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Equities retraced amid weak US consumer confidence and near completion of quarter-end rebalancing

Equities retraced amid weak US consumer confidence and near completion of quarter-end rebalancing

Saxo Bank Saxo Bank 29.06.2022 09:29
Summary:  The U.S. markets reversed and turned south yesterday after a weak Conference Board Consumer Confidence survey, in particular the expectations element. Buying from quarter-end portfolio rebalancing has exhausted and gave way to selling from trading accounts. China relaxed quarantine requirements over inbound travelers but tourism stocks pared gains. Chinese auto stocks were pressured after an EV maker, NIO being alleged for accounting irregularities. What’s happening in markets? Storm clouds thicken, company downgrades begins to grow US equites appear in the of the storm ahead of a likely recession, while American consumer expectations feel to their lowest level in the decade. TheNasdaq 100 (USNAS100.I) and S&P 500 (US500.I) sharply stepped back on Tuesday; after company downgrades came in, while inflation woes increased after Oil rose for the 3rd day. US crude inventories fell 3.8 million barrels last week, while natural gas futures broke their downtrend and headed up. This supported oil stocks moving to fresh high ground again with Occidental Petroleum (OXY) rising or the fourth day and flagging bullish technical indicators on the week and monthly charts which means its shares could head higher still. As for company news; Goldman is expected to announce losses jumping over $1.2 billion in its consumer business and it may be forced to take on more lending-loss provisions. Shares in Nike, the world’s biggest sportswear companyfell 7% after investors digested its weak outlook, with gross margins (profits) tipped to flatten or even decline 0.5%. APAC markets are in the red APAC equities were mostly on the back foot as recession concerns took over with the US consumer confidence sliding below expectations. Consumer stocks took a big hit, but continued tightening also weighed on the tech sector. Japan’s Nikkei (NI225.I) was down over 1% despite a surge a utilities amid the continued stress on Japan’s electricity grid due to the current heatwave. Meanwhile, Australia’s ASX200 is down for the first day in five days, falling 1.1% today. As groundhog day goes, tech and high growth names are being sold. Singapore’s STI (ES3) was the sole green on the Asia board as US futures were in gains as well. In China, CSI300 (000300.I) retraced and was down 0.8% after rising to a new high (since early March) above 4500 briefly. Hang Seng Index (HSI.I) and Hang Seng TECH Index (HSTECH.I) declined 1.6% and 2.9% respectively.  Travel agent, airline, catering and casino stocks which registered high single-digit to double digit gains yesterday following China’s announcement to shorten its mandatory quarantine period to 10 days (down from 21 days) for inbound travellers, gave back some of those gains this morning.    Auto makers were sold amid profit-taking as well as a negative report alleging accounting irregularities of NIO (NIO.US/NIO.SP/9866).  NIO’s shares were 7.7% lower in Hong Kong’s morning session.  Other auto makers were also down 3% to 8%. EURUSD on backfoot with lack of policy clarity ECB President Lagarde reiterated ECB's current stance on the continuation of its policy normalization path & will go as far as necessary to bring Euro Area inflation back to the 2% target in her speech at the ECB Forum on Central Banking yesterday. She hinted again at a 25bps rate hike in June and gave no proper insight into the anti-fragmentation tool. EURUSD sold off from 1.06+ levels to lows of 1.0504 and traded close to 1.0520 in Asia. USDJPY back above 136 USDJPY is back above 136 amid gains in the USD on month-end flows. BOJ Governor Kuroda was on the wires too, saying that almost all of the inflation spike currently is due to the energy prices and hinting again that he doesn’t see wage pressures. He said that the 15-year deflation period in Japan has made firms very cautious in raising prices and wages. June Tokyo CPI is due on Friday and will eb watched closely as pressure remains on the upside. If inflation rises above 2.5%, the pressure on Kuroda to alter/withdraw the yield curve control policy will strengthen. Crude oil (OILUKAUG22 & OILUSJUL22) took a breather Crude oil prices dropped in the Asian session after a recent run higher as focus shifted back to supply side issues from Libya and Estonia, while Gulf oil producers are near max outputs. With no EIA data released last week due to a "systems issue", focus was on the API inventory data which suggested that crude stocks unexpectedly fell last week, almost erasing the major build from the week before. Gasoline stocks rose for the second straight week. With China’s restrictions also easing, it suggests a further run higher in energy may be coming. What to consider?  U.S. consumer confidence slide reinforces stagflation risks US Conference Board Consumer Confidence Index continued to deteriorate, and fell to 98.7 in June from May’s 103.2, below expectations and reaching its lowest level since February 2021. While indicating that stagflation risks continue to run high, it is probably a signal to the Fed given that this survey particularly focuses on the labor market. The Expectations Index (consumers' short-term outlook for income, business & labour market conditions dropped significantly to 66.4 (Jun) from 73.7 (May), its lowest level since March 2013. Fed speakers sing the same song A number of Fed speakers were on the wires yesterday. Williams hinted at a debate for the July meeting between a rate hike of 50bps or 75bps. He expects GDP growth of between 1.0-1.5% this year, beneath the FOMC’s median projection of 1.7%, and said that a recession was not his base case. Williams is a voter, but that also seems to be the base view from the =Fed for now. Fed’s Daly also said something similar, ruling out a possible recession but expecting the unemployment to rise slightly. Geopolitical tensions surge Geopolitical tensions continued to reign as G7 oil price cap proposal to cut off Russia’s revenues gained traction. G7 has agreed to explore a ban on transporting Russian oil that has been sold above a certain price and the cap may extend to Russia's gas exports as well. There is a risk such measures could backfire as Russia could reduce energy exports in retaliation which in turn could led to a upward spiral in prices. China continues its push for more infrastructure construction The National Development and Reform Commission reiterated China’s commitment to enhance both traditional as well as new infrastructure construction. Local governments have issued over RMB 2.54 trillion special bonds to finance infrastructure construction this year through June 16, tripling the among from the same period last year.  The central government has instructed local government to use up this year’s RMB3.65 trillion special bond issuance quoter by the end of June and urge them to spend the fund raised by the end of August.  Potential trading and investing ideas to consider? The reasons the market is primed for a big pull back? We think the market is set up for disappointment given strategist surveyed by Bloomberg are the most bullish they’ve been on quarterly earnings in 20 years. This means when companies provide earnings downgrades and report weaker than expected results, the market will likely to spooked and head lower. Companies in risk we think are in banking, property REITs, consumer spending, the industrial commodity sector and industrials (airlines and travel). Why? They will likely downgrade forward earnings for several reasons; firstly companies will likely be forced to factor in a slowdown in forward earnings; factoring in a likely recession (a drop in consumer and business spending), plus all government stimulus has dried up. Secondly, what’s happening under the surface is that US flight bookings have started to trend lower since May, plus high-to low US income households also began to slow down credit card spending, particularly over the last 4-6 weeks (according to Barclays). Plus, inflation has started to bite the US consumer with an increasing portion of the population living pay check to pay check (64%), while almost 50% of those earning six figures live pay check to pay check. All in all, rates rise will hurt consumers, and investors which is a why we think a larger pull back. Bloomberg Economics probability model also projects a 72% chance of recession before 2024. And if that occurs, history tells us, the market may fall 49-56% as it historically does. Copper-Gold ratio may be worth a look Our Commodity Strategist Ole Hansen has flagged the recent move in Copper-Gold ratio as an interesting one to watch for being a recession indicator. It has reversed sharply lower in the last few weeks, suggesting US 10yr yields may need to come down. Investing in focussed industries and themes via Shanghai and Shenzhen listed ETFs Starting from July 4, investors can invest in 83 Shanghai and Shenzhen listed ETFs through the Mainland and Hong Kong stock connect. Investors can utilize these ETFs to get access to focussed industries and investment themes.   --- For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Equities retraced amid weak US consumer confidence and near completion of quarter-end rebalancing | Saxo Group (home.saxo)
Christine Lagarde (ECB) Speaks Today! FX Pairs With Euro (EUR/USD) And (EUR/GBP) May Be Affected!

Christine Lagarde (ECB) Speaks Today! FX Pairs With Euro (EUR/USD) And (EUR/GBP) May Be Affected!

