1. British data prompts global bond selloff; oil rises

British data prompts global bond selloff; oil rises

Strong growth data out of Britain prompted the worst daily selloff in government bond for months and pushed yields on the world's benchmark bonds higher on Thursday, as expectations eased for a Bank of England interest rate cut.

By: | New York | Published: October 28, 2016 3:13 AM
In the United States, equity losses led by Comcast and consumer discretionary stocks offset gains in the healthcare sector, while European stocks slid and the US dollar advanced against the Swedish crown and Japanese yen. (Reuters) In the United States, equity losses led by Comcast and consumer discretionary stocks offset gains in the healthcare sector, while European stocks slid and the US dollar advanced against the Swedish crown and Japanese yen. (Reuters)

Strong growth data out of Britain prompted the worst daily selloff in government bond for months and pushed yields on the world’s benchmark bonds higher on Thursday, as expectations eased for a Bank of England interest rate cut.

In the United States, equity losses led by Comcast and consumer discretionary stocks offset gains in the healthcare sector, while European stocks slid and the US dollar advanced against the Swedish crown and Japanese yen.

Official data showed that Britain’s economy slowed only slightly in the three months after it voted to exit the European Union. It grew by 0.5 percent between July and September, a touch less than the second quarter’s 0.7 percent, enough to temper fears about an immediate economic impact following the Brexit decision.

Britain’s 10-year gilt was up 12 basis points to yield 1.27 percent, on track for its biggest daily rise since June 2015.

German and U.S. equivalents rose to their highest since early June at 0.19 percent and 1.86 percent, respectively. U.S. government yields were fueled further by upbeat jobless claims data, and were last at 1.85 percent.

“The stronger (gross domestic data) print in the UK has given further weight to speculation that the BoE will not provide further stimulus any time soon,” said Rabobank strategist Richard McGuire.

In U.S. equity markets, investors took Qualcomm’s deal to buy NXP Semiconductors for about $47 billion as a sign of confidence, sending up shares of both.

Despite beating earnings estimates a day earlier, Comcast pulled the S&P and Nasdaq lower, paring some losses after falling as much as 2.7 percent following price target cuts from Barclays and Deutsche Bank.

The Dow Jones industrial average fell 11.82 points, or 0.06 percent, to 18,187.51, the S&P 500 lost 4.15 points, or 0.19 percent, to 2,135.28 and the Nasdaq Composite dropped 29.66 points, or 0.56 percent, to 5,220.61.

Interest-rate sensitive sectors also struggled as bond yields rose. The S&P real estate sector was down 2.5 percent and on track for its worst decline in five weeks while utilities shed 0.4 percent.

Europe’s STOXX 600 slipped 0.01 percent, with defensive sectors such as healthcare and utilities providing the biggest boost to the index, underscoring investor caution.

The MSCI all-country world stock index was down 0.33 percent.

The U.S. dollar hit its highest in more than seven and a half years against the Swedish crown after dovish comments from Sweden’s central bank, and a three-month high against the yen on expectations for a December Federal Reserve rate hike.

The dollar extended gains during the day, last up 1.82 percent against the Swedish crown at 9.0702 crowns, after touching 9.0890, its highest level since early March 2009.

Oil prices edged higher on a reported drop in U.S. crude oil inventories, and as commitments from Gulf OPEC members assuaged doubts in the market about cooperation from other producers.

U.S. crude settled up 1.10 percent, or 54 cents, at $49.72 a barrel, while Brent crude added 44 cents, or 84 percent, to $50.40.

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