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From the Floor: Further upside potential for equities — #SaxoStrats

  • US tech stocks continue their rebound
  • Equity valuations in general are high, but further gains are possible: Garnry
  • US initial jobless claims and other leading indicators are seen to keep momentum
  • Oracle surprised strongly on the upside, but their cloud business is still small
  • 'The drop in the oil price is one of the main issues right now': Boye
  • Fed and UK central bank speakers should be watched today
  • Saxo's John Hardy will go online with a live Webinar on FX Update at 1330 CET
By Clemens Bomsdorf

For equities the outlook is good once again. We had a strong session in Asia and US technology stocks are continuing their rebound as Saxo head of equities Peter Garnry notes. In the short run, the sentiment is strengthening on the MSCI inclusion of Chinese A-shares. The question is whether it is time to go defensive. "Equity valuations are high, but there is still room,“ Garnry says, adding that he will have a closer look in his quarterly outlook.

Today he wants to point in particular at Oracle, which came with surprisingly robust quarterly figures. It delivered very strong results with its cloud business, which is growing 50% year-on-year, but one should keep in mind that it is still only a small part of the business.

In the US, jobless claims and other leading indicators are expected to keep momentum.

When it comes to fixed income the picture looks different. Global bond yields are back under pressure as oil and commodities extend their price drop. In particular the falling oil price is being watched closely by downturn-wary investors. 

US high-yield (energy biased) credit spreads are widening in response to the drop in the oil price. However, those remain far from previous stressed levels. "The US high yield sector is worth looking at right now,“ reports Saxo Bank fixed income trader Michael Boye. 

Amazon's stock is above $1000 again and other US tech 
stocks continue their rebound, too. Photo: Shutterstock 

Clemens Bomsdorf is a consulting editor at Saxo Bank


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