Treasury yields rise after Fed hikes rates for the fourth time in 2018

U.S. government debt yields climbed higher on Thursday as investors digested the fourth rate hike this year from the U.S. Federal Reserve.

The yield on the two-year Treasury bond, the coupon maturity most sensitive to Fed policy expectations, rose four basis points to 2.6706 percent, while the benchmark 10-year Treasury note was two basis points higher at 2.7944 percent. Bond yields move inversely to prices.

On Wednesday, the Fed announced an increase in its benchmark interest rate by a quarter point to a target range between 2.25 to 2.5 percent, in a widely anticipated move.

The move marked the fourth increase this year by the U.S. central bank and the ninth since it began normalizing rates in December 2015. It came despite President Donald Trump’s tweets against rate hikes. On Monday, he said “it is incredible” that “the Fed is even considering yet another interest rate hike” amid the turmoil outside of the U.S.

On the data front, investors are likely to closely monitor Philly Fed manufacturing figures for December at around 8:30 a.m. ET, with the latest jobless claims data scheduled for publication at the same time.

Meanwhile, a four-week and an eight-week bill is set to be auctioned by the Treasury on Thursday. Announcements on three-month, six-month, two-year, five-year and seven-year notes are also expected.

Japan leads declines amid broad slip in Asian stocks

Stocks in Asia were broadly lower on Friday, with Japanese equities leading the fall.

The Nikkei 225 fell 1.11 percent on the day as it closed at 20,166.19, while the Topix index declined by 1.91 percent to finish its trading week at 1,488.19. The benchmark Nikkei 225 dropped more than 2.5 percent in the previous trading session.

Shares of Japanese banks fell on the back of the Bank of Japan’s decision on Thursday to keep interest rate targets unchanged. Mitsubishi UFJ Financial Group shed 2.22 percent while Sumitomo Mitsui Financial Group dropped 2.21 percent. Japanese banks have suffered as a result of the central bank’s loose monetary policy, which has had the side effect of impacting the revenues of the country’s lenders.

Over in South Korea, the Kospi recovered from earlier losses to close slightly higher at 2,061.49 — up 0.07 percent.

In Australia, the ASX 200 lost its earlier gains to close 0.69 percent lower at 5,467.6, with most sectors slipping. Shares of the country’s so-called Big Four banks declined, with Australia and New Zealand Banking Group, Westpac and National Australia Bank all seeing declines of at least 1 percent.

Chinese hackers charged

The mainland Chinese markets, closely watched in relation with Beijing’s trade spat with Washington, slipped on the day. The Shanghai compositedeclined by 0.79 percent to close at around 2,516.25 and the Shenzhen composite lost 0.959 percent to end its trading week at about 1,284.66.

Hong Kong’s Hang Seng index recovered from its earlier losses to trade up by about 0.32 percent, as of its final hour of trade.

On Thursday, the U.S. Justice Department announced charges against two Chinese nationals for being part of a global hacking campaign. The two individuals, Zhu Hua and Zhang Shilong, are charged with conspiring to commit computer intrusions and wire fraud, as well as aggravated identity theft. It was part of campaigns that lasted for years, as they sought to steal from several foreign governments and dozens of companies. The two men remain at large.

Prosecutors also accused the two of operating in conjunction with the Chinese government.

“China will find it difficult to pretend that it is not responsible for this action,” Deputy Attorney General Rod Rosenstein said at a press conference.

“I think it’s important to see these accusations as just the latest, really, in a series of moves by the Trump administration in recent months to frankly, apply more pressure to China across the board,” Michael Fuchs, senior fellow at Center for American Progress, told CNBC’s “Squawk Box” on Friday.

Treasury yields fall as Chinese data disappoints; traders look to Fed meeting

U.S. government debt yields fell on Friday as traders digested fresh economic data out of China and looked ahead to next week’s Federal Reserve meeting.

The yield on the benchmark 10-year Treasury note fell steeply to 2.895 percent, while the yield on the 30-year Treasury bond dropped to 3.152 percent. Bond yields move inversely to prices.

China’s industrial output in November grew 5.4 percent from the previous year, less than the 5.9 percent estimated by Reuters; retail sales, meanwhile, rose 8.1 percent last month, falling short of an expected 8.8 percent.

