|Bid||52.78 x 40000|
|Ask||53.10 x 40000|
|Day's Range||52.55 - 53.13|
|52 Week Range||47.78 - 54.09|
|Beta (5Y Monthly)||0.91|
|PE Ratio (TTM)||11.76|
|Forward Dividend & Yield||2.03 (3.83%)|
|Ex-Dividend Date||Jan 09, 2020|
|1y Target Est||N/A|
(Bloomberg) -- Gold reached a seven-year high as concern over the economic impact of the coronavirus boosted demand for haven assets and fueled speculation that the Federal Reserve will ease monetary policy before year-end.Prices extended gains above $1,600 an ounce to the highest since February 2013. Copper headed for a third straight decline, while the dollar strengthened and U.S. equities fell after a jump in confirmed infections in South Korea and Japan.Bullion has climbed almost 7% this year amid mounting concern over the economic impact of the virus. While minutes from the Fed’s last meeting indicated the central bank could leave rates unchanged for many months, futures traders maintained expectations for at least one cut over 2020. Low rates are a boon for gold, which doesn’t offer interest.“The minutes suggest that the bar to ease policy is clearly lower than to lift rates,” Colin Hamilton, an analyst at BMO Capital Markets, said in an emailed note Thursday. “In particular, they back up Powell’s recent comment that policymakers would not tolerate continued below-target inflation. This commentary was viewed as supportive gold.”Read more: Doubts Re-Emerge Over China Data; Cases Top 75,700: Virus UpdateSpot gold advanced for a third straight day, rising as much as 0.7% to $1,623.73 an ounce. Holdings in global exchange-traded funds backed by bullion have risen to a fresh record, and are on course for a sixth weekly expansion, the longest streak since November. Futures settled 0.5% higher at 1:30 p.m. on the Comex in New York.“It looks like a self-fulfilling prophecy,” said ABN Amro Bank NV strategist Georgette Boele. As prices broke out, the move has attracted more investors into gold, she said.Gold could reach $1,650 over the coming weeks, according to UBS Group AG’s Global Wealth Management unit.“With U.S. equity valuations elevated, any further upsets could see another bout of volatility, a further rally in government bonds and a higher gold price,” analysts Wayne Gordon and Giovanni Staunovo said in a note.Copper prices, meanwhile, fell 0.7% in London and closed at the lowest level in almost two weeks, and zinc hit the lowest level since July 2016. Chinese officials again changed the way the nation officially reports the number of infections and asked firms not to resume work before March 11. That caused fresh worries alongside new fatalities outside of China, weakening demand for industrial metals.“Hubei’s announcement that firms will remain closed until March 10th is reviving concerns that the follow-through impact may be more prolonged than anticipated,” TD Bank analysts including Bart Melek said in a note to clients.‘What Goes Up’In other precious metals, silver, platinum and palladium declined in the spot market. All four major precious metals have risen this week.Palladium, used in vehicle pollution-control devices, has been supported by concerns over a widening global deficit, and a pledge by the Chinese government to stabilize car demand.Spot palladium has risen about 39% this year. The gains have still been eclipsed by those of rhodium, a less-liquid precious metal from the same group that expanded its year-to-date advance on Thursday to 110%.Read more: Why Palladium Is Suddenly a More Precious MetalBoth rhodium and palladium are advancing on tight supplies and as demand from the car industry remains strong, Anglo American Plc said Thursday.Still, the coronavirus is threatening Chinese auto sales with factories across the nation suspended and the global supply chain disrupted. That means prices have room to retreat in the short-term, Anglo’s Chief Executive Officer Mark Cutifani told investors.“What goes up quickly can come down twice as quick,” he said.\--With assistance from Martin Ritchie.To contact the reporters on this story: Ranjeetha Pakiam in Singapore at email@example.com;Elena Mazneva in London at firstname.lastname@example.org;Justina Vasquez in New York at email@example.comTo contact the editors responsible for this story: Lynn Thomasson at firstname.lastname@example.org, Pratish Narayanan, Luzi Ann JavierFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The spread of the coronavirus has suddenly sparked foreign-exchange traders into action.The dollar is emerging as the winner, heading toward a key psychological threshold that could supercharge a rally few saw coming at the start of the year. At the other end of the spectrum is the yen, which suffered its biggest two-day loss since 2017 after the threat of a Japanese recession sent hedge-fund buyers fleeing.The moves spurred gauges of volatility, which had been lying dormant near record lows in recent months.What’s going on in currency markets is “mad, bad and very ugly,” said London-based Kit Juckes, a strategist at Societe Generale SA. “It looks like huge capitulation by almost anyone who isn’t a dollar bull.”The greenback is outperforming virtually everything so far this year, confounding expectations that it would weaken following a trade deal between Washington and Beijing. The U.S. dollar index -- a widely-watched gauge of the currency versus its major peers -- has surged this week toward 100, which hasn’t been breached in nearly three years.It’s the level that capped the dollar twice in 2015 and effectively offered support during the first quarter of 2017 before finally giving in, heralding the greenback’s sharp decline that followed.“The 100 level is a big deal,” said Neil Jones, head of foreign-exchange sales to financial institutions at Mizuho Bank Ltd. “A number of buy signals will kick into play, it will set the alarm bells off.”There’s more good news for dollar bulls. The index’s moving averages are close to forming a so-called golden cross, when its 50-day measure rises above its 200-day equivalent. It would be the first time since 2018 and a sign to some traders of more gains to come. The pattern formed 13 times since the turn of the century, heralding average gains of about 2.5% in 40 days.Topsy TurvyWhile the dollar revels in its traditional role as a haven, the ferocity of the moves have turned other well-known paradigms on their head.The yen, which has long served as safe harbor from threats ranging from the Greek crisis to the U.S.-China trade war, has suddenly found its power drained. The coronavirus threatens to further weigh on a struggling economy, which analysts forecast will shrink an annualized 0.25% this quarter following a 6.3% contraction in the previous three months. Some options traders are betting the currency will weaken to 120 per dollar, from 111.96 currently.“A sharp slowing in tourism from China will have an important negative effect on the Japanese balance of payments,” said George Saravelos, a strategist at Deutsche Bank AG, which recommends investors stay long the dollar. “This is idiosyncratically negative for the yen, which no longer runs a goods surplus.”Market MovesWhile only the Swiss franc could match the greenback among major currencies on Thursday, rising to the highest level versus the euro in nearly five years, other haven assets also rallied, including U.S. Treasuries and gold, which touched the highest since 2013.Elsewhere, the pound slumped to lows last seen in November despite strong U.K. economic data, and emerging markets were not spared, with the won among the biggest losers after South Korea reported its first coronavirus fatality.Other Asian currencies slumped as contagion fears continued. The Singapore dollar slid to the lowest in almost three years on Thursday. The yuan retreated and the Australian dollar, which is seen as a proxy to the Chinese currency, slid to an 11-year low.“The emotional see-saw continues,” said Mark McCormick, global head of FX strategy at TD Securities.\--With assistance from Vassilis Karamanis and Jack Pitcher.To contact the reporter on this story: John Ainger in London at email@example.comTo contact the editors responsible for this story: Dana El Baltaji at firstname.lastname@example.org, Neil ChatterjeeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Toronto-Dominion (TD) possesses the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
