Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Key points:
Webinar replay: Trading the 2024 US election
Macro:
Macro events (times in GMT): US Sep. Factory Orders (1500), US 3-year Treasury Auction (1800), China Oct. Caixin PMI (0145), Australia RBA meeting (0330) US Election tomorrow.
Earnings events:
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities:
Volatility: The VIX is at 21.88, down 5.53%, reflecting a slight easing in volatility as markets await this week’s high-stakes events. The one-day VIX1D spiked 41% to 19.22, reflecting immediate event-driven uncertainty. Expected moves for the week are notably elevated, with implied moves at 2.53% for the SPX and 3.10% for the NDX, signaling investor caution. The put/call ratio stands at 1.61, the highest since early August, indicating increased hedging as traders position for potential market turbulence around the U.S. election and Fed decision. The Fed’s rate decision on Thursday could add to the volatility, particularly if it deviates from market forecasts.
Fixed Income: UK gilts stabilized on Friday following the selloff caused by the UK Autumn Budget, with the 10-year yield settling at 4.44%, down from a peak of 4.53% during the week. Expectations for BOE rate cuts were adjusted to 95bps by the end of 2025, compared to 125bps a week earlier, with a 21bps cut anticipated this Thursday. German bonds saw the two-year yield dip to 2.25%, and the yield curve steepened as 10-year Bund yields rose to 2.40%. Meanwhile, US Treasury yields climbed to their highest levels in months, erasing earlier gains from weak but distorted October jobs data. This increase reflected caution ahead of key events, including refunding auctions, the US presidential election, and the Fed’s rate decision, with the 10-year yield reaching 4.36% on Friday, the highest since July.
Commodities: WTI crude climbed toward $71 per barrel on Monday, marking a fourth consecutive session of gains as OPEC+ delayed its December production plans, aiming to stabilize prices and prevent oversupply amid demand uncertainties. Renewed Middle East tensions further supported oil prices, with Iran signaling a potential "crushing response" to Israel, possibly timed after the U.S. election but before the January inauguration. Meanwhile, Brent crude rose to $73.1. Gold remained steady at $2,750 as investors assess safe-haven demand and the Fed's policy outlook ahead of the election, while silver held around $32.49, close to a two-week low.
Currencies: Sterling stabilized Friday after the steep run lower on the announcement of the autumn budget, but long UK gilts bear watching this week for whether the bond market will continue to revolt on the fiscal outlook for the country, which would spill over into sterling if yields continue to rise. Elsewhere, the US dollar sold off in the Asian session to start the week after a strong finish on Friday, seemingly as Trump’s odds of winning have faded sharply in betting markets. The US election is tomorrow.
For a global look at markets – go to Inspiration.
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)