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US yields keep climbing, squeezing currency markets

A renewed surge in US yields is sucking the air out of global financial markets this morning, putting equities, commodities, and risk-sensitive currencies deep in the red. With yields on ten-year Treasuries flirting with the 5 percent threshold for the first time since before the global financial crisis and rate differentials tilted firmly in the dollar’s favour, the greenback is crushing its major rivals, pushing further into overbought territory. The Israel-Hamas conflict continues to pose a threat to markets, but safe-haven flows are generally subsiding as the perceived risk of a regional escalation falls. Momentum is fading in gold and...

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Will Fed Chair Powell change his tune?

• Shaky sentiment. Renewed market wobbles as Middle East tensions were compounded by higher bond yields. Stocks fell & the USD was a little firmer.• AUD vol. AUD whipped around. Gains on the back of the better than expected China data & ‘hawkish’ tone from the RBA unwound overnight.• Upcoming events. AU jobs report released today. US jobless claims are due tonight, but more focus will be on a speech by Fed Chair Powell. Some renewed wobbles in markets overnight with Middle East tensions compounded by another move up in bond yields. Stocks retreated (US S&P500 -1.3%), while oil (WTI...

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Geopolitical tensions worsen, supporting safe havens

Markets are back in risk-off mode after an explosion at a hospital in Gaza shifted the calculus around President Biden’s trip to the Middle East, and raised the risk of a wider conflagration. Oil prices are rising as Iran calls for an embargo against Israel, equity futures are setting up for a softer open, and the dollar is maintaining altitude. Flight-to-safety flows are likely to subside through the session, but Treasury yields are trading near the highest levels since 2006 after yesterday’s hotter-than-expected retail sales number raised the likelihood of more monetary tightening from the Federal Reserve. Cumulative futures-implied odds...

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Good Baa’d Data

The legendary investor Charlie Munger likes to tell a story:“A teacher asks a class a question: There are 10 sheep in a pen. One jumps out, how many are left?”. Everyone but one boy says 9 are left. That one boy says “none are left”. The teacher says “you don’t understand arithmetic” and he says: “You don’t understand sheep.” This morning’s better-than-anticipated retail sales report helped boost the Atlanta Federal Reserve’s GDPNow nowcast estimate, with the updated model forecasting a 5.4-percent annualised expansion in real gross domestic product for the third quarter* – joining September’s blowout payrolls report and stubbornly-sticky...

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Divergent North American Data Supports Greenback

US retail spending rose by more than expected last month, keeping the US exceptionalism trade intact and helping support yields across the front end of the curve. According to figures published by the Census Bureau this morning, total receipts at retail stores, online sellers and restaurants rose 0.7 percent on a month-over-month basis in September after an upwardly-revised 0.8-percent gain in August, up 3.4 percent over a year prior. Markets were expecting a 0.3 percent headline gain. Gas station sales climbed 0.9 percent month-over-month, while motor vehicle and parts dealers posted a 1 percent gain. Receipts at food services operations...

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