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Weekly Market Update (June 09, 2024)


HIGHLIGHTS

US equities performed well this week. Both the S&P500 and Nasdaq hit new highs. Nonfarm payroll came in stronger than expected, pushing the yields higher. All eyes are on CPI next week.


Commodities: Gold prices dropped as the People’s Bank of China announced that they did not buy gold in May. Oil prices dropped despite the OPEC’s cuts. The decline is mainly driven by the higher-than-expected inventory.


Europe: European equities went up this week after the European Central Bank cut rate by 25bps. The easing bias is gone but they provide little forward guidance. The pace and timing of the next steps depend on the incoming data, which means uncertain.


Japan: Market expects Bank of Japan to keep the rate unchanged in next week's meeting. There will likely be comments on the weak yen and more forward guidance. Officials signaled that it is appropriate to decrease bond buying when it is closer to the end of monetary stimulus. The market expects there will be a possible hike in July.

 
MARKETS

Nasdaq

17,133.13

+2.38%

S&P 500

5,346.99

+1.32%

Dow

38,798.99

+0.29%

10-Year

4.43%

-8bps

Brent

79.49

-2.56%

DXY

104.93

+0.30%

*Data as of market close. 5-day change ending on Friday.

 
VIEW FROM THE STREET

Equity

UBS: The upward revisions of earning guidance and broadening corporate profit growth beyond the Magnificent 7 are supportive to the equity markets. Macro environment is also favorable to equities, as the financial condition is expected to be looser.


Standard Chartered: European Central Bank and Bank of Canada have started the rate cut cycle. It is positive for risk assets like equities. We recommend the technology and communications sector as it has the strongest outlook and earnings upgrades driven by AI concepts. Besides, election years have also been positive for US equities historically.

Fixed Income

Morgan Stanley: Credit spreads, especially investment grade (IG), have tightened almost without interruption for more than a year. With the solid backdrop, including low aggregate debt, low locked-in yields established from 2020 and 2021, strong cash flow and low net debt issuance, the increase in equity volatility does not transmit to higher credit spreads. We remain overweight IG credit.


Blackrock: We overweight short-duration bonds and neutral on long-duration treasuries as there are 2-way risks ahead. Besides, private credit is expected to gain earning share as banks retreat. The risk-to-reward ratio is attractive.

Economy

Barclays: Economic data including nonfarm payroll, income and wage growth suggests that the US economy remains resilient. Although there was a decline in labor market dynamics, the narrative of resilient economy still stands given the above data.


J.P. Morgan: High oil prices could be the new normal. In the last 5 years, Brent oil prices went up by around 23%, while the headline CPI has increased by a similar amount. In the coming months, oil prices will still be very sensitive to supply-demand shocks, including Middle East conflicts, OPEC decisions and global oil consumption.

 
KNOWLEDGE TRANSFER

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DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.



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