HIGHLIGHTS
S&P500 reached all-time high again this week, mainly driven by the expectation of a lower recession likelihood. Volatility remains high as the near-term risks are still here. 2Y treasury yield also hit a 2-month high.
China Pullback: CSI 300 dropped 9.5% this week to the level that is lower than it was prior to the long Golden Week holiday. This is mainly attributed to the lack of details on the size of the stimulus package. Markets are keeping an eye on the fiscal policy briefing this weekend with high expectations.
Oil: After the two-week rally in energy prices, it slowed down this week as markets are waiting for more developments from the Middle East conflicts. Markets expect a further decline in supply could boost oil prices, which Brent could go up for $10-20 per barrel by next year.
Minutes: No surprise from the FOMC’s minutes as it reaffirmed that the 50bps cut is supported by a substantial majority of members. However, it also mentioned that 50bps rate cut pace is not committed. The committee members believed that inflation risks are low, while others believed the risks in labor market still exist.
MARKETS
18,342.94 | +1.13% | |
S&P 500 | 5,815.03 | +1.11% |
Dow | 42,863.86 | +1.21% |
10-Year | 4.07% | +9bps |
Brent | 78.93 | +1.08% |
DXY | 102.92 | +0.42% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
UBS: During the Q2 reporting season, mega-tech firms highlighted the risks of underspending on AI, but not overspending. We believe that the capex intensity (i.e. capex divided by sales) is still below their peak levels. Investors should consider structured strategies or buy-the-dip strategy for quality AI stocks.
Standard Chartered: Markets were disappointed by China’s equities as there are no concrete details of the fiscal funding. HSI also broke below the support level. Investors are recommended to add some laggards in the consumer sectors, such as consumer discretionary and communication services.
Fixed Income
Goldman Sachs: The dispersion in the USD High-Yield (HY) market showed convincing signs of decline. We expect the default rate of US HY bonds will increase over the near term but eventually end 2025 back at the current level of 3%.
Standard Chartered: US 10Y treasury yield jumped above 4% this week, mainly driven by the higher-than-expected employment data. Several technical indicators suggest that it has reached the “oversold” territory and thus higher odds of a reversal.
Economy
Barclays: The US CPI inflation surprise to the upside, indicating a potential slower Fed rate cut. Meanwhile, the initial claims increased. We remain our call for a 25bps cut at the coming FOMC meeting in November.
J.P. Morgan: Investors shifted their focus on the unemployment rate. While we see the unemployment increase, it is driven by the increase in labor supply but not the decline in employment. Initial job claims and reported layoffs remain low, indicating that the situation is not as alarming as headlines suggest.
KNOWLEDGE TRANSFER
GLP-1
Here's all you need to know about the Game-Changing Obesity Drugs.
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.
Comments