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(Alliance News) - The yield on the US 10-year treasury topped 1.0% for the first time in over nine months on Wednesday, as Democrats took the first step toward taking control of the US Senate and strengthening President-elect Joe Biden's standing as he prepares to take office on January 20.
Democrat Raphael Warnock has won one of Georgia's two US Senate runoffs, becoming the first black senator in his state's history and putting the Senate majority within the Democrats' reach.
The focus now shifts to the second race between Perdue and Democrat Jon Ossoff. That contest was too early to call as votes were still being counted.
If Ossoff wins, Democrats will control both chambers of Congress, as they already are the majority in the House of Representatives. This would allow Biden to push through larger stimulus measures, which is potentially inflationary.
The yield on the US 10-year note was quoted at 1.019% in the early hours US time. Yields rise as bond prices decline.
The yield reached a high of 1.299% back in March but was as low as 0.51% in August. In March, yields widened as a result of risk version due to the spread of Covid-19 and an oil price crash.
"Markets have sent the 10Y US Treasury yields above 1% and the USD weaker on the back of the likely Democratic sweep. We think the election result is supportive for market sentiment, as we will get a more stimuli-friendly political leadership in the US but with limitations on how much taxes can be hiked due to the slim majority," Danske Bank commented early Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.8% at 6,661.52
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Hang Seng: up 0.2% at 27,697.01
Nikkei 225: closed down 0.4% at 27,055.94
DJIA: closed up 167.71 points, or 0.6%, at 30,391.60
S&P 500: closed up 26.21 points, or 0.7%, at 3,726.86
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GBP: up at USD1.3653 (USD1.3611)
EUR: up at USD1.2339 (USD1.2280)
Gold: soft at USD1,947.33 per ounce (USD1,947.54)
Oil (Brent): up at USD53.84 a barrel (USD53.01)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
US results of Senate runoff elections in Georgia
0930 GMT UK CIPS -Markit services purchasing managers' index
0900 GMT UK SMMT car registration figures
1100 GMT Ireland monthly unemployment
1430 GMT UK BoE Governor Bailey appears before Treasury Committee
0955 CET Germany services PMI
1000 CET EU services PMI
1100 CET EU producer price index
1400 CET Germany provisional consumer price index
0945 EST US services PMI
1000 EST US manufacturers' shipments, inventories and orders
0700 EST US MBA weekly mortgage applications survey
0815 EST US ADP national employment report
1030 EST US EIA weekly petroleum status report
1400 EST US FOMC meeting minutes and economic forecast
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UK members of Parliament will return to Westminster to vote on regulations enforcing England's national lockdown as the stringent restrictions entered into force overnight amid spiralling coronavirus cases. The Commons has been recalled from its Christmas recess for the second time, to debate and retrospectively vote on the measures announced by UK Prime Minister Boris Johnson on Monday. Johnson will update MPs on the new controls – which include the closure of schools to most pupils and a return to the stay at home order – before a vote due in the evening. The measures are expected to pass with ease, with Labour set to support the motion. The regulations enforcing a national lockdown in England came into effect at 0001 GMT on Wednesday, as new figures suggested one in 50 people had coronavirus last week.
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Shop prices in the UK slipped again in December, with fashion retailers continuing to offer discounts and food inflation easing to its lowest level in more than two-and-a-half years. According to a British Retail Consortium and Nielsen tracker, shop prices fell by 1.8% annually in December, which includes the crucial Christmas period. It was the same annual rate of deflation as in November. However, the December fall was a worse slump than the 12-month average decline of 1.4% and the six-month average of a 1.6% slip. Numbers showed non-food prices fell by 3.2% annually in December, slowing than November's 3.7% slump. However, the December deflation was still worse than the 12-month average decline of 3.0%. Food inflation slowed dramatically to 0.4% in December from 1.3% in November, the lowest rate of inflation for the category since March 2018, the BRC said.
