GLOBAL MARKET SNAPSHOT
Europe retained its leadership position on Wednesday. The region’s gains were spread across country and sector with 91% of Eurostoxx 600 constituents posting gains while only energy saw a sub-1% rise. India’s Sensex climbed 1.8% in local terms in response to the appointment of a new central bank governor. In the U.S., S&P 500 again finished well off its highs after gaining as much as 1.8% intraday. It was somewhat of a junk rally as quality and yield lagged more volatile shares with high short interest.
The Treasury curve saw a modest bear steepening with the belly seeing the most weakness. Gilt yields jumped as Theresa May faced a confidence vote over her Brexit plan, which she ultimately won by a difference of 200 to 117. Indian bonds strengthened with the appointment of Shaktikanta Das as central bank governor who is being seen as more dovish than his predecessor.
The U.S. dollar weakened -0.4%. British pound led among G10, rallying 1.1% ahead of the confidence vote noted above. Emerging market currencies were broadly stronger with the JPMorgan EM FX Index up 0.5%. South Africa’s rand appreciated 1.5% as an inflation reading exceeded expectations. Brazilian real gained 1.2% ahead of an interest rate decision this afternoon that saw BCB hold rates at 6.5%.
The Bloomberg Commodity Index declined -0.5% on energy weakness. WTI slumped -0.9% to $51.20 per barrel after the EIA’s weekly status report showed crude oil inventories declined by 1.2 million barrels last week, lower than the expected 3 million barrel draw and a far cry from the 10 million barrel decline reported by API yesterday. Natural gas continued to be exceptionally volatile with futures down -7.0% on the session.
Today’s consumer price report was in line with expectations as both headline and core numbers matched consensus forecasts. The headline index was unchanged from October, recording a 2.2% increase from a year prior. The core index (ex-food and energy) also saw a 2.2% year-over-year increase after rising 0.2% in November. BLS also issued its real earnings report that showed average hourly earnings increased by 1.0% year-over-year over the rate of inflation.
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