Charting the Markets: Burberry and Bonds Not as Good as Gold

As the odds of a U.S. rate hike in the next six months lengthen, global equity investors have a renewed spring in their step after two days of losses. Fed fund futures put the probability of a move this month at just 4 percent, versus 10 percent on Tuesday. March 2016 is also now looking less certain, with the likelihood of a policy change below 50 percent compared to 59 percent a couple of days ago. Asian and emerging market stocks rallied as much as 2 percent, while European equities gained for the first day in four.

One reason investors believe the Fed won't raise rates in the near term is that U.S. inflation is stuck near zero. The lack of global inflationary pressures is keeping a lid on global bond yields. Sovereign bond yields in developed markets - as measured by the Bloomberg Global Developed Sovereign Bond Index - have fallen to the lowest level in five months. This year U.S. treasuries have returned 2.3 percent, Eurozone government bonds have risen 1.7 percent and Japanese sovereign debt has gained 0.5 percent. This has been powered by expectations that monetary policy will stay looser for longer or that further measures - quantitative easing - will be necessary to combat deflationary pressures.