Saxo Bank Saxo Bank 29.06.2022 09:18
Summary:  Risk sentiment took a steep dive yesterday, with US equities losing two percent in a downbeat session in the wake of the weakest reading for the expectations component of the US Consumer Confidence survey since 2013. US treasuries found a safe haven bid, driving yields sharply back lower, and the US dollar and the Swiss played their role as safe haven currencies, while the JPY snapped back from its recent weakness on the dip in yields.   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)US equities took a sizeable hit yesterday on the back of weaker than expected consumer confidence and expectations figures for June with the S&P 500 futures down 2.1% and Nasdaq 100 futures were down 3.3%. The stark turnaround shows the difficulties in trading this market. The 3,800 level is the next level to watch on the downside in S&P 500 futures and if they hold above this level then this will be a stabilizing factor for US equities, also the US 10-year yield is coming down in today’s session. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) trade lowerCSI300 was down nearly 1% after briefly rising to a new high (since early March) above 4500. Hang Seng Index (HSI.I) and Hang Seng TECH Index (HSTECH.I) declined 1.8% and 3.3% respectively. Travel agent, airline, catering and casino stocks which registered high single-digit to double digit gains yesterday following China’s announcement to shorten its mandatory quarantine period to 10 days (down from 21 days) for inbound travellers, gave back some of those gains this morning. Auto makers were sold amid profit-taking as well as a negative report alleging accounting irregularities of NIO (NIO.US/NIO.SP/9866). NIO’s shares were 7.7% lower in Hong Kong’s morning session. Other auto makers were also down 3% to 8%. EURUSD and USD pairsWeak risk sentiment yesterday saw the US dollar gaining sharply across the board, with EURUSD shying well away from the 1.0600 resistance area that was teased on multiple occasions over the last several sessions and trading back towards the pivotal 1.0500 area within the range to the 1.0350 cycle low, one that sits just above the lows since the early 2000’s (the 1.0341 level from 2017). Animal spirits seem to be in the driver’s seat as quarter-end approaches, and it is notable that the USD advance required no assistance from US treasury yields, which dipped yesterday on apparent safe haven seeking into treasuries. Also watching a key pair like AUDUSD, which is triangulating within a zone and near a downside break just below 0.6900, with the range low for the cycle into 0.6829. EURCHFEURCHF is dipping toward parity, which briefly traded in the wake of the Russian invasion of Ukraine. The surprise 50-basis point rate hike from the Swiss National Bank at its meeting this month has boosted the franc sharply versus the single currency as the latter is weak on the ECB’s slow start to the tightening cycle and as it grapples with supporting peripheral bond markets with balance sheet adjustments, which will make any real quantitative tightening a difficult task. A big dip in the weekly sight deposit data this week from the SNB (when this grows, it shows the SNB is intervening) suggests the central bank is not concerned about the CHF strength, but it will be interesting to watch the price action if the pair falls through parity. Crude oil (OILUKAUG22 & OILUSAUG22)Crude oil trades softer in response to renewed stock market weakness driven by investor doubts about the Fed’s ability to bring down inflation without hurting the economy. However, continued worries about supply disruptions from Libya to Ecuador ahead of Thursday’s OPEC+ meeting is likely to put a floor under the market. OPEC+ members produced 2.7m b/d less than their target in May with the total deficit since May 2020 reaching 562 million barrels. The API last night reported a 4m barrel draw in crude stocks while gasoline and distillates both rose. The EIA will publish two weeks of inventory data today following last week's delay. American’s planning on taking a holiday by car in the next six months has dropped to the lowest seasonal level in four years, a sign high gasoline prices may start to negatively impact demand. US Treasuries (TLT, IEF)US Treasury yields fell sharply yesterday and followed through overnight after the highs in yesterday’s session for the 10-year Treasury yield benchmark reached toward 3.25%, the highest in four days. Treasuries seem to have found a safe-haven bid for the moment, something that is familiar from markets past, but not associated with this cycle, in which in most cases, a rise in treasury yields has served as a driver of negative risk sentiment. The technical situation picks up energy if the 10-year yield follow through last week’s low of 3.00%, which could shift the focus back toward the 2.75% area and suggest that market concern for an incoming recession is gathering pace. What is going on? Cotton (CTZ2) stabilizing following major routCotton, a recession-sensitive contract, took a major hit last week from raised concerns about an economic slowdown, primarily in China, a major consumer of cotton, but also the wider world. The fiber together with copper are often viewed as gauges for the health of the Chinese and global economy, and recently both have been flashing red alert. However, after hitting a nine-month low, some 32% below the May peak, the market is showing signs of stabilizing. Driven by a combination of prices hitting deeply oversold levels, the speculative froth being sharply reduced, China softening its strict Covid rules and not least a worsening outlook for US crops after the percentage of crops being rated good to excellent dropped to just 37% versus 52% a year ago.  U.S. consumer confidence slide reinforces stagflation risksUS Conference Board Consumer Confidence Index continued to deteriorate, and fell to 98.7 in June from May’s 103.2, below expectations and reaching its lowest level since February 2021. While indicating that stagflation risks continue to run high, it is probably a signal to the Fed given that this survey particularly focuses on the labor market. The Expectations Index (consumers' short-term outlook for income, business & labour market conditions dropped significantly to 66.4 (Jun) from 73.7 (May), its lowest level since March 2013. Fed speakers sing the same songSeveral Fed speakers were on the wires yesterday. Williams hinted at a debate for the July meeting between a rate hike of 50bps or 75bps. He expects GDP growth of between 1.0-1.5% this year, beneath the FOMC’s median projection of 1.7%, and said that a recession was not his base case. Williams is a voter, but that also seems to be the base view from the =Fed for now. Fed’s Daly also said something similar, ruling out a possible recession but expecting unemployment to rise slightly. Fed Chair Powell will be speaking at the ECB summit on Wednesday, but we doubt he will add any new information, and is likely to confirm the fight against inflation and discount recession risks. H&M Q2 pre-tax profit beats expectations. The Swedish fashion retailer delivers pre-tax income of SEK 4.8bn vs est. SEK 4bn and is guiding for more store closures than estimated. The company is also announcing SEK 3bn buyback of its own shares. What are we watching next? Copper-gold ratio calling for lower yieldsThe copper-gold ratio has historically had a relatively high correlation with the yield on US Treasury notes. With copper being a leading indicator of global economic health and gold being the leading indicator of fear, ie economic and geopolitical distress, a rising number – copper outperforming -tends to support higher bond yields. Last year the ratio rallied strongly, thereby sending a signal that yields had to move higher. That finally happened and during the past few months yields have surged beyond levels justified by the ratio which in the meantime has slumped on emerging signs of an economic slowdown, thereby calling for a top in US long end yields.  ECB not gaining much credibility as it is set for tightening and “anti-fragmentation”ECB President Lagarde reiterated ECB's current stance on the continuation of its policy normalization path & will go as far as necessary to bring Euro Area inflation back to the 2% target in her speech at the ECB Forum on Central Banking yesterday. She hinted again at a 25bps rate hike in July and gave no proper insight into the anti-fragmentation tool. German inflation is due today, expected to rise to 8.0% y/y for June from 7.9% y/y previously but if gains are any stronger than that, we may see the markets tilting more towards pricing a 50bps rate hike from the ECB in July. Geopolitical tensions surgeGeopolitical tensions continued to reign as G7 oil price cap proposal to cut off Russia’s revenues gained traction. G7 has agreed to explore a ban on transporting Russian oil that has been sold above a certain price and the cap may extend to Russia's gas exports as well. There is a risk such measures could backfire as Russia could reduce energy exports in retaliation which in turn could led to an upward spiral in prices. Quarter-end on Thursday and portfolio rebalancing flows. After a terrible quarter-to-date for global equities (the first quarter ended on a high note), rebalancing flows may buoy equities into quarter end on Thursday. There is also talk of an enormous option structure (a put spread on the S&P 500) held by JP Morgan with a key strike price in the structure at 3,620 that expires on Thursday, one that some believe has helped to hold up the market as that level approached. Earnings Watch. The next important earnings release to watch is General Mills today which is expected to deliver FY22 Q4 (ending 31 May) revenue growth of 6% y/y and 2%-point increase in the operating margin compared to the previous quarter. General Mills is a large US consumer foods business and can thus provide insights into the cost pressures across food and logistics. Today: Acciona Energias Renovables, Kabel Deutschland, Paychex, General Mills, McCormick & Co Thursday: Constellation Brands, Micron Technology, Walgreens Boots Alliance, Shaw Communications Friday: Nitori Economic calendar highlights for today (times GMT) 0700 – Spain Flash Jun. CPI0800 – ECB's Guindos to speak0900 – Eurozone Jun. Confidence Surveys1000 – ECB's Schnabel to speak1100 – US Weekly Mortgage Applications1200 – Germany Flash Jun. CPI1300 – Central Banks speakers at ECB Conference: Fed Chair Powell, BoE Governor Bailey, ECB President Lagarde1430 – EIA's Weekly Crude and Fuel Stock Report for weeks ending June 17 and 241500 – ECB President Lagarde to speak1530 – US Fed’s Mester (voter) to speak1705 – US Fed’s Bullard (voter) to speak2350 – Japan May Industrial Production0100 – New Zealand Jun. ANZ Business Survey0130 – China Jun. Manufacturing and Non-manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 28, 2022 | Saxo Group (home.saxo)
FXO Market Update - USDMXN back to the middle of the range.

FXO Market Update - USDMXN back to the middle of the range.

Saxo Bank Saxo Bank 28.06.2022 11:02
Summary:  USDMXN spot is back below 20.00 and in the middle of last months’ range. Vols have traded lower over the last week as spot has moved away from the highs but there is still room for vols to trade lower with spot at current levels. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these. FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: USDMXN spot USDMXN is back below 20.00 and to the middle of the last 3 months range of 19.50/20.65. Vols have traded lower as spot has moved away from the highs at 20.65 but still trades higher than when spot been around these levels earlier during the last months. 1 month currently trades at 11.50 but there is room to move down another 1-1.5 vol if spot stick around these levels for a while. The next big event is US CPI in two weeks so there is good chance vols will continue drift lower and spot stay around these levels. Risk reversals still on the high side and have not come down as much compared to the ATM vol when spot moved lower. USDMXN top side offers best value with the high risk reversal but we prefer selling strangle for the extra premium.  Sell 1 month 20.5000 USDMXN callReceive 1,000 pips Sell 1 month 19.5000 USDMXN putReceive 420 pips Spot ref.: 19.9250 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: FXO Market Update June 28 2022 | Saxo Group (home.saxo)
Financial Markets Today: Quick Take – June 28, 2022

