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● Treasury yields move higher as market prices in Fed June rate hike
● Dollar firms but euro holds near 6-month highs ahead of French poll
● European bourses gain ground as US futures edge higher
● Chinese iron ore futures plunge, hitting mining stocks
● Oil prices slip and gold holds near cheapest level in six weeks
The dollar and Treasury yields are nudging higher as investors continue to process the outlook for US monetary policy.
The Federal Reserve decided on Wednesday to keep interest rates unchanged, as expected, but left open the prospect of raising them next month.
The US central bank described the slowdown in growth during the March quarter — which sent a chill through markets at the end of last week — as “transitory” and said consumption growth had been solid and inflation was running close to its target.
The probability of the Fed lifting rates 25 basis points at its June meeting has jumped to 90 per cent, according to pricing data tracked by Bloomberg, from a 61.1 per cent chance a week ago.
The dollar index, a measure of the US currency against a basket of global peers, is up 0.2 per cent to 99.41 after a 0.2 per cent gain in the previous sessions. The yield on the benchmark US 10-year Treasury, which rose 2 basis points on Wednesday, is up another 2bp to 2.33 per cent. Yields move in the opposite direction to price.
Iron ore futures fell 8 per cent to Rmb469 a tonne on China’s Dalian Commodity Exchange on Thursday, taking the price to its lowest level since October amid fears about waning Chinese demand in the face of tightening liquidity in financial markets.
Brent crude, the international oil benchmark, is down 0.5 per cent at $50.52 a barrel, while West Texas Intermediate is off 0.7 per cent to $47.50 after a report on Wednesday showed US inventories fell less than expected.
US index futures suggest the S&P 500 will gain 2 points to 2,390 when trading gets under way later in New York, though it may be contained in part by some poorly-received comments from Facebook following its results.
China’s Shanghai Composite fell 0.3 per cent and Hong Kong’s Hang Seng lost 0.3 per cent as traders warily watched mainland money-market rates hovering around two-year highs amid authorities’ efforts to tame financial risks by squeezing liquidity.
Forex and fixed income
The euro is barely changed at $1.0880 and German 10-year Bunds are losing some haven cachet, with yields up 2bp to 0.35 per cent, as traders express relief that the final French presidential debate did not seem to derail centrist candidate Emmanuel Macron.
The British pound is down 0.2 per cent to $1.2840 after UK prime minister Theresa May denounced “threats” from the EU side of Brexit negotiations.
The Australian dollar is slipping 0.3 per cent to a four-month low of $0.7399. The currency tumbled 1.5 per cent against its US counterpart on Wednesday — its biggest one-day drop since the US presidential election — weighed down by commodity prices and the more hawkish outlook for US interest rates.