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While you were sleeping: Treasuries slide as China adds to concern

Thursday 11th January 2018

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US Treasuries slid amid concern demand for the securities is fading.

China added to bond investors’ jitters on Wednesday as Bloomberg reported, citing people familiar with the matter, that senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of US Treasuries.

It isn’t clear whether the officials’ recommendations have been adopted, according to Bloomberg.

US Treasuries fell, sending yields on the 10-year note three basis points higher to 2.58 percent,  the highest level in 10 months.

Appetite for government debt has eased as optimism about the global economic outlook has lifted. Investors will closely watch US inflation data, including Friday’s report on the consumer price index. 

Chicago Federal Reserve Bank President Charles Evans, who dissented on the Fed's December decision to hike rates, on Wednesday said he would like to wait until mid-2018 before raising rates, Reuters reported. Many analysts predict the Fed will raise its target rate in March. 

“I’d feel a lot more confident if I saw those transitory reductions in the inflation rate go away,” Evans said, adding that the cost of waiting until midyear would be low. “And if in fact things are worked out we could resume a nice gradual pace (of rate hikes) at that point, and still get the funds rate up to its natural level before too long,” he told reporters, according to Reuters.

Wall Street moved lower. In 1.25pm trading in New York, the Dow Jones Industrial Average inched 0.01 percent lower, while the Nasdaq Composite Index fell 0.3 percent. In 1.10pm trading, the Standard & Poor’s 500 Index slipped 0.08 percent. 

To be sure, Wall Street remains close to record highs.

“We’ve had a tremendous run, mostly unabated since Trump’s election in 2016 and with no volatility,” Michael Scanlon, managing director of Manulife Asset Management, told Reuters. “If we do see a pullback, that’s going to be a buying opportunity.”

The Dow was little changed as declines in shares of Intel and those of DowDuPont, down 1.7 percent and 1.2 percent recently respectively, offset gains in shares of General Electric and those of JPMorgan Chase, recently up 2.2 percent and 1.4 percent respectively.

In Europe, the Stoxx 600 Index ended the session with a 0.5 percent decline from the previous close. Germany’s DAX Index dropped 0.8 percent, while France’s CAC40 Index slid 0.4 percent.

However, the UK’s FTSE 100 index rose 0.2 percent, bolstered by a rally in financial stocks including Royal Bank of Scotland and HSBC.

Shares of J Sainsbury gained 2.2 percent in London after the British supermarket chain said it now expects full-year profit “moderately ahead” of expectations, even as it warned that conditions in the year ahead will “remain challenging”. 

The company said it now expects full year underlying profit before tax to be “moderately ahead of published consensus.” To be sure, “market conditions remain challenging and we are cautious about the consumer environment in the year ahead,” the company said in a statement. 

Retail like-for-like sales, excluding fuel, rose 1.1 percent in the 15 weeks ended January 6, the company said. 

"We had a strong Christmas week, with record sales, over 340,000 online grocery orders and stellar growth in Argos Fast Track delivery and collection," Mike Coupe, Group Chief Executive Officer, said in the statement, adding that online accounted for 20 percent of the group’s sales during the quarter


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