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Ireland's service industry rebounded in December, data from Allied Irish Banks and IHS Markit showed, returning to growth as the country re-emerged from a six-week lockdown. The services business activity index rose sharply in December to 50.1, from November's five-month low of 45.4. Any reading above the no-change mark of 50.0 indicates expansion. Total activity stabilised in the final month of the year, following a three month downturn, AIB said. Outstanding business increased for the second month in a row, and employment in the sector rose for the first time since February. New business fell further, but companies grew more confident about the 12-month outlook on the back of positive vaccine developments. Overall business sentiment was the strongest since February.
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The pace of growth in China's service industry slowed in December, data from Caixin showed, mirroring the country's manufacturing sector. The headline seasonally adjusted business activity index fell to 56.3 in December from 57.8 in November. The dip was blamed on softer new business growth with only a "modest" rise in new export sales. Caixin did note, however, new business growth remains "solid".
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Japan's service sector remained subdued in December, data from au Jibun Bank and IHS Markit showed. The seasonally adjusted Japan services business activity index dipped fractionally to 47.7 in December from 47.8 in November. Private sector activity decreased for the eleventh consecutive month, but December's dip represented the softest pace over the 11-month period. Business activity and new orders remained in decline during December as a further wave of coronavirus infections caused renewed disruptions to service providers, Jibun noted.
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President Donald Trump's extraordinary effort to overturn the US presidential election result is going before Congress as legislators convene for a joint session to confirm the Electoral College vote won by Biden. The typically routine proceeding will be anything but, a political confrontation unseen since the aftermath of the Civil War as Trump mounts a desperate effort stay in office. The president's Republican allies in the House and Senate plan to object to the election results, heeding supporters' plea to "fight for Trump" as he stages a rally outside the White House. The longshot effort is all but certain to fail, defeated by bipartisan majorities in Congress prepared to accept the results. Biden, who won the Electoral College 306-232, is set to be inaugurated on January 20.
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BROKER RATING CHANGES
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CREDIT SUISSE CUTS INTERTEK TO 'NEUTRAL' ('OUTPERFORM') - TARGET 5,900 (6,300) PENCE
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BERENBERG RAISES VODAFONE TO 'BUY' (HOLD) - PRICE TARGET 155 (148) PENCE
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COMPANIES - FTSE 100
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Informa said John Rishton will replace Derek Mapp as chair. Rishton is currently chair-elect at London-listed security services firm Serco. Rishton takes over as chair at Informa in June. For 2020, Informa expects to report revenue in the range of GBP1.65 billion and GBP1.68 billion, in line with guidance provided back in September. This would be at best down 42% from GBP2.89 billion in 2019. Adjusted operating profit will tumble to between GBP250 million and GBP270 million, from GBP933.1 million. The company did note that it delivered GBP600 million in cost savings by year end, and it has seen a "continued return and recovery of physical events in mainland China and other parts of Asia".
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Auto Trader said demand for car buying in its third quarter ended December was "remained strong". Visits to its marketplace were 20% higher than a year earlier. However, sales volumes are expected "to be impacted in January and February". Auto Trader said it will book monthly operating losses between GBP5 million and GBP7 million due to being free for customers in December 2020 and February this year. "The group's balance sheet remains strong. At the end of December, we had drawings of GBP45 million on our GBP400 million revolving credit facility and remain substantially below our covenant requirements for both debt and interest cover," Auto Trader added.
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COMPANIES - FTSE 250
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Baker Greggs cautioned that profits will not return to pre-health crisis levels until "2022 at the earliest". Greggs said total sales in the 53 weeks ended January 2 slumped 31% to GBP811 million from GBP1.17 billion. On average, fourth-quarter company-managed shop like-for-like sales were at 81% of the prior year's levels. Greggs expects a full-year pretax loss of up to GBP15 million, swinging from a GBP108.3 million profit the year before. The baked-products retailer was hit hard by the virus crisis which has emptied high streets and offices across the UK. The company did, however, note that it has ramped up its home delivery offering. Greggs said 600 of its shops now provide delivery services, and it expects this to rise to 800 in 2021.
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COMPANIES - MAIN MARKET AND AIM
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Topps Tiles fared better. The tile retailer said its retail like-for-like sales climbed 20% in the 13 weeks to December 26. Topps Tiles noted sales growth "across both of our main customer groups, professional fitters and homeowners".
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Wednesday's Shareholder Meetings
no events scheduled
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