(Bloomberg) -- For all of Donald Trump’s complaints about the dollar’s strength, he may have himself to blame.One theory behind the greenback’s 2.8% climb so far this year has to do with the U.S. president’s soaring approval rating. While concerns about the coronavirus have certainly increased the demand for so-called safe haven assets like the dollar, there has also been a 70% correlation between Trump’s popularity and the U.S. dollar since his election, according to calculations from TD Securities.That relationship has come into sharper focus as Trump’s approval rating has shot to 46%, the highest in three years, according to Real Clear Politics. It mirrors a similar relationship noted by Wall Street analysts as well between equities and Trump’s rising odds of re-election, as measured by prediction markets.The U.S. currency has been more closely tracking stocks rather than falling Treasury yields, which would typically drag down the dollar, said Mark McCormick, global head of FX strategy at TD Securities.“Regardless of how Trump feels about the dollar, he’s been good for the buck,” he wrote in a report. “It’s likely the case that U.S. risk assets, and by extension the USD, prefer the status quo to a progressive shift in the White House.”The Bloomberg Dollar Index rose as much as 0.4% Thursday to touch its highest level in more than four months.The Trump campaign has floated the idea of another round of tax cuts and, if re-elected, he would likely pursue a sizable infrastructure package, McCormick said. Similarly, a more centralist candidate such as Michael Bloomberg, who has been rising in the polls, would be “unlikely to upset the apple cart.” A progressive like Bernie Sanders, on the other hand, could pose a significant risk, the strategist said.“Expect more two-way risks ahead,” McCormick said.(Disclaimer: Michael Bloomberg is seeking the Democratic presidential nomination. He is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)(Updates prices.)\--With assistance from Felice Maranz and Ruth Carson.To contact the reporter on this story: Katherine Greifeld in New York at email@example.comTo contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Jennifer Bissell-Linsk, Nick BakerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Where the euro goes next may be all about investor positioning.The common currency has slipped to the lowest since 2017 versus the dollar, yet this hasn’t deterred asset managers from accumulating the largest net long position on record. The move is more in line with the view of hedge funds, who are the most negative on the euro in three years, according to the latest Commodity Futures Trading Commission data.And while the increased bearishness of these leveraged funds should be expected given their flexibility to quickly respond to short-term fluctuations, the positioning across institutional investors may have taken some by surprise. The direction for the euro may therefore come down to who adjusts their exposure from multi-year extremes first.The common currency has come under pressure in both the spot and options markets on concerns over the coronavirus outbreak’s effect on the euro-area economy and the potential for a response through monetary stimulus by the European Central Bank. Options gauges signal traders are the most bearish on its short term prospects in five months, while they hold neutral bets over the longer term.Technically, there are signs the euro could see a relief rally in the short term, yet it remains on a bearish path in the medium term. It traded as much as 0.2% stronger Monday at $1.0851, rising for the first day in four.NOTE: Asset managers are institutional investors, including pension funds, insurance companies and mutual funds. Leveraged funds are typically hedge funds and other speculative money managersNOTE: Vassilis Karamanis is an FX and rates strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment adviceTo contact the reporter on this story: Vassilis Karamanis in Athens at email@example.comTo contact the editors responsible for this story: Dana El Baltaji at firstname.lastname@example.org, Neil ChatterjeeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
TD Securities (USA) LLC today announced that principals Michael Coster and Joe Nellis and the advisory team from Kimberlite Group, LLC have joined TD Securities. Kimberlite is a strategic real estate advisory and private capital raising firm based in New York City.
(Bloomberg) -- The Federal Reserve Bank of New York will shrink its repurchase-agreement operations more than analysts expected, starting with Friday’s overnight offering, a sign officials are comfortable removing liquidity without upending funding markets.The central bank on Thursday announced a new schedule for both overnight and 14-day term repo operations through March 12. Starting next week, the term offerings will drop by $5 billion, to a maximum of $25 billion, and those starting March 3 will shrink again, to a maximum of $20 billion. The bank’s daily overnight operations, meanwhile, will drop by $20 billion, to a limit of $100 billion.This marks the second straight month the Fed is reducing liquidity injections. It said in mid-January that it would reduce term operations by $5 billion starting in February. These operations have been oversubscribed this month, but analysts say the demand from dealers hasn’t indicated renewed stress in funding markets, or concern about bank reserves. Instead, the strong bidding is seen as simply underscoring that the rates dealers can get in these operations are lower than prevailing market rates.“This decrease is a bit faster than expected,” said Gennadiy Goldberg, a senior U.S. rates strategist at TD Securities. “Given the functioning of the money markets recently, they’re probably feeling a bit more confident they can take away some of the repo support more quickly without market disruptions.”The newly scheduled offerings will provide liquidity through March 26. The Fed has been conducting repos and Treasury-bill purchases in a bid to keep control of short-term rates and bolster bank reserves. The efforts have calmed markets since the September spike that took overnight repo rates as high as 10%, and helped quell concern about a potential cash crunch at the end of 2019.The repo market has also experienced little volatility around other calendar events, such as Treasury auction settlement dates, when the market is prone to indigestion due to the influx of collateral.Fed Chairman Jerome Powell reiterated in congressional testimony this week that the central bank stands ready to adjust the operations as conditions warrant. Powell said last month the Fed would continue term and overnight repo operations at least through April.The Fed also said Thursday that it planned to continue buying $60 billion of Treasury bills each month for reserve management.To contact the reporter on this story: Alexandra Harris in New York at email@example.comTo contact the editors responsible for this story: Benjamin Purvis at firstname.lastname@example.org, Mark TannenbaumFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil posted the biggest gain in almost six weeks as signs that the spread of Asia’s coronavirus may be slowing boosted investor confidence that crude’s sell-off has peaked.Futures in New York climbed 2.5% on data from China that showed a drop in suspected coronavirus infections. The positive sentiment was largely undeterred by a government report showing U.S. crude stockpiles posted the largest build since November.