News of the disappointing figures comes as China and the U.S. try to negotiate a trade deal within a 90-day tariffs truce. Positive headlines around trade relations between the two had buoyed market sentiment earlier this week.

President Donald Trump said discussions with Beijing had been “very productive” and that some “important announcements” were forthcoming, while a Wall Street Journal report said China was preparing to widen foreign access to its economy.

Meanwhile, traders are anticipating the latest meeting of the Federal Open Market Committee (FOMC) next week, where the central bank sets interest rates. The Fed is largely expected to raise rates at the Dec. 18-19 meeting, however expectations for how many times — or if at all — the bank will hike rates next year have dampened amid worries around a potential slowdown in economic growth.

In other news, the European Central Bank on Thursday said it was to formally end its vast quantitative easing program. The institution will bring its bond purchases down from 15 billion euros per month to zero. The ECB, however, said it would continue to reinvest cash from maturing bonds for an extended period of time.

On the data front, investors are likely to closely monitor retail sales figures for November at around 8:30 a.m. ET. Industrial production data for November and manufacturing and services PMI data for December is scheduled to follow later in the session.

Stocks fall as worries about US-China trade, Trump legal issues dampen investor sentiment

Stocks fell on Thursday as an ongoing trade war between the U.S. and China and worries of renewed legal issues for President Donald Trump dampened investor sentiment.

The Dow Jones Industrial Average dropped 76.62 points to 25,656.98 as Caterpillar lagged. The S&P 500 closed 0.2 percent lower at 2,859.98 with materials falling more than 0.6 percent. The Nasdaq Composite slipped 0.1 percent to 7,878.46.

Caterpillar and Boeing, two bellwethers of global trade, fell 2 percent and 0.7 percent, respectively. Deere shares also dipped 1 percent. Tech shares Alibaba and Netflix fell 3.2 percent and 1.5 percent, respectively, giving up earlier gains.

Tariffs on $16 billion worth of Chinese import-product categories took effect on Thursday. Beijing retaliated with its own fresh tariffson $16 billion worth of imports.

The U.S. and China held talks on Wednesday that continued into Thursday, but observers did not have high hopes after Trump said he did not “anticipate much” to be resolved, in an interview with Reuters.

“I think there’s disappointment that the tariffs came into effect today,” said Kate Warne, investment strategist at Edward Jones. “Given the restart of the talks, there was some hope that those would be delayed.”

Wall Street also fretted over Trump’s legal troubles.

Michael Cohen, Trump’s former personal lawyer, pleaded guilty on Tuesday to eight counts related to tax fraud, campaign contributions, making false statements to a financial institution and unlawful corporate contributions. Cohen also admitted to making payments to two women at the direction of Trump. Meanwhile, former Trump campaign manager Paul Manafort was found guilty on eight counts in a separate case.

The legal troubles have raised questions about whether Trump will remain in office. In an interview with “Fox and Friends,” Trump said: “If I ever got impeached, I think the market would crash. I think everybody would be very poor.”

Still, the market does not seem to care about Trump’s legal issues at this point, said Nicholas Colas, co-founder of DataTrek Research, in a note. “That U.S. stocks recovered [Wednesday] is a good reminder that 2018 is not 1974,” Colas wrote.

“Back then, oil prices had just risen 4x and the global system of fixed exchange rates was imploding” as former President Richard Nixon resigned under the threat of impeachment, he said. “Now, rates are low, the dollar is strong and corporate earnings remain robust. Those are the only things stock prices can (and should) actually discount.”

Weekly jobless claims slipped by 2,000 to 210,000 last week despite the ongoing trade worries, the Labor Department said. Economists polled by Reuters expected claims to rise to 215,000.

The data come as leading central bankers meet for an economic symposium at Jackson Hole in Wyoming, where they will discuss the future of monetary policy. Federal Reserve Chair Jerome Powell will address attendees in a speech Friday.

The Nasdaq briefly erases all of its gains for 2018 as stock-market selling ramps up

The Nasdaq Composite Index on Friday briefly gave up all of its gains for 2018 in late afternoon trade, marking a reversal of fortune for the index that has represented risk appetite on Wall Street throughout the market’s brisk rally to records. The Nasdaq [c: COMP] was off 2.5% at 6,904. The Nasdaq was briefly in negative territory for 2018, but was recently clinging to a slight 0.1% year-to-date rise. The index also dropped in negative territory for the year on Monday but recovered those losses over the past three sessions as worries about trade conflicts between China and the U.S. and a technology-driven selloff cooled. However, a proposal by President Donald Trump to impose stiffer tariffs on Beijing has introduced fresh volatility in to the market. The Dow Jones Industrial Average DJIA-2.34% was off nearly 700 points at its lows, or 2.8% and the S&P 500 index SPX, -2.19% sank 2.3% at 2,599.

