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Howard Davies: Financial Markets Remain on Life Support

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Central banks push assets higher, today's jobless data is more important than usual, and more sovereign bond yields hit record lows. Here are some of the things people in markets are talking about today.

Buy anything

Even if emerging-market stocks are dipping most risk assets, including commodities, developed-market stocks, and emerging-market currencies are making multi-month highs, while haven assets such as gold and government bonds are doing the same. The blame for this apparent market disconnect from the weak global outlook (we're not even a week past that disappointing U.S. jobs report) is being placed firmly at the door of global central banks who are expected to stay more accommodative for longer. The current focus is on the European Central Bank's corporate bond purchase program which this morning was said to be buying securities issued by troubled carmaker Volkswagen AG

Initial jobless claims

At 8:30 a.m. ET the Department of Labor will release weekly jobless claims data, a number that investors will be watching closely following last week's disappointing payrolls number. Citigroup Inc. strategists led by Steven Englander say that a spike in jobless claims would confirm that the May payrolls figure released last week indicates a wider slowdown in the U.S. economy. Economists surveyed by Bloomberg expect today's number to come in at 270,000, in line with recent weeks.

Sovereign bond yields

This morning the yield on the U.K.'s 10-year government bonds fell to 1.220 percent, the lowest since Bloomberg started tracking the data in 1989. German bund yields are hovering close to the all-time record low reached yesterday. U.S. Treasury yields were at 1.678 percent at 6:05 a.m. ET, below the 1.7 percent that has proven to be a “key psychological level” over the past few months. With macro risks from Brexit, elections in Europe, and next week's Fed meeting on the horizon, the trend may not be over yet. 

Markets lower

The MSCI Asia Pacific Index dropped 0.5 percent overnight with almost every market in Asia closing lower. The biggest losses were in Japan where the Topix index lost 1 percent as yen strengthening continued. In Europe the Stoxx 600 index was 1 percent lower at 6:13 a.m. ET in a broad-based selloff that saw 520 index members falling. Futures on the S&P 500 Index, which closed within points of an all-time high yesterday, were 0.4 percent lower.

Democrats to turn up heat on Trump

Massachusetts Senator Elizabeth Warren is due to take her involvement in the presidential race to a new level when she joins Vice-President Joe Biden on stage later today. Warren is expected to voice harsh criticism of Republican nominee Donald Trump at the event and upcoming television ads point to a negative campaign from both sides in what promises to be a fraught run-up to the vote in November. 

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