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While you were sleeping: US Treasuries slide on supply, inflation worries

Wednesday 10th January 2018

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Wall Street rose to record highs amid optimism about corporate earnings, while US Treasuries slid amid concern about pending government debt supply and inflation. 

In 1.11pm trading in New York, the Dow Jones Industrial Average climbed 0.5 percent, while the Nasdaq Composite Index rose 0.3 percent. In 12.56pm trading, the Standard & Poor’s 500 Index gained 0.3 percent. 

The Dow rose to a record high of 25,414.13, the S&P 500 ascended to a record of 2,757.83, while the Nasdaq climbed to a record of 7,178.11.

US Treasuries dropped, pushing yields on the 10-year note four basis points higher to 2.52 percent, the highest in about 10 months, according to Bloomberg. 

While equities are running high on optimism, sentiment in the government bond market has cooled. 

“We’re seeing a lot of overseas buyers who would come in every time we’d have a move close to these levels who aren’t coming in anymore,” Michael Franzese, New York-based head of fixed-income trading at MCAP, a broker-dealer, told Bloomberg. “That’s kind of scaring me a little bit. One eye is constantly on the exit button.”

The Dow rose as gains in shares of Boeing and those of Johnson & Johnson, recently up 2.6 percent and 1.8 percent respectively, outweighed declines in shares of Intel and those of Nike, down 1.5 percent and 1.1 percent recently respectively.

Investors are gearing up for corporate earnings season. Earnings for S&P 500 companies are expected to rise 11.8 percent in the fourth quarter, compared with an 8 percent increase a year earlier, according to Reuters.

“Across the board, we’re positive about fourth quarter and the next few quarters,” Tim Dreiling, regional investment director for The Private Client Reserve of US Bank, told Reuters. “But it could be a little bit noisy after we got the tax reform law passed and companies make some adjustments close to year-end.”

In Europe, the Stoxx 600 Index finished the day with a 0.4 percent increase from the previous close. Germany’s DAX Index gained 0.1 percent, the UK’s FTSE 100 index added 0.5 percent, while France’s CAC40 Index climbed 0.7 percent.

Shares of Wm Morrison Supermarkets rose 2.4 percent in London after the UK supermarket chain reported better-than-expected sales over the holiday period. 

For the ten weeks to January 7, group like-for-like sales excluding fuel climbed 2.8 percent, the company said in a statement. Sales were "especially strong" over the Christmas and New Year period, with group like-for-like sales rising 3.7 percent for the six weeks to January 7, the company said.

"More and more customers found more things they wanted to buy at competitive prices at Morrisons this Christmas," David Potts, the company's chief executive, said in the statement.

"Our plans to become a broader and stronger business are progressing well, with another period of positive like-for-like sales and the start of the rolling programme to supply McColl's," Potts noted. 

Shares of rival J Sainsbury closed 3.1 percent higher. 

Separately, survey data from both Kantar Worldpanel and Nielsen showed Tesco enjoyed the strongest performance of the UK’s big four chains over the Christmas quarter with total sales growth put at 3.1 percent and 3.4 percent respectively, Reuters reported. 

The data also showed that privately-owned German discounters Aldi UK and Lidl UK continued to outpace the sales growth of all the big four, winning market share from all but Tesco, according to Reuters.


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