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US and European equities continued their decline after Fridays Jerome Powell inspired sell-off , though the pace was more moderate in a choppy, range bound session.
The risk sensitive NASDAQ is down around 5% post the Fed chairs comments at the Jackson Hole symposium. All three major US indices found support at their 50 day moving average during the session, this will be a level to watch in the upcoming trading days.
Bonds also sold off, with yields rising as market participants continued to re-price the Fed rate hike trajectory and subsequent easing in the future after the hawkish tone on Friday, rate markets are now pricing in a 70% chance of another 75bp hike at the Feds September meeting.
In FX markets the USD was mostly flat, the Euro reclaimed the parity level on some hawkish comments from ECB members on the weekend and a drop in regional gas prices tumbled on news that Germany is better prepared for the winter than initially feared.
JPY continued to weaken against the greenback as rising treasury yields increased the US-Japan rate differentials even further, this has been the biggest driver of the strength in the USDJPY which now is close to testing the highs set in July.
Commodities were mixed with Copper continuing its slide on the back of global growth concerns.
Natural Gas was extremely volatile as comments from European leaders regarding emergency measure plans saw the price whipsaw violently during the session, closing the gap up at open and finishing the day flat from Fridays close.
Crude oil jumped to fresh August highs aided by the softer dollar, as well as the overhang from OPEC production cut suggestions and Middle East geopolitical uncertainty.
In today’s economic announcements, the German CPI figure will be one that is closely watched and expected to see inflation in Europe’s biggest economy continue to rise and will take on extra importance after some of the hawkish rhetoric out of ECB members over the weekend.
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