After a turbulent start to the year, optimism in the U.S. financial markets is rebounding with expectations of Federal Reserve rate cuts and the sustained growth of the AI sector. European bond markets have seen improved confidence, leading to tightened yield spreads, while the oil market shows stability above $78 a barrel. However, in stark contrast, Chinese markets faced a significant downturn, with the Hang Seng Index nearing a 17-year low, and the maintained benchmark lending rates failed to meet investor expectations for stimulus. Upcoming economic data, including GDP and Personal Incomes/Outlays reports, are poised to offer fresh insights into the inflationary landscape without any guidance from the Fed ahead of the FOMC meeting. Despite a shift in sentiment towards maintaining current interest rates, December 2024 futures suggest significant rate cuts are still on the table. The Conference Board’s index points to a potentially sluggish economy ahead, driven by concerning factors such as the inverted yield curve. Meanwhile, the bond market’s sluggish start suggests a cautious approach from investors, seeking direction amidst modest gains and low volatility. The mortgage-backed securities market (UMBS) ended on a positive note, albeit with a slight increase.

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