Equities seen in a better mood overall after some choppiness yesterday
The strong dollar was the key driver in the market overnight and the rebound higher in Treasury yields also weighed on sentiment in tech stocks late on.
That saw the Nasdaq shed gains to close 0.2% lower with the index now down over 5% this month and headed for its worst performance since September last year.
Things are looking better today though as Treasury yields are seen cooling off a little but it is still early days, so it may be tough to discount similar moves to yesterday.
S&P 500 futures are up 0.5%, Nasdaq futures up 0.6%, Dow futures up 0.5%. Meanwhile, 10-year Treasury yields are down slightly by 1.7 bps to 1.52%.
That is keeping risk currencies mildly higher so far on the day against the rampant dollar this week, though month-end and quarter-end flows are still a key focus in the day ahead.
Citi's month-end hedge rebalancing model suggests broad USD buying across the board, which is supported by the move yesterday, with the firm arguing that:
The model suggests USD buying even against currencies like CHF and AUD where local assets have done even worse, because they assume foreigners hold more U.S. assets and tend to hedge them to a greater degree. Citibank concludes the signal to buy USD and sell JPY is the most significant at 1.12 standard deviations.