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Markets look set to take first Fed rate hike in their stride

The relatively calm reactions to Friday’s strong US employment report support our view that the gradual return of US interest rates towards more normal levels is unlikely to be the seismic shock that many have been fearing, particularly those following emerging markets and commodities. Nonetheless, we continue to expect further upward pressure on Treasury yields and on the US dollar, at least against other major currencies, and see US equities underperforming their peers in Europe and Japan.

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