Five Things You Need to Know to Start Your Day
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Markets are rallying, G7 finance ministers are meeting in Japan, and Brexit risk is evaporating. Here are some of the things people in markets are talking about today.
The MSCI Asia Pacific Index added 0.3 percent overnight, with Japanese shares climbing due to the yen weakening on the U.S. rate outlook. In Europe the Stoxx 600 was 0.9 percent higher at 5:35 a.m. ET as commodities recovered some of the week's losses, boosting miners. In the U.K., Ladbrokes Plc jumped as much as 12 percent after the Competition and Markets Authority said it won't stop the company's merger with Coral Group. S&P 500 futures were 0.3 percent higher.
G7 finance ministers meet in Japan
Finance chiefs from the Group of Seven advanced economies who are meeting in Japan are already showing signs of disagreement over how to boost global growth. On one side, German Finance Minister Wolfgang Schaeuble is claiming "German fiscal policy is rather successful" while on the other is Japan's Taro Aso who is expected to ignore the German financial frugality model and push for more fiscal stimulus. That argument aside, the risk of Britain leaving the European Union, and the effect that would have on international markets will be a key concern at the meeting.
Brexit cloud lifting
G7 aside, polling data and betting-company odds are increasingly showing that the chances of the U.K. voting to leave the EU are falling. Yet unfortunately for the British economy, two Bank of England officials this morning said that the slowdown may not all be related to the uncertainty surrounding the referendum. The pound, which rallied yesterday, has fallen back into a funk this morning as the abating Brexit risk is outweighed by the sluggish economic outlook from the BoE officials. There is one silver lining in all this - the U.K.'s Royal Mail Plc says it expects a short-term surge in sales as both sides in the campaign post material to voters.
The last time the Treasury term premium - the extra compensation investors demand for owning long-term debt - was as low as it is now was 1962. Globally, the search for yield has meant some countries have been able to get away very long term debt recently, and that trend is being reflected in the Treasury market as investors seem to put far less emphasis than usual in the maturity date of the debt they are buying. In the current circumstances it seems to make a lot of sense for the U.S. to join the ultra-long party.
Oil rises, gold getting sold
This morning oil is holding onto this week's gains, with a barrel of West Texas Intermediate trading at $48.33 at 6:10 a.m. ET. Gold, meanwhile is suffering a reversal, with the precious metal set for its third weekly loss in a row as traders reprice the chances of a Fed rate hike which would bolster the dollar. It is a different story for industrial metals as aluminum rose the most in a month while copper, nickel and zinc also advanced.
What we've been reading
This is what's caught our eye over the last 24 hours.
- The irresistible force that dominates currency markets is back.
- Negative equity is becoming a big problem in the car market.
- This country is trying to turn itself into Africa's Singapore.
- One million Chinese have visited Shanghai Disneyland, and it's not even open yet.
- The iron mountain on China's doorstep tops 100 million tons.
- Alberta's wildfires couldn't have come at a worse time for the local economy.
- What it's like to be detained and interrogated in North Korea.