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US treasury yields rose 4bps and the S&P500 shed 1.3% after Fed Chair Powell said in a Q&A session of his Semi annual testimony to Congress that his outlook for the economy had strengthened since December with the latest data adding to his confidence about inflation quickening. Expectations are now for three full rate increases this year. Tough talking was perhaps to be expected but the Fed will remain data (especially stock market) dependent about these expectations, in our view. Logically, the dollar gained across the board and gold fell in the day’s context. It was again one of these days when once the corrective tone was established very few places were left to hide as stocks, bonds and precious metals fell in concert. This conforts our long held view that in order to be balanced, a diversified portfolio now needs to hold some shorts. Gold outperformed stocks towards the end, still ending 1% lower, nursing half that loss vs. EUR. 

Judging from the recovery from the 10% selloff which was probably the fastest on record, equities got a chance to reach a more balanced stage after yesterday’s correction. And Fed Chair Powel will get a chance to backpedal a little on Thursday for the second leg of his testimony as well. At the same time as EU chief negotiator Barnier critized May’s negotiating stance, eight conservatives entering into rebellion called for the UK to keep a customs union with the EU that could topple May’s slim majority at the House of Commons. May opposes this scenario as hardliners in her government wish to strike trade deals around the world, which would be incompatible with the UK staying in a customs union with the EU. GBP rallied in response (although paradoxically having May toppled may raise the odds of B. Johson taking her place ... which would be clearly pound negative in our view). Jeremy Corbyn backs the idea of a customs union with the EU.

For the whole day and even as stocks were still hovering around unchanged, CHF strength prevailed and EURCHF closed at the lows, below 1.15, opening the possibility to speculate on some large asset shifts from a gorilla in the space which could explain part of the simultaneous equity market loss and CHF strengthening. Oil fell following comments from the IEA head regarding the fast pace of U.S. shale growth which was coupled with the remaining very large (and most likely excessive and vulnerable) net long speculative long position in oil futures. Italian elections are coming over the week end which may explain the recent underperformance of European equities. Thebresult will likely be a hung parliament which in the case of Italy is no surprise and not an outcome to be worried about. 

BentinPartner Advisers, Basel There is more to our research than the Daily Close, the Confidometer and our blog posts. To receive actionable content, a comprehensive wrap up every day and our tactical FX and global models positioning or if you wish to be notified 24/7 with updates on key macro economic releases and/or technical breaches on our comprehensive investment universe covering international equities, bonds, FX, precious metals and commodities, take a free trial to the Bentin Daily, our premium research service. We help you know when to run and when to sit by tracking all developing (or well established) trends and equally importantly by flagging market breakouts. You may join our free trial by clicking here. https://www.bentinpartners.ch/subscribe We are leaving no stone unturned. Important Disclaimer © Copyright by BentinPartner llc. This blog is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security or underlying asset referenced herein or investment advice. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situation, investment horizon and particular needs. This blog does not include information tailored to any particular investor. It has been prepared without any regard to the specific investment objectives, financial situation or particular needs of any person who receives this report. Accordingly, the opinions discussed in this blog may not be suitable for all investors. You should not consider any of the content in this report as legal, tax or financial advice. The data and analysis contained herein are provided "as is" and without warranty of any kind. BentinPartner llc, its employees, or any third party shall not have any liability for any loss sustained by anyone who has relied on the information contained in any publication published by BentinPartner llc. The content and views expressed in this report represents the opinions of Marc Bentin and should not be construed as guarantee of performance with respect to any referenced sector. We remind you that past performance is not necessarily indicative of future results. Although BentinPartner llc believes the information and content included in this report have been obtained from sources considered reliable, no representation or warranty, express or implied, is provided in relation to the accuracy, completeness or reliability of such information. This blog is also not intended to be a complete statement or summary of the industries, markets or developments referred to in the blog.   


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