“Markets are pricing in that we may have hit peak coronavirus fear,” said Daniel Ghali, a commodities strategist at TD Securities. “Investors that were bearish are thinking they want to start to take their foot off the pedal.”Prices have also drawn some support from signals that OPEC and its partners may intervene to shore up the market. The coalition slashed its estimate for demand growth in the first quarter by 440,000 barrels a day, as the coronavirus hits fuel consumption in China. In a meeting with Energy Minister Alexander Novak, Russia’s key oil producers voiced support for the idea of extending OPEC+ output cuts into the second quarter, but made no final decision.Saudi Arabia has been the strongest advocate for production cuts of an additional 600,000 barrels a day. Russia has remained noncommittal, saying more time was needed to study the proposal.The Energy Information Administration reported that nationwide crude inventories rose 7.46 million barrels last week, more than double the 3.2 million-barrel increase forecast by analysts in a Bloomberg survey. The report also showed a surprise gasoline draw of 95,000 barrels.Gasoline futures surged 4.4%, the biggest rise increase since September, after a fire broke out overnight at Exxon Mobil Corp.’s Baton Rouge oil refinery in Louisiana, halting production at the fifth-biggest fuel-making plant in the U.S.West Texas Intermediate crude for March delivery gained $1.23 to settle at $51.17 a barrel on the New York Mercantile Exchange.Brent for April settlement climbed 3.3% to settle at $55.79 a barrel on the ICE Futures Europe exchange in London, putting its premium over WTI at $4.38.The market’s structure also showed signs of strengthening with the discount on front-month Brent contracts versus the second month narrowing to 12 cents, suggesting fears of a supply glut may be easing.Still, discounts have held for Brent contracts for the majority of 2020, a pattern known as contango that typically reflects oversupply.“We’ve seen a lift because in the very near term, it’s all about the virus,” says Judith Dwarkin, chief economist at RS Energy Group. “Until we’re out of the woods the market will be laser focused on slowing demand growth and if OPEC waits to implement cuts until April, it may be too late to deal with the bulge in supply.”To contact the reporter on this story: Jackie Davalos in New York at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Mike Jeffers, Reg GaleFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
TD Bank, America's Most Convenient Bank®, announced today it closed on $35.3 in bank financing used by Westhab to fund the construction of the Dayspring Commons Campus in Yonkers, New York. The apartment building and community center will address the urgent issue of homelessness and affordable housing.
TD Bank, America's Most Convenient Bank®, announced today that it has provided $18 million in financing to the Massachusetts Society for the Prevention of Cruelty to Animals (MSPCA-Angell) in part to fund the construction of a 6,000-square-foot addition to its Critical Care Unit (CCU) and medical ward.
(Bloomberg) -- The virus-induced rally in U.S. Treasuries could be brief as China stimulus and a recovery in U.S. growth rein in demand, according to BNP Paribas SA.Yields for the 10-year bond may drop to a 2016 low before rising as high as 1.95% in the next three months, said Shahid Ladha, head of G-10 rates strategy at BNP. While the coronavirus outbreak will hurt China’s economy, the rapid gains in Treasuries suggest that the market has gotten ahead of itself, he said.“It’s gone quite far in the U.S. especially with broad U.S. risky assets looking up,” Ladha said at an interview in Singapore. Convexity hedges -- where investors seek to compensate for a drop in rates by buying longer-dated bonds -- may have exacerbated the fall in yields, he said.Benchmark yields have fallen 35 basis points this year to 1.57% as investors priced in slower global economic growth and easing by central banks due to the coronavirus outbreak. The pace of the decline has stoked debate over how far the rally can go.As the death toll mounts in China, measures to contain the virus have hurt retailers and shuttered factories. The People’s Bank of China has announced stimulus to counter the fallout, including providing special re-lending funds. Officials have stressed that there’s ample policy room to deal with a crisis.“The market will try at some point to look beyond onto the considerable investment and upside that comes after, as did happen in Hong Kong, China in 2003,” Ladha said, referring to the SARS outbreak. “You try to learn from history.”Dovish FedTreasury 10-year yields fell to as low as 1.32% in 2016. TD Securities and J.P. Morgan Asset Management have predicted that subdued price pressures and dovish Federal Reserve policy may pave the way for further gains in the bonds.But, Ladha noted that the strength of the U.S. economy and decent inflation levels are likely to limit the drop in yields. Data last week showed American employers ramped up hiring in January and wage gains rebounded, bolstering the case for the Fed to keep interest rates on hold for the rest of the year.Here are some of Ladha’s other investment views:Firm favors local-currency Asian government bonds including Singapore, Thailand and ChinaAsian central banks are poised for more easing, which will provide “some insulation” from the virus-induced economic slowdownInvestors seeking hedges are better off selling expensive equities than buying “rich” TreasuriesRise in 10-year Treasury yields will likely be capped at around 2.25% this year amid global demand for positive-yielding debt(Adds yield forecast in last bullet)To contact the reporter on this story: Ruth Carson in Singapore at email@example.comTo contact the editors responsible for this story: Tan Hwee Ann at firstname.lastname@example.org, Liau Y-Sing, Nicholas ReynoldsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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(Bloomberg) -- The lesson for investors backing higher Treasury yields this week was clear: A good growth story is no match for the virus-related fears gripping the market.It will be tough for the U.S. economy to serve up numbers much stronger in the coming days than what investors just saw. Yields did climb more than 15 basis points from the week’s lows on surprisingly healthy manufacturing and services data, but the move had lost stamina by the time of Friday’s robust payrolls report. The world’s borrowing benchmark rate is stuck around 1.6% and probably tilted lower barring assurances from health authorities that the deadly coronavirus is under control.While inflation dominates the coming week’s economic news, Treasury investors probably aren’t going to worry about any pickup in price pressures until the Federal Reserve does. And testimony from Chairman Jerome Powell is unlikely to signal any change in the central bank’s patient stance -- he’s far more likely to highlight rising global risks.