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Marc Chandler

Marc Chandler

He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

Articles by Marc Chandler

How the Market Responds to US CPI may set the Near-Term Course

5 days ago

Overview:  US stocks built on the recovery started on Monday and Powell’s suggestion of letting the balance sheet shrink later this year eased some speculation of a fourth hike this year, which seemed to allow the Treasury market to stabilize.  What amounts to a greater appetite for risk is carrying over into Asia Pacific activity today. Many of the large bourses advanced more than 1%, with the Hang Seng up almost 2.8% and the Nikkei up  nearly as much.   Bond yields pulled back mostly 2-4 bp in the region, but higher unemployment (3.8% vs. 3.1%) saw the 10-year South Korean yield fall by six basis points.  Europe’s Stoxx 600 opened higher but has stalled, while US futures recover from initial weakness to move higher.   European yields are around 2-2.5 bp lower,

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Inflation and Geopolitics in the Week Ahead

9 days ago

The Omicron variant may be less fatal than the earlier versions, but it is disrupting economies. The surge in the Delta variant well into Q4 in the US and Europe was already slowing the recoveries. Investors will likely take the high-frequency real sector data with the proverbial pinch of salt until January data available beginning later this month.
While the tribalist approach, exemplified by “team transition” and “team permanent” debates about inflation, the recovery is precarious. Last week’s data confirmed that the aggregate composite PMI in the eurozone fell in December for the fourth time in five months. At 53.3, it finished the year at its lowest level since March. The average in Q4 22 was 54.3, down from 58.5 in Q3 and 56.8 in Q2.
The US composite PMI

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The Chagrin of Beijing and the Problem of Time

29 days ago

The central bank meeting cycle is over. Most of the important high-frequency data has been released until early January. The US debt ceiling has been lifted, avoiding an improbable default. A year ago, there was a sense of optimism, with a couple of vaccines being announced and monetary and fiscal stimulus boosting risk-appetites. Populism, which had been in the ascendancy after the Great Financial Crisis, seemed to be retreating in Europe and the United States.  Equities were rallying. In the last two months of 2020, MSCI’s free-float weighted global index rallied around 17.8%. It closed the year with a 14.3% gain. Through last week, it was up about 14.5 this year. The US 10-year yield, a global benchmark, peaked in March near 1.77%. Following a disappointing

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Bulls Shrug Off Bout of Profit-Taking, Leaving the Greenback Poised to Rally into Year-End

29 days ago

(The regular analysis will resume after the New Year.  In the meantime, look for several occasional thematic posts over the next couple of weeks.  Here is to a healthy and happy New Year!).  The dollar recovered from the bout of profit-taking seen after the FOMC largely confirmed market expectations to post a weekly advance against all the major and most emerging market currencies.  The omicron variant continues to sweep across the world, and efforts in large parts of Europe and the US to cajole employees into returning to offices were set back.  Growth concerns and the confirmation of the hawkish pivot by the Federal Reserve weighed on the dollar-bloc currencies and the Scandia.   The fact that New Zealand (November 23) and Norway (December 16)  hiked rates for

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The Week Winds Down with Equities under Pressure and the Dollar Mostly Firmer

December 17, 2021

Overview: The combination of the volatility and a large number of central bank meetings have exhausted market participants, and the holiday phase appears to have begun. Equities are under pressure following the sell-off yesterday in the US. Japan, China, and Hong Kong suffered more than 1.2% losses, while Australia, South Korea, and Taiwan posted minor gains. It was the fifth loss in the past six sessions for the MSCI Asia Pacific Index. Europe’s Stoxx 600 is off around 0.7% today, which is sufficient to put into the red for the week. US futures point to a softer opening. The debt market is quiet. The 10-year yield is little changed at 1.42% and is practically flat on the week. European yields are slightly softer and are 2-6 bp higher for the week. UK Gilts

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Fed Unleashes Animal Spirits

December 16, 2021

Overview:  The Fed’s hawkish pivot came a few weeks before yesterday’s FOMC meeting, which confirmed more or less what the market had already largely anticipated. Buy the (dollar) on rumors (of tapering and more aggressive stance on rates) and sell the fact unfolded, and unleashed the risk-appetites which rippled through the capital markets. US stocks rallied yesterday, and the futures point to a gap higher opening today. Large Asia Pacific bourses, led by a 2% rally in the Nikkie advance. Australia, despite strong jobs growth, as did New Zealand, while India struggled. Still, the MSCI Asia Pacific Index snapped a four-day slide. Europe’s Stoxx 600 gapped higher. The bond market remains subdued. The US 10-year yield is hovering around 1.44%, while European yields

