Bloomberg Business
-“Bonds Fall as BOE Drops Rate-Cut Signal; Pound Jumps on Ruling”
Global bonds declined after the Bank of England said it’s no longer expecting to cut interest rates again this year. Sterling rallied after a court ruled that the U.K. must hold a vote in Parliament before starting the two-year countdown to Brexit.
Government debt fell in 21 out of the 25 markets tracked by Bloomberg, led by Britain’s gilts, while the pound posted the biggest advance among the world’s major currencies. Equities fluctuated as traders assessed mixed corporate earnings amid fresh polls showing Hillary Clinton leading Donald Trump in the presidential race. Oil was little changed.
Traders have parsed economic data and remarks from policy makers to weigh whether growth is strong enough for major central banks to start shifting away from their ultra-loose stance. BOE officials raised their forecasts for growth and inflation, and indicated concern that higher consumer prices may even warrant tightening policy at some point. The statement came a day after the Federal Reserve left rates on hold and kept the option open for a hike in December, doing little to soothe anxiety over the U.S. election next week.
“It’s a market consolidation and stabilization in the absence of any bad news,” said Barthelemy Debray, a fund manager at Paris-based Cogefi Gestion, which has assets under management of about 500 million euros ($555 million). “We will see more volatility until Tuesday’s U.S. presidential elections.”
Bonds
Treasury 10-year note yields rose two basis points, or 0.02 percentage point, to 1.82 percent at 9:54 a.m. in New York, according to Bloomberg Bond Trader data. The 1.5 percent security due in August 2026 fell 5/32, or $1.56 per $1,000 face amount, to 97 5/32.
Ten-year gilt yields jumped six basis points to 1.23 percent, poised for the biggest increase in a week.
The yield on Spanish 10-year bonds advanced two basis points to 1.22 percent, after dropping nine basis points the previous day. Yields on German 10-year bunds, the region’s benchmark securities, rose three basis points to 0.16 percent.
Currencies
Sterling climbed against all of its 16 major peers, with the rally trimming the pound’s plunge versus the dollar in 2016, the worst among major currencies. The pound rose 1.4 percent to $1.2473 as of 12:50 p.m. in London, the biggest increase since July 14.
Mexico’s peso advanced 0.5 percent to 19.2790 against the dollar, making it the second strongest among 24 emerging markets tracked by Bloomberg, after the recent election polls put Clinton ahead by at least two percentage points. Mexico’s currency tends to weaken when Trump gains momentum in the presidential race as he has pledged to renegotiate the North American Free Trade Agreement that’s tied the country to the U.S. and to build a wall along the border to keep immigrants out.
The Bloomberg Dollar Spot Index dropped 0.2 percent, dropping for a fifth straight day.
Commodities
Crude steadied after a record surge in U.S. inventories sent prices plunging on Wednesday, capping the longest losing streak in two months.
West Texas Intermediate oil was little changed after tumbling 2.9 percent yesterday following a report from the Energy Information Administration that stockpiles increased by 14.4 million barrels last week. OPEC members who are claiming exemption from an agreement to limit supplies boosted their production in October, according to a Bloomberg survey. A measure of oil volatility is near the highest level in more than a month as investors in broader financial markets stay cautious amid a tightening White House race.
West Texas Intermediate for December delivery climbed 16 cents to $45.50 a barrel at 9:13 a.m. on the New York Mercantile Exchange. Brent for January settlement rose 27 cents to $47.13 a barrel on the London-based ICE Futures Europe exchange.
CNN Money
-“Court ruling throws Brexit process into doubt”
The U.K. High Court ruled that lawmakers should vote on whether the government can begin the formal Brexit process by triggering Article 50 of the EU treaty.
Experts say parliament is unlikely to block Brexit outright. But the ruling could mean Brexit is delayed, particularly by opposition in the upper chamber — the House of Lords. Lawmakers may get a chance to influence what kind of deal the government negotiates with the EU.
The main opposition Labour Party has already said it won’t try to block Brexit and instead will use the ruling to push for a Brexit «that works for Britain, putting jobs, living standards and the economy first.»
The ruling is a defeat for the government. Prime Minister Theresa May wanted to trigger Article 50 by the end of March 2017, meaning the U.K. would most likely leave the EU two years later.
The government said it was disappointed by the judgment and would appeal.
Fears that the government may pursue a «hard» break with the U.K.’s biggest trading partner have trashed the pound since the June 23 referendum.
The currency rallied more than 1% after the ruling was announced, but has still lost nearly 17% against the U.S. dollar since the vote.