From Marc to Market:
Overview: The back-to-back surprise rate hikes by the Australia and Canada spurred speculation that the Fed could hike next week, and this lifted US rates and helped the dollar recover. The odds of a hike increased, according to the indicative pricing in the Fed funds futures market from about a 20% chance to a little above 35%. now. At yesterday's high, the two-year yield was up a little more than 25 bp since the low before the US employment data last Friday. It is little changed today near 4.55%. Still, the greenback is softer against all the G10 currencies, but is mostly consolidating in narrow ranges. Emerging market currencies are more mixed. Of note the Chinese yuan is snapping a four-day fall, and after plummeting 7% yesterday, the Turkish lira steadied, but is off about 0.6%.
While most large equity markets in the Asia Pacific region fell today, Hong Kong and China's CSI 300 rose. The Stoxx 600 in Europe has drifted a little lower. If sustained, it would be the third loss this week. US equity futures are steady to slightly firmer. Benchmark 10-year yield are mixed in Europe. Peripheral yields are 1-3 bp lower while the core is flattish. UK Gilts and Swedish bonds are under more pressure and yields are 3-4 bp higher. The softer US dollar is helping gold stabilize after recording a bearish outside down day yesterday. It closed on its lows near $1940 but has not taken it out, and it is held slightly below $1950. July WTI reached $75 on Monday following the Saudi's unilateral cut of an additional 1 mln barrels a day in output (starting next month). However, it fell back to $70 on Tuesday and is in near the middle of that $5-range today....
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