Equities: New extremes and a challenging opportunity set
Discover insights on the future of equity markets in Q1 2024 and navigate the potential recession with strategic investment choices.
Chief China Strategist
Summary: Treasury yields surged following robust US retail sales, with the 2-year yield up 14bps to 4.36% and the 10-year yield climbing 4bps to 4.10%. USDJPY rallied above 148, while EURUSD saw minimal change despite ECB President Lagarde's warning of rate cuts likely to be later than when the market expected. Spot gold plummeted 1.1% to $2,006. The S&P 500 and Nasdaq 100 dropped 0.6% while the Hang Seng Index plunged 3.7%. The Chinese GDP and activity data were mixed but largely met expectations.
Saxo’s Q1 2024 Outlook titled “What happened to the future” is now out. You can read it here.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: Stocks sank as Treasury yields rose, with both the S&P 500 Index and the Nasdaq 100 Index falling by 0.6% to 4,739 and 16,736, respectively. All 11 sectors of the S&P 500 declined. Tesla dropped 2%, while Apple fell by 0.5% after a US court of appeals declined to grant a longer pause on its smartwatches with a blood oxygen feature.
Fixed income: Treasury yields rose in response to a hotter-than-expected retail sales report, led by a 14bp jump in the 2-year yield to 4.36%. The 10-year yield climbed 4bps to 4.10%. In the futures and OIS markets, the probability of a 25bp cut at the March FOMC was trimmed to 57%, down from 63% one day earlier. The $13 billion 20-year Treasury bond auction met with tepid demand, with the awarded yield stopping at 0.8bp above the trading level at the time of the auction, and primary dealers left with a larger-than-usual portion of the auction.
China/HK Equities: The Hang Seng Index plummeted by 3.7%. The Chinese GDP and activity data released in the morning were largely in line with expectations. Investors attributed the improvements to the low base in the year before and continued to feel concerned about the sustainability of the recovery of the Chinese economy in 2024. News that the EU may impose a tariff on Chinese electric vehicles as soon as this June triggered selling on EV stocks. President Xi’s remarks of tightening the Party’s control over China’s financial sector with supervision that has 'teeth’ and Premier Li Qiang’s push-back to calls for more aggressive stimulus measures contributed to the deterioration in market sentiment. The CSI300 declined 2.1%.
FX:As US Treasury yields rose, USDJPY extended its rally, reaching above the 148 handle. Meanwhile, EURUSD remained little changed after ECB President Lagarde pushed back market expectations of rate cuts as early as April.
Commodities: Spot gold plunged 1.1% to $2,006 as Treasury yields rose on stronger US data. The short-term direction of gold will be dictated by the trajectory of US bond yields and the dollar.
Macro events: US housing starts & building permits (Dec), US Philly Fed survey (Jan), UK RICS house price (Dec), Japan machinery orders (Nov)
Earnings: TSMC, Compagnie Financier, Trust Financial, Fastenal, PPG, M&T Bank, JB Hunt, Northern Trust, KeyCorp
In the news:
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What happened to the future?
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