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• US markets shrug off Moody's downgrade
• US cyclical stocks rally on tariff truce, but margin risks linger
• Pound consolidates gains after EU-UK post-Brexit agreement
• Long-dated JGB yields surge after weak auction raises investor demand concerns
• RBA cuts its policy rate against a backdrop of heightened global uncertainty
• Chinese banks lower benchmark lending rates, in line with monetary policy easing
US Equities Take a Breather After Winning Streak
US equity futures signaled an opening in the red as investors appeared to take a pause following a 6-day winning streak in the S&P 500 index. US equity markets closed yesterday slightly higher, rebounding from earlier losses following Moody’s downgrade. The price action suggests investors may have looked past the downgrade, focusing instead on the improved macro outlook and still resilient earnings momentum. Across the pond, European equities rose modestly and currency markets traded in limited ranges, with the dollar slightly weaker. In fixed income, US Treasury and euro-area sovereign bond yields were also little changed. JGBs were the notable mover this morning, with 20-year JGB yields surging as much as 15 bps to 2.56%, the highest level since 2000. A weak 20-year JGB auction raised concerns about investor demand. The bid-to-cover ratio at the 20-year JGB sale today fell to 2.50x, the lowest level since August 2012. Elsewhere, the Reserve Bank of Australia cut its policy rate against a backdrop of heightened global uncertainty. In a second rate cut this year, the key rate was reduced by 25 bps to 3.85%, a two-year low.
