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DJ FTSE 100 to Trade Flat Ahead of US Jobs Data -- Market Talk

· 02/05/2021 02:45

0745 GMT - The FTSE 100 is expected to start the session trading flat as investors continue to weigh Thursday's Bank of England policy announcement and look ahead to U.S. jobs data later. IG estimates the index will open 2 points lower. Sterling extends Thursday's gains after the BOE left its key interest rate unchanged at 0.1% and poured cold water on the prospect of negative rates in the near-term. The U.S. nonfarm payrolls report, due at 1330 GMT Friday, is expected to show a return to jobs growth in January. "A strong figure seems unlikely to discourage risk lovers, but too strong data could weigh on investor sentiment and lead to some profit taking in risk positions," Swissquote Bank analyst Ipek Ozkardeskaya says. (renae.dyer@wsj.com)

0720 GMT - German 10-year Bund yields are trading essentially unchanged, showing no reaction to a sharp reduction in German manufacturing orders in December. German manufacturing orders fell by 1.9% on the month in December, underperforming economists' forecast of a 0.8% fall in The Wall Street Journal's poll. The 10-year Bund yield is trading 0.2 basis point lower at -0.458%, according to Tradeweb. (emese.bartha@wsj.com)

0714 GMT - Italian government bond, or BTP, yield spreads over Bunds are testing the 100 basis point level as investors remain confident that former European Central Bank President Mario Draghi will succeed in forming a new government. "While the direction of travel [of BTP-Bund spreads] seemed clear, the speed of the adjustment is still remarkable, considering the remaining question marks of how Draghi is going to establish a stable majority," says Christoph Rieger, head of rates and credit strategy at Commerzbank. The German bank looks at foreign investors as driver of the next leg of spread tightening. The 10-year BTP-Bund spread is trading just a nod above 100 basis points, down 0.5 basis points, according to Tradeweb. (emese.bartha@wsj.com)

0706 GMT - BNP Paribas posted strong investment-bank results for 2020, with fixed-income revenue booming on the back of strong client activity, but it warned that a fixed-income slowdown is to be expected this year. Fixed-income revenue rose almost 59% last year, a performance unlikely to be repeated this year. Fixed-income "is unlikely to experience the same magnitude of revenues that it generated in 2020 on the back of exceptionally intense client activity," the bank said. (pietro.lombardi@dowjones.com; @pietrolombard10)

0703 GMT - Investors tolerate risks related to Italian government bonds, or BTPs, increasingly better, say Societe Generale's rates strategists. The 10-year BTP-Bund spread narrowed to 100 basis points this week, as investors cheer former European Central Bank President Mario Draghi's decision to accept the mandate to try and form a government in Italy. "Investors' risk tolerance on BTPs has increased, while that on Bunds is deteriorating," they say, maintaining their target for the 10-year BTP-Bund spread of 90 basis points. Still, the strategists consider the BTP-Bund spread volatility too high, and say that if the spread volatility doesn't decline soon, valuations will start looking overstretched. (emese.bartha@wsj.com)

0647 GMT - Pictet Asset Management considers Chinese bonds continuing to be an attractive investment, as they are a source of yield. The Chinese economy is staging a V-shaped recovery from the pandemic-induced slowdown, boosting the bond market's real yield differential with the U.S. to a record 400 basis points, Pictet AM says. Meanwhile, core inflation in China stands at a 10-year low of 0.4% which should prevent a tightening of monetary policy in the country, the asset manager says. (emese.bartha@wsj.com)

0641 GMT - The Netherlands' new July 2031 DSL and Germany's new April 2033-dated inflation-linked bonds are among government bond issuance in the eurozone next week. The Dutch State Treasury Agency will launch the new 10-year bond at a direct auction, aiming to raise EUR4 billion-EUR6 billion on Tuesday. On the same day, the German Finance Agency will launch the April 2033-dated linker with EUR1.5 billion on offer. Germany on Wednesday will auction EUR4 billion in April 2026 Bobl. Italy is set to round up next week's supply on Thursday, with the exact details of that auction to be announced on Monday. (emese.bartha@wsj.com)

0641 GMT - Commerzbank expects Portugal to skip a government-bond auction window next week after a EUR3 billion 30-year bond-issuance this week. Portugal's debt agency keeps the second and fourth Wednesdays of a month open for a government bond auction and it usually takes the first window, which would be Feb. 10. Still, if Portugal's debt agency wants to hold an auction next week, it will announce an auction later on Friday. (emese.bartha@wsj.com)

0608 GMT - The Nikkei Stock Average ended up 1.5% at 28779.19, supported by transportation and real estate stocks. Corporate earnings remain closely watched. Transportation stocks were among the top gainers, with East Japan Railway 3.4% higher, West Japan Railway up 6.3% and Tobu Railway up 3.3%. Real estate stocks also rose, with Nomura Real Estate up 2.3%, Star Mica Holdings and Hulic Co. each advancing 2.9%. USD/JPY was at 105.50 compared with 105.55 late Thursday in New York. The yield on the 10-year Japanese government bond was unchanged at 0.055%. (justina.lee@wsj.com)

0247 GMT - Asian currencies mostly weaken against USD, as improved economic prospects for the U.S. versus the rest of the world increase the appeal of USD-denominated assets. The USD's outperformance reflects the better near-term outlook for the U.S. economy compared to the Eurozone and Japan, partly due to the faster rate of Covid-19 vaccinations in the U.S., CBA says. USD/KRW climbs 0.5% to 1,125.82, USD/SGD rises 0.1% to 1.3382, while USD/JPY is little changed at 105.54. (ronnie.harui@wsj.com)

2353 GMT - RBA Governor Phil Lowe has rejected assertions made in a parliamentary hearing that the central bank has become too insular and that its decision-making processes are therefore weakened. Strangely, the criticism of the RBA then extended to questions around having central bank outsiders appointed to its nine-member, interest-rate setting board. There are seven people not from the RBA on the board, comprising six people from the business sector and the Treasury Secretary. (james.glynn@wsj.com ; @JamesGlynnWSJ)

2349 GMT - Japanese stocks may rise on hopes for corporate earnings recoveries and a weaker yen. Nikkei futures open up 230 points at 28620 on the SGX. USD/JPY is at 105.55, up from 105.14 as of Thursday's Tokyo stock market close. Some Japanese exporters' shares may benefit from the yen's recent trend weaker. Mitsui Fudosan, Nippon Steel, Nippon Telegraph & Telephone are set to report their results later in the day, among other big companies. The Nikkei Stock Average fell 1.1% at 28341.95 on Thursday. (kosaku.narioka@wsj.com)

(END) Dow Jones Newswires

February 05, 2021 02:45 ET (07:45 GMT)

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