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Bonds Seem Convinced of Higher Inflation, Says Wraith

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Yellen warns on inflation expectations, U.K. budget is nigh, and oil returns to June 2015 highHere are some of the things people in markets are talking about today.

Caution

Federal Reserve Chair Janet Yellen warned that there’s been “some hint” that inflation expectations may be drifting down and said that removing policy accommodation too quickly could risk prolonging the U.S. central bank’s challenge in meeting price goals. The dollar dropped after the comments made at an event at New York University. The Fed’s stance on inflation prospects may become clearer at 2 p.m. Eastern Time when minutes from the Oct. 31-Nov. 1 meeting are published. 

Budget day

U.K. Chancellor of the Exchequer Philip Hammond is due to announce his 2018 budget at 7:30 a.m., amid uncertainty over Britain’s economic future and the stability of Theresa May’s government. With inflation increasing the size of the deficit, the chancellor’s room for policy maneuver is limited. Bond investors are expecting a modest reduction in gilt issuance in the 2017-2018 fiscal year, so any surprise to the upside could undercut bulls. 

Oil rise 

A barrel of West Texas Intermediate for January delivery was trading at $57.87 at 5:45 a.m. as crude headed for its highest close since June 2015. U.S. inventory data are expected to show the first drop in three weeks later today, while next week’s OPEC meeting is seen likely to extend the current production cuts. Veteran oil trader Andy Hall will give an outlook on U.S. shale production at the gathering, underscoring the importance of the American energy revolution. 

Record highs

Overnight, the MSCI Asia Pacific Index followed the lead from the U.S., gaining 0.6 percent and briefly passing its 2007 high. Japan’s Topix index closed 0.3 percent higher as the yen strengthened against the dollar. In Europe, the Stoxx 600 Index edged up 0.1 percent by 5:45 a.m. as regional investors seemed to have missed the ‘global rally’ memo. S&P 500 futures gained 0.1 percent, the 10-year Treasury yield was at 2.37 percent, and gold was broadly unchanged. 

Coming up…

With U.S. markets closed for Thanksgiving tomorrow, some data releases have been pushed forward to today. Weekly initial jobless claims, due at 8:30 a.m., are expected to show a drop to 240,000. Durable good orders numbers for October will be released at the same time, followed by University of Michigan sentiment at 10:00 a.m. Oil watchers will be keeping an eye out for inventory data at 10:30 a.m., and the Baker Hughes rig count at 1:00 p.m.

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