Fed Hawkish Tone Caps Further Upside for Stocks

European yields are lower on the day, but the Euro is higher as, core yields are coming down. European stock markets come off recent highs, and are down on the session. DAX[i] and FTSE 100[i] remain at high levels, but the air is getting thinner at these lofty highs and investors turned cautious on a day without key local data releases, which left the focus on political challenges ahead and the prospect of further Fed tightening. Eurozone spreads are mixed, with France and Italy underperforming as election jitters continue to cause volatility and make for different developments in yield curves as well. Bund and Gilt curves flattened as the short end underperformed, but the French curve flattened with the long end underperforming following the French unemployment report. Ongoing ECB asset purchases may help to keep a lid on peripheral yields, but tapering speculation is also picking up.

 

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