US EARLY MORNING: US index futures are bouncing higher after Monday's drubbing

US equity futures are seeing some reprieve after the recent downside, which saw the S&P 500 slip beneath the 4,000 level for the first time in over a year. Index futures are currently higher by 0.9-1.7% (NQ +1.7%, RTY +1.1%, ES +1.0%, YM +0.9%), while Treasury yields are narrowing by 2-9bps, with the rally most pronounced in the long-end; major curve are narrowing. Amid the drubbing yesterday, JPMorgan told its clients that it remains pro-risk, with overweight positions in equities and commodities, and underweight positions in bonds and cash. "The past week’s sell-off appears overdone, and driven to a large extent by technical flows, fear, and poor market liquidity, rather than fundamental developments," the bank wrote, "while we expect growth to soften, we continue to push back on a base case assumption that the global economy is headed for recession, an outcome that is increasingly being priced by markets." JPM, which has been expressing its bullish thesis for some time now, says its constructive view is premised on COVID reopening, policy easing in China, strong labour markets, light positioning, distraught investor sentiment, and healthy consumer and corporate balance sheets. It has also argued that we have reached "peak hawkishness" on monetary policy, where the Fed is leaning back on calls to move rates up by 75bps increments. JPM prefers overweighting Emerging Markets stocks vs Developed Markets stocks, is underpinned by its view of policy easing and an eventual COVID reopening in China, as well as cheap valuations. It is also strategically overweight of commodities and energy stocks, premised on its views of a commodity super cycle, as well as geopolitical risks, while the bank says energy stocks are discounting long-term oil prices well below spot prices.

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10 May 2022 - 09:41- EquitiesResearch Sheet- Source: Newsquawk

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