Daily Market Report - 30/01/2015

UK 10-year bond yields fell to a record low of 1.402 per cent today, as investors rushed to plough cash into an asset largely regarded as "safe". The fall came a day after Bank of England chief economist Andrew Haldane admitted that "there's no rush" to raise interest rates. The base rate has now been at 0.5 per cent for 70 consecutive months.

At the same time, the Bank's governor, Mark Carney, suggested the UK could sink into deflation for a period of time, suggesting it will do all it can to keep borrowing costs low. That dovish tone was enough to convince investors that the UK is a reasonably reliable bet. The last time gilt yields were anywhere near this low was during the height of the euro crisis, in 2012, as investors sought refuge in the UK's relatively safe government debt. But that began to climb as rumours increased that the Bank of England could begin to hike rates.

Yesterday the US labour market got a welcome boost as the weekly Initial jobless claims figure fell sharply last week to 265,000, the lowest level for initial jobless claims since April 15, 2000, according to the Department of Labour. This is also the largest week-over-week decline since April 2009.

 Expectations were for claims to come in at 300,000, down slightly from last week's 307,000 number. Last week's number was revised up slightly to 308,000. Initial jobless claims are still near historic lows and are consistent with an economy that is adding jobs and going from strength to strength. 

The Euro finally received some good news yesterday as the German’s jobless rate fell for the fourth-month straight, taking it to an all-time low, in another sign that the Eurozone's largest economy is strengthening. It fell to 6.5 percent in December, or the lowest level since the country reunified in 1990. The number of people out of work fell to 9,000 to 2.84 million on a seasonally adjusted basis, data released today by the Labour Office showed. A strong German labour market, combined with lower energy prices is providing the consumer the confidence to spend

While Germany narrowly avoided falling into recession last year, since then its economy has gone from strength to strength, and yesterday the government revised its growth outlook for this year to 1.5 per cent, up from an earlier estimate of just 1.3 per cent. Yesterday’s  figure  shows the "star economy" is pushing further away from the rest of its peers, with the Eurozone unemployment rate currently languishing at 11.5 per cent.

Key Announcements:
EUR - 10:00 : Eurozone Consumer Price Index (YoY) Jan expected to fall from -0.2% to -0.5%
EUR - 10:00 : Eurozone unemployment  rate (Jan) expected to unchanged at 11.5% 
USD - 13:30 : US Gross Domestic Product (Q4) expected to be lower at 3.3% from 5%

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