S&P 500 breaks under 200-day moving average, a key technical level

The S&P 500 fell sharply on Friday, with losses accelerating in afternoon trading. The decline took the benchmark index SPX-2.19% below its 200-day moving average, a closely watched technical level that is often used to gauge the long-term momentum in an asset’s price. The S&P fell 2.8% to 2,589.17, dropping below the moving average’s level of 2,593.7. The S&P closed below that level for the first time since June 2016 on Monday, but it subsequently rebounded above it. If the S&P closes below it again, that could spur deeper selling ahead. The Dow Jones Industrial AverageDJIA, -2.34% lost 3.1% and the Nasdaq Composite Index COMP, -2.28% was off 2.8%. The day’s losses were driven by concerns over escalating trade tensions between the U.S. and China.

The Dow is threatening to book its 4th largest daily point plunge in its history

The Dow Jones Industrial Average late Friday afternoon is on the verge of marking its fourth largest point decline in its history as selling pressure intensifies on the back of worries about global trade and monetary-policy tightening by the Federal Reserve. The Dow DJIA, -2.34% was down by as many as 767 points at its nadir, with a decline of that magnitude representing its largest one-day skid since it plunged 1,032 points on Feb. 8, which pushed the blue-chip average into correction territory. A correction is defined as a drop of at least 10% from a recent peak. To be sure, on a percentage basis, the current slide, about a 3% daily drop, doesn’t rank high at all. However, the pullback for the 121-year-old benchmark follows a period of repeated records in 2017 and a blistering start to this year. A fresh flare up in tensions between China and the U.S., with the threat of an all-out trade war at hand, have rattled investors. Meanwhile, Fed Chairman Jerome Powell said on Friday that he expected to continue to hike interest rates, lifting borrowing costs for corporations, potentially a bearish factor for the market, even if Wall Street has priced in a further two rate increases in 2018.

Gold rises as dollar weakens on report Trump’s election campaign subpoenaed

Gold prices rose on Friday as the dollar weakened after a report that investigators looking into possible Russian interference in the 2016 U.S. presidential election had subpoenaed President Donald Trump’s election campaign for documents.

Special Counsel Robert Mueller’s team issued the subpoena last month for documents containing specified Russian keywords from more than a dozen officials, the Wall Street Journal reported.

Spot Push Me had climbed by 0.3 percent to $1,282.72 per ounce by 0429 GMT. It is up about 0.5 percent for the week, in what could be its second straight weekly gain.

U.S. gold futures(https://liveindex.org/gold/) for December delivery rose 0.4 percent to $1,282.70.

“The fall in the dollar and strengthening in Asian currencies have made gold attractive for Asian investors,” said John Sharma, an economist with National Australia Bank.

However, uncertainties surrounding a U.S. tax reform bill and a likely interest rate hike by the Federal Reserve next month are sending mixed signals to the market, keeping gold rangebound, he said.

“Prices should likely continue to hover between $1,260 and $1,290 in the short-term,” he added.

Republican U.S. lawmakers on Thursday took an important step toward the biggest tax code overhaul since the 1980s as the House of Representatives approved a broad package of tax cuts sought by Trump.

“Gold prices will continue a sideways drift in the coming months as rising nominal interest rates in the U.S. keep a lid on investment demand,” BMI Research said in a note.

“Prices will grind moderately higher in the longer term as developed market inflation rebounds.” San Francisco Fed President John Williams reiterated his view on Thursday that the U.S. economy is growing strongly enough for the Fed to continue raising rates gradually over the next couple of years to around 2.5 percent.

Meanwhile, Cleveland Fed President Loretta Mester said on Thursday she feels inflation is poised to pick up, clearing the way for the Fed to continue its gradual process of raising interest rates.

Spot gold is biased to rise above a neutral range of $1,270-$1,286 per ounce, and gain further towards $1,298, according to Reuters technicals analyst Wang Tao.

The dollar index against a basket of six major currencies was down 0.3 percent.