Financial Markets Today: Quick Take – June 28, 2022

Saxo Bank Saxo Bank 28.06.2022 09:51
Summary:  US equity markets rolled over for a negative session yesterday after Friday’s blockbuster advance and as US treasury yields rose on mixed US data and a weak Treasury auction. Crude oil advanced sharply again as the G-7 jawboned on intentions to cap prices on Russian energy imports. Volatility is generally seeping out of markets as we head into the heart of the summer, but is this a sign of dangerous complacency? The roll into the new financial quarter on Friday may provide the answer.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were slightly lower yesterday following a worse than expected Dallas Fed Manufacturing Activity print for June hitting –17.7 vs est. -6.5 suggesting economic activity is slowing down faster than anticipated. However, S&P 500 futures are rising this morning trading around the 3,924 level with yesterday’s high at 3,948 being the natural resistance level to watch on the upside. Short-term momentum in S&P 500 futures is still leaning on the upside and our view is that 4,000 is the most likely gravitational point. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Both indices took a pause in their recent advance. Hang Seng Index dropped 0.9% and CSI300 was little changed. Hang Seng TECH Index (HSTECH.I) was off by 1.7%.  Tencent (00700) lost about 5% as its largest shareholder, Prosus NV planned to continue to unload its stake in the company. Other mega cap Chinese tech stocks also declined by 2% to 4%.  China’s leading electronic appliance retailer, GOME (00493) plunged 12% after share placement at a deep discount. Shares of BYD Electronic (00285) jumped over 11% in anticipation of rising orders from Apple.  EURUSD and USD pairs The USD situation remains the focus after the currency has traded with no conviction since the June 15 FOMC meeting saw the Fed hiking the most since 1994 with the 75 basis point move. Since then, the market has pulled forward the anticipated time frame of peak Fed funds rate to early next year as it predicts conditions will allow the Fed to ease off by then. The US dollar has only consolidated gently since mid-month, and we watch further developments in risk sentiment and US yields for where the US dollar is headed next. Overnight, the key upside resistance in EURUSD at 1.0600 was tested briefly. The downside focus is on the cycle lows at 1.0350 just ahead of the lows since back in 2003, although tactically, the price action is so bottled up that a close below 1.0500 would suggest some downside momentum. ECB President Lagarde is set  to speak at the ECB conference in Sintra, Portugal today. USDJPY USDJPY trades above 135.00, eyeing the 136.70 top, although the key driver to take it there would be fresh weakness in global safe haven bonds that takes yields to new highs for the cycle. US treasury yields peaked out more than a week ago and are not adding any fuel to the weak-yen fire. To drive new interesting in JPY upside and pull the focus away from the BoJ’s cap on 10-year JGB yields, we would likely need a more significant adjustment lower in yields elsewhere – for example a sub-3.00% level in the US 10-year Treasury benchmark, which has correlated tightly with USDJPY for the last 18 months. Crude oil (OILUKAUG22 & OILUSAUG22) Crude oil trades higher for a fourth day as the focus continues to switch from demand destruction fears back to supply constraints. News impacting the market being Libya facing more disruptions, Ecuador may shut output on anti-government protests, Iran nuclear talks to resume in Doha today, while UAE’s ruler in a conversation with President Macron said they and the Saudis are pumping close to capacity. OPEC+ meets this week to discuss supply, at a time when several members have struggled to meet their production targets. A sharper rally back above 115/barrel in WTI and 120/barrel in Brent would be needed to suggest that the recent large sell-off wave from the cycle top is merely a consolidation and not a more significant reversal. Specs cut their WTI net long to a 26-month low in the week to June 21 and including Brent the total net long was reduced by 12%. Gold (XAUUSD) Gold remains rangebound with current market developments not providing enough oxygen to propel it in either direction. Traders currently must navigate a market focusing on recession fears driven by aggressive tightening by central banks and geopolitical tensions while a plan to ban gold imports from Russia is likely to have a limited impact. As we head into the low liquidity peak holiday period of July and August, the market will continue to take much of its cue from movements in Treasury yields and the dollar. Gold is currently stuck within a slightly downward trending range between $1813 and $1838. US Treasuries (TLT, IEF) US Treasury yields rose yesterday, in part on a very weak 5-year t-note auction yesterday that was the weakest since 2010, as measured by its awarded yield relative to indications earlier in the day. The bid-to-cover ratio was the lowest, at 2.28 since early 2021. Some of the demand weakness may have been due to an earlier 2-year t-note auction falling on the same day. The US 10-year benchmark yield settled near 3.20%, still not seriously threatening the cycle highs near 3.50%. To the downside, the 3.00% level touched briefly last week is an important area for whether the longer-term outlook tilts more aggressively toward recession fears. Today sees an auction of 7-year T-notes. What is going on? World’s biggest mining company, BHP Billiton, rises sharply ahead of financial year-end BHP shares have risen sharply over the last three days after nearly touching the key 200-day moving average, with a rally in Tuesday’s session of more than 3%.  BHP upside could continue on the ASX as it is end of financial year in Australia and BHP shares are down 11% YOY; meaning fund managers may need to top up BHP positions. Secondly, a little optimism came from China this week which has helped the iron ore price rise 4% this week. However, caution remains over the medium term with BHP as its output could be lower than expected given the interruptions from Covid restrictions. Also, BHP may give a dimmer 2022FY outlook. BHP’s operational review is due July 19, and financial results are due August 16. Nike shares slide on weak guidance Nike (NKE:xnys) shares fell over two percent yesterday after the company gave cautious guidance on its gross margins for the year and especially on the outlook for the Chinese market. Sales in China fell 20% in the reported quarter, missing analyst estimates, although company executives suggested that they remain hopeful on the region for the longer term. Norway says it will not contribute equity to SAS Many European airliners are struggling with labour shortages, labour strikes, and weak balance sheets with SAS being in the most acute situation. Norway’s government has said it will not contribute to SAS which is seeking more equity financing and a new labour agreement to get to a more sustainable cost structure. Some respite in the U.S. recession scenario US durable goods data reported last night was above expectations, with the headline rising +0.7% m/m (exp. 0.1%, prev. 0.4%) for May. This has helped to mitigate concerns that we may see a technical recession in Q2. Atlanta Fed's GDPnow model for Q2 was also revised up to +0.3% after the data, from an initial estimate of flat growth which sounded alarm bells for an impending technical recession. This has meant that Fed could proceed with aggressive rate hikes, bringing rates above the estimated rate of neutral quickly. Still, it is important to consider that the durable goods data was backward looking as it was for the month of May, and focus is still on PCE and ISM manufacturing data due at the end of the week. What are we watching next? US consumer confidence will provide hints on the labor market The US consumer confidence from the Conference Board survey is due in the US today. This metric has held up even as University of Michigan posted ever lower levels, including a record low (for its 44-year history) in June. The University of Michigan arguably focuses more on the inflation/cost of living dynamics, which is hitting the consumer now especially due to the increase in gasoline prices. But the Conference Board survey correlates more close with the strength of the labor market. More details on the two surveys and other activity indicators for the US economy are here. Once we start seeing declines in Consumer Confidence, it will be an indication that slowdown is being felt in the labor market and may raise concerns at the Fed. Quarter-end on Thursday and portfolio rebalancing flows After a terrible quarter-to-date for global equities (the first quarter ended on a high note), rebalancing flows may buoy equities into quarter end on Thursday. There is also talk of an enormous option structure (a put spread on the S&P 500) held by JP Morgan with a key strike price in the structure at 3,620 that expires on Thursday, one that some believe has helped to hold up the market as that level approached. Earnings Watch The next important earnings release to watch is General Mills tomorrow which is expected to deliver FY22 Q4 (ending 31 May) revenue growth of 6% y/y and 2%-point increase in the operating margin compared to the previous quarter. General Mills is a large US consumer foods business and can thus provide insights into the cost pressures across food and logistics. Tuesday: Wise, Alimentation Couche-Tard, TD Synnex Wednesday: Acciona Energias Renovables, Kabel Deutschland, Paychex, General Mills, McCormick & Co Thursday: Constellation Brands, Micron Technology, Walgreens Boots Alliance, Shaw Communications Friday: Nitori Economic calendar highlights for today (times GMT) 0830 – ECB Chief Economist Lane to speak 1100 – ECB's Panetta to speak 1200 – Hungary Central Bank Rate Decision 1230 – US May Advance Goods Trade Balance 1245 – ECB President Lagarde Press Conference 1300 – US Apr. S&P CoreLogic Home Price Index 1400 – US Jun. Consumer Confidence 1430 – US Weekly DoE Crude Oil and Product Inventories 2030 – API's Weekly Oil and Product Inventory Report 0130 – Australia May Retail Sales Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 28, 2022 | Saxo Group (home.saxo)
Oil stocks charge again, are US equities on the brink of a huge disappointment and BHP attempts to rise out of bear market

Oil stocks charge again, are US equities on the brink of a huge disappointment and BHP attempts to rise out of bear market

Saxo Bank Saxo Bank 28.06.2022 09:46
Summary:  Food price inflation looks likely to pick up again, while oil price inflation bubbles up too, with Bloomberg research now expecting a 72% chance of a recession. The EURO is the talk of the town ahead of the ECB likely to make a jumbo rate hike. In equities oil stocks see momentum trades pick up amid fresh oil supply concerns. BHP shares come out of a bear market as end of financial year buying picks up in Australia, also supported by iron ore's 4% rally this week. Yet we question if BHP's rally is short lived. And VW is poised to sell some assets to get quick access to cash. What’s happening in markets?   US markets take a breather ahead of end of quarter, or is this the eye of the storm? US equites took a trim with Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) falling slightly on Monday, ahead of the end of quarter/half year end on June 30. Markets were spooked by inflationary indicators creeping up again with the oil price back over US$110 after Libya said it may suspend exports from the Gulf of Sirte in the next three days. So investors bunkered into bonds again, which pushed up the US 10 year yield to 3.2%. Despite Monday’s pull back, the S&P500 is up 6.2% and the Nasdaq is up 7.2% from June 17. At Saxo we think equities are likely to get spooked and will probably head sharply lower once the market sees the reality, that company earnings will likely be dimmer than anticipated. New Bloomberg data showed that S&P strategist haven’t been this bullish on quarterly earnings in 20 years! As we’ve highlighted, and discussed yesterday as well, we think the market is likely to get bitterly disappointed, spooked and fall when company results and outlooks come through – which could hurt investors and add to a much larger pull back. Bloomberg Economics probability model projects there being a 72% chance of recession before 2024. If that occurs, history tells us, the market may fall 49-56%. Best 2022 performers - oil company stocks- rise back up proving inflation is higher for longer Given the moves in oil overnight, oil companies shares came back with vengeance overnight, with shares in oil companies like Valero Energy (VLO), Devon Energy (DVN), Hess (HES), Marathon Oil (MRO), becoming the best performers on Monday rising 5-8% each. Year to date, these stocks have seen the most momentum and best share price performers year to date, up over 40%+. , APAC markets are mostly lower after starting the day all in the green Brakes are being put on the bear market bounces, for now with European summer holidays underway. This means quarter-end portfolio rebalancing could be over in some markets, while it continues in Australia. It’s also near option expiries, which means we could still continue to see some bounces until the very end of the month, but, Q2 earnings will be the next big catalyst for the move lower in equities as analyst estimates are still very high and that will mean earnings misses and also more downgrades. A weaker end to the Wall Street and higher oil prices means APAC equities will be under pressure, and China equities also reversed course today. Singapore’s STI (ES3) was down 0.2% while Japan’s Nikkei (NI225.I) was in losses of 0.15% at lunch as tech was lower. End of financial year sales in Australia? It’s nearing end of financial year in Australia with the ASX200 up for the fourth day, up 0.7% on Tuesday buoyed by rebalancing, while Oil and Iron ore commodity stocks lead the charge. However we think broad gains will be in check after July, for three reasons – firstly Australian bond yields are rising again and the Aussie 10-year yield is at 3.81%. Secondly, local reporting season numbers are due, and we think more earnings disappointments will be released and this will spook ASX investors causing broad pull backs as companies grapple with lack of resources (staff), higher wages, less demand and rising costs with the situation to get tougher as the RBA rises rates. And thirdly, we still don’t have notice from China when they are officially ending lockdown, so we see the commodity metal rally potentially being short lived until we have solid reopening reports. Chinese equity markets rally takes a pause Hang Seng Index (HSI.I) dropped about 1% and Hang Seng TECH Index (HSTECH.I) was off by 1.6%.  Tencent (00700) lost about 5% as its largest shareholder, Prosus NV planned to continue to unload its stake in the company.  Other mega cap Chinese tech stocks also declined by 2% to 4%.  Property sales volume across top 30 cities in China recovered in June, rising 81% from May, though still 13% below last year’s level for the same period.  China Overseas Land (00688) and CR Land (01109) climbed about 1%.  CSI 300 (000300.I) was little changed. EURUSD downside may remain limited As long as US Treasury yields and the US dollar remain range-bound, the scope for a significant downside in EURUSD is limited. Pair broke above 1.06 last night and the ECB-hosted central bank conference in Sintra, Portugal has a host of ECB speakers lined up who could take this chance to hint at jumbo rate hikes. Eurozone inflation is also due this week, which means the EUR will possibly remain supported for now. Crude oil (OILUKAUG22 & OILUSJUL22) back in gains While the demand destruction fears have taken out a lot of froth from the commodity markets last week, we are now seeing gains return as the focus shifts back to supply constraints. WTI crude was back above a $110/barrel while Brent was at $116. Libya is sending a warning on oil exports again, which it may suspend due to political crisis. Meanwhile, EIA continues to delay its weekly oil report due to hardware failure, and the prospect of additional supply from OPEC's key oil producing nations is pretty limited. What to consider?    Some respite in the U.S. recession scenario? US durable goods data reported last night was above expectations, with the headline rising +0.7% m/m (exp. 0.1%, prev. 0.4%) for May. This has helped to mitigate concerns that we may see a technical recession in Q2. Atlanta Fed's GDP now model for Q2 was also revised up to +0.3% after the data, from an initial estimate of flat growth which sounded alarm bells for an impending technical recession. This has meant that Fed could proceed with aggressive rate hikes, bringing rates above the estimated rate of neutral quickly. Still, it is important to consider that the durable goods data was backward looking as it was for the month of May, and focus is still on PCE and ISM manufacturing data due at the end of the week. US consumer confidence will provide hints on the US labor market The US consumer confidence from the Conference Board survey is due in the US today. This metric has held up even as University of Michigan recorded declines. The University of Michigan arguably focuses more on the inflation/cost of living dynamics, which is hitting the consumer now especially due to the increase in gasoline prices. But the Conference Board survey phrases questions more on the job market. More details on the two surveys and other activity indicators for the US economy are here. Once we start seeing declines in Consumer Confidence, it will be an indication that slowdown is being felt in the labor market and may start to bother the Fed.     EV makers on watch; VW selling assets to get cash? Tesla has a new rival? Volkswagen (VOW) is said to be nearing a deal to sell its minatory stake in Electrify America to Siemens that could be valued at $2 billion. The deal is expected to be announced as soon as Tuesday. VW is said to be cutting staff numbers in Europe as it overhauls its business as well and cuts costs. VW shares are heavily down this year and face further pressure as car sales are expected to grind lower. VW shares are already down over 30% this year. Meantime, Tesla (TSLA) is facing increasing competition from Kia Motors (who majority shareholder is Hyundai) with there cars seeing a huge jump in sales in Q1. However, Tesal remained the leader in the US, with Tesla EVs accounting for 72% of the market. It’s also worth noting Elon Musk has not tweeted in a week. Could Elon be getting ready to announce Tesla is going to buy a lithium company, given lithium stocks have fallen considerably in value?   Potential trading and investing ideas to consider? World’s biggest mining company, BHP comes out of bear market. For how long? Shares in the world’s biggest mining company, BHP (BHP) are making green tracks for the first time in four weeks, which has officially taken BHP shares out of bear market territory, now down 19.8% from its April high. BHP shares could see buying pick up for three reasons; firstly its EOFY in Australia and BHP shares are down 12% YOY; so we may likely to see fund managers top up BHP positions as it’s the largest commodity stock in the world and the biggest stock on the ASX. Secondly, the technical indicators suggest BHP shares could rally on a daily charts as it's in oversold territory. And thirdly, sentiment picked up in China after it declared victory over Shanghai’s covid outbreak yesterday. This resulted in the iron ore price jumping 5% yesterday while the Copper price rose for the first time in five days. Big picture on BHP? caution remains over the medium term in BHP as the industrial metal commodity rally could be short lived, until we have consistent news from China that restrictions are easing. BHP’s financial year ends this week. An operational review is due July 19, which will probably give a dimmer outlook on commodity demand and we could likely see a drop in output given covid restrictions. BHP’s financial results are due August 16.   Relief in food prices may be short lived USDA's crop progress report indicated that the weather forecast shows a drier trend but mild temperatures. This should help for good crop growth and is not really threatening to US crops. But the report noted a deterioration in crop quality, and that means any respite in food prices is likely to be short-lived. Trading needs to resume from the ports in the Black Sea which was damaged/disrupted by Russia's invasion, meanwhile, Ukraine’s production will likely remain below optimum levels in the coming years. That being said, weather changes continue to affect crop production in the US, which means the only way for the food prices is up in the medium-to-long term.   _____________________________________________________ For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Oil stocks charge again while US equities on brink of disappointment | Saxo Group (home.saxo)
Crypto Weekly: Unfamiliar territory

