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 January 20 2023
Erik Schafhauser
Senior Relationship Manager
Good Morning,
Risk remained under pressure yesterday on economic data and Fed speakers. Initial Jobless claims show the labor market remains tight and the Philly Fed Index showed a slowdown at the same time.
Susan Collins joined the ranks of Fed members seeing a terminal rate above 5% as necessary but traders are not believing it yet. The Terminal rate remains at 4.9%.
Indexes closed lower with the Dow down 0.76%, S&P 500 down 0.76%, Nasdaq down 0.96%. The GER 40 fell to below 15000 and technically DAX has formed at top and reversal pattern, an evening Doji and could fall to 14,653 possibly 14,356. Over night Asia we see some buying mainly driven by the a statement out of China that the worst was over for the fight against Covid.
According to Refinitiv calculations based on analyst expectations, earnings for the S&P 500 companies should decline 2.8% for the fourth quarter, compared with a 1.6% decline in the beginning of the year.
The 10 year US rates are trading at 3.41 a key level, that – if broken – can take us to 3.22. Bunds could rise to 143.38.
FX remains at interesting levels, EURUSD is back above 1.08 – 1.0836, GBPUSD 1.2375, and the Yes weakens to 129 despite high inflation in Japan.
Gold continues to be strong at 1927 and is pulling Silver back to 24 – we traded a 5% range this week so far. 24.50 has consolidates as a key resistance.
Bitcoin trades at 21000 even though the lending unit of crypto firm Genesis filed on Thursday for U.S. bankruptcy protection.
With little economic date today after German and UK numbers at 8, overall sentiment will likely make or break the day.
Friday
Japan CPI,
Germany PPI
UK Retail Sales
Canada retail sales
Earnings: Sandvik, Schlumberger, State Street
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