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Simon Smiles: Bond Selloff Is Changing Expectations

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Bond-market rout eases, euro-area growth is mixed, and there's a commodity reversal. Here are some of the things people in markets are talking about today.

Bonds find a bid

The bond-market selloff that had seen a decline of $1.4 trillion in the amount of negative-yielding debt since Nov. 4 is easing this morning. U.S. Treasuries rallied, with the yield on the 10-year falling 7 basis points to 2.2 percent by 4:51 a.m. ET after a technical indicator implied they were at their the most oversold since 2007. In Japan, the yield on the 10-year bond rose above zero for the first time since September. 

Mixed euro-area growth

Growth in Germany, Europe's largest economy, fell short of analysts expectations and slowed to 0.2 percent in the third quarter, down from 0.4 percent in the previous period. There was better news in Italy for embattled Prime Minister Matteo Renzi. GDP grew 0.3 percent, beating expectations. Dutch growth also came in ahead of forecasts

Commodity reversal

Base metals which had staged a huge rally following the election of Donald Trump in the U.S. are in full blown retreat this morning. Iron ore in Asia, which had jumped as much as 27 percent last week dropped as much as 11 percent this morning, while copper is down more than 2.5 percent. Crude, which had fallen to an eight-week low yesterday is also seeing a change in fortunes, with a barrel of West Texas Intermediate for December delivery rising 2.5 percent to $44.41 by 5:08 a.m. ET. 

Markets mixed

Overnight, the MSCI Asia Pacific Index increased 0.2 percent, with Japan's Topix index also rising 0.2 percent, extending the rally to a fourth session. In Europe, the Stoxx 600 was unchanged at 5:10 a.m. ET as a rally in energy shares was offset by a slump in bank and mining shares. S&P 500 futures added 0.3 percent

U.K. inflation, Carney testimony

Inflation in the U.K. unexpectedly slowed in October to 0.9 percent, below expectations from economists who had factored in a larger hit from the weakening pound. Sterling briefly slipped below $1.24 after the data was released, before trading 0.6 percent lower at $1.2426 by 5:35 a.m. ET. Governor of the Bank of England Mark Carney is giving testimony to the U.K. Parliament this morning. Coming up this morning in the U.S., retail sales data for October is due at 8:30 a.m. ET, while there are four regional Federal Reserve presidents due to speak today.

What we've been reading 

This is what's caught our eye over the last 24 hours.

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