Crypto Weekly: Unfamiliar territory

Saxo Bank Saxo Bank 27.06.2022 15:49
Summary:  Based on historical and statistical data, this bear market is arguably the worst in the history of crypto. Several of the global conditions are new for the crypto market, and cryptos have to maneuver in uncharted territory. Additionally, BlockFi’s shareholders are likely to get fully diluted if the firm accepts a $250mn bailout from FTX, whereas depositors are likely made whole. Trading below previous all-time highs Bitcoin and Ethereum reached all-time highs in November last year of $69,000 and $4,850, respectively. Quickly thereafter, fatigue spread across the crypto market leading to a present 6-months period of tumbling prices. At present, Bitcoin trades at 21,150 (BTCUSD) and Ethereum changes hands at 1,210 (ETHUSD) from a low of $17,550 and $880 earlier this month. Thought-provoking, these lows are below the all-time highs of the infamous market cycle of 2017 and 2018 of around $19,800 and $1,400. It is the first time that fatigue leads to lower prices than in a former market cycle, meaning we are entering territory with no similar history. According to Glassnode, the Mayer Multiple (MM) of both Bitcoin and Ethereum is historically low. Based on a 200-day simple moving average as a long-term mean, the Mayer Multiple tracks price deviations above and below this level. For the first time, Bitcoin has recorded a lower MM (0.487) compared to the previous cycle's low of 0.511 in 2018. Out of Bitcoin’s 4,160 trading days, only 84 days have closed with a MM below 0.5. Ethereum’s MM value has recently been as low as 0.37. Considering all Ethereum’s trading days, only 1.4% of these had a MM value below 0.37. Alongside other price metrics and on-chain data, Glassnode largely concludes that this bear market is so far the most significant in crypto’s history. As we see it, one should be careful about perceiving that it cannot get much worse, because this bear already beats prior bear markets. At this moment, the crypto market is surrounded by conditions it has never dealt with, such as high global inflation, increasing interest rates, global unrest, and possibly a recession on the horizon. Moreover, stressed by the fatigue in particularly growth stocks, investors have arguably reassessed their overall risk sentiment to a degree that crypto has not experienced in prior cycles. Strictly speaking, if investors continue to seek risk-off, it is not unthinkable that crypto is an asset class to be further liquidated by particularly retail investors.   FTX bails out BlockFi, Goldman Sachs looking at buying Celsius assets One of the largest cryptocurrency exchanges FTX has announced its intention to bail out troubled crypto-lender BlockFi. Similar to another crypto-lender Celsius, BlockFi has allegedly been short on liquidity to comply with its liabilities to its clients. FTX has offered BlockFi a $250mn credit facility offer, which might be enough to get the firm back on the straight and narrow. FTX’s offer is structured in a way in which depositors are to be repaid before FTX in case BlockFi becomes insolvent. However, the offer consists of an option for FTX to acquire BlockFi at “essentially zero cost”, effectively fully diluting existing shareholders. Raising money with a valuation as high as $5bn last year, many existing shareholders are not pleased by this fact, so the offer by FTX has not been signed yet.   Speaking of Celsius, Goldman Sachs is reportedly looking to raise $2bn from investors to acquire Celsius’ assets in case the lender files for bankruptcy. The investment bank should be interested in the assets at a hefty discount. For now, Celsius has halted withdrawals without any news on the outlook of the firm. Bitcoin/USD - Source: Saxo Group Ethereum/USD - Source: Saxo Group Source: Crypto Weekly: Unfamiliar territory | Saxo Group (home.saxo)
ECB's Marathon. Earnings Season Is Coming! What's Up Equities?

ECB's Marathon. Earnings Season Is Coming! What's Up Equities?

Saxo Bank Saxo Bank 27.06.2022 10:51
Summary:  Today we discuss Friday's huge equity market rally and its likely proximate causes, especially the revision lower of a key US inflation expectations survey. Looking ahead, we consider the importance of the quarterly roll this week after a horrific quarter for equities as of last week's lows that may be driving rebalancing flows. As well, options exposures may be a key driver into quarter end. We also discuss the mounting impact of quantitative tightening in the weeks ahead, the outlook for the Q2 earnings season with a few interesting names reporting out-of-synch earnings this week, the US dollar and the macro calendar ahead as the ECB hosts a three day conference starting today. Today's pod features Peter Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are also located there. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Technically and seasonally pivotal week ahead | Saxo Group (home.saxo)
Oil stocks charge again, are US equities on the brink of a huge disappointment and BHP attempts to rise out of bear market

