Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Chief Investment Strategist
Key points:
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The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: US stocks extended gains for the third consecutive day, as sentiment remains buoyed by expectations of Fed rate cuts post-NFP miss, as well as on the back of a strong earnings season and increasing shareholder returns. Russell 2000 and NASDAQ 100 led the gains, up 1.2% and 1.1% respectively. Tech and chip sentiment remained upbeat, with Super Micro Computer, Micron and Nvidia up 6%, 4.7% and 3.8% respectively. Warren Buffett’s Berkshire Hathaway was up 1% after reporting a quarterly results over the weekend that included a 40% jump in Q1 operating earnings from a year earlier. Apple fell close to 1% as Buffett cut his stake, despite remaining optimistic about the iPhone-maker’s business. Focus could turn to Wall Street report that Apple is developing AI chips for data centers. Earnings focus today on Walt Disney, and energy major such as Duke Energy and Occidental Petroleum.
Over in Asia, Japan markets returned from holiday opening 1.5% higher on Fed rate optimism and yen back on weakening trend after intervention-driven gains. China markets also closed higher on Monday, with CSI 300 up 1.5% after Golden Week holiday and Hong Kong’s HSI clocking in another 0.6% gains to rise to 8-month highs above 18,500.
FX: The US dollar traded sideways on Monday after ending lower for a second consecutive week. This week is light on macro data and focus will likely remain on earnings and geopolitics. JPY was back in focus with intervention seemingly out of the way, and USDJPY traded back above 154 as FX Chief Kanda saying that intervention may not be necessary if markets are orderly. This came after some remarks from Janet Yellen over the weekend saying that they would expect interventions to be rare and consultation to take place. USDJPY faces a test of the 21DMA at 154.60. AUDUSD has remained steady above 0.66 after the post-NFP surge on Friday, and RBA posturing will be key today, but markets are already priced in aggressively. USDCNH traded back above 7.20, as onshore China markets reopened, and CNY midpoint fixing was back below 7.10 but yen weakness will be key for Chinese authorities once again.
Commodities: Geopolitics was back in the driving seat for crude oil traders after last week’s drop, with prices rising as Israel rejected a ceasefire proposal for Gaza strip that was accepted by Hamas. Demand outlook remains supported by expectations of Fed’s rate cuts, and focus today will be on the EIA outlook report. Base metals pushed higher amid the better risk-on tone across markets. Copper was back in gains as China markets reopened, and Gold prices also gained as expectations of rate cuts rose. Silver led with over 3% gains, and agri commdoities also extended gains with Wheat up over 4%.
Fixed income: Treasuries were choppy in post-NFP ranges with no major data ahead of refunding auctions. More detail can be found in this article.
Macro:
Macro events: RBA Announcement, EIA STEO; Swiss Unemployment (Apr), German Trade Balance (Mar), EZ Construction PMI (Apr), Fed’s Kashkari
Earnings: UBS Group, Siemens Healtineers, Nintendo, BP, Duke Energy, Arista Networks, McKesson, Walt Disney, Ferrari, TransDigm, UniCredit, Suncor Energy, Coloplast, Sampo, Infineon Technologies, Leonardo, Geberit, Datadog, Coupang, Rockwell Automation, Occidental Petroleum
News:
For all macro, earnings, and dividend events check Saxo’s calendar.
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