World shares steadied on Wednesday though investors stayed cautious at the prospect of U.S. interest rates staying higher for longer, which in turn pushed Treasury yields to five-month highs and buoyed the U.S. dollar.
Markets have already slashed bets on the number of U.S. rate cuts this year to fewer than two, a sea change from about six cuts predicted at the beginning of the year. The first rate cut is still expected in September, although the market’s confidence in that has declined. The MSCI world equity index, which tracks shares in 47 countries, was flat. U.S. stock futures, meanwhile, slipped a smidgeon, after Wall Street stocks were mixed on Tuesday.
Two-year Treasury yields retested 5 per cent overnight, while 10-years held near a five-month high on the diminishing expectations of Fed easing this year. Tensions in the Middle East are still running high. Israel vowed to respond to Iran’s weekend attack despite international calls for restraint, although its war cabinet put off a meeting to decide on its response until Wednesday.
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