Financial Markets Today: Quick Take – June 27, 2022

Saxo Bank Saxo Bank 27.06.2022 09:46
Summary:  Market sentiment brightened at the end of last week as the final June US University of Michigan Survey revised long term inflation expectations lower after a shockingly high read in the initial survey earlier this month. The riskiest assets rebounded the most and the US dollar eased lower, although US treasury yields failed to drop in response to the news. This week features plenty new Central Bank jawboning as the ECB hosts a prominent conference, and quarter-end on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Friday’s session was the biggest 1-day gain this the current drawdown began on 1 January blasting through the opening gap on the 13 June trading session around the 3,890 level closing at the 3,916 level. Momentum has changed in the short-term and with the positive indications out of China claiming success in controlling Covid in Shanghai S&P 500 futures could extend to 4,000. Sentiment and expectations have simply become too negative relative to the actual economic dynamic so economic figures and earnings releases might be a positive catalyst going forward beating expectations. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Chinese equity indices continue to climb. Hang Seng Index (HSI.I) is up 2% and Hang Seng TECH Index (HSTECH.I) is up 4% with technology leading the gains with the biggest movers being Xiaomi (+10%), Alibaba Health (+6%) and JD Health (+7%), Sunny Optical (+7%). Consumer stocks, such as home appliance retailers, sportwear and catering also registered gains. In A-shares, tourism, airlines, auto and other consumption stocks outperformed.  CSI300 (000300.I) is up 1%. EURUSD and USD pairs The USD situation has been in limbo since the June 15 FOMC meeting saw the Fed hiking the most since 1994 with the 75 basis point move. Since then, the market has pulled forward the anticipated time frame of peak Fed funds rate to early next year as it predicts conditions will allow the Fed to ease off by then. The US dollar has only consolidated gently since mid-month, and we watch further developments in risk sentiment and US yields for where the US dollar is headed next, with key upside resistance in EURUSD at 1.0600 and the downside cycle lows at 1.0350 just ahead of the lows since back in 2003. An ECB-hosted conference this week could test ECB credibility. EURSEK This week features an ECB-hosted central bank conference in Sintra, Portugal Mon-Wed, with numerous ECB speakers and speakers from other central banks. Sweden’s Riksbank meets on Thursday and is likely set for a 50 basis point rate hike bringing the policy rate to +0.75% after a sea change in its policy outlook at the previous meeting, while the ECB has pre-announced a 25 basis point hike for its July meeting, taking the policy rate to –0.25%.  The euro faces risks going forward due to existential concerns on the central bank’s awkward attempt to both tighten policy while shifting balance sheet holdings to prevent yields from rising sharply for peripheral EU countries like Italy and Greece. EURSEK is poised near the highs of the range since March, as the SEK is often seen as a kind of proxy for the regional economic outlook and is sensitive to risk, but should policy credibility from the Riksbank weigh more heavily in the balance? At the same time, Riksbank policy tightening threatens a crisis of its own in the domestic Swedish housing market, pumped to bubbly heights by years of easy monetary policy. Crude oil (OILUKAUG22 & OILUSAUG22) Crude oil pulled back higher on Friday, suggesting a stabilization in the price action as this cemented a local rejection of the sharp sell-off that materialized last Wednesday. But a sharper rally back above 115/barrel in WTI and 120/barrel in Brent would be needed to suggest that the recent large sell-off wave from the cycle top is merely a consolidation and not a more significant reversal. The US-Iran are set to renew talks on the 2015 nuclear deal this week, with the talks mediated by the EU. Copper (COPPERUSSEP22) Copper posted its biggest weekly loss in a year last week, driven by global recession fears and China lockdown hurting growth and demand in the world’s biggest consumer of industrial metals. While the Bloomberg Industrial Metal index trades down 6% on the year, copper is currently 15% under water with around half of that loss realised this week when Fed chair Powell reiterated his commitment to bring down inflation, thereby raising the risk of a hard landing. In addition, Chile’s mining giant Codelco has reached an agreement with workers to end a strike that could have led to a price supportive reduction in supply. Below $3.86 the next key level of support can be found at $3.50/lb, the 50% retracement of the 2020 to 2022 rally. US Treasuries (TLT, IEF) The big headline on Friday was the revision lower in the June University of Michigan sentiment survey inflation expectations (more below), but while other markets supposedly celebrated this news as a signs that it would prompt the Fed to ease off on signaling a faster pace of tightening, US treasuries actually weakened late Friday all along the curve after the 10-year Treasury benchmark yield traded close to 3.00% on Thursday, closing above 3.10% on Friday an back at 3.15% this morning. The US Treasury is set to auction 5-year notes today and 7-year notes tomorrow. What is going on? US June Final University of Michigan Sentiment Survey sees 5-10 year inflation expectations revised lower This had a significant impact on market sentiment, as the preliminary June survey put long-term inflation expectations at 3.3%, a sudden 0.3% jump and the highest reading since the early 1990’s save for a single month in 2008. This was widely seen as inflation potentially getting unanchored, but the revision took the number back down to 3.1%, and thus back within the recent range, if at the very top. Still, the overall Michigan Sentiment figure was revised lower to 50.0 - the lowest in the 44-year history of the survey. Japan likely to issue power crunch advisory After Australia, now Japan is facing a power shortage. The trade ministry will issue an advisory if reserves are expected to fall below 5%, and risk of blackouts remains. The country’s power supplies have been stretched thin since last week’s strong earthquake. Power reserves are also limited as older oil-powered plants have been retired and most nuclear reactors remain shut after Fukushima. This raises the possibility of switching back to traditional energy sources such as coal, as Australia is doing, but also a greater shift to nuclear sources. Volatility in equities calms before end of quarter Volatility in equities (as measured by VIX) has fallen 21% from its June high and looks to be calming before end of Quarter and Half-year rebalancing, which has helped to push the S&P500 and the Nasdaq into a technical uptrend on the short-term charts. Beyond quarter-end selling pressure may resume on Q2 company earnings, where expectations look  Turkey bans lira loans, sending TRY sharply higher Turkey moved to support its currency by restricting lending to corporate borrowers who hold more than 15 million lira in foreign currencies, potentially affecting thousands of companies. These companies might be prompted to dump their foreign currency holdings if they want to continue accessing credit in TRY. After trading as high as 17.37 on Friday, USDTRY traded in the low 16.00’s today. What are we watching next? Quarter-end on Thursday and portfolio rebalancing flows After a terrible quarter-to-date for global equities (the first quarter ended on a high note), rebalancing flows may buoy equities into quarter end on Thursday. There is also talk of an enormous option structure (a put spread on the S&P 500) held by JP Morgan with a key strike price in the structure at 3,620 that expires on Thursday, one that some believe has helped to hold up the market as that level approached. Food prices continue to jump This is only the beginning. It is partially related to the pandemic and the Ukraine war (especially for countries most exposed to agricultural imports from Russia and Ukraine). But other factors are playing a major role too: weather, especially la Nina, has severely affected crop production (too dry conditions in Brazil, the United States and Brazil and too wet conditions in Australia and Southeast Asia) and avian flu has caused a sharp increase in poultry and egg prices all across the globe. In France, roughly 8 % of egg-laying hens have been culled since late last year, for instance. Within the eurozone, food prices have risen most this year in Lithuania, Latvia and Portugal. In this country, they have increased by 7.6 percentage points. For the lowest 15-20 % income quintile, it is now getting harder to buy meat and high-quality food. Rice could be the next agricultural commodity to increase. According to the United Nations’ Food and Agriculture Organization Food Price Index, international rice prices are up for the fifth consecutive month in May, at a 12-month high. Protectionist measures (ban on imports, for instance) and a substitution of wheat (which is now too expensive) by rice could lead to a more unbalanced market and it could lower existing stocks too. Ultimately, it could push rice prices much higher in the short-term. Australian inflation to worsen and spook markets Australia’s Federal Treasurer conceded Australian inflation will worsen over the coming months before only improving in 2023. Jim Chalmers said the RBA’s forecast of 7% y/y inflation is too low and ‘widely off the mark’. Earnings Watch The Q2 earnings season is coming up in about two weeks and in the meantime a few important earnings releases are published this week. Our main earnings focus is on Nike, General Mills, Micron Technology, and Walgreens Boots. Monday: Nike, Trip.com, Jefferies Financial Group, Prosus Tuesday: Wise, Alimentation Couche-Tard, TD Synnex Wednesday: Acciona Energias Renovables, Kabel Deutschland, Paychex, General Mills, McCormick & Co Thursday: Constellation Brands, Micron Technology, Walgreens Boots Alliance, Shaw Communications Friday: Nitori Economic calendar highlights for today (times GMT) ECB conference kicks off today, to last through Wednesday. 1230 – US Preliminary May Durable Goods Orders 1400 – US May Pending Home Sales 1430 – US Jun. Dallas Fed Manufacturing Survey 1730 – ECB President Lagarde to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 27, 2022 | Saxo Group (home.saxo)
Saxo Spotlight: What’s on investors and traders radars this week? - 27/06/22

Saxo Spotlight: What’s on investors and traders radars this week? - 27/06/22

Saxo Bank Saxo Bank 27.06.2022 09:44
  Summary:  On the economic news front, we will likely see a tale of two worlds this week with US sentiment indicators likely to show the US consumer is doing it tough, while China's eco data will likely bolster. Plus, what to keep an eye on in South Korean and Japanese markets. Meanwhile, all important commodity reports are on tap from OPEC+, while a US Agri pulse check is due. In equities, why to expect a likely short-term rally in the S&P500, the Nasdaq, ASX200 and BHP before end of half year and end of financial year in Australia, before we think downside will likely pick up again.   US sentiment indicators to tilt the balance further towards slowdown fears Markets have been seeing a double whammy of inflation concerns and recession fears later, with more and more US activity data now point towards a slowdown in economic activity. Key focus is beyond the Fed surveys to housing and consumer data now. Monday sees durable goods and pending home sales, but highlight for the week will be the PCE data on Thursday which is a key input for Fed’s policy. Consumer confidence is key as well to gauge the impact of higher prices on consumer, and the ISM manufacturing survey will likely re-affirm the global slowdown message sent by the PMI data last week. Finally, a third revision of the Q1 GDP will continue to show a significant decline, and with Atlanta Fed now predicting a flat growth in Q2, technical recession is looking likely in the US. We can also expect another busy week of Fed Speak. China PMIs are expected to rebound to expansionary territory The June Emerging Industries PMI (EPMI) released last week climbed to 52.5 from 48.9 in May, getting back to expansionary territory.  Citing the EPMI and high frequency data, analysts are expecting the official Manufacturing PMI and Non-manufacturing PMI to return to expansionary territory, rising to 50.3 (vs 49.6 in May) and 50.1 (vs 47.8 in May) respectively according to Bloomberg consensus.  While Bloomberg consensus is anticipating 49.4 for June Caixin Manufacturing PMI, quite a few street economists are forecasting this data point also going above 50, returning to expansionary territory.  Eurozone inflation pain may embolden the ECB A new record high of 8.3% y/y in expected for the Euro-area inflation after 8.1% y/y print in May, as energy and food prices continued to drive pressures. The jump in natural gas prices as Russia’s Gazprom announced further cuts to gas supplies via its Nord Stream pipeline to Germany is likely to feed into price pressures for the coming months. We believe this will raise the expectation of a 50bps rate hike at ECB’s July or September meeting, with the only factor to consider being the anti-fragmentation tool. South Korea export growth set to decelerate in June Bloomberg survey of economists is calling for a deceleration in South Korea’s export growth to 4.9% YoY in June, down from 21.3% in May.  As there were fewer working days in June this year than last year, the headline number may have overstated the weakness and the underlying trend growth may remain in double digit. Japan’s eco data to be supported by reopening Japan reports industrial production, Q2 Tankan survey and Tokyo CPI data in the week ahead. Industrial production possibly recovered in May from June’s -1.5% m/m, but still remained in negative territory as the key regions of China remained in some form of a lockdown. June Tokyo CPI is likely to show further price pressures after the national CPI report for May showed inflation remaining above the Bank of Japan’s 2% target. Q2 Tankan survey is key to gauge business sentiment, which may have been supported by the non-manufacturing sector as the border curbs were lifted. We also get a look at Japan’s labor market, which should re-affirm strength from the services side. Jobless rate is likely to remain unchanged at 2.5%. The focus still remains on any further jawboning by the officials to reverse the weakness of the yen, raising risks of an actual intervention or a policy shift. OPEC’s delayed oil report, and a look at US agri supply Energy prices ran lower last week on fears of demand destruction even though the market remains tight. OPEC’s Annual Statistical Bulletin is scheduled to be launched on June 28 and will be key to watch to gauge the supply situation in energy markets. We do not see enough reason yet to change our bullish view on commodities, as the demand destruction is unlikely to bring the market back in balance. OPEC+ is seen reconfirming plans for an oil output rise of 648k BPD in August at its meeting this week, according to Reuters. Metals will continue to look at China’s reopening as the next key catalyst. Also on the radar is an update on US weather developments to gauge the agri production and inventory levels, with a monthly update on crop acreages and inventories from the US Department of Agriculture due. Volatility in equities calms before end of HY, June 30 Volatility in equities has fallen 21% from its June high and looks to be calming for now. This coincides with end of Quarter and Half-year rebalancing which has pushed the S&P500 and the Nasdaq into a technical uptrend on the daily charts. [Rebalancing is where fund managers take profits from asset class that have done well like Commodities; (Oil, Grains) & Defense, and then top up/buy those assets that have fallen (Tech, Property). So, the S&P500 and Nasdaq are likely to rally up ahead of Thursday from a technical and theoretical perspective, while in Australia its end of financial year so rebalancing may be heavier. But selling pressure is likely to resume and volatility could pick up next week, as the big picture suggests the US’ benchmarks S&P500, the Nasdaq 100 and ASX200’s weekly and monthly charts are still in downtrends as we go through a slowdown. At Saxo, we also think more downside is ahead as earnings estimates for company earnings are still too optimistic. Once Q2 company earnings and downgrades for the year come in, the market is likely to be disappointed and possibly head lower again, while also grappling with tightener liquidity. The world’s biggest mining company, BHP could come out of bear market this week Shares in the world’s biggest mining company, BHP (BHP) have fallen 23% from April as China’s lockdown has ground down industrial metals demand and prices in iron and copper. However this week, BHP shares could see buying pick up for three reasons; firstly its EOFY in Australia and BHP shares are down 16% YOY; so we may likely to see fund managers top up BHP positions as it’s the largest commodity stock in the world and the biggest stock on the ASX. Secondly, the technical indicators suggest BHP shares could rally on a daily charts as it's in oversold territory. And thirdly, sentiment picked up in China after it declared victory over Shanghai’s covid outbreak. This resulted in the iron ore price jumping 3.7% today the technical indicators suggest buying may continue in the short term, meanwhile, the Copper price jumped for the first time in five days. However, caution remains over the medium term in BHP and as the industrial metal commodity rally could be short lived, until we have consistent news from Chin that restrictions are easing. BHP’s financial year ends this week. And we await their operational review due July 19, which will probably give a dimmer outlook on commodity demand. BHP’s financial results are due August 16. Key economic releases & central bank meetings this week Monday June 27 China Industrial Profits (May) Thursday June 30 China Manufacturing PMI (June) China Non-manufacturing PMI (June) South Korea Industrial Production (May) Friday July 1 China Caixin Manufacturing PMI (June) South Korea Exports, Imports & Trade Balance (June)   Source: Saxo Spotlight: What’s on investors and traders radars this week? | Saxo Group (home.saxo)
Global equities staged a notable rally | Saxo Bank

