Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Chief Investment Strategist
Summary: The selloff in equities and bonds extended on Friday as hot inflation concerns roiled markets ahead of key event risks from Fed and BOJ meetings this week. Tech stocks led losses, with Adobe guidance falling short of expectations and focus shifts to Nvidia’s GTC event today where new chips may be unveiled. Japan equities however open stronger today, as yen weakness persisted despite expectations of BOJ normalization. In commodities, focus is on metals with Copper and Silver ending last week with robust gains, and oil prices also trading near highs.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: US stocks ended the week lower as the tech rally paused ahead of key event risks from Fed and BOJ meeting this week. NASDAQ 100 was down over 1% on Friday as hot inflation reports last week raised concerns on whether the Fed’s dot plot could shift hawkish this week. Adobe tumbled 14% as outlook fell short of expectations, and tech focus will be turning to the Nvidia GTC conference this week where new flagship chips are expected to be launched. Defense and green metal stocks remain in focus.
In Asia, Japan’s Nikkei 225 was back above 39k at Monday’s open, rising 0.9%, as yen weakness continued to underpin a strong run higher in stocks despite expectations of BOJ normalization. China and HK stocks ended last week in gains, and China’s data dump on Tuesday will be in focus.
FX: Dollar is starting the week on the front foot with a host of central bank meetings ahead, but primary focus on the Fed and the BOJ. DXY index is hovering close to 103.50 and key moving averages are coming just above this level. USDJPY is now close to 149 signaling that a BOJ rate hike is fully priced in and any dovish commentary this week from the BOJ or a hawkish outcome from the Fed could easily put the focus above 150. EURUSD holding up better despite a stronger dollar, trading just below 1.09 as ECB signals on a June rate cut continue to get clearer. AUDUSD drifted back below 0.66 this week and trades near 0.6560 with risks ahead from a dovish tilt from RBA and another set of weak China data due tomorrow.
Commodities: Green metals remain in focus with Copper up 6% last week although Iron ore slipped below the key $100-mark amid China’s property sector concerns. Gold softened slightly last week after touching highs of close to $2,200 earlier as hot inflation concerns returned, but Silver gained on the back of price action in Copper and touched fresh YTD highs of $25.44 last week. Crude oil also rose last week on IEA raising its global oil demand forecast and geopolitical risks remaining elevated. For more on commodities, read our weekly commentary here.
Fixed income: Treasuries sold off with inflation concerns coming back on the radar last week, and ahead of Fed and BOJ announcements due this week. 10-year notes saw their worst week this year as Fed rate cut bets were dialed back. Both 2-year and 10-year Treasury yields rose over 20bps last week. Fed’s 2024 dot plot will be key focus this week, along with 20year auction on Tuesday.
Macro:
Macro events: China Retail Sales (Feb), China Industrial Production (Feb, China Jobless Rate (Feb), China Property Investment (Feb), EZ Final CPI (Feb)
Earnings: WuXi AppTec
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)