Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Summary: The NY Fed's 1-year inflation expectations remained at 3.0%, but 3-year expectations increased to 2.7% from 2.9%. The US 10-year yield rose to 4.42%. S&P 500 closed stable at 5,202, while Nasdaq 100 slipped 0.1%. Tesla rebounded 4.9%. Japan’s Nikkei 225 surged 0.9%. The dollar stagnated despite high yields. AUDUSD climbed above 0.66 due to a 6% surge in iron ore prices.
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The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: The S&P 500 finished the session nearly unchanged at 5,202, while the Nasdaq 100 shed 0.1% to 18,100 in a muted session. Tesla rebounded 4.9% as investors reacted to Elon Musk’s announcement last Friday of an August unveiling of the long-awaited self-driving Robotaxi. Coinbase Global surged 6.7%. In Asia, Japan’s Nikkei 225 rallied by 0.9% to 38,893, while China’s CSI300 slid 0.9%. The Hang Seng Index climbed modestly by 0.1% to 16,733. Treasury Secretary Yellen said in Beijing that the U.S. is not seeking to decouple with China, but she reiterated her criticism of China exporting its overcapacity in green energy products to the U.S.
FX: The dollar was unable to go higher again despite yields being sticky on the 3-year inflation expectations surging higher. The weaker dollar pushed activity currencies higher, and NOK and AUD gained despite oil prices inching slightly lower on hopes of a ceasefire in the Middle East. EURNOK drifted lower to 11.60 from highs of 11.66 yesterday. AUDUSD rose back above 0.66 with 6% gain in iron ore prices and broader commodities. EURUSD surged back above 1.0850 and 100DMA test comes in at 1.0874, while USDCAD was back below 1.36 and both ECB and Bank of Canada could show a dovish tilt at their meetings this week. USDJPY remains pinned below 152 and eyes will be on the US inflation release on Wednesday. Bitcoin was flying again, up over 3% to inch above $72k again but reversed lower in Asia, while Ethereum was up about 9% as Bitcoin halving draws closer.
Commodities: Crude oil prices reverted back to gains after a drop to sub-$90/barrel level on hopes of a ceasefire in the Middleeast conflict, as reports suggested that Hamas rejected the Israel ceasefire offer. EIA’s monthly oil report will be in focus today. Gold and copper were also at fresh highs. Gold demand remained underpinned by central bank demand from China and India, as well as retail demand from China. US CPI will be the next big focus.
Fixed income: The 10-year yield climbed another 2bps to 4.42% on Monday after the post-employment report spike last week. At one point, the 10-year yield advanced to 4.46% in European hours but pulled back in the New York trading hours. The 2-year yield rose 4bps to 4.79%.
Macro:
Macro events: EIA STEO
Earnings: Bank of Ningbo, Hengli Petrochemical
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
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