February 26, 2018, by Lorcan Roche Kelly
The recovery in global stocks endures, with markets taking their cue from Friday’s strong U.S. performance. Overnight, the MSCI Asia Pacific Index advanced 0.8 percent, while Japan’s Topix index closed 0.8 percent higher with telecoms and drugmakers leading the gains. In Europe, the Stoxx 600 Index was 0.5 percent higher at 5:45 a.m. Eastern Time with all industry groups in the green. S&P 500 futures added 0.4 percent, the 10-year Treasury yield was at 2.864 percent and gold was higher.
The bond market has paused the push for 3 percent on the 10-year Treasury yield as it awaits Federal Reserve Chairman Jerome Powell’s address to Congress this week, kicking off with the House Financial Services Committee tomorrow. A number of veteran central-bank watchers suggest Powell may be willing to accept inflation as high as 2.5 percent as the monetary authority seeks to extend the almost nine-year U.S. expansion. Meanwhile today, European Central Bank President Mario Draghi is scheduled to face lawmakers in Brussels, as the crisis in Latvia seems certain to dominate the question-and-answer session.
Xi, Xi… Xi?
China’s Communist Party is set to open the path for Xi Jinping to rule the country beyond 2023 with a repeal of the constitutional provision that caps the number of consecutive presidential terms at two. While analysts welcomed the development, saying the political certainty would be largely positive for Chinese assets, there were warnings that a lack of accountability could lead to higher risks of policy errors. Companies that cater to the country’s growing middle class and those focussed on the state’s security apparatus have fared best under Xi’s rule to date.
A mixture of supply constraints and a falling dollar sees crude holding Friday’s gains. A barrel of West Texas Intermediate for April delivery was trading slightly higher at $63.59 by 5:45 a.m. as disruptions hit exports from Libya. The changing face of U.S. exports, with the new option to load very large crude carriers at the Louisiana Offshore Oil Port, is set to cut costs and waiting times for buyers in Asia.
One more deal
Berkshire Hathaway Inc. Chairman and CEO Warren Buffett said the company needs to make “one or more huge acquisitions” in order to substantially increase earnings in its non-insurance group. The company also revealed a $29 billion boost to net earnings in the fourth quarter from changes in the U.S. tax code. Elsewhere in corporate deals, United Parcel Service Inc. is suing the European Union for 1.7 billion euros ($2.1 billion) in compensation for damages it says it suffered after regulators wrongly blocked its attempted takeover of TNT Express NV.