Market correlation

Rising commodity prices-CRB index (high inflation) are generally indicative of economic growth, which results in higher interest rates and lower bond price ( higher bond yield)

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World stocks and commodities rose on Monday, boosted by upbeat Chinese data, while U.S. oil futures jumped to a near six-month high as escalating tensions between the Iraqi government and Kurdish forces threatened supply. Global markets digested the large amount of weekend newsflow, and clearly liked what they saw as S&P futures were modestly in red while both European and Asian stocks are higher.

The USD is marginally stronger after Yellen’s comments suggest the Fed may look through weak inflation. Still, for those who missed this weekend financial elite extravaganza, Yellen stated that new normal will be lower interest rates than seen historically and that inflation has been largest surprise for the US economy this year. Yellen added that gradual hikes in fed funds rate are likely to be appropriate during next few years and that she will be paying attention to inflation data in the upcoming months, although she guesses that the soft reading will not persist.

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Yield up