Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Morning Brew December 8 2023
Erik Schafhauser
Senior Relationship Manager
Summary: And Nothing Else Matters - NFP Today
Good Morning
Heading into the Non-Farm Payrolls today at 14:30 CET followed by the University of Michigan Sentiment at 16:00. The German Inflation Data at 8 will find much less importance. The Non-Farm Payroll is expected at 180k after 150k in October, the number contains 25k Auto workers who returned back to work from the strike so it is a little distorted. The unemployment rate is expected at 3.9% and average Earnings are seen to have risen 0.3% on a monthly basis.
The great assumption which drove equities higher and the USD lower in the last few weeks wasthe expectation of rate cuts next year. If the number comes stronger than expected, this could shift the expectation and weigh on Equities and boost the Dollar, our Charu sees EURUSD and Gold as heavily affected. A miss would have the opposite effect.
Peter wrote on previous rate cuts: A look at previous Fed rate cuts and what it means for equities
The Japanese GDP came as a disappointment in the night, it fell by 2.9% vs an expected -2.1% on low consumer spending. Real Wages were down 2.3% and household spending came 2.5% lower. This weighed on the Nikkei, which fell to a 4 week low . The Yen gained 2% yesterday which makes Japan the focus for traders cross asset class. Over night, USDJPY saw a low at 142.50 but disappointing data let it rise again to 144
Kim: Technical Update - Heavy selling in USDJPY, EURJPY, AUDJPY, GBPJPY and CHFJPY. Close to be testing key supports
The US 500 gained to 4580 with Tech being the big driver. AMD rose 9.9% on a strong AI outlook, the Dow remains above 36000 and the US Tech 100 NAS is testing the 16k. Despite (or because of) political issues in Germany, the GER40 remains strong at 16680.
The 10 Year Yield fell to 4.15 and the USD Index to 103.70. EURUSD is 1.0780, GBPUSD 1.2580 and Gold and Silver 2030 and 23.80
In recent data announcements, the real move often came with some delay after the data release, it might be dangerous to feel safe shortly after the number came out.
Trade safely and consider using options for speculative trading, volatility remains low in FX as well as Equities. EURUSD 1 month is at 7%, Silver 21 and the VIX near 13.
Next week we will have major central bank announcements and key data points so we should see lots of movements.
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