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Japanese bond yields plunge, German industrial production surges, and Goldman say the commodity rally is a false start. Here are some of the things people in markets are talking about today.
Japanese bond yields plunge
Japan's 10-year yield extended its push into negative territory, dropping to an all-time low of minus 0.12 percent, meaning almost three-quarters of Japanese government bonds currently offer yields at or below, zero percent. By far the biggest move in trading overnight was the Japanese 30-year, which saw its yield plunge 22 basis points to a record low 0.468 percent. Japan's 40-year yield is now lower than the U.S. 12-month yield.
German industrial production
German industrial production rose 3.3 percent in January, the most since September 2009, surpassing every estimate in a Bloomberg survey of economists. This could be a sign that domestic demand (yes, in Germany) is starting to underpin output as external trade cools. Eurostat this morning confirmed its initial reading for euro-area growth at 0.3 percent in the fourth quarter of 2015.
Buyer beware. That's the message from Goldman Sachs Group Inc. to investors as it predicts the current commodity rally will fade as higher prices prompt more supply to enter the market. Goldman are not alone in their thinking when it comes to iron ore, which saw a 19 percent surge yesterday, with Citigroup Inc. saying it's still bearish as supply and demand fundamentals remain firmly in place while Axiom Capital Management Inc. said the price jump was probably just a “blip.”
European stocks are extending their decline from a five-week high this morning, with the Stoxx 600 Index 1 percent lower at 11:15 a.m. London time, with losses being led by the miners. Dismal trade data out of China may be contributing to the risk-off mood. In Asia overnight the MSCI Asia Pacific Index fell 0.7 percent, with the Shanghai Composite Index managing to squeeze a gain of 0.14 percent as speculation of state-backed funds buying reversed earlier losses. U.S. futures are lower ahead of the start of trading.
Bank of England Governor Mark Carney was accused of jeopardizing the central bank’s credibility in the European Union debate as he faced questioning from U.K. members of parliament. Carney defended the bank's language in a report on the referendum, and said the bank would not be making any recommendation of the topic. The bank said yesterday that it would be offering extra liquidity to U.K. banks around the time of the referendum vote as a precautionary measure.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Michael Bloomberg says he won't run for president in 2016.
- Odd Lots Podcast: How an obscure government report launched a $3 trillion industry.
- These states aren't waiting for Donald Trump to build the wall.
- The slow decline of European investment banking.
- Wall street bankers' average bonus falls by the most since 2011.
- It's two years since the mysterious disappearance of flight MH370.
- Here's exhibit A on those €500 notes.