Bonds on the block, equities at a crossroads

Michael McKenna
Head of Editorial Content, Saxo Bank

Volatility may be returning to pre-shock levels, but the recent equities selloff is still very much in focus with Saxo Bank's John J. Hardy pointing to 2,750 as the key line in the sand for the S&P 500 as it represents a major Fibonacci retracement of the big spike lower.

Saxo technical analyst Kim Cramer Larsson is of a similar view, reporting that a bearish session today could open things up for a re-test of 2,564. "There remains a risk that we could move lower again, and I would need to see a close above Friday's highs across all exchanges in order to take a bullish view on US shares," says Larsson.

One of the major factors facing markets today is the $179 billion US Treasury note auction, which represents a good chunk of the $258bn in Treasuries on the block this week. The outcome of these auctions is critical for the dollar says Hardy, adding that the bellwether greenback pair remains USDJPY where the 107.50-108.30 area is in focus as key resistance.

The second major event today is the German ZEW indicator of economic sentiment set for release at 10:00 GMT. Saxo Bank head of equity strategy Peter Garnry reports that this release could be a major factor in European markets, adding that consensus is calling for a decline.

"The recovery seen in European equities has been disappointing, and a decline in the ZEW reading [could potentially represent a broader rollover in macro]," says Garnry.

Finally, Saxo Bank head of commodity strategy Ole Hansen says that industrial metal prices are headed lower as Washington weighs the possibility of punitive tariffs on aluminium and steel. According to Hansen, the imposition of such tariffs could raise prices in the US while crating a price-lowering excess of supply in the rest of the world.

Beyond Trump's tariffs, Hansen reports that gold resistance remains firm at $1,360/oz while the headlines of London's IPWeek remain supportive of crude oil.

Quarterly Outlook 2024 Q2

2024: The wasted year

Macro: It’s all about elections and keeping status quo

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.

FX: The rate cut race shifts into high gear

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.

Equities: The AI and obesity rally is defying gravity

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.

Fixed income: Keep calm, seize the moment

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: Is the correction over?

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.

Macro: It’s all about elections and keeping status quo
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.
FX: The rate cut race shifts into high gear
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.
Equities: The AI and obesity rally is defying gravity
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.
Fixed income: Keep calm, seize the moment
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: Is the correction over?
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.

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Bonds on the block, equities at a crossroads

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Quarterly Outlook 2024 Q2

01 / 05

Macro: It’s all about elections and keeping status quo

FX: The rate cut race shifts into high gear

Equities: The AI and obesity rally is defying gravity

Fixed income: Keep calm, seize the moment

Commodities: Is the correction over?

Macro: It’s all about elections and keeping status quo

FX: The rate cut race shifts into high gear

Equities: The AI and obesity rally is defying gravity

Fixed income: Keep calm, seize the moment

Commodities: Is the correction over?

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