We begin with the United States where even the more dovish Fed officials such as Evans are now preparing the markets for at least two rate hikes in 2016.

Source: Chicago Tribune

Here is the 10y note futures contract declining in response to this messaging from the Fed.

Source: barchart

The market is still assigning a significant probability of one or no hikes (63.5%) - so there is some adjustment ahead once the Fed decides to move.

Source: CME

In the meantime the US dollar is starting to gradually rise again.

Source: barchart

In other economic developments in the US, the housing market appreciation is now 6% (year-over-year). That's too high given the tepid wage growth.

This next chart illustrates why the housing market shouldn't be growing at this rate. Here is the relative change in house prices vs. wages (1991 =100). This will price a significant number of households out of the housing market. 

Source: @SoberLook

US manufacturing continues to struggle - below is a nice summary from Markit. The Fed's upcoming rate hikes (that are likely to result in a stronger dollar) will provide headwinds for the manufacturing sector.

Source: Markit

Speaking of the US dollar, after the recent correction, the long-dollar position is no longer viewed as the most crowded trade. Short emerging markets is now on top.

Source: @sobata416, h/t Jake, BAML

Hedge funds and institutional investors have been selling the dollar. Is that unwinding of the long-dollar trade over for now?

Source: ‏‏@MerrillLynch

 Turning to the energy markets, here are some updates.

1. Larger than expected crude oil inventory build last week was offset by a decent size draw on gasoline in storage. As discussed yesterday, US gasoline demand remains quite strong. The second chart below shows gasoline futures rising.

 

Source:  barchart

2. Overall the oversupply situation is starting to look a bit more reasonable. Total US rig count (including natural gas rigs) is at the lows we haven't seen in a couple of decades.

Source:  @Brian_M_Wilcox

Investment in new wells and exploration is less than half of the 2014 levels.

Source: ‏ @Brian_M_Wilcox

Source: ‏ @Brian_M_Wilcox

As a result, production declines should accelerate.

Source: @businees, h/t Josh

3. By the way, job losses in the energy sector have been tremendous.

Source: @BloombergTV 

4. One spillover effect of low energy prices is the need for banks to take prudent reserves against energy debt. Apparently Canadian banks haven't reserved sufficient amounts.

Source: @WSJGraphics, h/t Jake

Continuing with commodity markets, here are 3 trends worth noting.

1. Lumber market rally remains intact. Is this driven by export demand or is it an indication of some strengthening in US construction?

Source: barchart

2. The "sugar high" continues.

Source: barchart

3. Palm oil prices are on the rise as well, which is also reflected in the physical market. The reason is the El Niño weather cutting production.

Source: barchart

We now look at the credit markets.

1. It's remarkable how quickly corporate CDS spreads have come in. Here we have the following CDS indices: iTraxx Crossover,  HY CDX, iTraxx Emerging Markets, iTraxx Asia - all tightening sharply. 

Source: HSBC

Source: HSBC

Source: HSBC

Source: HSBC

2. European investment-grade corporate bond issuance is shown below - hitting a record. The ECB called and the corporate debt market answered.

Source: @MorganStanley

3. Unlike in the US, EU HY corporate leverage has been declining - with EBITDA (earnings) increasing while debt declining recently.

Source: @MorganStanley

Speaking of credit, we now look at China where ...

1. ... the popularity of the bond market as a source of funding is on the rise.

Source: Macquarie

2. China's corporate bond index yield continues to fall - almost in a straight line. All that new demand from levered WMPs (wealth management products) needs to be satisfied.

Source: S&P

3. China's housing market is picking up steam.

Source: Macquarie

In fact, according to Bloomberg, "real estate prices in Shenzhen are up 74% over the past 12 months".

Source:  ‏@pdacosta, @business

Here are some updates on other emerging economies.

1. The Central Bank of Nigeria unexpectedly reversed policy by raising the benchmark rate to 12%. A sudden jump in inflation (second chart below) has spooked the central bank.

 

2. On the other hand, Hungary's central bank decided to cut rates - in part in response to the ECB's latest move.

Source: CNBC

3. We've had a massive trade deficit increase in the Philippines on higher imports. This could be an indication of an economic rebound. 

4. Singapore remains firmly in deflation as the housing market is in the doldrums and job growth has stalled.

Next, we have the Japanese government yield curve. That's not very healthy looking. 

Source: @SoberLook

Now on to the Eurozone, where economic results from Germany have been mixed.

1. We see a big divergence between German current business assessment and expectations. Note that expectations tend to lead the overall index. 

Source: Ifo

Also, the German ZEW Economic Sentiment Index rose less than expected. There is clearly some unease about future economic developments.

Source: ZEW

2. Here is a chart from the FT that shows net and gross 2016 Eurozone bond issuance. Take a look at Germany. This is where the ECB will be dealing with insufficient inventory for its QE program.

Source: @FTMarkets

3. We continue to see significant outflows from European equity funds. Investors are not confident that the latest QE bazooka will support the equity markets, especially as the euro has risen recently.

Source: Deutsche Bank

Switching to the UK, the nation's house prices are growing faster than expected - nearly 8% per year. The housing shortage continues.

Source: @SoberLook

Just like in the US, UK wage growth is low for the level of the country's unemployment rate.

Source: HSBC

As an aside, Brexit odds rose in the betting markets. The Brussels attacks are adding to the anti-EU sentiment in the UK.

Source:  @PredictWise

Finally, here is a picture of the actively managed mutual fund industry's destruction, as ETFs and index funds dominate.

Source: @FTMarkets 

Turning to Food for Thought, we have 5 items this morning:

1. Will our children be better off financially than we are? This is one of the issues Bloomberg explores in trying to understand global voter anger.

Source: @business

2. How does Twitter growth compare to that of Facebook?

Source:  ‏@StatistaCharts, h/t Jake

3. Comparison of debt balances by the age of borrower: 2003 vs 2015 

Source: @FactTank, h/t Jake

4. Attacks on medical facilities in Syria.

Source: @StatistaCharts , h/t Jake

5. Microbreweries take off.

Source: @ek_obrien