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Traders' expectations that the Constitutional Court of Germany would approve the European Stability Mechanism, the euro zone's new bailout fund, also bolstered market sentiment.
One widely watched guide, the Chicago Board Options Exchange's VIX index, a measure of traders' expectations of share price gyrations, in July reached levels not seen since the 1987 crash, and shot up again last week.
The Federal Reserve can control short-term interest rates, but long-term rates, which determine mortgage costs, depend largely on bond traders' expectations of the government's future borrowing needs.
The oil price fall, which began over concerns about the rout on Chinese stock markets, has been exacerbated by traders' expectations of the market being flooded by Iranian exports following the lifting of sanctions.
Traders' expectations for inflation over the next decade fell to almost a five-year low as oil settled to its lowest price since May, yields on Treasuries whose payments are tied to the Consumer Price Index showed.
Click here for more of Peter Way's analysis of block traders' expectations of ETF price movements.
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The big swings in inflation expectations have been most evident in the so-called break-even rate — which is the difference between yields on 10-year Treasury notes and 10-year TIPS and reflects trader expectations for consumer prices over the life of the debt.
The Keynes-Hicks hypothesis states that under normal conditions in commodity markets, when demand, supply, and spot prices are expected to remain unchanged for some months to come and there is uncertainty in traders' minds regarding these expectations, the futures price, say, for one month's delivery is bound to be below the spot price that traders expect to prevail one month later.
Traders said expectations of a dovish statement from the US Federal Reserve were also calming the market, after the UK's better-than-expected wages and employment data prodded sterling to a day's high of $1.4196.
Federal Reserve Chairman Ben Bernanke had a double-edged message for traders, voicing expectations that the economy will break out of the recession in 2009, but cautioning that growth thereafter is likely to remain sluggish.
And traders pushed their expectations for the next Bank Rate rise all the way back to September 2017, a month later than expected.
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