The BoC/PMIs/Wash, rinse, repeat with yen/A bunch of interesting earnings comments

Yes, the Bank of Canada cut rates by 50 bps yesterday as expected to 3.75% but its 10 yr yield today is at the highest level since late July at 3.26%. Their reasoning for stepping up the cuts, "With inflation now back around the 2% target, Governing Council decided to reduce the policy rate by 50 bps to support economic growth and keep inflation close to the middle of the 1% to 3% range." And what comes next? "If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further." But, "We will take decisions one meeting at a time." It's the Canadian dollar that has mostly reflected the BoC dovishness with it trading at the weakest level vs the US dollar since early August. 

It's going to be really interesting from here where long rates go not just in Canada but also around the world as central banks cut short term rates. In terms of messaging, does the long end believe the central banks are right in believing that inflation will stay down or instead they are stoking a resumption of a lift? Are the excessive global sovereign debt levels now mattering? I still expect a lot of inflation volatility in coming years and think that the overload of government debt now does matter (see gold) and long rates are still heading higher in fits and starts. 

Today starts to bring us October PMI data from S&P Global. Japan's composite index fell back under 50 at 49.4 with manufacturing falling to 49 from 49.7 and services down to 49.3 from 53.1. S&P Global said "Firms often attributed the deterioration to a muted economy and subdued new order flows." Australia's was little changed at 49.8 vs 49.6 with both components little changed with manufacturing at 46.6 and services at 50.6. 

The bright spot around the world continues to be India with manufacturing at 57.4 and services at 57.9. 

The October Eurozone PMI didn't move much at 49.7 vs 49.6 in September as expected with continued weakness in manufacturing and relative strength in services.  S&P Global said "The Eurozone is stuck in a bit of a rut, with the economy contracting marginally for the 2nd month running...At the country level, it can be noted that the deterioration of the situation in France was met by a slight moderation in the decline in Germany."

While the ECB continues to cut and likely wants to again in December, "Inflation in the services sector seems likely to stay elevated, as costs and selling prices in October rose faster than the previous month. This is probably due to persistent wage pressure, which impacts service providers especially hard."

After the recent selling, European yields are dropping, but not sure if in response to the data which was about in line or after a modest rally in Asian bond markets. US yields are down too after the 10 yr touched 4.25% yesterday. I mentioned the other day that 4.30% is the key level to watch as it's the 50% retracement of the moved to 3.60% from 5% last year.