“It’s clear there’s a downward bias in yields, and until we have some scare in inflation I think that stays,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “The coronavirus may dampen global commodity prices, so if anything it takes a little wind out of the sails of inflation.”As for data that may dent Treasuries in the coming week, retail sales and consumer sentiment are forecast to show the foundations of the record U.S. expansion remain intact. And while a heavy freight of supply might normally pressure yields higher, Priya Misra at TD Securities reckons the current appetite for government securities can easily absorb the combined $84 billion of 3-, 10- and 30-year debt ahead next week.Cap on YieldsMisra, global head of rates strategy at TD, says that until the Fed shifts to a more hawkish stance, the 10-year yield is capped at 1.7%, leaving it more room to fall than to rise.Equities markets may bring more suspense, as indexes near all-time highs could be vulnerable to disappointments in the coming crop of earnings, Misra says.“I look at profit margins and they’re declining -- if we get an earnings scare, I think this story unravels,” she said.The apparently blithe mood in stocks -- at least until Friday’s declines -- may be more consistent with the strength in Treasuries than it seems, if it’s based on the assumption of Fed support, in Misra’s view. That would also gel with the rates market’s pricing for more than a full rate cut as soon as September. The Federal Reserve Board said this week that the outbreak presented a “new risk” to the economic outlook for the U.S.“The reason equities can do well is the Fed has essentially told us if things are bad they’ve got our back, and if things are good they’ll let it run,” Misra said. “I think we’re pricing in this Fed put.”What to WatchTraders will also be watching the results from Tuesday’s New Hampshire Democratic primary for the latest read on which candidate is ascendantThe New York Fed will release new schedules on Feb. 13 for Treasury purchases and repo operationsHere’s the economic calendar:Feb. 11: NFIB small business optimism; JOLTS job openingsFeb. 12: MBA mortgage applications; monthly budget statementFeb. 13: Consumer price index; jobless claims; real average earnings; Bloomberg consumer comfortFeb. 14: Import/export prices; retail sales; industrial production; capacity utilization; Bloomberg U.S. economic survey; business inventories; University of Michigan sentimentFed speakers are everywhere, and the chairman’s on Capitol Hill:Feb. 10: Governor Michelle Bowman; San Francisco Fed’s Mary Daly; Philadelphia Fed’s Patrick HarkerFeb. 11: Daly; Powell addresses the House Financial Services Panel; Vice Chairman Randal Quarles; St. Louis Fed’s James Bullard; Minneapolis Fed’s Neel KashkariFeb. 12: Harker; Powell before Senate Banking PanelFeb. 13: Senate panel holds hearing for Fed nominees Judy Shelton, Christopher Waller; New York Fed’s John WilliamsFeb. 14: Cleveland Fed’s Loretta MesterThe first coupon sales for the quarter are on the way:Feb. 10: $45 billion of 13-week bills; $39 billion of 26-week billsFeb. 11: $30 billion 56-day cash management bills; $38 billion of 3-year notesFeb. 12: $27 billion of 10-year notesFeb. 13: 4-, 8-week bills; $19 billion of 30-year bonds\--With assistance from Alexandra Harris.To contact the reporter on this story: Emily Barrett in New York at email@example.comTo contact the editors responsible for this story: Benjamin Purvis at firstname.lastname@example.org, Mark Tannenbaum, Nick BakerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. India’s central bank resorted to unconventional policy tools again, as it shored up efforts to bring borrowing costs down and boost demand in an economy on course for its weakest expansion since 2009.The Reserve Bank of India offered to inject as much as $14 billion cash through one- and three-year funding operations, akin to the long-term repos put in place by the European Central Bank. It also relaxed bad-loan norms for some small borrowers and eased reserve requirements for select lending on Thursday, while keeping the benchmark interest rate at a decade-low of 5.15% following a recent spike in inflation.“It has to be kept in mind that the central bank has several instruments at its command that it can deploy to address the challenges the Indian economy faces in terms of sluggishness in growth momentum,” Reserve Bank of India Governor Shaktikanta Das told reporters in Mumbai.The injection of more durable and long-term cash comes weeks after the RBI announced its own version of “Operation Twist” -- where it is buying long-dated government securities and selling short-term bonds. That has helped in better transmission of the central bank’s 135 basis points of rate cuts last year, Das said.The six-member Monetary Policy Committee also kept the door open for further monetary policy easing, by retaining its accommodative stance.“Das has done a Draghi again,” Arvind Chari, head of fixed income at Quantum Advisors Pvt Ltd. in Mumbai, told BloombergQuint, referring to the European Central Bank’s long-term repo operations that started in 2014. He has in the past likened Das’s comment on sticking to an easing bias for “as long as it is necessary” to the “whatever it takes” sentiment spelled by Mario Draghi, the former head of the ECB.Going BeyondIn December, Das resorted to ‘Operation Twist’ with the aim of keep borrowing costs in check after a shock spike in inflation forced the MPC to pause on rate cuts. With inflation now at 7.35%, the central bank’s ability to use the regular rate instrument to lower borrowing costs has diminished.While the MPC said it “recognizes that there is policy space available for future action,” the outlook for inflation is “highly uncertain at this juncture.”High inflation has already pushed India’s real rates -- adjusted for inflation -- deep into negative territory, making it less attractive to investors chasing high-yielding assets in emerging markets.“The RBI is keen to experiment with a wider toolkit, especially as its hands are tied in the short term, given the spike in inflation,” said Mitul Kotecha, senior EM strategist at TD Securities in Singapore. “The use of unconventional measures such as LTRO offers a way to try to enhance the monetary transmission mechanism and fine-tune policy, lowering shorter term yields, without having to cut rates.”The bond markets cheered the move, with yields on the two-year notes dropping by 18 basis points to 5.82% and that of the 3-year notes declining by a similar margin. Yield on the benchmark 10-year bonds was down by 5 basis points.Mild RecoveryThat drop in bond yields should translate into lower borrowing costs and help underpin the green shoots emerging in the economy.Growth in the year starting April is expected to rebound to 6% from an estimated 5% in the current fiscal year, according to the RBI. That matches the lower end of the government’s 6%-6.5% forecast and comes amid early signs of a growth turnaround in the economy.What Bloomberg’s Economists Say:“Looking ahead, we expect the RBI to keep its accommodative hold at its next review in April. Beyond that, inflation is likely to ease back into the 2-6% target range, which would open up room for a rate cut in June.”\-- Abhishek Gupta, India economistTo read more, click hereThe RBI flagged downside risks to growth from the coronavirus, saying the pandemic may “impact tourist arrivals and global trade.” That comes at a bad time for India where recent high-frequency data show that the manufacturing and services sectors are rebounding after a slump. A global slowdown could impact exports which have been rather sluggish.Central banks across Southeast Asia signaled strong policy action this week to counter a hit to their economies from the viral outbreak. The Bank of Thailand cut its benchmark interest rate to a record-low, while the Philippines also lowered borrowing costs. Singapore signaled there was room for the currency to ease and Bank Indonesia Governor Perry Warjiyo said the central bank will keep policy accommodative this year.