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FOMC Sets New Course

December 15, 2021

The Fed delivered what it was expected to do:  double the pace of tapering and project a more aggressive interest rate response with its individual forecasts.  The dollar initially rallied on the headlines, and new sessions highs were recorded, but the price action was a bit of a head-fake, as it were. The greenback’s gains were quickly pared,  though it remained above JPY114 ahead of Chair Powell’s press conference. The market had already discounted two hikes and almost 3/4 of the third hike before the FOMCmeeting. The adjustment also requires moving the 2023 profile as well.  The FOMC statement also reads hawkishly, too, in the sense that the Fed acknowledges the solid jobs growth continued, and it no longer characterizes inflation as transitory. Again,

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Has the Market Carried the Fed’s Water? Is the Dollar Vulnerable to Buy the Rumor and Sell the Fact?

December 15, 2021

Overview: The US dollar is trading with a bit of heavier bias against most of the major currencies as the focus turns to today’s FOMC meeting, where a clear consensus has emerged in favor of faster tapering and a dot plot pointing to a steeper pace rate hikes.  Emerging market currencies led by Turkey and South Africa are mostly lower. The JP Morgan Emerging Market Currency Index is lower for the third straight session.  The US 10-year Treasury yield is flat, near 1.44%, while European yields are mostly a little higher.   The US two-year yield is flat around 66 bp, while the 2-year Gilt yield jumped around 5 bp after higher than expected CPI.  New US sanctions against Chinese companies took a toll in Chinese and Hong Kong indices, while Japan, South Korea, and

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No Turnaround Tuesday for Equities?

December 14, 2021

Overview:  Activity in the capital markets is subdued today, ahead of tomorrow’s FOMC meeting conclusion and the ECB meeting on Thursday.  The MSCI Asia Pacific equity index fell for the third consecutive session.  European bourses are heavy after the Stoxx 600 posted an outside down day yesterday. Today would be the fifth consecutive decline. Selling pressure on the US futures indices continues after yesterday’s losses.  Australia and New Zealand bonds played catch-up to the large drop in US Treasury yields yesterday, while European benchmark yields are edging higher.  The 10-year US Treasury yield is around 1.43%.  The dollar is mixed against the major currencies.  The Canadian and Australian dollars and Norway are softer, while the Swiss franc and euro lead

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Dollar Starts the Week Bid ahead of the FOMC

December 13, 2021

Overview: Equities, bonds, and the dollar begin the new week on a firm note.  Japanese, Chinese, Australian, and New Zealand equities advanced in the Asia Pacific region.  Europe’s Stoxx 600 is snapping a three-day decline, and US futures are 0.25%-0.35% higher.  The US 10-year yield is a little softer at 1.48%. European benchmark yields are mostly 1-2 bp lower, and near 0.71%, the UK Gilt’s yield is at a three-month low.  The dollar is rising against all the major currencies and is 0.3%-0.45% higher against most.  The Canadian dollar and sterling are the most resilient.  Among emerging market currencies, the Chinese yuan continues to defy official signals to eke out a small gain.  The Turkish lira is off more than 2%, after having dropped 4% initially.

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FX Daily, December 6: Semblance of Stability Returns though Geopolitical Tensions Rise

December 6, 2021

Swiss Franc
The Euro has risen by 0.26% to 1.041

EUR/CHF and USD/CHF, December 6(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The absence of negative developments surrounding Omicron over the weekend appears to be helping markets stabilize today after the dramatic moves at the end of last week. Asia Pacific equities traded heavily, and among the large markets, only South Korea and Australia escaped unscathed today. Europe’s Stoxx 600 is trading higher, led by energy, financials, and materials. US futures are narrowly mixed. Similarly, Asia Pacific bonds played a little catch-up with the large Treasury rally ahead of the weekend. The US 10-year had approached 1.30% but is now up almost four basis points to

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FX Daily, December 02: Calm Surface Masks Lack of Conviction

December 2, 2021

Swiss Franc
The Euro has risen by 0.09% to 1.0587

EUR/CHF and USD/CHF, December 2(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The downside reversal in US stocks yesterday seemed to accelerate after the first case of the Omicron variant was found in the US. In itself, it should not be surprising, but perhaps, what was especially disheartening is that the person had been fully vaccinated. The S&P 500 traded on both sides of Tuesday’s range and closed below it low, a bearish signal. The Nasdaq settled on its lows and looks equally ugly. That said, there has been no follow-through selling, and both are trading higher. The US 30-year yield recorded a marginal new 11-month low, and the 2-10 year curve flattened

