- Signs that an agreement in the fiscal cliff negotiations is close - stock markets and US bond yields markedly higher.
- House prices in China continued to recover in November.
- We expect Riksbank to cut its repo rate by 25bp today. Markets since yesterday
It appears that the US is substantially closer to an agreement in the fiscal cliff negotiations, see Wall Street Journal. Apparently President Barack Obama delivered some important concessions in connection with discussions yesterday with Republican House Speaker John Boehner, after Boehner on Friday accepted tax increases for affluent households with incomes exceeding USD1m.
President Obama softened his stance on tax increases for the wealthy and said that he was now willing to accept that the Bush-era tax cuts should only expire for households making more than USD 400,000 and not as previously demanded for households with incomes exceeding USD 250,000. In addition, Obama also accepted a Republican proposal to slow social security growth by using a different cost-of-living adjustment for social security disbursements.
The negotiations also include a possible deal on raising the debt ceiling that could be reached as soon as February. Aides to Boehner called the offer from President Obama "a step in the right direction."
House prices in China continued to increase moderately in November, according to the official house prices released in China this morning. China only releases data for individual cities but according to Danske Bank’s house price index for the 35 largest cities in China house prices in November increased -0.8% y/y after increasing -1.4% y/y in October. Seasonally adjusted house prices increased 0.3% m/m in November.
The US stock market closed markedly higher yesterday on expectations that an agreement in the fiscal cliff negotiations is imminent. S&P 500 yesterday finished 1.2% higher. Asian stock markets are also higher across the board, mainly taking their lead from the positive developments in the US. Nikkei is up 1.2% and Shanghai 0.9%.
US bond yields are also markedly higher and the yield curve continues to steepen. Since markets closed in Europe yesterday 10-year US bond yields have increased 6bp to 1.78%.
In the FX market EUR/USD this morning is trading largely unchanged at 1.317. JPY has weakened slightly since market close in Europe yesterday and USD/JPY is this morning trading 84.00. In the Scandinavian currencies SEK has continued to weaken moderately ahead of today’s Riksbank interest rate decision.
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