just In: Although the final U.S. S&P Global composite PMI and services PMI readings of 52.0 and 52.5 are a tad below preliminary indications, the are solidly above the 50 no change threshold and represent 6- and 7-month high scores.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland producer prices, January service sector purchasing manager surveys, Powell interview, Turkish CPI and PPI
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