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 September 10 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Debate and CPI - Doom or Gloom?
Good morning.
Yesterday we saw a decent recovery after Fridays selloff.
US Indexes recovered app 1.2% at average volumes. Nvidia regained 3.5% after falling more than 15% last week, Palantir and Dell could gain on joining the S&P500 on September 23rd.
Apple`s event failed to excite traders, the stock closed basically unchanged after the company announced basically what was expected.
This morning, there is some nervousness again, most Indexes are app 0.3% lower again with the US 500 at 5460, the US 30 40740, the US Tech 100 NAS 18590, GER40 17430 and the Switzerland 20 11950.
EURUSD is at 1.1040, GBPUSD 1.3070 and USDJPY 143.15. Gold and Silver are trading at 2505 and 28.38- and 10-year yields at 3.70. The probability of a 50 Basis point cut is 30% , 70% in favor of 25 BPS.
There is a significant event risk in the Debate tonight and the CPI tomorrow. The interpretation of the Fed`s decision will be interesting as with a 25 basis point cut, there will be fear the Fed is not doing enough to support the economy, while with a 50 basis point cut there could be worries the Fed is too far behind. A positive interpretation is also possible for both events so sentiment will be crucial.
The ECB is basically certain to cut by 25 bps on Thursday.
Chinese Exports rose at the fastest pace in a year and a half while imports fell behind expectations. The reason seems to be increased orders ahead of possible increases in tariffs but this may turn to be a self-fulfilling prophecy. Exports were 8.7% higher YoY imports only 0.5%, increasing the trade surplus more than anticipated.
The hotly anticipated presidential debate between Harris and Trump on Tuesday is the best chance for either candidate to tilt the odds between now and Election Day. Elsewhere, the stock market is in a bad mood indeed.
- USD: Payrolls report argues for the Fed to cut rates by 25bps next week
- EUR: ECB’s rate cut may come with a neutral tone
- JPY: Safe-haven appeal remains intact but bigger gains need larger US recession concerns
- AUD: Commodity sell-off undermines RBA’s hawkish posturing
- CNH: China’s deflation and US election risks add to headwinds
Trade safely!
Tuesday
- Data DE HICP, UK Unemployment rate,
Wednesday
- Data China Trade, UK GDP, US CPI.
- Earnings: Dollarama,,
Thursday
- Data ECB Rate decision, US Initial Jobless Claims & PPI.
Earnings: Adobe, Kroger
Friday
- Data University of Michigan Sentiment
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