From Marc to Market:
Overview: The re-emergence of bank stress reverberated through the US markets yesterday, downgrading the perceived chances of a Fed hike next week and sending the US 2-year yield sharply lower. The yield settled 13 bp lower, the largest drop in three weeks. The risk-off sent the US dollar higher against most of the major and emerging market currencies. Follow-through US dollar gains today has been mostly limited to the Australian dollar, where after today's CPI figures has given up any residual chance of a hike next week, and the Swedish krona, where two dissents give a dovish twist to the Riksbank's 50 bp hike. The euro and sterling are leading the G10 currencies today. The euro's strength is helping to lift the eastern and central European currencies higher to lead the emerging market complex.
The US 2-year rate has stabilized today near 3.92%, and the perceived odds of a Fed hike next week is slightly above 80%. Equities were mixed in the Asia Pacific region, but of note China's CSI 300 fell for the sixth consecutive session. Europe's Stoxx 60 is off around 0.7%, for its third consecutive decline. Its bank share index is off 1.1% after falling 2.7% yesterday. Favorable earnings by a regional US bank and Microsoft and Alphabet are encouraging bottom picking after yesterday's sharp US equity losses. The 10-year US Treasury yield is little changed near 3.41%, while European benchmark yields are mostly 2-4 bp lower. Sweden's 10-year yield is off six basis points. Gold has recovered from yesterday's low near $1976 to again straddle the $2000 area. June WTI made a marginal new low for the month yesterday ($76.50) amid demand concerns, reports suggesting there was no sign of Russian output cuts and worries that refiners' demand will slow. Late yesterday's API reportedly estimated that US inventory fell by 6 mln barrels. June WTI is trading with a $77-handle today....
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