The renewed sense of calm that has led to global equity market rallies has US Treasuries down sharply again and yields are also higher overseas. The US 10 and 30 yr yields are at the highest since Oct 31st. The 2 yr note yield is at the highest since Aug. There is this belief on the part of some that we’re going to see this grand asset allocation out of bonds and into stocks to drive them higher still but they forget that stocks have fed off the spigot of cheap money. While it’s still cheap, less cheap will make cash an asset class again and the Fed’s worst nightmare is higher inflation and bond yields. Investing decisions are not just bonds or stocks as both rallied for 20 yrs in the ’80s and ’90s. The Nikkei closed above 10,000 for the 1st time since July as the yen continues lower. The one fly in global equity markets was a sharp 2.6% selloff in the Shanghai index in the last hr and half of trading after Premier Wen said they won’t let up on their curbs on the property market. Ahead of India’s central bank meeting tomorrow, wholesale inflation rose 6.95%, above expectations of 6.55%. In Europe, UK jobless claims rose more than expected and their unemployment rate held at the highest since 1995. In the US, purchase apps rose 4.4%, up for a 3rd week to an 8 week high but refi’s fell 4.1%, down for a 5th week to a 9 week low. II: Bulls 43.6 v 47.9 Bears unch at 26.6 with the balance expecting a correction.
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