Global equities staged a notable rally | Saxo Bank

Saxo Bank Saxo Bank 27.06.2022 09:42
Summary:  With both inflation risks and recession fears having moderated somewhat, plus quarterly rebalancing portfolio demand, global equities had the best week in a month. Today, APAC stocks continued to surge, aided by improvement in sentiments. What’s happening in markets? U.S. equities rallied strongly The jump in new home sales to 696K in June and a upward revision to 629K in May from 591K previous reported dampened some of the hype of recession fear somewhat.  At the same time, the downward revision of the long-term inflation expectation in the University of Michigan consumer survey to 3.1% from 3.3% provided a modest relief to worries about inflation.  These, together with quarter-end rebalancing trades from pension funds and short covering from traders, took the S&P 500 to close the holiday shortened week 6.5% higher.  APAC stocks buoyed by China and Wall Street gains Following a strong week on the Wall Street, APAC equities kicked off the new week with strong gains even as US equity futures were slightly lower. Sentiment was also boosted by Shanghai reopening which boosted the beaten-down Copper and Iron Ore stocks, as well as gains in tech. Market gains were led by Australia’s ASX… Japan’s Nikkei (NI225.I) was also up by 1% led by energy sector as shares of Japanese electricity companies rose with spot power prices jumping higher due to electricity shortage concerns. Tight supply continues to risk blackouts in Japan, and the restart of coal-fired plants or a switch to nuclear may be the only alternatives as global supply lags. Tokyo Electric Power (9501) rose over 6%, while Chubu Electric (9502) was up over 3% as profits for electricity companies is set to soar with spot prices doubling from a week ago. Singapore’s STI (ES3) also rose 0.5% with EV-maker NIO at fresh highs. Australia’s ASX200 is up 1.7% on Monday, kicking off the last trading week for the financial year on a high note The stocks seeing the most buying are stocks that have been sold down the most of late,  as fund managers bring their asset allocations into alignment before end of financial year, June 30. So lithium stocks are rising the most as a collective; with Core Lithium (CXO) up 13%, Liontown Resources (LTR) and Lake Resources (LKE) up 9% teach. Meanwhile, gold stocks succumb to profit taking and selling. Evolution Mining (EVN) shares are down the most, 21% today after the copper-gold giant advised 2022 revenue will higher but its output will be lower, as covid has affected its workforce with 30% of staff absent for at least a week since early March. Other gold stocks are following EVN lower with Northern Star (NST) down 11%, with other gold stocks like Ramelius Resources (RMS) and Gold Road (GOR) and Newcrest Mining (NCM) down 7-5%. Chinese stocks continued to charge higher Investors have been bringing up Chinese equity exposures to rebalance their portfolios towards quarter-end, given still light positioning and the desire to catch up with Chinese stocks’ impressive outperformance since mid-March.  Hang Seng Index (HSI.I) rose 3.2% and Hang Seng TECH Index surged 5.6%.  Technology led the charge higher.  Xiaomi (01810) jumped more than 12%.  Alibaba Health (00241) and JD Health (06618) climbed over 9%. Sunny Optical (02382) was 10% higher.  Consumption stocks, such as home appliance retailers, sportwear and catering also registered impressive gains in share prices.  In A shares, tourism, airlines, auto and other consumption stocks outperformed.  CSI300 (000300.I) climbed 1.3%. USDJPY slide looks shaky The Japanese yen has been stable especially in light of the underlying spread move in US-Japan and EU-Japan yield spreads. Even the reaction to comments from the ex-official responsible for intervention hinting at a possibility of a unilateral intervention saw a muted response. But the risk of sharp reversal is still there and we would continue to caution clients about the potential volatility in USDJPY and the yen crosses. EURJPY was rejected at 143 but potential to test that again remains with EZ inflation print due this week which may embolden calls for a jumbo rate hike by the ECB. What to consider?  University of Michigan inflation expectations revised lower, Fed hawkishness getting louder University of Michigan 5-year inflation expectations were revised down to 3.1% from prelim reading of 3.3%. At the June Fed meeting, Fed Chair Powell cited the jump in inflation expectations as a big reason why the FOMC shifted to 75bps from 50 bps. Now with the measure revised back to where it was for most of the past year, odds of a 50bps rate hike at the July meeting have picked up. Nonetheless, Fed talk is setting the bar higher on hawkishness, and we may see more on that in the week ahead. Fed's Bullard on Friday reaffirmed his call for front-loaded hikes to 3.5% Fed Funds by year-end and said the US economy was strong. Japan likely to issue power crunch advisory After Australia, now Japan is facing a power shortage. The trade ministry will issue an advisory if reserves are expected to fall below 5%, and risk of blackouts remains. The country’s power supplies have been stretched thin since last week’s strong earthquake. Power reserve are also limited due to as older oil-powered plants have been retired and most nuclear reactors remain shut after Fukushima. This raises the possibility of switching back to traditional energy sources such as coal, as Australia is doing, but also a greater shift to nuclear sources. Australian inflation to worsen and spook markets Inflation is the key item the RBA  wants to tackle and the central bank only has one tool to fight it - rate hikes. However today, the Federal Treasurer conceded Australian inflation will worsen over the coming months before only improving in 2023. Jim Chalmers said the RBA’s forecast of 7% YOY inflation is too low and ‘widely off the mark’. This is something we at Saxo, have been saying for some time, that the inflation expectations are too low, and as such when inflation numbers do get released, that the market will be shocked and face selling pressure. For more clues for what to watch see our  rate hike checklist. China’s fall in industrial profits narrowed in May China’s industrial profits fell 6.5% YoY in May, moderated from the -8.5% YoY decline in April. The mining sector continued to lead in profits, growing 92% YoY.  Coal mining and oil and gas exploration’s profits were more than doubled from last year.  The manufacturing sector’s profit dropped 18.5% YoY in May, having narrowed by 3.9 percentage points from April. Among the 13 basic consumption industries, eight registered growth in profits, with alcohol and food processing leading the charge.  Potential trading and investing ideas to consider? The commodity bull run may not be over Commodity sector was spooked by demand destruction fears last week, and we saw a broad-based selloff in energy, metals and agriculture. However, the oil market is still very tight with supply constrained due to the war and recent shift to ESG and demand collapse for now is just anticipated. A modest recession wouldn't cut the demand as heavily to bring the market back in balance. So we believe medium-term price pressures could return.   Gold (XAUUSD) may be key this week After being range bound for a long time, we may finally see Gold breaking out of its recent range. Demand destruction fears are set to face a further uptick in the week ahead as US eco data continues to raise recession fears. US yields will find it tougher to run much higher even as Fed’s hawkishness continues, given that markets are now focusing on a recession next year and Fed’s subsequent easing. In addition, four of the G7 countries are banning imports of Russian gold which will provide further impetus to the yellow metal. China’s reopening also brings a potential bid, and we still see the potential for gold hitting a fresh record high during the second half of 2022 as growth slows and inflation continues to remain elevated.   --- For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Global equities staged a notable rally | Saxo Group (home.saxo)
Japan: retail sales rise while consumer sentiment weakens

Podcast: Rates plunge lifts equities out of the abyss | Saxo Bank

Saxo Bank Saxo Bank 24.06.2022 12:26
Summary:  Today we look back at yesterday's historic session with big moves lower in the US and German 2-year yields responding to PMI figures for June indicating a more rapid decline in economic activity than estimated by economists. This is naturally lifting the recession probability and the timing of it causing safe-haven flows into bonds. The most interest rate sensitive parts of the equity market were the winners yesterday such as biotechnology and bubble stocks. Across currencies we observe weakness in the USD, AUD, and NOK reflecting lower economic activity, and the pressure is also coming of the JPY due to yesterday's rates move. On commodities we touch on the weakness in wheat and the tight physical market in oil. Other topics covered are the guidance cut from Zalando and container freight rates coming down. Today's pod features Peter Garnry on equities and Ole Hansen on commodities. Listen to today’s podcast - slides are found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Rates plunge lifts equities out of the abyss | Saxo Group (home.saxo)
A week of consolidation

