Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
In the news:
Macro:
Macro events: UK Inflation (May)
Earnings: Steelcase
Equities: The S&P 500 achieved its second consecutive record close on Tuesday, increasing by 0.2% with a boost from Nvidia's surging shares. The Nasdaq also marked its 7th straight record close with marginal gains, while the Dow added 56 points. Nvidia rose by 3.6%, pushing its market cap to $3.34 trillion, surpassing Microsoft, now valued at $3.32 trillion. Earlier this month, Nvidia reached $3 trillion for the first time and exceeded Apple. Energy, Financials, and REITs gained, while Communications and Consumer Discretionary lagged in the S&P. The CAC 40 surged by 0.8%, extending its recovery for the second session after recent political turmoil caused the index to drop to its lowest point since January. Most stocks experienced gains, with Renault increasing by 1.4% after announcing expectations for its budget brand, Dacia, to double sales and profitability by 2030.
Fixed income: The yield on the US 10-year Treasury note fell to 4.22%, approaching its lowest level since late March, after a $13 billion auction of 20-year US government bonds. Additionally, May's retail sales increased less than anticipated, and previous months were revised downward, strengthening expectations for Federal Reserve rate cuts in the current year. More than half of the market expects a Fed rate cut in September. However, Fed Officials still emphasize the need for more evidence of cooling inflation before lowering rates.
Commodities: Gold traded near $2,310 per ounce, close to its over-one-month-low of $2,290 on June 4th, influenced by a strong dollar and reduced central bank demand in Asia. The People's Bank of China paused its aggressive gold-buying spree in May due to high prices, halting strong bullion demand since 2022. Oil continued its upward momentum from the previous day, as traders anticipate support for prices due to summer demand. Additionally, natural gas surged by 4.3%, ending a four-day decline, driven by hot weather forecasts boosting demand expectations. Prices of iron ore cargoes with 62% were around $107 per tonne, remaining close to the lowest level since April, as a set of economic data contributed to concerns about demand for ferrous metals from China.
FX: On Tuesday, the US dollar weakened modestly due to softer US retail sales and Federal Reserve officials advocating patience with rate cuts. The Australian dollar rose to 0.6660 following a hawkish stance from the Reserve Bank of Australia, which kept the possibility of a rate hike open, while AUDNZD also climbed to 1.0850. The British pound wavered around 1.27 ahead of the UK CPI release and the Bank of England's rate decision. The euro traded near 1.0730 as French election concerns eased and Eurozone inflation met expectations. Meanwhile, the Swiss franc hit a three-month high, with USDCHF dropping to 0.8827, below the 200-day moving average, in anticipation of the Swiss National Bank meeting on Thursday.
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.
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