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U.S. Markets Rebound as Dovish Fed Officials Ease September Rate Hike Concerns

Friday’s global market selloff briefly carried into the morning today before reversing course following speeches given by Fed Members that helped to ease investor near-term rate hike concerns.  Atlanta Fed Bank President Dennis Lockhart spoke early in the day and presented the case that while raising rates warrants a “serious discussion,” there lacks a definitive need to take action at any particular FOMC meeting.  Federal Reserve Governor Lael Brainard echoed a similar tone as she maintained her historically dovish perspective, requesting prudence in implementing any tightening policies.  In opposition to several of the previous views from voting members of Fed regarding the labor market, Brainard argued that current unemployment levels, while low, are not generating growth that would typically be associated with a healthy environment.  Soon after her comments, U.S. Treasury yields and swap rates fell 1-3 basis points across the curve as futures odds of a September rate hike decreased nine percent from Friday, and now sits at 15%.              

Political news spilled into markets today after Hillary Clinton was forced to leave a 9/11 commemoration on Sunday with dizziness and dehydration caused by pneumonia, an illness that had not been disclosed previously.  Her planned two-day trip to California this week also had to be cancelled in order to allow for more recovery time.  The potential for her illness to impact polling data unnerved analysts who had previously built market projections off a Clinton administration.  From an interest rate perspective however, Minneapolis Fed President Neel Kashkari assured that politics would not play a part in any FOMC decision.

Overseas, both Asian and European markets finished down on the day as concerns over the shift away from monetary easing hinted by Mario Draghi last week continued to weigh down markets.  With the influential Fed comments coming later in the day on Monday U.S. time, its unclear how international markets will react to the downward shift in odds of a near term U.S. rate increase.  Asian stock indexes finished down almost 2% on the day while European equities were down roughly 1%.
   
All three major U.S. stock indexes are currently jumping up near 1.5%, while Treasury yields and swap rates are down 1-3 bps across the curve.  Brent and WTI Crude prices are up as well on the day, at $48.30/barrel and $46.25/barrel, respectively.      

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