Financial Markets Today: Quick Take – June 24, 2022

Saxo Bank Saxo Bank 24.06.2022 12:01
Summary:  A weak set of flash June PMI surveys out of Europe and the US yesterday took short yields sharply lower on fears that recession may arrive sooner than expected. With market pricing for peak central bank tightening getting pulled sharply forward yesterday, equities decided this was cause for celebration, preferring to consider the positive liquidity and valuation effects of falling yields rather than the bad news that prompted them to fall.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Yesterday we talked about the importance of a close above the 3,800 level in S&P 500 futures and while the close was 0.25 point below the close was strong enough coupled with lower interest rates to extend the momentum this morning. S&P 500 futures are trading around the 3,824 level with the 3,877 level being the next key gravitational point to watch. The key driver for equities today is the shape of the VIX forward curve and whether US interest rates will continue to weaken amid fears over recession. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The indices climbed overnight with market sentiment towards Chinese equity markets continuing to improve, driving the CSI300 to a new high at 4383, last seen in early March. EV battery and makers, home appliance, alcohol and beverage led the charge higher.  With still light positions ahead of quarter end in Chinese equities and the urge to catch up with the Chinese markets’ recent outperformance, investors are bringing up Chinese equity exposure to rebalance.  As well, recent Chinese headlines may be driving an improvement in sentiment – see more below on the BRICs forum hosted by China yesterday. EURUSD and USD pairs The USD was pushed back lower from its rally attempt yesterday as risk assets celebrated the drop in global bond yields rather than fretting the fact that the cause of that drop was due to rising fears of an incoming recession. The US dollar can only thrive broadly as a safe haven trade, whether the driver for weak risk sentiment is the Fed’s ongoing tightening on financial conditions or whether the same is due to a worsening economic outlook. EURUSD is caught in limbo between 1.0600-50 resistance/upside pivot and the 1.0400-1.0350 downside pivot zone. Note that the cycle low near 1.0350 is only a few pips above the major low since 2003 of 1.0341 (from 2017). USDJPY and JPY crosses The JPY was offered about as much support as possible yesterday as the weak preliminary June PMI survey data from the Eurozone and the US sparked a powerful rally in sovereign bonds that took yields sharply lower all long the yield curve. The JPY did respond, particularly in EURJPY terms as the yield moves in Europe were the most severe, but nothing is yet breaking down there unless the pair begins to revisit the 140.00 area. USDJPY broke below the first pivotal 135.00 area, but there was no follow-through. If yields continue to edge lower, pressure is likely to mount on JPY crosses broadly and we’ll watch the 134.00-133.50 area in USDJPY for signs of a more pronounced breakdown. Crude oil (OILUKAUG22 & OILUSAUG22) Crude oil shows signs of stabilising following a near 15% top to bottom correction during the past ten days on increased concerns that aggressive rate hikes by central banks around the world will eventually hurt growth and with demand for key commodities from energy to industrial metals. Prices have dropped despite continued signs that the crude oil and and especially the fuel product market remains very tight, the latter being highlighted through near record refinery margins, which would have come down if demand was easing. In the short term we will see a battle between macroeconomic focused traders, selling oil as a hedge against recession, and the physical market where price supportive tightness remains. Copper (COPPERUSSEP22) Copper is heading for its biggest weekly loss in a year driven by global recession fears and China lockdown hurting growth and demand in the world’s biggest consumer of industrial metals. While the Bloomberg Industrial Metal index trades down 6% on the year, copper is currently 15% under water with around half of that loss realised this week when Fed chair Powell reiterated his commitment to bring down inflation, thereby raising the risk of a hard landing. In addition, Chile’s mining giant Codelco has reached an agreement with workers to end a strike that could have led to a price supportive reduction in supply. Below $3.86 the next key level of support can be found at $3.50/lb, the 50% retracement of the 2020 to 2022 rally. US Treasuries (TLT, IEF) US treasury yields dropped sharply yesterday on the weak initial June PMIs (details below) that are bringing forward recession fears and now have the market pulling forward peak Fed tightening to March of next year. The 10-year Treasury yield dropped through the important 3.15-20 area and fell all the way to the psychological 3.00% yield level before rising again. The move lower fully erased the rise in yields sparked by the release of the May CPI data on June 10. Cycle top in yields or is this a false dawn for treasuries? What is going on? Norway’s Norges Bank raised the deposit rate 50 basis points yesterday ... more than most expected, and guided for rates to rise more quickly and to a higher level than in the March forecast, which put rates at 2.5% by the end of 2023. Yesterday’s statement said that the bank would look to take rates to 3.0% “around 3.0% in the period to summer 2023”. Inflation forecasts were also raised markedly – to 2.5%. The CPI forecast was raised to 3.3% from 2.4% for 2023 and the 2024 forecast was raised to 3.0% from 2.5%.  The EURNOK reaction was underwhelming as the pair remains capped at the key 10.50 area, with NOK perhaps failing to get more out of this hawkish adjustment due to the correction of oil prices linked to growing recession fears. Global PMI plunge raises recession fears Eurozone PMIs were at 16-month lows in June, falling below expectations. Manufacturing was at 52 from 54.6 in May, while more importantly services plunged to 52.8 in June from 56.1. The EURUSD slid below 1.0500 on the report but as noted yesterday, the lows at 1.0350 were not tested because of the focus on US slowdown concerns. Later, US PMIs disappointed as well, with manufacturing at 52.4 from 57 in May. Overall, the PMI releases have shifted focus some more on slowdown/recession from inflation, and more of that is likely to be seen in the coming weeks. What is worth noting is that services PMI also slowed substantially, so all the demand moving from goods to services also doesn’t have much room to run. Powell’s message remains the same; but Bowman raises the hawkish bar The second day of Fed Chair Powell's testimony had little new, reaffirming his commitment to reigning in inflation is 'unconditional'. Perhaps the only points to note were that Powell said the Fed would not raise its inflation target and the endpoint for the balance sheet is roughly USD 2.5tln-3.0tln smaller than it is now. More hawkish, however, was Fed's Bowman who is a voter. She said another 75bps rate hike will be appropriate in July – which seemingly is the consensus view now – but she also added that hikes of at least 50bps may be seen at the next few subsequent meetings. Zalando cuts FY outlook The fashion e-commerce retailer is cutting fiscal year revenue growth guidance to 0-3% against previously 12-19% expected as the company is facing severe headwinds from weaker consumer confidence. This is basically a repeat of the recent guidance cut from Asos in the UK. US weekly initial jobless claims were out a 229k... … vs. 231k last week and 232k the week before. This data series troughed back in late March at historic lows and has been rising since on a moving average basis. This high frequency data series is the most up-to-date indicator on the US labor market and bears watching as the last few weeks of claims data are the highest since January and a further rise would suggest that the US unemployment rate may be set to rise. China’s markets reacting favorably to policy hints in the headlines For example, President’s mentioning of “striving to achieve the full year social and economic targets” in the BRICS Business Forum yesterday and remarks in the Central Comprehensively Deepening Reforms Commission meeting that “supporting platform enterprises to service the real economy” are cited by analysts as reasons to cheer for “boosting growth” and “reducing regulation”. However, the “economic targets” are not specified and can be general rhetoric. Likewise, the bulk of the readout concerning the platform economy is about enhancing regulations not reducing them. But analysts still picked up that one single sentence and interpreted it in a positive light.  What are we watching next? The Final Jun. University of Michigan sentiment and inflation expectations survey out today The preliminary release of the June survey showed sentiment at all-time lows in the 44 year history of the survey at 50.2, fully 5.1 points below the worst levels during the global financial crisis. As part of the survey, the market will closely watch for any revision to the 5-10 year inflation expectations in this final version of the June survey after the initial reading of 3.3% raised eyebrows as it jumped well clear of 3.0% to the highest level since a one-off spike in 2008 (and before that since the mid-1990's). Inflation expectations are an important input into Fed considerations for setting the appropriate level of monetary policy. Earnings Watch Today's focus is Carnival that is moving into its prime part of the traveling season and with weak consumer confidence in the US and Europe we are curious to get indications on future demand. Today: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0800 – Germany Jun. IFO Survey 1130 – Australia RBA’s Lowe speaks 1130 – US Fed’s Bullard (voter) speaks 1330 – UK Bank of England’s Pill to speak 1345 – UK Bank of England’s Haskel to speak 1400 – US Jun. Final University of Michigan Sentiment 1400 – US May New Home Sales Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 24, 2022 | Saxo Group (home.saxo)
Oil recovers, gold inches higher

Oil retreats, bonds yields take a breather seeing equities calm before end of HY, while the eco derailment remains the biggest question

