Useful information
Prime News delivers timely, accurate news and insights on global events, politics, business, and technology
A general view of the Bank of England on December 19, 2024 in London, England.
Dan Kitwood | Getty Images News | fake images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Do you like what you see? You can subscribe here.
What you need to know today
All eyes on US jobs report
The US nonfarm payrolls report for December will be released later on Friday. Economists hope it will show an increase of 155,000 jobs, compared to 227,000 in November, and that the unemployment rate will remain unchanged at 4.2%. Analysts of Goldman Sachs and citi groupHowever, they believe both figures will be worse than consensus forecasts.
US markets dark, European markets close higher
US markets were closed on Thursday in honor of former US President Jimmy Carter, who died in late December at the age of 100. Asia-Pacific markets fell on Friday. Japan’s Nikkei 225 fell about 1%, leading losses in the region, as data showed household spending in November fell less than expected. China’s CSI 300 lost 1.25% after the People’s Bank of China suspended bond purchases.
Record lows for Chinese 10-year bond yields
Chinese sovereign bonds have seen a strong rally since December, with 10-year yields falling to record lows this month after falling around 34 basis points, according to LSEG data. Loan demand Consumer and corporate profitability in China has been lackluster, causing banks to buy up government bonds, putting pressure on yields.
Fed governor thinks December cut should be ‘final step’
US Federal Reserve Governor Michelle Bowman said the Fed’s interest rate cut in December should be its “final step in the policy recalibration phase.” That suggests Bowman, who is a voting member of the Federal Open Market Committee, could oppose further cuts this year. Other Federal Reserve officials who spoke this week were more optimistic about lowering rates.
(PRO) UK Small and Mid Cap Stocks to Buy
There may be some questions raised about the strength of the UK economy at the moment. But Barclays continues to see investment opportunities in the country and named three small- and mid-cap stocks it is betting on at the moment, two of which have implied upside of more than 40%.
The final result
Long-term borrowing costs for the UK government are currently at a level the maximum of almost three decades. At 6am London time, the performance of the 30 year old golden was 5.359%, its highest level since 1998.
Yields on gilts (a fancy British term for government bonds like US Treasuries) soared after the UK’s Debt Management Office announced on Tuesday auctioned £2.25 billion ($2.83 billion) in government bonds with a 30-year maturity.
Typically, bond yields rise in response to higher interest rates, which remain elevated when inflation remains stubbornly above most central banks’ 2% target.
In the UK, this is a problem. Headline inflation rose to 2.6% in November on an annual basis, the second consecutive monthly increase.
Worse still, in October, the UK’s gross domestic product contracted by 0.1% month-on-month, raising the specter of stagflation, when an economy struggles with high inflation and a stagnant economy.
The Labor government’s plans to raise taxes and significantly increase borrowing have also put pressure on gold prices, which are moving in the opposite direction to yields.
Also consider currency movements. Higher government bond yields often translate into a stronger currency, because the yields attract global investors who increase demand.
He british poundHowever, it has fallen against the US dollar even as bond yields have risen.
Together, these factors paint a picture of a fragile economy, so it seems natural that investors would demand higher returns if they wanted to lend money to the UK government.
But we should not exaggerate the situation. Consider Liz Truss’s disastrous 2022 “mini-budget”, which caused a sell-off in government bonds and a jump in yields in a matter of days (yields typically move at a glacial pace).
During that period, the 30-Year US Treasury Yield It was around 3.5%. It was at 4.9% on Friday, which means Treasuries are keeping pace with Treasuries instead of going crazy. In other words, the recent rise in bond yields is not necessarily due to turmoil in the UK, as bond yields, interest rates and inflation fears remain high globally.
It’s always scary when a country’s financial markets experience problems. When others face the same problems, perhaps this makes the scenario a little more bearable.
— CNBC’s Chloe Taylor, Jenni Reid, Karen Gilchrist and Elliot Smith contributed to this report.
