HIGHLIGHTS
US labor market is strong, supported by the higher-than-expected nonfarm payroll data and slightly dropped unemployment. Rate cut plan may be delayed, and markets are expecting the next full rate cut in October instead of June. Equities are not performing well this week.
Wildfires: The devastating wildfires in LA is causing about $150 billion economic losses, ranking among the costliest natural disasters in modern US history. It is also weighing on state-sponsored insurance program, and a basket of insurance companies stock also dropped this week.
Oil: Oil prices went up this week, with Brent traded above $80 per barrel. It has been up more than 5.4% year-to-date, driven by the increasing risks of sanctions on Russia and Iran, decline in US supply and cool weather. The new US sanctions will likely target more Russian oil tankers and insurance companies.
Yuan: China continues stabilizing the yuan by applying a higher daily reference rate. The People’s Bank of China also limits yuan lending in Hong Kong to control short positions.
MARKETS
19,161.63 | -2.34% | |
S&P 500 | 5,827.04 | -1.94% |
Dow | 41,938.45 | -1.86% |
10-Year | 4.78% | +18bps |
Brent | 79.68 | +4.03% |
DXY | 109.64 | +0.66% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Morgan Stanley: Momentum factor was performing well but starts to fail. We expect fundamentals like value and quality stocks matter again in 2025, and the period that market trend moving only on anticipation has passed.
UBS: Markets are worried about the rate-sensitive tech stocks would be capped due to high yields. Investors remain cautious after the strong tech rally as the valuation is likely to be too high.
Fixed Income
UBS: Selling pressure in global bond markets continued toward the end of the week. Investors are concerned about the expansionary budget plan in UK and more government bond supply. Moreover, markets are cautious due to the scaled-back expectation of the extent of rate cuts this year.
Standard Chartered: We suggest investors take advantage of bond volatility to lock in the elevated yields. Although yield could still break higher, we believe it is a good entry point to secure long-term income. We recommend US mortgage-backed bonds, global convertible bonds and FX-hedged European government bonds as they offer additional yield pick-up opportunities.
Economy
Barclays: FOMC is likely to downplay high rates with the resilient activities and disinflationary confidence. Treasury yields are rising and dollar is strengthening, while labour market is too hot to allow for any rate cut soon.
Goldman Sachs: Dollar is strong and at near 2-year high right now. It has rallied about 6% since election, and supported by series of favorable data including jobs data, service sector activity, and upward pressure on inflation.
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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