Key Takeaways
- Global bond markets are experiencing a rise in long-term yields, with the Japanese long bond yields being a major concern.
- The US personal income data showed a 1.9% increase from a year ago, while personal expenditures were up 2.1% on the same basis.
- The University of Michigan consumer sentiment survey reported a tiny gain, but overall levels remain dismal.
- Canada’s payroll data showed a surprising gain of 53,600 jobs, with all gains in part-time employment.
- The IMF’s latest review of Canada was positive, citing their handling of the US trade tensions.
- India’s central bank cut its key repo rate by 25 bps to 5.25%, citing confidence in a softer inflation outlook.
Introduction to Global Economic Events
The global economy is experiencing a range of events that are affecting markets and economies around the world. In the US, personal income data is in catch-up mode, with September details released overnight showing a 1.9% increase from a year ago. Personal expenditures were up 2.1% on the same basis, and the PCE version of inflation was up 2.8% from a year ago. These numbers are not surprising, but they did generate a minor relief rally on Wall Street. Meanwhile, the University of Michigan December consumer sentiment survey reported a tiny, probably insignificant, gain, leaving it 28% lower than a year ago.
Canadian Economic Performance
Canada reported payroll data for November overnight, which showed a surprising gain of 53,600 jobs, rather than the expected dip of 5,000. However, all the gains were in part-time employment, with full-time jobs shrinking by 9,400. This caps three consecutive months of jobs gains for Canada, even if overall part-time employment is rising faster than full-time over these three months. The IMF’s latest review of Canada was positive, citing their handling of the US trade tensions. Markets are shifting their view, and a rate hike by the Bank of Canada is now the more likely scenario.
Global Interest Rates and Bond Yields
In India, the central bank cut its key repo rate by 25 bps to 5.25% at its overnight meeting, citing confidence in a softer inflation outlook. The RBI has now cut rates by a total of 125 bps since the beginning of the year, bringing the repo rate to its lowest level since July 2022. In Japan, household personal spending fell unexpectedly in October, down 2.9% from a year ago, and reversing a 1.8% gain in September. The UST 10yr yield is now at 4.14%, up 4 bps from this time yesterday, and up 12 bps for the week. The Chinese 10-year bond rate is 1 bp softer at 1.84%, while the Japanese 10-year bond yield is up a sharp 12 bps for the week to 1.95%.
Global Market Performance
Wall Street has started its Friday with the S&P 500 up 0.2% to be up 0.9% for the week. European markets were mixed, with London’s FTSE 100 down 0.5% and Frankfurt’s DAX up 0.6%. Tokyo closed down 1.1% for a weekly gain of 0.3%, while Hong Kong was up 0.6% for a weekly gain of 0.5%. The ASX 200 ended its Friday session up 0.2% to cap the week with a similar gain, while the NZX 50 ended down 0.2% resulting in no change for the week. The Fear & Greed index has eased to the ‘fear’ zone from the ‘extreme fear’ zone last week.
Commodity Prices and Currency Movements
The price of gold will start today at US$4215/oz, up US$6 from yesterday, and up US$4 for the week. Silver is back on a tear, back at over US$58.50/oz and near its record high. American oil prices are again 50 USc firmer at just over US$60/bbl, while the international Brent price is now at just under US$64/bbl, and up about US$1 for the week. The Kiwi dollar is little-changed from yesterday, now at just over 57.7 USc, up 40 bps for the week. Against the Aussie, the Kiwi is down 30 bps at just on 87 AUc. The bitcoin price starts today at US$88,859 and down 4.0% from this time yesterday.
Conclusion and Outlook
In conclusion, the global economy is experiencing a range of events that are affecting markets and economies around the world. The rise in long-term bond yields, particularly in Japan, is a concern, while the US personal income data and University of Michigan consumer sentiment survey show a mixed picture. Canada’s payroll data was surprising, and the IMF’s positive review of Canada’s handling of US trade tensions is a welcome development. The cut in India’s key repo rate is a sign of confidence in a softer inflation outlook. As the week comes to a close, markets are watching the movements in commodity prices, currency exchange rates, and bond yields, and the Fear & Greed index has eased to the ‘fear’ zone.
