Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access both platforms from your single Saxo account.
Sticky inflation and earnings next week
Peter Garnry
Chief Investment Strategist
Summary: While yesterday's inflation did little to move markets as the headline and core inflation in the US for July came in as expected. However, looking at the stickier parts of the inflation report including the services CPI excluding energy are still underscoring that inflation is not under control. In today's equity note we are also focusing on next week's earnings which will have a focus on large consumer oriented companies such as Home Depot, Tencent, Walmart, Carlsberg, and JD.com.
Key points in this equity note:
- Yesterday's US inflation report on the surface looks good but the stickier parts of the CPI report actually increased a bit in July highlighting that inflation has not been solved and could quickly become worse if commodity prices extend their recent momentum.
- Next week's earnings releases will evolve around consumer oriented companies providing investors with fresh information on how companies across China, broader emerging markets, Europe and the US see the outlook for the consumer.
Inflation remains unsolved as next wave looms
Yesterday’s US July inflation report saw headline and core inflation hitting 0.2% m/m as expected creating little disturbance in financial markets. Investors are likely looking through this report as commodity markets have turned around since May with energy prices running higher and rice prices hitting highest levels since 2008. While the inflation report looked okay July marked a turnaround in the super core parts of the CPI basket up 4.1% y/y increasing a bit from June.
Our own preferred measure is the services inflation excluding energy which came down to 4.9% y/y but is still at an elevated level. With the US labour market still being tight we expect services inflation to remain hot paving the way for the next inflation should commodity markets extend their tightness in the second half and the global economy avoiding an outright recession. If we are right in our recent big macroeconomic call that the global economy is headed towards stagflation light, then read our equity note from yesterday on our to position in such an environment. Earnings next week will focus on consumer confidence
The earnings season has been positive for equity markets confirming that the outlook remains stable and earnings growth is improving. Next week, our earnings focus will be on the consumer oriented companies reporting such as Meituan, Xiaomi, Tencent, and JD.com all linked to consumer and spending in the Chinese economy. Given the good Q2 results from Alibaba yesterday, we expect these companies to show good progress in Q2 except maybe for Xiaomi that like Apple is hit harder by inflation as electronic consumer goods have been impacted a lot from inflation eating into disposable income.
In emerging markets NU Holdings (parent of Nubank which is the largest online bank in Brazil/Latin America) and Sea Ltd (biggest e-commerce business in Southeast Asia) will each provide a good temperature on the emerging market consumer outside China.
In the US, our earnings focus will be on Home Depot and Walmart that both are massive players in the US consumer sector. With new housing and permits stabilising this year we expect Home Depot to slowly adjust their outlook in a more positive direction.
In Europe, our earnings focus is on Carlsberg (one of the largest breweries), Adyen (important payments company), and Nibe Industrier which is a good proxy on green transformation investments from households due to the heat pump business.
Next week’s most important earnings releases across the markets we track during the earnings season.
- Monday: CSL, PetroChina, Meituan, Xiaomi, COSCO Shipping, KE Holdings, Trip.com
- Tuesday: Suncor Energy, Alcon, Home Depot, Agilent Technologies, NU Holdings, Sea Ltd
- Wednesday: Carlsberg, Tencent, JD Health, JD Logistics, Cisco, TJX, JD.com, Target
- Thursday: Telstra, Coloplast, CNOOC, Adyen, Nibe Industrier, Geberit, Walmart, Applied Materials, Ross Stores
- Friday: Kingspan, Deere, Palo Alto Networks, Estee Lauder, XPeng
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)