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Yet seeing that the Fed Chair Yellen is firmly perched on a hawkish stance, there is certainly something preparing for the end of this year. Judging from the FOMC Chair Yellen’s speech yesterday, the first Fed rate hike may happen by December and could rather be a relief for the entire market. Both the G10 and emerging markets are running out of patience regarding the lack of visibility on Fed’s road map.
A potential status quo in December could cost the Fed dearly, in terms of market volatility and financial instability and even credibility. For now, despite record lows in the likes of the Brazilian Real, the South African rand and the Turkish lira, the market is pricing in a near 50% probability of a move in time for Christmas.
Due today, the US second quarter growth data could see a downside revision. The slowdown in exports but also the accumulation of business inventories warns that lethargy will soon knock at US’ door. The recent experience has proven that massive cash injection in the financial system has not been an efficient solution. Therefore the positive correlation between the risk appetite and the life expectancy of low rates wanes significantly.
Investors are craving for a clearer picture and the marginal utility of an extra month of cheap Fed liquidity decreases. Stock prices are heading south even if the Fed is willing to leave the cash tab open for some more time.
The commodity market has been the first to throw in the towel; the artificially puffed up stock market has however a longer way to run south.
The US sovereign yield curve flattened by more than 10 basis points on the back-end since the FOMC decided to keep its policy rates unchanged at the September meeting. Inflows to the US sovereign bond market continue as if there were no tomorrow. According to a UBS report, the treasury AUM was boosted by about 12% over the past month. The capital flow dynamics suggest that the US treasury market is still perceived as the best place to be parked.
European markets look set to turn lower at the start of trading on Monday. The new US and Chinese tariffs take effect today so traders in Asia and Europe look cautious. Both continents are more exposed to global trade than the US. For markets, the new tariffs …Read more
Whilst risk sentiment has been healthy across the week, this swelling optimism boosted US stock markets to an all-time high overnight. A rally in tech stocks, which have done a lot of lifting for the indices over the year, in addition to fading concerns over U…Read more
Despite a shaky end to trading on Wall Street overnight, which saw the Dow gain 0.6%, the S&P just 0.1% and the Nasdaq slip by the same, Asian markets moved broadly higher on improved sentiment. European bourses are taking the lead from the US over Asia, w…Read more
Asian markets took the lead from Wall Street overnight, rallying as the latest tit for tat measures in the escalating trade spat have not been quite as severe as the markets had been expecting. Tech stocks were also heavily in demand, bouncing back after steep…Read more
Traders are faced with a sea of red in risk-off trading as markets are set to open on Tuesday. Despite the fact the market has been expecting an escalation in trade tensions between the world’s two largest economies with further tariffs from Trump; the reality…Read more
Escalating trade tensions will once again be a central theme to driving sentiment and trading this week, with President Trump widely expected to levy tariffs on a further $200 billion worth of Chinese imports, potentially as soon as today. The elevated trade c…Read more
European bourses are set to take the lead from a positive session on Wall Street and Asia overnight. A drive higher from tech stocks on Wall Street helped lift Asian equities after their recent battering, pulling them off 2-year lows.
Asian markets were endin…Read more
Today will be a busy day for traders with 2 central bank rate decisions and US inflation data all due for release within a few hours of each other. The BoE monetary policy announcement will kick things off, followed shortly after by the ECB rate announcement a…Read more