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December Monthly

December 1, 2021

The pandemic is still with us as the year winds down and has not yet become endemic, like the seasonal flu.  Even before the new Omicron variant was sequenced, Europe was being particularly hard hit, and social restrictions, especially among the unvaccinated, were spurring social strife.  US cases, notably in the Midwest, were rising, and there is fear that it is 4-6 weeks behind Europe in experiencing the surge.  Whatever herd immunity is, it has not been achieved.  Moreover, despite plenty of vaccines in high-income countries, inoculation efforts in many low-income countries won’t begin in earnest until next year.  That said, the new variant has injected a new element into the mix, and it is with a heightened degree of uncertainty that we share our December

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Fragile Calm Returns and Powell’s Anti-Inflation Rhetoric Ratchets Up

December 1, 2021

Overview:  Into the uncertainty over the implications of Omicron, the Federal Reserve Chairman injected a particularly hawkish signal into the mix in his testimony before the Senate.  These are the two forces that are shaping market developments.  Travel restrictions are being tightened, though the new variant is being found in more countries, and it appears to be like closing the proverbial barn door after the horses have bolted. Equities are higher.  The MSCI Asia Pacific Index, led by South Korea, and India, rose for the first time in four sessions, and Europe’s Stoxx 600 is recouping more of yesterday’s loss.  US futures are trading more than 1% higher.  Benchmark yields are higher.  The 10-year US Treasury yield is up four basis points though is still below

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Pessimistic Omicron Assessment Squashes Risk Appetites

November 30, 2021

Overview: A pessimistic assessment offered by the CEO of Moderna shattered the fragile calm seen yesterday after the pre-weekend turmoil.  Risk appetites shriveled, sending equity markets lower and the bond markets higher.  Funding currencies rallied, with the euro and yen moving above last week’s highs.  The uncertainty weighs on sentiment and makes investors question what they previously were certain of.  The MSCI Asia Pacific Index fell over 1% before the weekend and again yesterday.  Today, South Korea’s 2% slide led the regional decline that saw Japan and Hong Kong fall more than 1%.  Australia, Taiwan, and India managed to post minor gains.  Europe’s Stoxx 600 is off over 1.5%, giving back all of yesterday’s gain (~0.7%) after the pre-weekend 3.6% drop.  US

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Sentiment Remains Fragile

November 29, 2021

Overview: The fire that burnt through the capital markets before the weekend, triggered by the new Covid mutation, burned itself out in the Asian Pacific equity trading earlier today. A semblance of stability, albeit fragile and tentative, has emerged. Europe’s Stoxx 600 is up about 1%, led by real estate, information technology, and energy.  US index futures are trading higher, with the NASDAQ leading.  Benchmark 10-year yields are firmer.  The US 10-year Treasury yield has risen about six basis points to 1.53%.  European yields are mostly 1-2 basis points higher, while the UK Gilt yield is up four basis points. The dollar remains, as we say, at the fulcrum of the major currencies, but in an opposite way, with the funding currencies that rallied strongly before

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The Dollar Moves Back to the Fulcrum between the Funding and Higher Beta Currencies

November 28, 2021

The new covid variant injected a new dynamic into the foreign exchange market.  The World Health Organization cautioned against the need to impose travel restrictions, but policymakers, by and large, do not want to be bitten by the same dog twice.  To err on the side of caution is to minimize one’s biggest regret.  The risk is that the uncertainty is not lifted quickly but lingers, which would likely unpin volatility.  US and European benchmark 10-year yields fell sharply ahead of the weekend.  In the US, the market unwound some of its aggressive pricing in of Fed policy.  This is reflected in the commensurate drop at the short-end.  In Europe, the decline in 10-year yield reflected a slowing of growth/inflation as its short-end was largely unchanged.  There are

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Jobs (US) and Inflation (EMU) Highlight the Week Ahead

November 27, 2021

The new covid variant and quick imposition of travel restrictions on several countries in southern Africa have injected a new dynamic into the mix.  It may take the better part of the next couple of weeks for scientists to get a handle on what the new mutation means and the efficacy of the current vaccination and pill regime.The initial net impact has been to reduce risk, as seen in the sharp sell-off of stocks.  Emerging market currencies extended their losses.  The JP Morgan Emerging Market Currency Index has fallen in eight of the nine sessions.  Among the major currencies, the currencies used to fund the purchase of other financial assets, namely the yen, Swiss franc, and euro, strengthened in response to the covid news.  The currencies that are seen levered