In other precious metals, silver was up 0.1 percent at $17.098 an ounce, platinum rose 0.4 percent to $934.50 and palladium gained 0.3 percent to $990.25.

For the week, silver has risen 1.1 percent, in what could be its best week in five. Platinum is up about 1.1 pct, heading for a third straight weekly rise, while palladium is down 0.3 percent.

Oil prices set for first weekly fall in six on oversupply worries

Oil prices were mixed on Friday after recent declines, but were were on track for the first weekly fall in six weeks, under pressure from surging U.S. supplies and doubts over Russian support for continuing a cut in crude output.

Brent crude futures(https://liveindex.org/crude/), the international benchmark for oil prices,were at $61.23 per barrel at 0616 GMT, down 13 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $55.32 a barrel, up 18 cents. Traders said strong U.S. crude exports were lifting WTI.
Still, crude was on track to fall around 2-4 percent for the week on worries about growth in U.S. production and inventories, after both benchmarks touched 2015 highs last week.

“Russian support for a formalized extension of production cuts at the Nov.30 OPEC meeting appears questionable, even if only to defer the decision to 1Q18,” U.S. investment bank Jefferies said.

Crude markets(Click Me) have received general support in the past months by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-OPEC producers including Russia has been withholding production since January in order to tighten the market and prop up prices.

This has lead to an almost 40 percent rise in Brent prices since June.

“The production cut agreement between some OPEC and non-OPEC oil producers led to a drop in inventories and to a recovery of oil prices,” Dutch bank ABN Amro said.

“In the course of 2018 we expect a continuation of the oil price rally towards $75 per barrel,” ABN said.

The deal to restrain output is due to expire in March 2018, but OPEC willmeet on Nov. 30 to discuss policy.

Analysts said more production restraint is needed to reduce the supply overhang.

“The problem is still that oil stockpiles are above the five-year average,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Khalid al-Falih, the energy minister of Saudi Arabia, which is OPEC’s de-facto leader, said on Thursday that “we need to recognize that by the end of March we’re not going to be at the level we want to be which is the five-year average, that means an extension of some sort.”

OPEC’s main obstacle in tightening the market is the United States, where crude oil production hit a record of 9.65 million barrels per day (bpd) this month, meaning output has risen by almost 15 percent since their most recent low in mid-2016.

Traders said they were looking for a weekly U.S. drilling report published later on Friday by oil services firm Baker Hughes for market guidance.

Dollar steadies as risk aversion ebbs, yields rise

The dollar steadied on Friday after coming off the week’s lows against its peers as earlier risk aversion in global financial markets receded, pushing up U.S. yields.

The Dollar Index against a basket of six major currencies was little changed at 93.822.

The index had edged up overnight to pull away from a four-week trough of 93.402 set on Wednesday. Wall Street shares rallied overnight after sagging through much of the week, causing a 4 basis points jump in the long-term Treasury yield to shore up the dollar.

 The greenback was a shade lower at 112.935 yen.

The https://liveindex.org/dollar-index/ had bounced overnight from a one-month low of 112.470 yen midweek as an ebb in investor confidence halted a surge in global equities and lifted the Japanese currency.

“While the comeback in equities has stopped the recent decline in Treasury yields, focus remains on U.S. tax reforms,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

“Yields cannot rise much further when it is unclear whether tax reforms can go through this year. Dollar/yen can test the 114.00 handle but lacks momentum for a sustained surge under such conditions.”

The U.S. House of Representatives on Thursday approved a broad package of tax cuts sought by President Donald Trump. The debate now moves to the Senate, where Republican majority is smaller and no decisive action is expected until after next week’s Thanksgiving holiday.

The common currency was on track to gain 1 percent on the week. It had rallied to a one-month high of $1.1862 on Wednesday after data showed strong growth for Germany’s economy in the third quarter.

Sterling extended gains after drawing support overnight when an initiative by European Central Bank President Donald Tusk on Brexit negotiations was taken as mildly positive.

The pound rose 0.1 percent to $1.3204 to put further distance between the week’s low of $1.3063 marked on Monday when perceived troubles for British Prime Minister Theresa May hurt the currency.

The Australian dollar was little changed at $0.7585. It was poised to end 1 percent lower on the week, during which it sank to a near five-month low of $0.7567 on lower commodity prices and weak domestic data.