Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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(Editor's note: due to technical difficulties, there are some audio issues in today's Morning Call video.)
Saxo Bank Head of FX Strategy John Hardy reports that the euro continues its ascent despite Italian yields continuing to rise with key EURUSD flashpoints at 118.25, 119.25, and of course 1.20.
"It's interesting to see that the European Central Bank appears to be playing hardball with the populist Italian government," says Hardy, adding that markets appear to be pricing in expectations for a hawkish central bank move tied to the end of ECB QE at the bank's June 14 meeting.
Globally, the decline in emerging market currencies is presently centred on Brazil where extreme levels of political unrest place the country at risk of further currency volatility.
In terms of European shares, Saxo Bank head of equity strategy Peter Garnry says that Casino, Carrefour, Santander, AB InBev, and Edenred maintain noteworthy levels of exposure to the Brazilian market.
Elsewhere in stocks, Garnry reports that the US S&P 500 is 12 points away from the most recent "air pocket" seen in March with Saxo's equities head stating that he expects the benchmark US index to push through into this area.
The key element for markets at large remains risk sentiment, says Hardy, with US yields raising a question mark on this front as they have returned to the pivotal 3% area.
Quarterly Outlook
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