 |  |
| Market Updates | Written by CEP News | Apr 21 08 12:34 GMT | | |
| (CEP News) - There is plenty for markets to digest this morning, with the Bank of America reporting disappointing first quarter earnings, crude oil reaching a new high, a European Central Bank official warning of increasing wages and the Bank of England announcing a plan to swap asset-backed securities for government bonds. North American fixed income markets are declining and equities are mixed with yields on U.S. 10-year Treasury notes up 2.5 bps to 3.73% and Canadian 10-year CGBs up 0.9 bps to 3.70%. Futures on the Dow Jones Industrial Average are trading down 16 points to 12794. The Canadian dollar is up 0.20 cents to 0.9977 USD and the euro up 0.80 cents to 1.59013 USD. Analysts surveyed by Bloomberg expected Bank of America first quarter profits of 41 cents per share but the banking giant earned only 25 cents. The company announced writedowns of $6.01 billion and CEO Kenneth Lewis said second-quarter U.S. GDP growth will be "minimal at best." Following the earnings report, U.S. equity futures and overseas bourses fell to session lows, the U.S. dollar neared an all-time low against the euro and Treasuries briefly rallied. Overseas fixed income has been outperforming the U.S. Yields on UK two-year bonds were down 7.4 bps to 4.29%, five-year yields down 7.9 bps to 4.33%, 10-year yields down 8.1 bps to 4.65% and 30-year yields down 5.6 bps to 4.54%. The UK rally followed a Bank of England plan to allow UK banks to swap mortgage-backed assets for government bonds, which is in the pipeline. The central bank said the preliminary size of the plan is likely to be around £50 billion, with an asset swap permitted for a period of one year, which may be renewed for a total of three years. UK government debt was also aided by a Rightmove report on UK housing that showed year-over-year house prices increased by only 1.3% in April following a 5.0% gain in March. The property website noted that the drop indicated sellers were recognizing that a decade of rising UK house prices had come to an end. In Germany, returns on two-year German Bunds were down 4.5 bps to 3.79%, five-year yields down 5.2 bps to 3.87%, 10-year yields down 3.0 bps to 4.10% and 30-year yields down 3.0 bps to 4.64%. European Central Bank council member Klaus Liebscher said record oil prices are beginning to push up wages and noted that "second-round effects are appearing in some countries in the euro area." Liebscher said that even though risks to the eurozone economy were on the "downside", there is no room to cut rates. Shortly following Liebscher's comments, crude rose to a record high of $117.40 a barrel at Nymex. Futures on WTI crude oil are up $0.14 to $116.83 while gold futures at the Chicago Board of Trade are up $7.20 to $922.40. U.S. equity market futures are mixed. Contracts on the Dow Jones Industrial Average are down 16 points to 12794, the S&P 500 down 2 points to 1386 and the NASDAQ up 6 points to 1901. European stock markets are declining, with the Eurostoxx down 33.75 points to 3164.68, the UK FTSE 100 down 20.20 points to 6036.30 and the German DAX down 63.71 points to 6779.37. Asian markets followed Friday's North American rally with the Japanese Nikkei closing up 220.10 points (0.42%) to 13696.55 and the Hang Seng Index up 523.89 points to 24721.67. Despite the Bank of America miss, North American sovereign debt continues to sell off. Yields on two-year Canadian government bonds were flat at 2.87%, five-year yields flat at 3.19%, 10-year yields up 0.9 bps to 3.70% and 30-year yields flat at 4.14%. U.S. two-year yields were up 1.7 bps to 2.15%, five-year yields up 2.8 bps to 2.93%, 10-year yields up 2.5 bps to 3.73% and 30-year yields up 2.0 bps to 4.52%. Strategists noted a stabilization in U.S. dollar libor. One-month libor increased to 2.90% from 2.87% while three-month rates increased to 2.92% from 2.91%. "The modest rise in libor overnight suggests the drama there is reaching its end. Second, with Fed Funds futures and our own call consistent that it's a 25 bps ease next week, we think the disappointment trade has largely been seen," wrote David Ader, U.S. government bond strategist at RBS Greenwich, in a note to clients. The Canadian dollar was up 0.20 cents to 0.9977 against the USD (1.00237 USD/CAD) and down 0.20 cents to 1.5939 (0.6274 CAD/EUR) against the euro. The U.S. dollar was down 0.25 to 103.42 against the yen and the euro up 0.80 cents, to 1.59013 against the U.S. dollar. The pound sterling was down 1.20 cents to 1.9858 USD and the Australian dollar was higher by 0.80 cents to 0.9423 USD. The U.S. Dollar Index was down 0.241 points to 71.683. All data taken at 8:09 a.m. EDT. By Adam Button, abutton@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca | |
No comments:
Post a Comment