Leon Hinde

At this point, the FED Funds futures market is pricing in a 95% certainty of an upward adjustment to the Fed Funds target and a 40% chance of another adjustment by May of 2017.

Sunday will be the Presidential elections in Austria and the Parliamentary referendum in Italy. Between these two events, it’s more likely to expect a market moving result from the elections in Austria. If the Italian people vote “No” to the constitutional changes proposed on the ballot, the worst case result is that PM Matteo Renzi will be replaced by some other non-elected technocrat designated by the EU.

However, if the Freedom Party leader, Norbert Hofer, is elected as the next president of Austria, his promises to hold a “Brexit” style referendum, combined with his general disdain for EU policymakers in Brussels, could pressure G-7 equity markets lower.

USD and US Stock indexes look technically stretched; internal volume and “breadth of market” indicators are showing signs of rolling over. It seems the slightest fundamental disruption to the current expansionary theme could trigger a pullback.

Over the last five years, one of the least important concerns for US Corporate Treasurers has been the forward cost of funding. However, over the last two months, the sharp rise across the US Treasury curve has exposed some notable differences in how banks perform versus technology companies perform in a rising interest rate environment.

Since October 1st, the yield on the US 10-year note has surged close to 90 basis points from 1.55% to 2.44%. This is nearly a 60% increase and has helped US banking stocks, while hurting some big technology names.

For example, Since October 1st, shares of J.P.Morgan have climbed over 20% from $67.00 per share to over $81.00 per share. During that same period of time, shares of Facebook have dropped from $133.00 per share to just under $115.00 per share; a 13.5% drop.