Global optimism, UK spending promises lift long gilt yields to three-month high

© Reuters.  Global optimism, UK spending promises lift long gilt yields to three-month high © Reuters. Global optimism, UK spending promises lift long gilt yields to three-month high

By David Milliken

LONDON (Reuters) – British long-dated government bond yields rose to their highest in more than three months on Thursday as a global improvement in risk appetite and the prospect of big increases in public spending overshadowed a more dovish Bank of England.

Ten-year gilt yields () peaked at 0.814%, up around 9 basis points on the day and the highest since July 16, and 20- and 30-year yields gained a similar amount () ().

By contrast, two-year yields () barely budged — pinned down by an unexpected split vote at the Bank of England — and the two-year/10-year yield curve rose to its steepest since July 15 at 24 basis points.

The steepening yield curve reflected countervailing forces at play for different maturities of gilts.

Markets received a shock earlier in the day when two BoE policymakers unexpectedly voted to cut rates, and the majority said a rate cut could become necessary if Brexit uncertainty and a global slowdown did not ease.

One measure of interest rate expectations now prices in a two thirds chance of a quarter-point BoE rate cut by the end of next year, compared with just over half on Wednesday, pushing down on two-year and five-year gilt yields, which are already well below the BoE’s 0.75% Bank Rate.

But the broader tone in markets on Thursday was negative for fixed income assets, bolstered by increased optimism about a trade deal between the United States and China.

German 10-year Bunds , like their British counterparts, rose to their highest since mid-July.

And for longer-dated gilts, there was added upward pressure on yields from the second day of Britain’s election campaign, in which both the Conservative Party and the Labour opposition promised big increases in spending if they win the Dec. 12 vote.

The fiscal news was “arguably more significant” for gilts than the BoE decision, Capital Economics analyst Oliver Allan wrote in a note to clients.

Labour’s would-be finance minister, John McDonnell, promised an extra 150 billion pounds ($ 192 billion) of infrastructure spending during the next five years, on top of 250 billion pounds he has already promised for the coming decade.

McDonnell’s Conservative counterpart, Sajid Javid, said he would spend an extra 100 billion pounds.

Both plans would require a significant increase in gilt issuance over the medium term, and could push up inflation or BoE rates if the spending hits the economy at a time when it is close to full capacity.

However, Capital said it expected the increase in British yields to be limited as any significant rise would attract foreign investors at a time when yields on much euro zone debt are below zero.

“Although UK yields are low historically, they are not particularly low relative to those elsewhere in the developed world,” Allen said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Heads up: It will be a long weekend for some markets

Monday will be a holiday in the US, Canada, and Japan

Both the Canadian and Japanese markets will be closed entirely but some US markets will be open, notably the NYSE and NASDAQ. That means while certain financial institutions are closed, the stock market will still be running as per usual.

That said, we may observe lighter liquidity in trading as a result.
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Just a bit of a heads up before we head into the hustle and bustle involving US-China trade talks later on in the day.

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Non trend transitions to trend. Has the EURUSD non-trended long enough?

Is it time to prepare for a trend?  I think so….

There is a market truism that plays out eventually. That is, non-trends transitions to trends. 

The EURUSD is currently in a 463 pips non-trending trading range for 2019. How does that compare to history? Not too favorably. The lowest trading range for a  calendar year since the EURUSD introduction in 2002 is 1147 pips (back in 2013). The average since 2002 is 1966 pips. The recent average is around 1450 pips. 

There is room to roam. It is time to be prepared.

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Mnuchin comments show that a little optimism can go a long way with the current market mood

US equity futures spike to session highs on Mnuchin’s remarks on trade

E-minis 26-06
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Even if that optimism is a little bit misguided, Mnuchin basically gave us a taste of what to expect if there is good news to come from Trump and Xi’s meeting later on in the week. When I mean misguided, check out this report (may be gated) by the FT back in April.

Yup, it’s the same headline. That a “US-China trade deal is 90% done/complete”.

Markets may be a little too quick to jump the gun here by riding on Mnuchin’s comments today but if anything else, it highlights the kind of anticipation and focus towards US-China trade talks since the start of the week.

