Kevin Buckland’s view of the day ahead in European and global markets
The British bond market has become the focus of global investors’ attention, for unenviable reasons.
A 20 basis point jump in the benchmark gold coin this week to its highest level since 2008 has been linked by analysts to a growing crisis of confidence in Britain’s fiscal outlook, despite no apparent catalyst for the current wave of selling.
Some are thinking of the potential for a defeat similar to that which followed former prime minister Liz Truss’s disastrous September 2022 mini-budget.
To be sure, while the market views gilts as the center of the bond storm, there are many more reasons to be a seller.
The euro zone is bracing for increased bond supply amid accelerating inflation, which helped German bond yields jump to a five-month high on Wednesday.
And of even greater global consequence, the uncertain impact of President-elect Donald Trump’s proposed tariffs and immigration restrictions on inflation has worried both investors and Federal Reserve officials.
Economic data for the nation is already flashing warning signs of unsustainable price pressures, prompting traders to trim bets on the Fed tapering this year to just 41 basis points, less than the 50 basis points Fed officials discussed last month.
Yields on benchmark government bonds pushed to their highest since April at 4.73% before the bonds found buyers.
Caution is likely to prevail in Europe today, ahead of a market holiday in the United States that will close Wall Street and shorten trading in government bonds.
There is also available data on trade and production from Germany, along with data on retail sales in the Euroregion.
A parade of potentially revealing central bank speeches is also in the works, with Bank of England Deputy Governor Sarah Breeden set to deliver a speech on the outlook for inflation and monetary policy at the University of Edinburgh’s business school.
Fed Governor Michelle Bowman, Boston Fed President Susan Collins, Kansas City Fed President Jeffrey Schmid, Philly Fed President Patrick Harker and Richmond Fed President Thomas Barkin also take the podium at various locations.
That’s ahead of the week’s big macro event, looming on Friday in the form of the monthly US nonfarm payrolls report.
Key events that could affect markets on Thursday: * German industrial production, trade data (both November) * Eurozone retail sales (November) * BoE deputy governor Breeden speaks * Fed officials Bowman, Collins, Schmid, Harker and Barkinspeak * US stock market rest
