Risk-On Momentum Builds as Global Bonds Search for a Bottom

Attempts to strengthen the risk-on tone across financial markets continue, with US equities edging back toward record highs, driven by the technology and semiconductor sectors. On the other hand, global fixed income continues to test a potential bottoming area. Investors are awaiting further guidance from the Fed minutes and are beginning to look ahead to the key event of October: earnings season. Futures point to a flat open for both the US and European markets.

Financial markets sentiment

Financial markets are showing a neutral to moderately positive sentiment today. Intermarket analysis points to a Market Health Score of 72/100. Yesterday was a day of stabilization across financial markets, with our intermarket dashboards showing limited changes compared with the previous analysis. Risk appetite improved marginally in both the Dow/Gold and S&P 500/VIX ratios. The Commodities/Bond ratio remains near its period highs, while the decline in the S&P 500/Nasdaq ratio is losing momentum.

Turning to the various asset classes, we continue to closely monitor global fixed income. In our previous analyses, we highlighted the ongoing attempt to establish a bottom at current levels. This attempt is still underway, with a modest rebound yesterday, although it remains too early to conclude that the worst is over for the asset class. There were limited changes, meanwhile, in the overall tone of equities and commodities.

Our market weather map shows US equities rising to a score of 56, pulling further ahead of the other two geographic areas, which continue to contend with inflation and a strong dollar. Gold remains in negative territory, while bonds remain stable just above the 40-point score level. Looking at the other scores, it is worth noting that the Nasdaq, Semiconductors and Growth Style have all moved above the 60-point threshold.

Global Futures – Pre-Market Sentiment

Pre-Open Futures: Global futures point to a moderately risk-off sentiment (-0.22% on average), with the US slightly negative (-0.05%), Europe slightly negative (-0.09%), and Asia slightly negative (-0.46%).