Here are the top four things you need to know in financial markets on Friday, January 19:
1. U.S. 10-year yield hits highest level since 2014
The yield on the U.S. 10-year Treasury hit its highest level in more than three years on Friday as the selloff in global bond markets continued. Bond yields move inversely to prices.
Investors are speculating that global central banks are embarking on a solid move to remove ultra-loose monetary policies with the Federal Reserve projecting to raise interest rates three times this year.
Moreover, market participants are positioning ahead of governement debt issuance that will likely be needed if U.S. President Donald Trump’s follows through on his massive infrastructure plan.
At 5:59AM ET (10:59GMT), the 10-year yield rose around 0.7% to 2.630%, close to an intraday high of 2.642%, not seen since September 2014.
2. Dollar wallows near 3-year highs on government shutdown worries
The dollar hovered near a three-year low against major rivals on Friday as fears of a possible U.S. government shutdown added to underlying weakness that stems from the growing trend toward monetary policy normalization around the world.
The U.S. House of Representatives passed a bill on Thursday to fund government operations through February 16 and avoid agency shutdowns this weekend when existing allocations expire, but President Donald Trump’s insistence that an extension of funding for the Children’s Health Insurance Program (CHIP), a Democratic priority may have complicated its passage in the Senate.
At 6:01AM ET (11:01GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.22% at 90.11, moving closer to Wednesday’s three-year trough of 89.97. It is down around 2% so far in 2018.
3. U.S. set to take pole position in global oil output, IEA says
U.S. oil output is set for “explosive” growth this year as prices rally, potentially offsetting a further collapse in Venezuela’s production, the International Energy Agency said in its monthly report released Friday.
The IEA boosted its forecasts for non-OPEC supply growth this year by 100,000 barrels to 1.7 million barrels a day compared to last month’s report.
“This year promises to be a record-setting one for the U.S.,” the IEA said Friday.
“Relentless growth should see the U.S. hit historic highs above 10 million barrels a day (in output), overtaking Saudi Arabia and rivaling Russia during the course of 2018 — provided OPEC and non-OPEC restraints remain in place,” the Paris-based organization explained.
U.S. crude oil futures fell 0.39% to $63.70 at 6:02AM ET (11:02GMT), while Brent oil lost 0.40% to $69.03.
Later on Friday, market participants will also keep an eye on U.S. shale production when Baker Hughes releases its most recent weekly rig count data.
4. Wall Street set to recover while eyeing shutdown and consumer data
U.S. stocks looked set Friday to bounce back from the prior session’s losses as market participants kept an eye on developments in the wrangling over the extension of funding to avoid a government shutdown this weekend.
Investors will also pay attention to the preliminary release of the University of Michigan’s consumer sentiment index for January out at 10:00AM ET (15:00GMT).
At 6:03AM ET (11:03GMT) Friday, the blue-chip Dow futures rose 87 points, or 0.34%, S&P 500 futures advanced 8 points, or 0.30%, while the Nasdaq 100 futures gained 31 points, or 0.46%.
Elsewhere, European bourses also gained as traders focused on a fresh round of corporate earnings reports.
Earlier, Asian shares closed higher as optimism over the global economic growth outlook and improved corporate earnings continued to support the rally at the start of 2018. Further supporting economic confidence was data on Thursday that showed China’s growth in 2017 accelerated for the first time in seven years.