Should there be good news to come from the Trump-Xi meeting in Osaka, the euphoria in risk assets has the potential to be insatiable when we kick start the new week on Monday.

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Trump’s ‘Easy’ Trade War Hits Snags as China Plays the Long Game

© Bloomberg. MONESSEN, PA - JUNE 28: Presumptive Republican candidate for President Donald Trump speaks to guests during a policy speech during a campaign stop at Alumisource on June 28, 2016 in Monessen, Pennsylvania. Trump continued to attack Hillary Clinton while delivering an economic policy speech targeting globalization and free trade. (Photo by Jeff Swensen/Getty Images) © Bloomberg. MONESSEN, PA – JUNE 28: Presumptive Republican candidate for President Donald Trump speaks to guests during a policy speech during a campaign stop at Alumisource on June 28, 2016 in Monessen, Pennsylvania. Trump continued to attack Hillary Clinton while delivering an economic policy speech targeting globalization and free trade. (Photo by Jeff Swensen/Getty Images)

(Bloomberg) — In June 2016, presidential candidate Donald Trump stood between bales of crushed aluminum and a crowd of supporters in a factory outside of Pittsburgh and made a promise on trade that wasn’t hard to keep.

“If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful — this is very easy. This is so easy. I love saying this,” he told workers at the recycling firm Alumisource, a former steel plant in Monessen, Pennsylvania. “I will use every lawful presidential power to remedy trade disputes.”

Three years later, he has clearly delivered on the pledge.

Trump’s tariff-driven attack against the world’s No. 2 economy has shown that expanding trade powers has indeed been the easy part. But as events this week show, winning a trade war against China — which Trump once tweeted would also be “easy” — looks increasingly like a more difficult and protracted endeavor than anticipated, with Beijing now showing more signs of digging in than capitulating.

Trump’s hawks have been arguing ever since the president took office that the only way to get China to make meaningful changes to what some openly call a “deviant economic model” is to continue punching it in the nose until you force surrender. Yet the big question looming now is whether that belligerent approach may be backfiring with daunting consequences for the global economy.

After Trump escalated his tariff war on Chinese imports earlier this month and blacklisted Chinese telecom giant Huawei Technologies Co., Chinese President Xi Jinping called on citizens to join a “new Long March,” prompting echoes of that call in Chinese state media.

“All of the Chinese people are ready to embark on a new ‘Long March’ journey with greater courage and resilience and will never yield to foreign bullying and assault,” state-run Xinhua News Agency said in a commentary on Friday.

The hope for a respite from rising tensions now rests on a planned meeting between Trump and Xi on the sidelines of a late-June Group of 20 Summit in Japan. But it’s not clear that meeting will even take place. Cui Tiankai, China’s ambassador to the U.S., told Bloomberg Television on Friday that there had not yet been any official discussions about a meeting, though “the possibility is always open.”

“If things continue the way they are why would Xi want to meet with Trump,” said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics. “Every day the wedge between the U.S. and the Chinese side seems to get bigger and there’s no sign of any bridges being built.”

China is also not the only one showing signs of preparing for a longer trade war.

Trump this week announced a new $ 16 billion aid program for farmers caught in the trade wars to whom just weeks ago he had been promising a deal with China that would mean huge new purchases of their crops. He also has settled a dispute with Canada and Mexico over steel tariffs, which had led to retaliation by the U.S. neighbors against agricultural exports.

Commodity markets are reflecting the gloomy prospects for the trade talks.

The price of U.S. soybeans, which China has stopped purchasing during the trade feud, is hovering close to the lowest level in a decade just as planting season gets under way. A headline this month in the Des Moines Register, the biggest newspaper in Iowa, underscored the pain: “It can’t get any worse.”

Clothing, Smartphones

A bigger potential economic and political risk now confronting Trump is the risk that the next wave of his tariffs will hit consumer staples like children’s clothing and smartphones imported from China and thus envelop the entire U.S. economy.

