- Bonds sell off on hopes of increased growth next year
- Markets barely affected by impeachment chatter, as Senate widely expected not to vote to remove.
Key Events
Following a mixed Asian session, U.S. futures for the S&P 500, Dow and NASDAQ are struggling to gain traction while European shares are slightly lower. A vacuum in trade developments and U.S. President Donald Trump’s impeachment are stoking market indecision, leaving the focus instead on today's central bank decisions.
Global sovereign bonds extended a selloff.
Global Financial Affairs
U.S. traders don’t generally take profits on American political developments, in this case the impeachment of a Republican president by the Democrat majority in the House of Representatives. Though this is only the third time in American history that this event has occurred, the lack of market reaction thus far might be attributed to the fact that despite the censure, the president likely won't be removed from office since the next step would be a trial in the Republican-dominated Senate. Thus, U.S. contracts are currently marginally higher.
SPX futures opened lower but ticked up slightly after a second flat day yesterday for the benchmark index. Dow futures edged higher after the mega cap index rose for a fifth straight day on Wednesday.
NASDAQ futures opened 0.4% higher after yesterday’s marginal retreat for the tech heavy index, following a five consecutive day rally.
The STOXX Europe 600 opened higher but was quickly overwhelmed by supply, thereby dropping into negative territory.
Asian shares retreated from an 18-month high. Probable catalysts appear to be the lack of trade news and a calendar year that's coming to an end, with institutions unwinding positions as they ready their books to close out 2019.
South Korea’s KOSPI outperformed simply by edging higher, (+0.08%). China’s Shanghai Composite managed to scrape out the slightest advance, (+0.01%), keeping the index barely in the green. Japan’s Nikkei 225 underperformed, (-0.29%); it was bested slightly by Australia’s ASX 200 (-0.27%) and Hong Kong’s Hang Seng (-0.25%).
Government bonds around the world declined on hopes that 2020 will bring economic growth after a choppy 2019. Of course, a portion of this rests in part on the promise of an easing trade spat between the world’s two largest economies.
Yields on the U.S. 10-year Treasury note climbed for the fifth straight day, crossing over the 200 DMA since it fell below it during December 2018. Rates need to climb over the resistance level since the Nov. 7 high. Yields have been moving within a short-term rising channel since the September bottom. An advance over the 2.00 level will increase the probability that the downtrend since the November 2018 high has been reversed.
The Bank of Japan left monetary policy unchanged amid the thaw in trade tensions. While it raised economic growth forecasts for next year, the Asian nation’s exports shrank for the 12th straight month in November, on falling U.S. and Chinese demand, raising the risk of a fourth-quarter contraction. The yen fell for the fifth day out of six.
Traders await the results of a Bank of England policy meeting at 7:00 EST. No change in rates is expected. However, the meeting could pose further downside risks for sterling if additional policymakers swing toward the dovish camp and vote for an interest rate cut. Technically, the pound rebounded, after concerns of a no-deal Brexit from the European Union without a trade deal in place surfaced earlier this week.
Up Ahead
- U.S. Existing Home Sales for November will be released later today.
- Revised U.S. GDP data are due on Friday.
- Friday also brings quadruple witchingto U.S. markets, the simultaneous expiration date of stock index futures, stock index options, stock options and single stock futures. Expect elevated trading volume, particularly in the last hour of trade.
Market Moves
Stocks
- The Stoxx Europe 600 Index gained 0.2%.
- Futures on the S&P 500 Index were little changed.
- The U.K.’s FTSE 100 Index was steady.
- The MSCI Asia Pacific Index dipped 0.2%.
Currencies
Bonds
- The yield on 10-year Treasuries increased one basis point to 1.93%.
- Germany’s 10-year yield gained one basis point to -0.24%.
- Britain’s 10-year yield advanced two basis points to 0.792%.
- Australia’s 10-year yield jumped six basis points to 1.271%.