(Updates with economist’s comments below the 13th paragraph)To contact the reporters on this story: Anirban Nag in Mumbai at email@example.com;Kartik Goyal in Mumbai at firstname.lastname@example.orgTo contact the editors responsible for this story: Nasreen Seria at email@example.com, Karthikeyan Sundaram, Jeanette RodriguesFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Singapore’s central bank said there’s room within its exchange-rate band to accommodate some weakness in the currency to counter the coronavirus outbreak. The local dollar slid to a four-month low as traders boosted bets for an easing.The currency, which is maintained in a band against a basket of peers, has been fluctuating near the upper end of its boundary since October and could track lower, the Monetary Authority of Singapore said in a statement Wednesday. It maintained its policy outlook and said it’ll meet in April, as scheduled.The assessment from MAS comes as traders are ratcheting up bets for Asian central banks to loosen policy to contend with the spread of a virus that has claimed almost 500 lives in China. Singapore’s trade-reliant economy could prove to be especially vulnerable if the disease disrupts supply chains and saps demand for everything from travel to commodities and investment.“The hit to the economy, both from tourism and supply-chain impact from China, has obviously opened the door to easing,” said Mitul Kotecha, senior EM strategist at TD Securities in Singapore. The Singapore dollar “has reacted negatively, extending its recent decline, and will likely remain under pressure as markets increasingly price in easing.”The Singapore dollar dropped as much as 0.9% to S$1.3824 against the greenback, the lowest since Oct. 10. It was the worst-performing currency in Asia on Wednesday.“There is sufficient room within the policy band to accommodate an easing of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) in line with the weakening of economic conditions” due to the virus outbreak, the MAS said in a statement.A Central Bank With No Key Rate? Yes, in Singapore: QuickTakeEven before the outbreak spread, the city state was already planning measures to prop up an economy reeling from the effects of the U.S.-China trade war. The disease has added to worries about the outlook, with 24 confirmed cases to date.The government expects gross domestic product to expand 0.5%-2.5% this year after growing 0.7% in 2019. Finance Minister Heng Swee Keat is expected to deliver a supportive budget on Feb. 18.Under PressureAt its last review in October, the MAS eased policy for the first time since 2016 and signaled it was ready to make further adjustments amid rising risks to the growth outlook.The central bank guides the local dollar against a basket of currencies, adjusting the pace of appreciation or depreciation by changing the slope, width and center of a currency band.It doesn’t disclose details on the basket and how it works. Australia & New Zealand Banking Group Ltd. estimates the most heavily weighted are the U.S. dollar, ringgit, yuan, euro and yen.The yuan’s movements will be a focal point for Singapore dollar investors, with China’s currency expected to come under more pressure from the virus-induced fallout, according to S&P Global Ratings.“The more the dollar-RMB pushes above 7, the more people will think the MAS is going to do something,” said Shaun Roache, Asia-Pacific chief economist at S&P. But for now, it’s “communicating to the market that there’s already a little bit of ability for the exchange rate to absorb some of the shock without a policy change today.”(Adds S&P comments in last two paragraphs)To contact the reporters on this story: Michelle Jamrisko in Singapore at firstname.lastname@example.org;Ruth Carson in Singapore at email@example.comTo contact the editors responsible for this story: Tan Hwee Ann at firstname.lastname@example.org, ;Nasreen Seria at email@example.com, Liau Y-SingFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.The pound headed for the biggest slump in seven weeks as clashing statements from the U.K. and the European Union fueled fears that talks between the two sides on a future trade deal will be fraught.Sterling fell more than 1% to lead losses among Group-of-10 currencies, wiping out last week’s advance. EU chief negotiator Michel Barnier said in Brussels that a “highly ambitious” trade deal is on offer for the U.K. -- but only if London agrees to its rules. Speaking minutes later, Prime Minister Boris Johnson rejected the demand and insisted Britain will thrive even if negotiations fail.The pound’s drop marks a turnaround from the U.K.’s formal exit of the EU on Friday, when the currency completed its best week since mid-December after the Bank of England kept interest rates unchanged Thursday. While Britain is now in a transitional phase without rule changes, it could still be heading for an economically messy divorce if a trade agreement can’t be reached by the end of 2020.“The tough talk from both sides has thrown quite a bit of cold water onto the post-election Boris bounce,” said Ned Rumpeltin, European head of foreign-exchange strategy at Toronto-Dominion Bank in London. “Now that Brexit is officially behind us, we think markets need to re-calibrate their expectations for a rather bumpy road ahead.”Change in FortunesThe pound rallied toward the end of 2019 on expectations that Johnson would win December’s election and break the U.K.’s political deadlock. The euphoria has since faded and traders are now watching for whether Britain will seek an extension to the transition period before the deadline to do so in June.The U.K. currency fell 1.5% to $1.3015 by 3:55 p.m. in London, after gaining 1% last week. It weakened 1.1% to 84.93 pence per euro. Much of the loss came before Johnson took to the podium, suggesting traders had already positioned in advance.“Today’s losses are probably accentuated by the fact that the pound had rallied so far after the BOE meeting,” said Jane Foley, head of foreign-exchange strategy at Rabobank in London. “That said, we suspect that cable will likely be trading below 1.30 in the weeks ahead on concerns about the tone of the talks.”Still, concerns over Brexit talks are just one part of the equation for pound traders.Sterling’s slide on Monday also reflects the fact that the support it enjoyed in recent days from month-end flows is no longer there. In addition, the currency’s long-term technical charts showed bearish signals on Friday, while global markets overall are trading with a risk-off bias on concern about the economic impact of the coronavirus.Indeed, steady options pricing suggests there is currently too much noise in the pound’s spot levels.The challenges the U.K. and the EU face in striking a trade deal this year aren’t exactly news to traders. Nonetheless, short-term positioning remains sensitive to headlines that suggest the two sides are in for a clash -- especially after Friday’s move which came amid sizable month-end flows that pressured the dollar versus most major peers.Add to that the chart signals that may have spurred momentum investors to chase the market lower, and sterling’s defensive start to the week may be largely explained.The pound-dollar pair formed a bearish candle pattern on the monthly chart, the so-called hanging man, which is an early indication of a waning bullish bias. The currency has entered mean-reversion mode on the daily chart and looks to form a bearish engulfing line pattern on Monday, suggesting further downside risks. For options traders, however, this is all mostly spot noise. Front-end implied volatility is trading near recent lows, while bets for outsized moves over the next week remain subdued.Risk reversals, which show whether traders prefer to own bullish exposure or not, remain steady. Six-month risk reversals, that cover the June deadline for extending the transition period, are near the least bearish sentiment for the pound in two years, as the market still sees a no-trade Brexit as a tail risk.NOTE: Vassilis Karamanis is an FX and rates strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice(Updates pricing.)