The global bond rally is getting serious, China gears up to weaponize rare earths, and big moves in the commodity market. Here are some of the things people in markets are talking about today.
2% in sight
Government bond yields across the world are tumbling again, with the U.S. 10-year trading at 2.23% this morning as global trade tensions mount. The gap between the three-month and 10-year American yield fell as low as minus 12 basis points, the most since negative 2007. Benchmark yields in Australia and New Zealand dropped to all-time lows, Japan’s fell close to -0.1%, the lowest in three years, while German bund yields are close to the rock-bottom.
China may use its dominance in the global supply of rare-earth elements, critical for the many modern manufactured goods, as a means of striking back at U.S. trade measures. Chinese media, including the main outlet for the ruling Communist Party, ran reports highlighting that very prospect. The country controls 80% of global supply. Shares of companies in the sector have surged since President Xi Jinping visited a production facility in Jiangxi last week.
The renewed concerns over the health of the global economy and the trade outlook is hitting oil again, with a barrel of West Texas Intermediate dropping more than 2% this morning to trade at $57.80 by 5:45 a.m. Eastern Time. The rally in iron ore ground to a halt, with ArcelorMittal, the world’s largest steel producer, announcing cuts in production across its European operations due to weak demand. The one place for commodity bulls is U.S. grain futures, with a corn contract hitting the highest level in three years after a 20% gain in less than three weeks as rainfall continues to stop farmers getting seed in the ground.
Overnight, the MSCI Asia Pacific dropped 0.7% while Japan’s Topix index closed 0.9% lower as investors reassessed the global growth outlook. In Europe, the Stoxx 600 was down 1.5% at 5:45 a.m. with miners leading the losses in a session which is seeing every major industry group lower. It is a similar story with S&P futures which are pointing to a sharp drop at the open. Gold is higher.
All 25 analysts surveyed by Bloomberg see policy makers at the Bank of Canada holding rates unchanged when the monetary policy decision is announced at 10 a.m. in Ottawa. The moves in the bond market may see more attention paid to today’s Treasury auctions in which two- and seven-year notes are being sold. Exxon Mobil Corp. and Chevron Corp. both hold shareholder meetings today where the companies face votes on climate-change policies.