-Yellen’s hawkish/dovish speech: In her last speech ahead of next week’s FOMC meeting, Federal Reserve Chair Janet Yellen managed to walk a line between hawkishness — saying «the federal funds rate will probably need to rise gradually» — and dovishness by not giving any guide as to when that rate rise would come. Treasury 10-year notes fell and the dollar weakened following her address in Philadelphia. Market-implied odds of the next Fed rate hike are now at 2 percent for June, but increase to 42 percent for the September meeting.
-Pound gets (more) volatile: Overnight there was a sudden 1.5 percent spike higher in the British pound that traders are attributing to a fat-finger trade. Though the currency quickly unwound the sudden move higher, it has strengthened again throughout the morning, increasing to $1.4567 at 6:06 a.m. ET, the level reached in the immediate aftermath of last Friday’s jobs report. The volatility has not gone unnoticed by currency trading banks Saxo Bank A/S and FXCM Inc., which have raised their margin requirements for pound trades. With polling showing the result of the referendum as too close to call, some funds have commissioned their own exit polls, but even that doesn’t come without risk.
-Clinton clinches Democratic nomination: Hillary Clinton has become the first female presumptive nominee for a major U.S. political party after securing enough delegates to claim the Democratic presidential nomination. Her challenger for the position, Bernie Sanders, has so far refused to drop out of the race, saying he will take the battle to the convention in July in the hopes of winning over enough superdelegates to stop Clinton’s victory. President Barack Obama, who spoke with Sanders by phone on Sunday, is expected to endorse Clinton as early as this week.
-Euro-area growth quickens: The euro-area economy grew faster than previously estimated in the first quarter, according to a revision released this morning showing that GDP rose 0.6 percent in the period. Increases in both household consumption and investment drove the revision higher. Expectations are for the economy to slow in the second quarter as Brexit risk and elections weigh on sentiment.
-Markets higher: The MSCI Asia Pacific Index advanced 1 percent overnight with the weakening yen helping push Japan’s Topix Index 0.6 percent higher. In Europe, the Stoxx 600 Index had gained 1.4 percent by 6:15 a.m. ET as Yellen’s speech and growth data boosted stocks. S&P 500 futures were 0.3 percent higher.
June rate hike highly unlikely: Global markets are gaining after Yellen indicated a rate hike this month is off the table. In a speech Monday, she remained optimistic about the U.S. economy, but expressed concern about the recent U.S. hiring slowdown. She also mentioned China’s slowing economy and uncertainty about the outcome of the U.K. vote on membership of the European Union. «In the space of a week we’ve moved from a strong momentum for a June interest rate increase from the [Fed] to Yellen hitting the final nail into the coffin of a June increase with her speech yesterday,» said Simon Smith, chief economist at FXPro. The dollar was weaker overnight against most major currencies after her remarks.
-Stock market movers — Sarepta Therapeutics, Zillow: Shares Sarepta Therapeutics (SRPT) are up almost 25% premarket after the Food and Drug Administration requested more data before making a decision on whether to approve its new drug, eteplirsen. Real estate website Zillow (Z) gained 7.8% in after hours trading after agreeing to pay $130 million to its competitors, including News Corp (NWSA) owned Move Inc., to settle a lawsuit.
-Earnings and economics: Pharmaceutical company Valeant (VRX) is reporting before the opening bell. Valeant has had numerous problems in the past year, including its struggles to file an annual report, controversial drug price hikes that it had to retract, and allegations of Enron-like fraud. Its stock is down 88% in a year. Retailer Michaels (MIK) is also reporting ahead of the open. Restaurant and entertainment company Dave and Busters (PLAY) will report after the close. In China, new data show the country is still burning through its currency reserves. Chinese foreign currency reserves fell to $3.19 trillion in May, down from $3.21 trillion in April, according to the country’s central bank. German industrial output data for April was better than expected on Tuesday.
-Markets overview and recap: European markets are gaining in early trading, with Germany’s DAX up 1.5%. Asian markets ended the session positive. On Monday, the Dow Jones industrial average was up 0.6%, while the S&P 500 and Nasdaq both gained 0.5%.