Financial and Economic News Update
Global equity markets down after lower than expected fourth-quarter U.S. GDP estimate: Stock markets around the world are trading lower after data showed that the fourth-quarter U.S. GDP estimate stood at 2.6 percent, lower than the 3.0 percent forecast. In other economic news, the final figure of the University of Michigan’s January consumer sentiment survey will be released later in the day. Google Inc (NASDAQ:GOOGL) will likely be in focus today after it posted quarterly profit and revenue that fell below the average analysts’ estimates. Amazon.com, Inc. (NASDAQ:AMZN) may also see increased trading activity after the online retailer reported much higher than expected quarterly profit.
Oil trading higher: Brent crude gained in trade to rise above $49 a barrel, helped by new reserve regulations in China, which is likely to boost short-term import demand. However, despite the gain, oil may witness its seventh straight month of decline, hurt by the global supply glut. And prices fall even further, if the high stock levels continue. Producers are continuing to keep output high, and are bracing themselves for a lower-price environment.
Gold set for its best month in close to a year: Gold prices recovered from the previous session’s lows, and are on track to record its biggest monthly gain in close to a year, on the back of increased global liquidity. However analysts are cautious about the future prospects of the metal, and argue that once the first U.S. interest rate hike occurs, prices could tumble below the $1200-mark. Among other metals, silver and platinum also steadied in trade, after yesterday’s broad-based dip.
Dollar down against the yen: The dollar fell against the yen before a key U.S. government report that analysts say will show that the domestic economy slowed. The other notable mover for the day was the Swiss Franc which is down 5 percent for the week. The Swiss National Bank’s currency buying has increasingly convinced traders and investors that the central bank is now intervening in both the dollar and the euro markets.
Bond Market News
Treasuries lead a global rally in bonds: Treasuries are headed for a fourth straight month of gains as the looming threat of deflation sent sovereign bond yields to record lows. Government bonds from around the world have risen this month after the European Central Bank announced a new massive quantitative easing program, and the Bank of Japan continued with their unprecedented monetary stimulus to counter falling prices. U.S. government debt has gained 2.4 percent in January, versus the Standard & Poor’s 500 Index, which declined 1.7 percent during the same period.
Greek bonds rise after assurances on debt negotiations: Greece’s bonds rose after Prime Minister Alexis Tsipras assured that his new government will negotiate “with safety” with international creditors over the country’s debt obligations. Speaking with European Parliament President Martin Schulz in Athens, Tsipras gave assurances that the Greek government would not undertake any unexpected financial moves. Greek ten-year yields dropped 21 basis points to 9.96 percent, while rate on three-year notes fell 59 basis points to 16.69 percent.
Kaisa dollar bonds surge: Kaisa Group Holdings Ltd (HKG:1638)’s dollar debt jumped today as the confusion surrounding the troubled Chinese real estate company’s future escalated. Bloomberg reported that the local government of the city of Shenzhen, where Kaisa is based, has backed Sunac China Holdings Ltd (HKG:1918) attempts to buy a stake in the company. Kaisa’s $500 million of 2020 notes soared 18.6 cents to 80.1 cents a dollar, the highest in more than a month.
Expectations of a rate cut lifts Aussie bonds: Expectations of a reduction in interest rate next week pushed Australian bond futures higher. The March 2015 10-year bond futures contract, and the March 2015 three-year bond futures contract, gained in trade today. Analysts expect Prime Minister Tony Abbott to counter his growing unpopularity by cutting the cash rate to boost consumer sentiment.
Japan’s third largest bank reports unexpected profit on higher bond trading income: Mizuho Financial Group, Inc. (TYO:8411)’s third-quarter profit rose unexpectedly amid a 55 percent jump in revenue from trading government bonds and other securities. The stellar results reflect the extent to which Japan’s third largest bank has managed to navigate through falling bond yields to make money from trading. 10-year Japanese government bond yields dropped to a record low of 0.195 percent on January 20.
- US: Dow Futures: 17275.00 (-0.94%), S&P 500 Futures: 2000.75 (-0.88%), NASDAQ Futures: 4162.75 (-0.45%)
- Europe: CAC: 4610.67 (-0.48%), DAX: 10691.52 (-0.44%), FTSE: 6785.14 (-0.39%).
- Metals: Gold: 1262.90 (0.66%), Silver: 16.985 (1.26%), Copper: 2.4781 (1.10%)
- Energy: U.S. Crude: 44.94 (0.92%), Brent Crude: 49.39 (0.53%), Natural Gas: 2.662 (-2.06%)
- Commodities: Corn: 3.710 (-0.13%), Soya Bean: 9.680 (-0.03%), Wheat: 5.102 (0.49%)
- Currency: EUR/USD: 1.1315 (-0.08%), GBP/USD: 1.5061 (-0.05%), USD/JPY: 117.7200 (-0.50%)
- 10-year US Treasury: 1.6745% (-0.079), German 10-Year Yield: 0.338% (-0.021), Japanese 10-Year Yield: 0.284% (-0.002)
Economic Calendar for Friday, January 30, 2015:
08:30 A.M. ET: Gross Domestic Product Annualized (Q4)
08:30 A.M. ET: Gross Domestic Product (MoM) (November)
08:30 A.M.ET: Employment Cost Index (Q4)
09:45 A.M. ET: Chicago Purchasing Managers’ Index (January)
10:00 A.M. ET: Reuters/Michigan Consumer Sentiment Index (January)
12:45 P.M. ET: Federal Reserve Governor Daniel Tarullo speaks.
03:00 P.M. ET: Farm Prices
07:00 P.M. ET: St. Louis Fed President James Bullard speaks.