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Covid Strikes Back

November 26, 2021

Overview: Concerns that a new mutation of the Covid virus has shaken the capital markets.  Equities are off hard, and bonds have rallied.  In the foreign exchange market, the Japanese yen and Swiss franc have rallied.  While there may be a safe haven bid, there also appears to be an unwinding of positions that require the buying back of the funding currencies, which is also lifting the euro.  The currencies levered from growth, the dollar-bloc and Scandis are weaker.   Oil has been knocked back by around  6.7%, with January WTI trading near $73.Led by 2%+ losses in Japan, Hong Kong, and India, and 1%+ losses in South Korea, and Taiwan, the MSCI Asia Pacific Index has slumped to its lowest level since July.   Europe’s Stoxx 600 gapped lower and is off around 2.4%

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Turkey gets a Reprieve before US Thanksgiving, but Capital Strike may not be Over

November 24, 2021

Overview:  The dramatic collapse of the Turkish lira was like an accident one could not help look at, but it was not an accident, but the result of a disregard for the exchange rate and compromised institutions.  The lira was off around 15% at its worst yesterday, before settling 11.2% lower.  After falling for 11 sessions, it has steadied today (~2.7%)  but the capital strike may not be over.  On the other hand, the Reserve Bank of New Zealand delivered the 25 bp rate hike and seemed to give hawkish guidance, and yet the New Zealand dollar was sold and the worst-performing of the major currencies, off 0.65% through the European morning.  The tech losses on Wall Street yesterday weighed on Asia Pacific equities today, where the large markets fell but in China.

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Covid Surge Compounds Monetary Divergence to give the Euro its Biggest Weekly Loss in Five Months

November 21, 2021

Strong US consumption and production figures kept the greenback well supported last week on the heels of the jump in CPI to 6.2%.  Meanwhile, the surge of Covid cases in Europe underscores the divergences with the US, sending the euro to new lows for the year.  At the same time, oil prices headed south for the fourth consecutive week, matching the longest decline in more than two years.  It did not favor the Norwegian krone, the weakest of the majors, with a 2.15% drop.  It brought this year’s loss to almost 3.5%, despite it being the first G10 central bank to hike rate, with another likely next month.  The prospects of a Bank of England rate hike next month were lifted by the strong inflation and retail sales figures.  Sterling was the best performing major

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The Greenback Slips to Start the New Week

November 15, 2021

Overview:  While the Belarus-Poland border remains an intense standoff, there have been a couple other diplomatic developments that may be exciting risk appetites today.  First, Biden and Xi will talk by phone later today.  Second, reports suggest the UK has toned down its rhetoric making progress on talks on the implementation of the Northern Ireland Protocol.  Equities in the Asia Pacific region were mostly firmer, with China a notable exception among the large markets, even though the October data was generally stronger than expected.  Europe’s Stoxx 600, which has fallen only once this month, is edging higher to new records, while US futures are enjoying a firmer bias.  Benchmark 10-year yields are 1-2 bp lower, which puts the Treasury yield near 1.55%.  The

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CPI Shocker Lifted the Greenback, which now needs to Take a Breath

November 14, 2021

The jump in US headline CPI above 6% crossed some Rubicon and injected dynamic into the process.  The dollar rallied, and new highs for the year were recorded against the euro and sterling.  The dovish tapering announcement by the Fed on November 3 was completely unwound as the December 2022 Fed funds futures returned to the high-yield mark of 66 bp ahead of the weekend.  The two-year yield rose from about 39 bp at the start of the last week to almost 55 bp.  The volatility of the bond market (the equivalent of the VIX for the S&P 500) surged back to the year’s high (above 78%).   Ultimately, the idea that R-star, the real short-term interest rate when the US economy is at full capacity and inflation stable, has continued to trend lower will likely cap nominal

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FX Daily, November 9: Falling Yields Give the Yen a Boost

November 9, 2021

Swiss Franc
The Euro has risen by 0.09% to 1.0587

EUR/CHF and USD/CHF, November 9(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Reports that the Fed’s Brainard was interviewed for the Chair helped soften yields a bit, not that they needed extra pressure, on ideas she is more dovish than Powell. In turn, the lower yields saw the yen rise to its best level in nearly a month and led the major currencies higher against the dollar. The yen is joined by the Scandis and sterling to lead the majors. The New Zealand dollar is the laggard. Emerging market currencies are also mostly stronger, and the JP Morgan EM FX Index is rising for the third consecutive session, the longest streak in a couple of months. The

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Markets Await Fresh Developments

