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 August 9 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Take Profit or add to positions?
Good morning,
Risk sentiment was strong yesterday with Indexes posing solid gains across the board, the Dow ends up 1.8% the S&P 500 up 2.3% the Nasdaq up 2.9% and the Russel gains 3%. It was a broad rally, key single stocks were Eli Lily and Under Armor which rose 9.5% and 19.2% after good earnings.
As trigger, decent initial jobless claims were given, in my view, the lack of further bad news lets traders and investors see the recent levels as an attractive entry level. Volumes normalized to 12 billion shares on US Exchanges against 12.6 on average the last 20 days. Also International Indexes rose yesterday. This morning we are seeing a slight reversal, most indexes are red but less than 0.5%.
10 Year Yields are at 3.96 as Federal Reserve policymakers are increasingly confident that inflation is cooling enough to allow interest-rate cuts ahead, for the September meeting, we are trading 55% for 50 BPS hike and 45% for 25 BPS, for December we are at -105 BPS.
EURUSD is 1.0920, USDJPY 146.87, USDCHF 0.9458, GBPUSD 1.2750 Gold and Silver posted strong gains and are at 2422 and 27.60. Bitcoin is up 25% off Fridays lows at 60k.
The agenda remains thin, today we expect the German CPI and Canadian employment data after China`s CPI surprised to the upside.
Driver today will be overall sentiment that is difficult to predict – either we see a good mood like yesterday or traders will cut positions into the weekend.
The US Election, the middle east and Ukraine will be key factors.
- Apparently, Donald Trump and Kamala Harris will debate on Sep. 10 on ABC and there may be even more debates as polls show Harris leading Trump by 5 points
- The US, Egypt and Qatar are urging Hamas and Israel into talks on August 15
- Ukrainian forces remain in Russia and cause gas prices in Europe to ruse.
The next key economic release is the US CPI next Wednesday expected at 2.9% and 3.2% Core
Here key reads from our strats team
***Recent market volatility***
- Content from this week:
- US Economy, soft vs hard landing: SaxoTraderGO
- Portfolio considerations in current sell off SaxoTraderGO
- The perfect storm: SaxoTraderGO
- BoJ / Yen: SaxoTraderGO
- Gold response to market volatility: SaxoTraderGO
- Bonds hedging power in today’s market: SaxoTraderGO
- How to handle volatility: SaxoTraderGO
- How to protect your investment in turbulent times: SaxoTraderGO
- Surging volatility: Market on edge: Surging volatility | Saxo (home.saxo)
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