\--With assistance from Neil Chatterjee.To contact the reporters on this story: William Shaw in London at firstname.lastname@example.org;Vassilis Karamanis in Athens at email@example.comTo contact the editors responsible for this story: Dana El Baltaji at firstname.lastname@example.org, Anil Varma, Michael HunterFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Treasury Secretary Steven Mnuchin’s debt managers are poised to detail how they will integrate the revived 20-year note into their arsenal for funding U.S. deficits forecast to top $1 trillion each year over the next decade.The government’s refunding announcement Wednesday is expected to show that quarterly long-term debt sales will remain at a record high from February to April. The suspense this week lies in how soon the Treasury will begin selling 20-year notes, and whether it will re-allocate any sales from other coupon-bearing debt to make room for the new maturity.Dealers expect 20-year bond sales -- which were put on ice in 1986 -- to start in May rather than this month. But the Treasury may provide details this week on the issuance’s structure for the first time since it unveiled the plan in mid-January. The new maturity comes as the government is trying to lock in low rates and find more options to fund itself.The deficit has grown under President Donald Trump, mostly because of his tax cuts and higher outlays, even as he had promised to eliminate it. It could swell even further as well if Democrats win the Oval Office in November, as leading candidates are pitching voters with spending plans that would add billions more.“Treasury is looking down the barrel of increasing deficits for a very long period of time,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities. “And as we get closer to the presidential election, there isn’t anyone preaching any sort of fiscally conservative views. So Treasury needs spare capacity to borrow more going forward and is trying to figure out where they can catch additional pockets of demand.”In the fiscal year that ended in September, the government posted a $984 billion shortfall -- its most since 2012 -- and the Congressional Budget Office’s latest projections have the gap breaching the $1 trillion mark in 2020 and remaining there at least through 2030.Dealer forecasts are coalescing around the Treasury keeping auction sizes of three-, 10- and 30-year debt unchanged at a total of $84 billion in sales scheduled Feb. 11-13. Among those surveyed, all expect 20-year debt to be sold starting in May.The Treasury is also likely to make clear it’s continuing to work toward adding floating-rate debt linked to the Secured Overnight Financing Rate in coming quarters. SOFR is the Fed’s preferred candidate to supplant Libor as a benchmark for dollar rates. Most firms expect Treasury officials to also share their views on whether bill supply is becoming scarce amid the Fed’s purchases aimed at addressing funding issues in the money markets.Coupon CutsWhere Wall Street dealers’ views are mixed is whether the Treasury will reduce auction sizes of other tenors in May to accommodate the new maturity.Most agree that the department will hold off on reducing other coupon offerings, even though it’s well funded at the moment, as the fiscal shortfall will start creeping up again in the fiscal year that begins in October. That’s when the Treasury will also start facing a wall of maturing debt, forcing officials to lift overall sales to avoid a drop in net issuance.“Seeing the contour of how financing needs will evolve over the next few years, if Treasury cut sales of some other maturities they’d just have to eventually raise them again,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. “Given Treasury’s aim to be regular and predictable, they don’t really like to quickly reverse themselves. And there’s a pretty big funding gap that opens up in fiscal 2021 and 2022.”Strategists at JPMorgan Chase & Co., Societe Generale, Credit Suisse and BMO Capital Markets are among those predicting cuts to other maturities to make room for the 20-year sale. That’s in part because the Treasury might want to avoid cutting bills, which some say are already becoming scarce due to the Fed’s purchases, or having its cash buffer rise too much -- both likely outcomes if there are no cuts in coupon offerings.Mnuchin told Bloomberg News last month the Treasury is weighing letting the cash balance increase for “risk-management purposes.” TD’s Goldberg expects that to be the case -- and that’s partly why he doesn’t foresee any coupon-cuts ahead. Treasury’s cash balance reached $450.5 billion on Jan. 29, the most since 2008, and was at $445.9 billion as of Jan. 30.Rising CostUse of debt financing is increasingly in vogue by those touting modern monetary theory. An adviser to Bernie Sanders’ presidential campaign says that the U.S. government could easily pump half a trillion dollars of extra deficit spending into the economy each year without risking a jump in inflation.“The accumulation of this debt has to be serviced and that’s why Treasury is scrambling to take advantage, where they can, of achieving savings on the interest payments,” said Bill Hoagland, a former Senate Budget Republican staff director who’s now a senior vice president at the Bipartisan Policy Center.The annual interest expense on Treasury debt has risen in each of the last four fiscal years, topping $574 billion in the most recent. CBO predicts net interest cost on all of the government’s debt will more than double over the decade. Interest costs are increasing due to the growing debt pile, even as the average yield it pays has fallen.That’s why some investors still expect the government to revisit the idea to issue ultralong debt beyond 30-years, even though Mnuchin told Bloomberg News that this plan is on hold for now.“I wouldn’t be surprised if they started dropping hints again about issuing longer term debt,” said Nick Maroutsos, global bonds co-head at Janus Henderson Group Plc. “Locking in rates at low levels makes sense.”\--With assistance from Sophie Caronello.To contact the reporters on this story: Liz Capo McCormick in New York at email@example.com;Saleha Mohsin in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, ;Margaret Collins at firstname.lastname@example.org, Jenny Paris, Scott LanmanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.There are signs that concern in the global foreign exchange market over the deadly coronavirus may be wearing off.The Swiss franc slipped to nearly a three-week low against the dollar on Wednesday, even as the virus spread further. The Japanese yen, another traditional refuge for safety, has failed to gain since Hong Kong initiated travel bans on Tuesday, while the Australian dollar, often traded as a proxy for China assets, is showing signs of weathering the outbreak.Currency markets may be looking through headlines which have helped dictate sentiment across other asset classes. The move in the franc in particular indicates some traders have already adjusted their portfolios and are looking toward other risks instead.Previous outbreaks of deadly diseases suggest currencies may be relatively resilient toward the spread of coronavirus, Nordea Bank Abp said in a research note earlier this week. While traditional bellwethers of risk appetite such as equities may face a temporary sell-off and bonds gain ground, moves in currencies are likely to be more contained, the bank predicted.The haven moves may also be linked to speculation that the virus could prove less deadly than some of its predecessors.