The fear of rising prices caused Treasury Secretary Steven Mnuchin to pick up the phone and speak with Walmart (NYSE:) Inc. Chief Financial Officer Brett Biggs, who has warned that duties on Chinese imports will raise prices for American consumers.

“I am monitoring this situation carefully,” Mnuchin told the House Financial Services committee on Wednesday.

China is turning the tables on the U.S., accusing the Trump administration of overreach and government intrusion into private enterprise. Though many in Washington believe the administration has valid security concerns, the restrictions on Chinese companies such as Huawei, in particular, have raised fears of a bigger technological war that could backfire against the U.S.

Tech Progress

“What are people really up to under the pretext of national security? We don’t know,” Cui said Friday. “Can they really stop the technological progress? Can they really deprive people of the right to benefit from the technologies? I don’t think so. And do they really have the interests of the American people in mind? I don’t think so either.”

The escalating battle over Huawei has left U.S. suppliers caught in the middle and raised questions for some industries about what some already see as the inevitable long-term damage to their position in the lucrative Chinese market.

John Neuffer, president of the Semiconductor Industry Association, said chip makers like many U.S. industries supported U.S. efforts to bolster national security. But U.S. semiconductor companies had also faced a “significant and immediate adverse impact’’ from the blacklisting, he said.

2020 Elections

In playing the long game, China may be looking at Trump’s weak poll numbers and trying to wait him out, in the hopes that a Democrat might unseat him in the 2020 election. Trump and those close to him see that as a miscalculation, portraying his tough stand on China as a political asset.

That confidence might be overstated around the Monongahela River town where Trump laid out his trade strategy during the 2016 campaign. Even after tariffs on steel imports from China and other countries, the industrial rebirth there hasn’t happened as he promised.

“We really haven’t seen much of a change in the revitalization that he spoke of with the mills,” said Leanna Spada, director of the Mon Valley Regional Chamber of Commerce in Charleroi, Pennsylvania. “There are some people who think it’s going to happen, but some still don’t see it — it’s just not feasible.”

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Great white shark tracked in Long Island Sound for “first time ever”

A great white shark that was tagged last year off Nova Scotia was detected Monday in Long Island Sound. Ocearch, an organization that electronically tracks aquatic life, announced on Twitter that it was monitoring the nearly 10-foot long great white in the sound “for the first time ever.”

Ocearch posted a picture of “Cabot,” a nearly 10-foot-long fish swimming near Greenwich, Connecticut. The shark was spotted last week off the North Carolina coast.

According to its Twitter bio, the shark is named after explorer John Cabot after SeaWorld solicited suggestions from Nova Scotians.

Shark experts say it measures 9-foot 8-inches long, weighs 533 pounds and is likely looking for smaller fish to eat.

Trending News

Chris Fischer, Ocearch’s founding chairman and expedition leader, says the group was “quite surprised to see this one so far to the west.”

The group says Cabot’s presence could be a sign of environmental improvement.

“This is something to celebrate,” Fischer said. “I know they’ve been working hard in the sound to clean it up and to get life to come back to the region and when you have an apex predator like Cabot move in to the area, that’s a sign there’s a lot of life in the area and you’ve probably got things moving in the right direction.”

Speaking with CBSN, wildlife expert Jeff Corwin agreed with Fischer’s assessment. “Their populations are increasing. The waters in some areas — which people may find hard to believe — are healthier now,” Corwin said. “A healthy, more robust ecosystem; better buffet means more diners at the aquatic diner.”

Corwin said that this isn’t always the case and adds that “in the last 40 years, we’ve lost 66% of all our planet’s nature.”

Last week, Cabot was among a cluster of great whites spotted off the coast of North Carolina. Great whites can tip the scales at up to 4,000 pounds and grow to be 17 feet long, and their numbers on the Atlantic Coast are on the rise.

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U.S. – CBSNews.com

Nordea long EUR/USD – target and stop loss.

Citing ‘have highlighted the green shoots globally for a while now’, and  we judge that an Asian rebound is better news for EUR than USD.

The bank going long euro against the US dollar (they note that in the long term they are not so bullish on EUR).

