Calm before the storm
Today's news headlines:
‘Bond market points to Fed standing firm in battle against inflation’. On Wednesday the gap between two-year and ten-year US treasury yields hit 84 basis points, a three-decade high, indicating that markets expect the Federal Reserve to remain tough on its battle against soaring consumer prices. Short term treasuries paying a higher interest rate than long term is known as an inverted yield curve and has preceded every US economic downturn for half a century. After the release of strong US jobs data last week, investors are concerned that the central bank will continue pushing interest rates higher next year and the ‘terminal’ federal funds rate expectation is sitting around the 5 per cent level, from expectations of 4 per cent as recently as September. (Financial Times)
‘City set for boost as Hunt loosens financial services rule book’. UK Chancellor Jeremy Hunt will today announce over 30 financial services reforms with the aim of boosting growth in the City of London and making it a more attractive place to do business. On top of removing the cap on bankers’ bonuses that was introduced back in 2014, City regulators will be given an additional objective of delivering growth and competitiveness, alongside ensuring financial stability. (Financial Times)
European stocks are expected to open slightly higher this morning, but any gains will be cautious in the face of the US inflation data released this afternoon. Next week the Federal Reserve and European Central bank meet to decide interest rates, so any economic data released before then is likely to carry extra weight.
Chinese CPI y/y: 1.6% vs 2.1% previously
US PPI m/m: 1:30PM
Prelim UoM Consumer Sentiment: 3:00PM
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