UK wages push Gilts-Bund spread to historic levels
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Why has the UK‑Germany gilt‑Bund spread widened to historic levels?
The spread between UK and German bond yields is now the widest since the fall of the Berlin Wall and the reunification of Germany. Now the divide though is monetary policy, every reason for the ECB to cut, rising wages, and the reasons for the Bank of England to do less. And then what about the Fed? We are 24 hours away from their next meeting. Retail sales today in the United States were strong, but not overly so, so maybe they've hit the sweet spot. It's Wednesday, it's the 18th of December. Twenty twenty four, it's the morning call from Nab. Good morning. Well, not much movement in the US dollar, but the Aussie dollar is down naught point six per cent, the Canadian dollar down half percent this morning, the pound is up naught point two percent, and the yen is up naught point four percent.
The Aussie now, by the way, at sixty three point three US cents. US equities are in the red. In fact, at the close, the worst day since the end of October. The Dow is down naught point six percent, the S P has lost naught point four percent, the Nasdaq down a third of one per cent, the Russell thousand one point eight percent lower this morning, all those closing prices. And a similar story in Europe where the FTSE one hundred is down naught point eight percent, the DAX down a third of one percent at close. No big moves with bonds. Yields on ten year treasuries are unchanged, down four in Canada, down two in Germany. When I say no big moves, actually up eight basis points in the UK, up ten for two year guilts in the UK, up to four point four six percent.
That is fixed. fifty five basis points higher than it was a few months ago. An Aussie ten years were at four point two nine percent yesterday, up a few basis points on futures overnight. An oil down quite a bit, three quarters of a percent off WTI. It was worse earlier in the session, naught point nine percent off Brent. Brent around seventy three thirty a barrel now.
How did US equity markets react to the latest data releases?
So NABS Sky Masters joins me today. So we've got this fall in equities in the United States. I'm wondering whether that's if Any of that is reflecting uh the the strong retail sales. Well th they were strong but they weren't too strong, were they? And maybe they were just right because we did sort of um I mean it was feared they might be higher and because they weren't, we saw yields falling back a little bit, didn't we, after those results came in.
Yeah, good morning. Good morning, Phil. Um, an an interesting night of of price action across financial markets. Um y you know, it a a pretty busy data calendar. Um and you know, one one of the key reports, as you've mentioned, was was the US retail sales and um we also had industrial production and and manufacturing um data out in the US as well. So the data was a bit bit mixed. From from the US. So the the headline retail sales number was a touch stronger than expected, so it came in at point seven percent versus um the consensus um estimate of point six. Uh and you know it was seen that sales were boosted by the Black Friday um at online stores, but also by by auto sales. Um and you know, this this report follows some strong prints seen in September.
and October and and does suggest that the consumer um spending um has remained supportive into into year end. But as as you said, sort of post the data releases we've actually seen Treasury yields um head lower in yield and and and equity markets are weaker. So so you know why why is that? You know I think you know within the detail within the report the core reading of retail sales did come in weaker than expected. And then also there were some warning signals within the detail of the headline print. So of note was the fall in spending on food services, which was down point four percent. So it is noted that this this can be revised quite heavily.
What did the US retail‑sales report reveal about consumer spending?
So it's something just just to watch, but it is sort of maybe early side It is is the consumer was consumer appetite for discretionary spending starting to wane. So I think that that was a warning signal. And then also industrial production manufacturing reports came in we weaker than expected.
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Chapters
8 chapters
1
Why has the UK‑Germany gilt‑Bund spread widened to historic levels?
0:01–1:38
2
How did US equity markets react to the latest data releases?
1:38–3:38
3
What did the US retail‑sales report reveal about consumer spending?
3:38–5:31
4
How are rising UK wages influencing BoE policy expectations?
5:31–7:40
5
What does the widening gilt‑Bund spread indicate about ECB vs BoE outlooks?
7:40–9:32
6
Why are commodity currencies like the Aussie and Canadian dollar weakening?
9:32–11:39
7
How is Australian consumer sentiment affecting market expectations?
11:39–13:46
8
What are the key Fed expectations ahead of tomorrow’s FOMC decision?
13:46–14:28