On the green shoots:

  • combination of a triple-dovish Fed (QT, rates, inflation overshooting) … rise in oil prices has prompted a substantial drop in US real rates
  • drop in US real rates have also helped beget more expansionary financial conditions in EM Asia
  • upturn in Chinese monetary growth in March offers psychological support for the green shoots narrative.

Hence we go long EUR/USD

  • Target 1.1650
  • Consider a stop/loss 1.1187
Chart of EUR/USD chart and supportive financial conditions

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Start by doing the nesessary, and then the possible. Before long you will be doing the impossible.

What is possible is an important step in your trading.

This weekend, I posted my most recent video. It was inspired by a quote from someone who had nothing to do with the financial markets, but I could easily bridge the gap between the mindset for success in life, with the mindset for success as a traders.  I hope you learn from what I have to say and start applying the thoughts in your trading.  

If you have not seen it, click on the link above and remember to give your thumbs up or thumbs down on YouTube. Share it on social media, and add a comment – or ask any questions – too. 

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Thai baht leads Asia's bullish prospects; yuan long bets on the mend: Reuters poll

© Reuters. Thai baht notes are seen at a Kasikornbank in Bangkok © Reuters. Thai baht notes are seen at a Kasikornbank in Bangkok

By Aby Jose Koilparambil

(Reuters) – Investors remained bullish on China’s yuan for a third straight fortnight, a Reuters Poll showed on Thursday, as markets turned optimistic about the progress in Sino-U.S. trade talks.

Long positions on the yuan rose to their highest since February last year, the poll of 10 analysts showed, with investors regaining some of their lost appetite for a currency that shed nearly 6 percent against the dollar in 2018.

Global markets have taken heart from U.S. President Donald Trump’s decision earlier this week to extend a deadline to increase tariffs on imports from China, although he did not give away any clear-cut indications whether a resolution is possible or not.

Progress in trade talks between the world’s top two economies offset any dent in sentiment from soft economic data out of China lately.

Official survey results released on Thursday showed China’s service industry slowed in February, with analysts expecting further weakness this year as a slowing economy makes consumers more cautious on the spending front.

The poll respondents maintained bullish positions on the Singapore dollar, the Indonesian rupiah, the Malaysian ringgit and the Philippine peso as well.

Bullish sentiment for the Thai baht remained the strongest in the region for a third successive poll, with long bets at their highest in 13 months.

Thailand’s strong economic fundamentals, which consist of steady exports and domestic production, have made the baht a bastion of stability in Asia.

The Taiwan dollar, however, remained under pressure with bearish positions on the currency piling up in the past month and a half.

Taiwan’s export orders contracted in January for a third month on the trot, data showed last week, adding to evidence of a global tech slowdown that will likely hit profits for the island’s many technology manufacturers this year.

Meanwhile, short positions on the Indian rupee fell to their lowest since early April last year, when investors were bullish on the currency.

A bulk of the poll responses came in before India and Pakistan got involved in a military conflict this week, prompting leading powers to urge the nuclear armed neighbors to show restraint.

That sent Indian and Pakistani stocks lower on Wednesday, and caused the Indian rupee to weaken.

The Reuters survey is focused on what analysts believe are the current market positions in nine Asian emerging market currencies: the , South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3.

A score of plus 3 indicates the market is significantly long U.S. dollars. The figures included positions held through non-deliverable forwards (NDFs).

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Stock Market News

US stocks finish strong into the long weekend

Closing changes for the main US equity markets:

  • S&P 500 up 30 points to 2775 (finished at high of the day). Up 1.1%
  • DJIA up 1.75%
  • Nasdaq up 0.6%

That’s 8 weeks in a row of gains for the Dow and Nasdaq, which is the most since November 2017. The S&P 500 has risen 3 weeks in a row. Banks helped the Dow outperform on Friday.

On the week:

  • S&P 500 +2.5%
  • DJIA +3.1%
  • Nasdaq +2.4%

S&P 500 weekly:

Closing changes for the main US equity markets:

It’s been an impressive turnaround from the final week of December.

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