Markets continued to price three more ECB and Fed rate hikes, albeit with a slightly lower probability for the latter, as Warsh avoided rate guidance at the IMF meeting in Bangkok but gave a positive assessment of the US economy, while Lagarde reiterated upside inflation risks but favoured a measured response.

Sovereign curves steepened as US FY2026 figures showed record interest expenses and TIC data showed Chinese Treasury holdings at an 18-year low, pressuring long-end yields, although safe-haven flows from the equity sell-off partly offset it.

Eurozone peripheral spreads were flat, while the dollar weakened. US equities fell as the sell-off in AI and semiconductor stocks deepened, while defensives outperformed on both sides of the Atlantic, supporting European indices.

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