• Government debt sold as investors reassess inflation outlook
• Attention turns to potential impact of US fiscal stimulus on timing of Fed rate rises
• Wall Street rises in opening trade, heading back toward records
• Sweden’s krona touches two-week high after central bank ends QE
Tax cuts in the US could help boost the American economy and stock market which, in turn, will positively impact global economic growth and global stocks,” says Nigel Green, founder and chief executive of deVere Group.
“Global growth is speeding up. What’s more, this growth is fairly evenly balanced, with most major economies growing at an acceptable rate. Crucially, China is now growing at a more robust pace than had previously been expected and the eurozone is enjoying an upturn. Strong GDP growth is translating into good corporate earnings growth, which supports share prices.”
Hot topic
Government bonds are being sold again, lifting their yields, as investors eye the outlook for US inflation following the Washington vote for US tax cuts, while Wall Street stocks are rising and the dollar is holding steady.
The yield on 10-year US Treasuries is up 2.5 basis points at 2.49 per cent. It had been up by as many as 7bp during the previous session. The more policy-sensitive 2-year US bond yield is up 1.2bp at 1.86 per cent.
The pattern is similar for European government debt. The yield on Germany’s 10-year Bund is up 4.1 per cent at 0.416 per cent. It was also 7bp higher on Wednesday, the biggest single-session rise since July.
The passage of tax reform through the US Senate has left investors considering the outlook for US inflation in the context of the fiscal stimulus the bill will provide, buoying the dollar and leaving the global stock rally, which came in anticipation of the measures, looking fully valued.
The dollar index, which tracks the world’s reserve currency against six others, is up 0.1 per cent at 93.502.
The S&P 500 and the Dow Jones Industrial Average are up 0.3 per cent apiece in opening trade, taking them back towards Monday’s records.
Equities
European equities are steady, with Frankfurt’s Xetra Dax 30 up 0.3 per cent and London’s FTSE 100 slipping 0.1 per cent. The Europe-wide Stoxx 600 is flat.
Hong Kong’s Hang Seng slipped 0.1 per cent as financials fell 0.2 per cent and information technology stocks slipped 0.6 per cent. On mainland China, the CSI 300 index of large-cap companies in Shanghai and Shenzhen is down 0.1 per cent.
Japan’s Topix rose 0.3 per cent, with financials up 1.4 per cent and consumer discretionary stocks gaining 0.2 per cent.
In Australia, the S&P/ASX 200 is up a further 0.1 per cent after hitting its highest level since January 2008 in the previous session, helped by simultaneous demand for resource stocks and financials.
Forex
Sweden’s krona is 0.2 per cent stronger at SKr8.3814 per dollar after the country’s central bank finished its bond-buying programme and lifted its inflation forecasts.
The pound is up 0.2 per cent at $1.3409 while the euro is up 0.1 per cent at $1.1844.
Japan’s yen is 0.2 per cent weaker at ¥113.12 per dollar.
Commodities
Oil prices are higher after figures from the American Petroleum Institute showed crude inventories fell by 5.2m barrels. Brent crude is 0.4 per cent higher at $64.04 a barrel while US marker West Texas Intermediate is up 0.5 per cent to $57.84 a barrel.
Gold is 0.2 per cent firmer at $1,264 an ounce.
Michael Hunter in London and Alice Woodhouse in Hong Kong
