Bonds & Stocks
Treasury yields rose on speculation that bets on rate cuts by major central banks have gone too far, with hawkish signals from the Bank of Japan rattling global bonds as traders awaited Friday’s US jobs report. With less than 24 hours left for the data that will test test market’s aggressive dovish repricing, Wall Street had to grapple with news that the world’s last negative interest-rate regime may be ending soon. The BOJ indication drove the Japanese yen up almost 2%, while sending yields higher across the board.
Economy
Proponents of a soft vs. hard landing may differ in their assessment of the current slowdown, but they can probably agree on one thing: The Fed will start cutting rates well before it’s clear what kind of landing we’re headed for. Our analysis of past FOMC transcripts, minutes and forecasts suggests officials tend to start cutting rates out of concern about weakening data well before they recognize a recession.
World
Israel’s military said its mission to destroy an estimated 500 kilometers (311 miles) of Hamas tunnels across the Gaza Strip will take months, causing a scale of urban destruction that may prove impossible to reverse. The devastating outcome of a drawn-out campaign against the militant group — with air strikes and ground battles continuing alongside the tunnel attacks — is likely to leave many of about 2.2 million Palestinians homeless and a question mark over where they can be re-housed.