“The latest focus seems to have shifted a bit to how the outbreak is progressing,” said Ned Rumpeltin, European head of foreign exchange strategy at Toronto-Dominion Bank in London. “This episode has eclipsed the infection rate of SARS, but there are also some indications that the relative severity of those cases may not be as acute.”Option markets are now signaling less bearish sentiment on the Australian dollar, a commodity-linked currency influenced by the country’s trade with China. One-week risk reversals, a barometer of positioning and sentiment, rallied in favor of buying the Australian dollar by the most in five months on Wednesday.Signs are also emerging that the euro could be about to strengthen against the Swiss franc. An indicator of whether the euro is oversold against the franc rebounded from a five-year low on Wednesday. The so-called relative strength index rose above 30, a level seen as signaling a reversal in direction.On technical charts, a candle pattern on the euro’s spot price against the franc on Tuesday suggested the shared currency could rise, or at least that a short-term bottom is in place.Moreover, the euro-franc pair closed above a key long-term level at 1.0673, the 38.2% Fibonacci retracement of its gains since January 2015. That was when the Swiss National Bank removed its currency cap against the euro and triggered one of the biggest shakeups in foreign-exchange history. Options pricing remains relatively steady, as bets for a stronger franc in the short-term have lost traction since Jan. 17.NOTE: Vassilis Karamanis is an FX and rates strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice(Updates with quote from Toronto-Dominion Bank in sixth paragraph.)To contact the reporter on this story: Vassilis Karamanis in Athens at email@example.comTo contact the editors responsible for this story: Dana El Baltaji at firstname.lastname@example.org, William Shaw, Neil ChatterjeeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
He oversees credit cards and unsecured lending, checking, deposit, payment products, residential lending and the bank’s Community Reinvestment Act efforts.
(Bloomberg Opinion) -- So far, 2020 has proved to be a tricky year for Wall Street bond strategists. First, they had to handicap the likelihood that a conflict between the U.S. and Iran would escalate into something truly terrible. Now they are grappling with the impact of the coronavirus that has left 80 dead in China, infected almost 3,000 people and spread across continents.In both cases, the immediate reaction was a massive rally in the $16.7 trillion U.S. Treasury market. The benchmark 10-year yield plunged 9 basis points on Jan. 3 in the immediate aftermath of the U.S. drone strike in Iraq that killed Qassem Soleimani. Similarly, the yield fell 5 basis points on Jan. 24 and tumbled an additional 7 basis points on Monday as the fallout from the disease intensified.In the first case, the rally fizzled within three days. Bond traders largely wrote off the episode as a blip that wouldn’t ultimately change the trajectory for global growth or the likelihood that the Federal Reserve would keep interest rates steady in 2020.Some strategists are making a similar call now. JPMorgan Chase & Co. says to sell 30-year bonds, calling the coronavirus scare “the latest risk of a series that have driven U.S. Treasury yields far below what fundamentals indicate.” TD Securities said it was closing its long 10-year Treasuries position in its model portfolio, explaining that “even though it is impossible to forecast the extent of contagion to the global economy or risk assets, we take profit on our long 10y trade as we don’t think that the risk-reward to being long Treasuries is as attractive any longer.” NatWest Markets acknowledged that “no one knows how offsides the market is at these levels,” but suggested “tactical longs should consider at least partially exiting here, while holding the core position.”Few dispute that if and when the coronavirus is contained, it’ll be painful for Treasuries. Even BMO Capital Markets, which is “decidedly in dip-buying mode,” estimates that 10-year yields will jump by 20 to 30 basis points when fears ultimately subside. Relative-strength index analysis suggests the market is already overbought and the haven-inspired rally should lose steam soon.But until that happens, the question is this: If traders can’t stomach 10-year Treasuries at 1.6%, what’s the alternative?For all the talk of stock markets in turmoil, the S&P 500 Index is still just down 3% from its all-time high and has gained more than 15% since early October. Investment-grade U.S. corporate bonds yield less than 1 percentage point more than Treasuries, close to the narrowest spread of the post-crisis period. And, of course, non-American safety seekers are really in a bind, with 10-year German bund yields falling to -0.38% and Japanese 10-year yields dipping to -0.05%. Simply put, nothing looks like a screaming buy, unless you count credit-default swaps on large U.S. airline companies.These back-to-back risk-off episodes have some strategists contemplating if they reflect something more permanent about the state of the world. Jim Vogel at FHN Financial put out his thoughts in a Monday note:“Markets trade them as one-off events. Unfortunately, the number of armed conflicts and political miscalculations has been steadily rising around the world for five years. Individual events can fade, but the overall noise level intensifies. For one thing, a structural increase in political and economic mistakes provides the infrastructure for still more. U.S. decisions to pull back from global affairs – hoping to force others to step up – represent an obvious vacuum that for now fosters more confusion and mistakes.”All of this throws a splash of cold water on what was supposed to be the prevailing investing theme of 2020: reflation. It’s hard to quantify what sort of damage the coronavirus will cause to global growth, but it’s safe to say it’ll come in lower, not higher. And the prospect of contagion makes it harder to focus on whether inflation will finally stage a comeback this year.I spoke earlier this month with Joseph Davis, Vanguard Group Inc.’s chief economist and global head of the Vanguard Investment Strategy Group. His headline-grabbing call was for U.S. growth to slow to just 1% in 2020. “Reflation is the head-fake this year,” he said. “Last year, it was recession.” He added that for the economy, “China is not going to be the world’s savior,” and that was before any word of the coronavirus.In that context, maybe a 1.6% yield on 10-year Treasuries doesn’t look so bad after all. It’s not what many expected — just six out of 58 analysts surveyed by Bloomberg saw it ending the first quarter at 1.6% or lower. But the events of the first few weeks of the year were equally as unpredictable. To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Today TD Bank announced several key changes to its Consumer Product leadership team. Matt Boss, previously Head of Credit Cards and Unsecured Lending (CCUL) at TD, has been named Head of Consumer Products, overseeing the Bank's Consumer Product portfolios. This includes Credit Cards and Unsecured Lending, Checking, Deposit, and Payment Products, Residential Lending and the Bank's CRA efforts. In this role, Boss will prioritize enriching the customer experience, incorporating new technology, and driving growth across each of the consumer product portfolios.
