Head of Saxo Strats
Summary: We observe more signs of stabilisation in equities with volatility markets normalising and Italian government bonds coming back from the lows. But this week will be the ultimate test of sentiment with earnings from Apple, Amazon, Microsoft, Facebook and Alphabet (Google's parent) and these stocks have helped the equity market bouncing back faster than expected. Equity valuations remain extremely elevated and thus good earnings and a positive outlook from these major companies are important for sentiment.
Last week was the first real test in weeks of sentiment in equities with Friday showing buyers are still controlling the game. Earnings have had a similar pattern of generally disappointing and the majority of companies skipping their outlooks as the economic environment is too uncertain. Technology stocks continue to be bid higher and volatility futures are close to be in contango for the first time in almost two months. Italian government bonds (BTPs) are also bid this morning as Italy is preparing to open its economy again. Many small positive signs although the oil market is still sending distressing price signals due to massive demand and supply imbalance.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