November 8, 2021

Overview: Last week’s bond market rally has stalled.  Benchmark 10-year yields are up 1-3 bp in Europe, and the three bp increase in the US puts the yield slightly below 1.50%.  Equities were mixed in the Asia Pacific region.  Japan, Hong Kong, South Korea, and Australia nursed losses after the regional benchmark (MSCI) rose 0.65% last week.  The Stoxx 600 had a seven-session rally in tow, but it is little changed in the European morning.  It rose 1.65% last week.  US futures indices are hovering around little changed levels after new record highs were set before the weekend.  The US dollar is narrowly mixed.  The New Zealand dollar and Norwegian krone are the strongest of the majors.  The Swedish krona, Swiss franc, and sterling are struggling.  The yen and euro

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Profit-Taking on Dollar Longs after Better than Expected Jobs Report Sets Stage Until CPI

November 7, 2021

The US dollar turned in a solid week’s performance, rising against most currencies and recording a marginal new high for the year against the euro.  Sterling and the Australian dollar competed for the worst performer.  Both central banks pushed against market expectations for aggressive near-term tightening. The central banks trigger a short squeeze in the bond market, where 10-year benchmark yields from 10 bp in the US to 34 bp in Italy.  UK 10-year Gilts and French Oats yields fell nearly 22 bp.  Germany lagged with an almost 18 bp decline.  The speculative market had its largest net short Treasury note futures position since March 2020.  It has swung from 1argest net long position in four years (~181k contracts) in early October to a net short position of

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Greenback has Legs Ahead of the Fed and Jobs

October 31, 2021

The US dollar turned in a mixed performance last week but ended on a solid note.  The pre-weekend and month-end activity may have exaggerated the greenback’s gains, but we suspect ahead of the FOMC meeting and the US jobs data that is the direction. Our understanding of the technical condition also favors a stronger dollar. The jump in Australian rates may help explain why the Aussie was the strongest of the majors (~0.75%).  However, the trajectory of monetary policy does not offer satisfying insight into other currencies.  The underperformance of the Norwegian krone (~-1.0%), where the central bank will most likely hike rates next week, for example. It seems almost as if the markets have concluded that most major central banks are behind the inflation curve.

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Big Week Begins Slowly

October 25, 2021

Overview:  The global capital markets give little indication of the important economic and earnings data that lie ahead this week.  There is an eerie calm. Equities in Asia were mixed.  Japan and Hong Kong, and most small bourses were lower.  Last week, the MSCI Asia Pacific Index gained almost 0.9%. Europe’s Stoxx 600 is little changed after rising about 0.5% last week. US futures are firm.  The S&P 500 and Dow Jones Industrials reached record-highs before the weekend.  The US 10-year yield is up a couple of basis points to 1.66%.  Last week, it briefly traded above 1.70%. European core yields have edged slightly higher, while the peripheral bonds are outperforming. The Antipodeans and Norwegian krone are leading the way higher among most majors, with the yen,

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Are the Technicals Anticipating a Soft US GDP Report? Could it be a “Sell the Rumor buy the Fact?”

October 24, 2021

Rising yields and record highs in the S&P 500 and NASDAQ failed to lift the dollar.  Indeed, the greenback fell against all the major currencies, even the Japanese yen, against which it had reached new four-year highs (~JPY114.70) before pulling back.  On the other hand, the Antipodean currencies and the Norwegian krone continued to lead the move against the US dollar. The Aussie rose to new three-month highs, while the Kiwi, Nokkie, and Canadian dollar saw four-month highs.  Emerging market currencies were more mixed than the majors.  At the end of the week, Russia’s larger than expected 75 bp rate hike helped lift the rouble, the best emerging market currency, last week. It reached a 15-month high ahead of the weekend.  The Chinese yuan reached its best level

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Markets Turn Cautious

October 21, 2021

Overview: After a couple of sessions of taking on more risk, investors are taking a break today.  Equities are mostly lower today after the S&P 500’s six-day advance took it almost to its record high, while the NASDAQ’s streak was halted at five sessions.  The Nikkei’s nearly 1.8% slide paced the Asia-Pacific session, where most bourses retreated.  Europe’s Dow Jones Stoxx 600 is off about 0.15% near midday after rising approximately 0.65% over the past two sessions.  US futures point to a weaker opening.  The US 10-year yield is slightly softer, around 1.64%, while European yields have edged higher.  The dollar is firmer against most currencies, with the Antipodeans and Norwegian krone seeing the largest losses, while the yen is the most resilient.  The dollar

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