Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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 closed higher with the S&P 500 Index cresting past a one-month high, spurred by a deceleration in the labor market and dovish remarks from Fed President Mary Daly, which stoked speculation of potential policy loosening. The S&P 500 notched up by 0.5%, breaching the 5,200 level, with the real estate and energy sectors at the forefront. Both the Nasdaq 100 and Dow Jones saw upticks by 0.2% and 0.8%, respectively. Equities reached peak gains later in the day following Daly's hint at adaptive rate measures should labor conditions weaken. This followed the release of unemployment claims data indicating a rise to a multi-month high.
Utility sector equities are experiencing a notable rally, driven by bullish investor sentiment on the prospects of data centers and AI technology ramping up electricity consumption, alongside sustained interest in the sector's conventional role as a safe haven asset.
Apple Inc. is gearing up to enhance its AI offerings using its proprietary chips in data centers for complex tasks, paralleling its strategy for personal devices. This aligns with Tim Cook's vision of AI as a competitive edge and sets the stage for a bold AI roadmap to be unveiled at Apple's Worldwide Developers Conference on June 10, signaling its entry into the generative AI space and intensifying competition with tech giants.
Roblox stock nosedives 21% following Q2 bookings guidance that fell short of consensus analyst expectations, signaling potential headwinds for the gaming company's revenue growth.
FX: The US dollar slumped yesterday after remaining steady in the last few days as higher-than-expected US jobless claims data signaled a cooling labor market and fueled expectations that the wage growth and inflation will slow to allow Fed to cut rates later this year. Japanese yen however underperformed in the G10 currency space, with USDJPY still pinned at 155+ levels despite weakness in the dollar. Meanwhile, AUD outperformed with AUDUSD rising back above 0.66 handle to erase post-RBA losses from this week. Sterling wobbled, and GBPUSD slid to lows of 1.2446 with a dovish BOE but rebounded to 1.2520+ as the dollar weakened later. GBPAUD remained a better way to play the BOE, as was discussed in this article. GBPAUD printed 4-month lows at 1.8909. EURUSD remained short of testing 1.08.
Commodities: U.S. WTI crude oil futures settled at $79.26/bbl, marking a 0.34% increase, while Brent Crude futures settled at $83.88/bbl, reflecting a 0.36% rise. Natural gas prices climbed by 5.21% to $2.3010 per million British thermal units, reaching their highest levels since late January. The EIA reported a larger-than-expected decrease of -1.4 million barrels in crude inventories. Additionally, gold prices rose by $18.00, settling at $2,340.30 per ounce. Silver saw a 3.6% increase, and copper rose close to 1%.
Fixed income: Treasuries rallied (yields were lower) following an increase in jobless claims hinting at a loosening jobs market as well as a strong 30-year auction. The rally in gilts was however more measured despite the BOE’s dovishness as markets await data to further price in UK rate cuts.
Macro:
Macro events: ECB Minutes; Japan’s Current Account (Mar), UK GDP Estimate (Mar), UK GDP Prelim. (Q1), Norway CPI (Apr), Canada Employment (Apr), US UoM Prelim. (May), China M2 (Apr). Speakers: ECB’s Cipollone, Elderson; BoE’s Pill; Fed’s Goolsbee, Bowman, Logan, Kashkari, Barr
Earnings: NTT, Honda, KDDI, Tokyo Electron, Enbridge, Li Auto
News:
For all macro, earnings, and dividend events check Saxo’s calendar.
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