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 8 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Murky Picture for now
Good Morning
We are looking back to an “interesting” first week of trading that gave us a rebound of US Yields, a stronger US Dollar and lower overall equities. The Non-Farm Payroll Data was a bit of a mixed bag as the headline numbers looked strong but the revisions were weak again.
US 10 Year Yields swung between 3.95 to 4.10 to now trade at 4.05, the USD Index is now 102.43, EURUSD is 1.0944, GBPUSD 1.2714 Gold 2032 and Silver 23.05 and Bitcoin 43800. Our Charu points out that “the Fed’s rate cut pricing is being re-assessed and market remains sensitive to hawkish data surprises. This could open the doors for a tactical USD recovery this week although a structural downtrend persists with March rate cut still remaining a high probability. Yen bears may return as well as BOJ pivot bets get pared, while EUR outlook turns further bearish on growth concerns emanating from a widening Middle East conflict.”
Equities closed in the green Friday but a little lower over the weekend, the US500 is 4690, down 1.6% for the year, the UUS Tech 100 NAS is 16282 or -3.2% for the year, the GER40 16559 off -1.2% in 2024. Apple has shed 5.9%, Amazon 4.4% and Tesla 4.2% on the year.
Boeing is again facing issues and the stock is worth watching today as the FAA orderd the grounding of 171 737 Max 9.
Oil is trading at 72.15 on worries we could see spreading violence in the middle east and blockage of the Red Sea. Ole published his commodity weekly on Friday
US Lawmakers are once again struggling to pass a spending deal to avoid a shut down.
The overall picture to trade remains the Hard or Soft Landing, the number of rate cuts to be expected and geopolitical worries – Our Quarterly Outlook that will be released later today will elaborate on our stance.
As we stand, rate traders expect the US Fed to deliver 5.5 cuts by year end, no change in January and more than 50% chance oof a cut in March.
The Earning season will start in earnest next week and the economic highlight of the week should be the US CPI on Thursday.
Trade Safely
Monday
- Data DE Industrial Orders, EU Unemployment Rate,
Tuesday
- Data Japan CPI, Australia Retail Sales, US International Trade $
Wednesday
- Data Australia CPI,
Thursday
- Data US CPI, Initial Jobless Claims,
Friday
- Data China CPI, PPI, UK GDP,
Expiries
Physically Settled Futures
FPF4 will expire 10 Jan 2024 at 16:00 GMT
Expiring CFDs
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