The Weak Pound Lifts the FTSE to Record Highs
European yields are moving lower, with Bunds outperforming as Gilts are held back by ongoing Sterling weakness, which is reviving inflation concerns, while underpinning at least to a certain extend the FTSE 100, which is managing slight gains, amid a general stabilization of European stock markets as oil prices recovered from early lows below USD 52 per barrel and manage slight daily gains. Cable hit a fresh low for the move and is poised to test the October lows near 1.2080.
U.K. BRC retail sales as well as French production numbers came in higher than anticipated. In the cash market the 10-year Bund yield is down -0.1 basis point at 0.27% and the Gilt yield is flat at 1.33%. Meanwhile Eurozone spreads have come in somewhat, while the German yield curve flattened slightly as the short end underperformed.
UK's FTSE 100[i] index hit a new record high today, benefitting from the continued descent in the pound, which hit a fresh eight-month low versus the euro. Weakness in the pound is flattening from the multinational component companies that form the FTSE 100 index and other top UK share indices, which earn most of their revenue in foreign currencies while not being too exposed to higher import costs. The FTSE 250 and All-Share indices are also trading near record highs. The pound is down by 2.6% versus the euro over the last week, and is off by 2.2% against the yen and by 0.8% in the case against the dollar. Most of the losses have been seen after PM May suggested over the weekend that she is setting a course for a "hard" Brexit, prioritizing immigration control over access to the EU's single market.
U.S. Consumer Credit Surges in November
U.S. consumer credit surged $24.5 billion in November, stronger than expected, after a $16.2 billion increase in October. Non-revolving credit paced the rise, jumping $13.5 billion versus $13.8 billion in October. But, revolving credit was up a solid $11.0 compared to the prior $2.4 billion gain. It's the largest increase in this measure since February 2001, with the record $19.5 billion increase set in April 1998.
Inflation in the world’s second larger economy unexpectedly decline in December according to official government figures. Chinese Consumer price inflation declined last month, dropping to an annual rate of 2.1% from 2.3% in November according to the National Bureau of Statistics in China.
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