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 May 13 2024
Erik Schafhauser
Senior Relationship Manager
Summary: US Inflation in Focus this week
Good morning,
On Friday, equities could basically defend the gains in slow trading. The S&P an the Dow gained 0.2% and 0.3% US, the Nasdaq was in the red by 0.03%. Equities had a great week overall, the S&P500 rose by 1.85%, the Dow Jones by 2.15% and the Nasdaq by 1.15%. The GER40 smashed through the 18500 and broke above 18800 – it is up 3.1% from a week ago.
US 10 Year Yields are just below 4.5% and the USD Index is holding at 105.30 EURUSD is trading at 1.0775, GBPUSD 1.2530 and USDJPY approaching 156 at 155.80 The BOJ remains in focus as the other majors are somewhat range bound.
Gold and Silver had a very good week even if we are seeing some reversal this morning, we are up 2.2% and 5.6% respectively at 1352 and 28.05. Stories of shortages of physical gold in Asia were making the round on FinTwit over the weekend.
This week, Wednesday is the key day, the US Consumer Price Index and the Retail Sales will be released. The CPI is a crucial input for the Fed and timing as well as the extent of possible rate cuts. As of now, we are at more than 50% probability for a rate cut in September and 40 basis points of cuts are priced in by December. The CPI is expected at 0.4% and 3.4% annually, the Core CPI is seen at 0.3% monthly and 3.6% annually.
Other news to watch are
- trade relations between the US and China as Joe Biden is expected to announce new tariffs on Chinese goods as early as this week
- the Bank of Canada warned of stress in the financial system possibly causing bouts of volatility
- the UK GDP came stronger than expected at 0.6% vs 0.4% expected.
- With excess savings from the Corona period used up, household debt in the US is worth keeping an eye on and retail Sales as well as Walmart earnings will be a good measure.
- China’s CPI rose 0.3% YoY from 0.1% previously and 0.2% expected, the PPI -2.5%
Key Events:
Monday
- Data Sweden House price, Loretta Mester speaks
- Earnings: Petrobras,
Tuesday
- Data Canada Leading index, DE HICP & ZEW . UK Labor data, US PPI, Jerome Powell & Lisa Cook speak
- Earnings: Alibaba, Home Depot, Sony
Wednesday
- Data Sweden PPI, EU GDP, US CPI& Retail Sales, Neil Kashkari & Michelle Bowman speak
- Earnings: Cisco,
Thursday
- Data JP GDP, AU Unemployment Rate, Initial Jobless claims & Philly Fed, Michael Barr , R. Bostic & Partick Harker speak
- Earnings: Walmart, JD.Com Under Amour
Friday
- Data China Retail Sales, EU HICP
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