(Bloomberg) -- Canadian retail sales rose the most in eight months in November, helping to allay concerns about the recent weakness in household consumption.Retailers sold 0.9% more goods in November, largely offsetting October’s 1.1% decline, Statistics Canada said Friday in Ottawa. That beat economist expectations for a 0.6% gain. Higher sales at motor vehicle dealers as well as at food and beverage stores were the main drivers of the increase. In volume terms, which strip out the effects of price changes, November sales edged up 0.7%.The report is a breath of fresh air after a series of surprisingly soft Canadian economic indicators in the fourth quarter, but it doesn’t change the overall picture of retail sales in 2019. Receipts are up only 1.5% in the first 11 months of the year, the worst performance outside recession since at least 1992.“One month of data doesn’t make a trend, and it is important to note that the headline print was disproportionately driven by a bounce back in auto sales,” Omar Abdelrahman, an economist at Toronto-Dominion Bank, wrote in a note. “We still expect a tepid performance for the Canadian economy in the fourth quarter.”The loonie briefly appreciated on the report, then fell back, trading little changed at C$1.3139 against its U.S. counterpart at 9:54 a.m. Toronto time. Two-year government bond yields were also little changed at 1.51%.Key InsightsFriday’s report comes two days after the Bank of Canada struck a more dovish tone during its rate decision. The better-than-expected retail print may help temper worries that weak household consumption in Canada will be long-lastingStill, the report wasn’t uniformly strong. Excluding motor vehicles, retail sales increased 0.2%, missing the median forecast for 0.5% gain. In volume terms, the category was little changedRetail e-commerce sales climbed to a record 4.4% of total retail trade, though it’s unclear how much of total online shopping is captured by the dataGet MoreRetail sales at cannabis stores expanded 5.2% in NovemberMotors vehicles and parts (+3%) and food beverage stores (+0.9) led gains; general merchandise sales (-0.8%) were the main downward contributorOctober’s print was revised to -1.1% from -1.2%(Updates with chart, economist quote, currency reaction)\--With assistance from Erik Hertzberg.To contact the reporter on this story: Shelly Hagan in Ottawa at email@example.comTo contact the editors responsible for this story: Theophilos Argitis at firstname.lastname@example.org, Chris Fournier, Stephen WicaryFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.U.K. economic activity roared back to the highest level since 2018 this month, weakening the case for the imminent Bank of England interest-rate cut that markets continue to price in.IHS Markit’s flash index for output across the whole economy jumped to 52.4 as firms cited reduced political uncertainty in the wake of Boris Johnson’s decisive election victory. That’s up from 49.3 last month, but not enough to convince traders that a reduction is off the table on Jan. 30.The Purchasing Managers Indexes had emerged as a key factor in the debate over BOE easing this month, providing the most up-to-date assessment of the economy after the Conservatives’ win on Dec. 12. The reading was higher than forecast and above the level many economists said was enough to stave off a rate cut.Still, traders were still pricing in a greater-than 50% chance of a move after the release, with some economists pointing out more positive data earlier in the week had raised the bar for what was expected from the PMIs. and the pound fell.The data was “marginal above the level of 52, where one could expect the Bank of England starting to become more reluctant to cut,” said Mikael Olai Milhoj, a Danske Bank analyst. A cut is “still a real possibility but a close call as things stand.”What Our Economists Say:“A significant bounce in the composite PMI reading today should be enough to deter the Bank of England from cutting rates at its January meeting.”\-- Dan Hanson. Click here for the full U.K. REACTOne reason why the debate on easing isn’t settled is that reports are awaited from BOE agents, a cross-country network that holds confidential conversations with businesses and community organizations. Investors and forecasters will be in the dark about that intelligence until the decision is announced, when the accompanying Monetary Policy Report will include a section summarizing the feedback.Markit said the Friday’s composite figure, which was up from 49.3 last month and came in well above the 50.7 median-estimate of economists, was consistent with a quarterly growth rate of about 0.2%. That’s good news for Johnson as he prepares to officially take the U.K. out of the European Union next week.“It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut, with policy makers taking a wait and see approach as they assess the performance of the economy in the post-Brexit environment,” said Chris Williamson, Markit’s chief business economist.Market SwingsWhile a January rate cut was seen as unlikely at the start of 2020, a spate of weak data, along with dovish comments from policy makers, boosted speculation a move was coming. Bets moderated slightly this week after some more positive releases.Two of the BOE’s nine officials have already voted for easing, while a number of others, including Governor Mark Carney, have indicated they would be paying close attention to the data before making up their minds.“We think it’s a close call,” said Ned Rumpeltin, European head of foreign exchange at Toronto-Dominion Bank. “But ultimately we think the sum total of what we’ve seen in the UK’s recent data overall will be enough to motivate a cut next week.”The PMIs, like a report earlier this week from the Confederation of British Industry, showed optimism among firms had jumped following the election, with Markit’s measure reaching the highest since June 2015. They also suggested the pickup may translate into real growth, with measures of new work rising strongly.The flash readings, based on 85% of responses, showed a gauge for the U.K.’s dominant services sector alone jumped to a 16-month high of 52.9, from 50 last month. Meanwhile an index for manufacturing reached 49.8, up from 47.5 in December and approaching the 50 level that separates expansion from contraction. Final readings will be released in the first week of FebruaryThe PMIs have previously come under criticism for being overly sensitive to political developments, while Carney said last year that they can be a misleading indicator of economic output in times of extreme uncertainty.For example, in the immediate aftermath of 2016’s Brexit vote, they presented a far gloomier picture of the economy than ultimately came to pass, a phenomenon that repeated itself last year.\--With assistance from Jill Ward, Greg Ritchie and William Shaw.To contact the reporters on this story: Lucy Meakin in London at email@example.com;David Goodman in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Fergal O'Brien at email@example.com, Brian Swint, Alaa ShahineFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.