From Marc to Market:
Overview: The US banking crisis has overwhelmed other market drivers. The strong measures announced as Asia Pacific trading got under way was embraced by the market even though moral hazard issues and gaps in the Dodd-Frank regulatory framework were exposed. The dollar is trading heavily. The prospect of a 50 bp Fed hike next week has evaporated and some are doubting that a 25 bp increase will be delivered. Rate hike expectations for the ECB this week and the BOE next week have been shaved, and the market now favors the RBA to join Canada in pausing as early its meeting next month.
Outside of China, Hong Kong, Taiwan and South Korea, equities have traded heavily. The Nikkei was off 1.1% and Europe's Stoxx 600 is more than 2% lower, its biggest loss so far this year. US equity futures have lost the early upside momentum. The most dramatic action is in the debt market, where US 10-year yields are off 14 bp to 3.56%. European benchmark yields are down 13-20 bp, and the 10-year JGB yield is down 10 bp (to slip below 0.30%). US and European two-year yields are off even more (23-35 bp) as the banking crisis is seen impacting the outlook for monetary policy. Lower rates and a weaker dollar saw gold gap higher and approach $1894 before consolidating. May crude has fallen around 1.7% to about $75.40 and give back its pre-weekend gains....
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