Stocks are hating the higher rates seen in US bond markets this afternoon but bank earnings could be helped by them. The yield curve (the spread between short and long-term rates) is extremely wide at the moment which means banks can borrow short at very low rates and lend long at much higher rates. The tricky part is that higher yields could chock off the recovery before it really gets rolling, a nightmare scenario.
EUR/USD is very choppy, trading 30-40 pips at a clip from 1.3890 to 1.3930. Stocks are down 1.7% on the session, mostly a a result of firmer US rates. This is helping increase risk aversion as the session wears on.
Cable is seeing some understandable profit-taking at the moment after reaching 1.6085 earlier. It trades now at 1.6008. Stops are seen below 1.5980 and again below 1.5950, dealers say.