Saxo Bank Saxo Bank 24.06.2022 11:59
Summary:  While the big picture of economic derailment remains the talk of the town, pressuring industrial metals, companies are increasingly experiencing financial strain and cutting staff numbers, while some companies like British Airways are threatening pay cuts. However, APAC equities enjoy a positive end to the week spurred on by the oil prices falling, and bond yields retreating, easing temporary inflation fears. Meanwhile, market bulls in NY and Hong Kong enjoy the lift in China tech stocks, with Alibaba and Tencent soaring up off multiyear lows. We cover the indicators that are flashing recession, and how Saxo clients are position themselves for the week ahead. What's happening in markets? APAC markets in the green Asian equities are in a pleasant sea of green Friday, with most higher today after the tech-heavy South Korean exchange turned positive after a meltdown earlier in the week. The upswing in China markets is also helping to support market sentiment. Japan’s Nikkei (NI225.I) posted gains of 0.8% as the yen recovered, led by defensive sectors healthcare and staples but gains in tech were also seen as expectations built for a Fed rate hike cycle to be interrupted due to recession fears. Singapore’s STI (ES3) was in gains of 0.4% led by REITs and Singtel despite heated inflation print yesterday at 5.6% y/y for May. Australia’s ASX200 trades 0.3% higher on Friday and up 1.1% on the week...with the Tech Sector and Property sectors up the most 6.4% and 3.4% this week, ahead of next week’s close of the Australian financial year on June 30. This is a time when the best performers of the financial year usually see profit taking and the worst performers might see a pickup in buying as fund manager bring asset allocations back into alignment. CSI300 Index (000300) made new high on improved sentiment and quarter-end rebalancing Sentiment towards Chinese equity markets continued to improve, taking CSI300 to a new high at 4375, last seen in early March. EV battery and makers, home appliance, alcohol and beverage led the charge higher.  With still light positions ahead of quarter end in Chinese equities and the urge to catch up with the Chinese markets’ recent outperformance, investors are bringing up Chinese equity exposure to rebalance.  Analysts also tend to read recent Chinese headlines through favorable lens.  For examples, President’s mentioning of “striving to achieve the full year social and economic targets” in the BRICS Business Forum and remarks in the Central Comprehensively Deepening Reforms Commission meeting that “supporting platform enterprises to service the real economy” are cited by analysts as reasons to cheer for “boosting growth” and “reducing regulation”. However, the “economic targets” are not specified and can be a general rhetoric. Likewise, the bulk of the readout of about the platform economy is about enhancing regulations not reducing but analysts still picked up that one single sentence and interpreted in positive light.  In Hong Kong, Hang Seng Index (HSI.I) was up over 1% with EV makers and tech names took the lead. Most commodities continue to lower vs coal supported as Australia and Germany ‘band aid’ the energy crisis Copper futures suggest further selling pressure is ahead. Copper has already fallen to a 15-month low and could face further strain as copper supply rises and demand remains weak with China’s lockdown likely to continue.   Iron ore (SCOA) price has lost 20% from its high the technical indicators suggest it could go lower Coal Futures. Amid the push for coal in Australia and Germany, the Newcastle Coal futures price has edge back up into record territory. What to consider?    Powell’s message remains the same; but Bowman raises the hawkish bar   The second day of Fed Chair Powell's testimony had little new, reaffirming his commitment to reigning in inflation is 'unconditional'. Perhaps the only points to note were that Powell said the Fed would not raise its inflation target and the end-point for the balance sheet is roughly USD 2.5tln-3.0tln smaller than it is now. More hawkish, however, was Fed's Bowman who is a voter. She said another 75bps rate hike will be appropriate in July – which seemingly is the consensus view now – but she also added that hikes of at least 50bps may be seen at the next few subsequent meetings. Global PMI plunge raises recession fears Eurozone PMIs were at 16-month lows in June, falling below expectations. Manufacturing was at 52 from 54.6 in May, while more importantly services plunged to 52.8 in June from 56.1. EURUSD slid below 1.0500 on the report but as noted yesterday, the lows at 1.0350 were not tested because of the focus on US slowdown concerns. Later, US PMIs disappointed as well, with manufacturing at 52.4 from 57 in May. Overall, the PMI releases have shifted focus some more on slowdown/recession from inflation, and more of that is likely to be seen in the coming weeks. What is really worth noting is that services PMI also slowed substantially, so all the demand moving from goods to services also doesn’t have much room to run. Japan’s inflation doesn’t move the yen Japan’s May CPI continued to stay above the Bank of Japan’s 2% inflation target. Headline inflation came in at 2.5% y/y, core at 2.1% y/y. USDJPY was marginally higher in a knee-jerk but the move was quickly reversed to resume its decline. Ex-MOF Takehiko Nakao’s comments continue to support the yen as expectations of unilateral intervention continued to rise. How are Saxo clients positioning themselves?   APAC clients most traded stocks, shares this week Tesla (TSLA) 69% of trades in Tesla are sells or shorts. Nio (NIO) 63% of trades in NIO are sells or shorts. Alibababa (BABA,9988) 64% of clients in Alibaba are buys/longs with the mood brightening toward Chinese Technology companies.   Saxo Australian clients, most traded stocks, shares this week Whitehaven Coal (WHC)  97% of trades in WHC were sells or shorts, as people take profits given this has been the star performer on the ASX this year (up 73% YTD). However, with the shift to coal by Australia’s government with the Australian energy minister calling for urgent access to more resources, with the coal futures are pushing back up and are back in record territory. This indicates the coal price is supported. BHP (BHP), 77% of trades are sells or shorts. Why? The industrial commodity super cycle has gone into hibernation; anticipating slower earnings growth News worthy global currency move at Saxo?  The most interesting currency move in the AUDUSD – and we’ve increasing been seeing sells/shorts the AUD – when compared to their stance this year – that’s because the iron ore price and copper are likely to see more selling . News worthy global index positions at Saxo? We’ve also seen selling/shorting transactions pick up in the US tech index, the Nasdaq 100. Potential trading and investing ideas to consider?     Panic is building with recession talk picking up Markets have been battling the double whammy of inflation concerns and recession fears lately. Recession or not, U.S. economic momentum is set to slow into the second half of the year as pent-up demand cools and higher interest rates take a toll. This, along with an earnings recession, means that equity markets may have more room to run on the downside. Bonds may become relevant again as a tool for portfolio diversification but improving the ‘quality’ of a portfolio should be the consistent objective in bear markets. Metals face more demand and supply pressures Industrial metals have been suffering from demand destruction fears, but now the supply backdrop has also improved on reports that Chile's Codelco (giant copper mining company) had reached an agreement with workers to end the strike. This suggests more downside for industrial metals, but more so for copper in particular. ---   For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Oil retreats, bonds yields take a breather seeing equities calm before end of HY, while the eco derailment remains the biggest question | Saxo Group (home.saxo)
FX Update: Commodities to lead bonds to lead JPY?

FX Update: Commodities to lead bonds to lead JPY?

Saxo Bank Saxo Bank 23.06.2022 13:21
Summary:  Commodity markets are commanding the most attention across markets and may be dragging bond yields down on the implications for easing inflation. In turn, then, shouldn’t JPY find a bit more support, as it did today when EU core bond yields cratered on weak flash June PMIs? Also, today the Norges Bank surprised many with a 50 basis point hike, although the NOK price action in the wake of the decision is underwhelming. FX Trading focus: Fresh pressure on JPY as BoJ losing control. USD triangulating. The JPY jumped overnight in the wake of comments by a prominent ex-Ministry of Finance official suggesting that intervention from the MoF can’t be ruled out, though he indicated the bar is high for intervention as it generally requires a sense of crisis. This price action came after the USDJPY rate managed to peak out at 136.70 on Tuesday despite softer US treasury yields this week, yields that are breaking down further today, as the 10-year benchmark US Treasury yield looks like it is in reversal mode, though a more profound sense of reversal would require a drop through 3.00% (trading near 3.10% as of this writing). Today, the weaker than expected flash June PMIs in Europe (France: 51.0 Manufacturing and 54.4 Services vs. 54.0/57.5 expected and 54.6/58.3 previous and Germany 52.0 Manufacturing and 52.4 Services vs. 54.0/54.5 expected and 54.8/55.0 previous, and Eurozone at 52.0 Manufacturing, 52.8 Services and 51.9 Composite) have brought EU core yields tumbling aggressively and taken EURJPY down several notches, a deserved re-alignment with the fundamentals. With or without intervention jawboning from Japan (and this is from an ex-official with no contact to the MoF personnel actually in charge), shouldn’t BoJ YCC policy per se should only pressure the JPY as a function of rising global yields, and when these head lower, the pressure should come off the JPY, after all? A massive sell-off in crude oil, even if a big chunk of the fall was retraced since late yesterday, is also a nominal JPY positive. Longer bond yields are likely in part reinforced by weak commodity prices as the latter are seen at the forward edge of the inflation drivers. And then the question becomes – if inflation pressures are seen as receding, will risk sentiment eventually celebrate that development or fret the reasons that price pressures are abating: on fears of recession? The easiest read is that commodity-related FX should struggle as long as the narrative is that commodity prices are retreating due to recession-induced demand destruction. On that note – watching the 1.3000 area in USDCAD and the cycle lows in AUDUSD near 0.6830. Chart: EURUSDEURUSD is weighing back on the 1.0500 area that has been the approximate mid-point of the range since 1.0600 fell about two weeks ago after weaker than expected flash June PMI survey figures out of the EU this morning. Interesting as well that EURUSD is breaking down as the key US 10-year treasury benchmark it breaking down through local support, but that is likely on core European yields beating an even more severe retreat on the soft data this morning. The EURUSD sell-off here likely to correlate with general risk sentiment and is showing signs getting any real downside momentum until we are closer to threatening the 1.0400 area, with the latest price action emphasizing the tactical importance of the 1.0600+ resistance. Source: Saxo Group Norges Bank hiked the deposit rate 50 basis points, a nominal surprise as observers were split on whether they would hike 25 bps again or 50 bps. I imagine USDNOK trading near 10.00 and EURNOK trading near the 10.50 area weighed in the decision to go with the bigger hike, as a weak currency is doing the Norges Bank’s inflation fighting intentions no favors. Governor Wolden did note that the krone has been weaker than expected. Interesting in the Norges Bank forward economic projections that the bank is far more concerned about persistent inflation than the ECB and Fed are, as the 2023 “underlying” CPI forecast was raised to 3.3% from 2.4% and the 2024 forecast was raised to 3.0% from 2.5%. GDP forecasts were lowered and the path of the policy rate was steepened and raised: in March, the Norges Bank forecast the policy rate to 2.5% at the end of 2023, and today’s statement sees the rate at “around 3.0% in the period to summer 2023. The NOK pulled off support, but the price action was not overwhelming, likely on the massive turmoil in the oil market. Table: FX Board of G10 and CNH trend evolution and strength.While the CHF posts the strongest trend reading, nothing has happened in the key EURCHF And USDCHF pairs since the shock SNB move to hike 50 bps last week. Watching the commodity currencies, AUD in particular, for more downside risk if the recent commodity corrections deepen – and as a flip-side of that, whether the JPY could start flipping positive in places as well. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Lots of odd crosses criss-crossing trends – chief focus on JPY pairs like AUDJPY and CADJPY if commodity correction continues, and on whether the USD rally is set to extend. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1100 – Turkey Rate Announcement 1230 – US Weekly Initial Jobless Claims 1345 – US Jun. Flash Services and Manufacturing PMI 1400 – US Fed Chair Powell to testify before House Panel 1800 – Mexico Rate Announcement 1800 – ECB's Villeroy to speak 2301 – UK Jun. GfK Consumer Confidence 2330 – Japan May National CPI Source: FX Update: Commodities to lead bonds to lead JPY? | Saxo Group (home.saxo)
Chart of the Week : Housing IS the business cycle

Chart of the Week : Housing IS the business cycle

Saxo Bank Saxo Bank 23.06.2022 13:16
Summary:  In today’s ‘Macro Chartmania’, we focus on the U.S. housing market. We believe that the housing market IS the business cycle in the United States or, at least, it plays a major role in the current cycle. Recent data confirms that housing will severely curtail in the coming months. Whether it will be a soft and a hard landing, it is still too early to say. Harder is the slowdown, higher is the probability of a recession or a recessionette this year or in 2023, of course. For the moment, a recession is not our baseline for the United States at Saxo Bank. Click here to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week. The American economist Edward E. Leamer wrote an interesting paper at the eve of the Global Financial crisis in September 2007 : Housing IS the business cycle. While we don’t agree with all the conclusions, the main take fully makes sense. Over the past decades, the housing market has systematically played a key role in the U.S. business cycle. This is also the case in the current cycle. Economists but also investors certainly did not pay enough attention to the housing market over the last two years, especially early in the pandemic when massive stimulus had fueled demand and had increased price bubbles all across the United States (at national level, housing prices are up almost 40 % on average since the outbreak). The housing market is now in a vulnerable position. With high inflation across the board pushing consumer confidence downward and mortgage rates surging above 6 % following the U.S. Federal Reserve’s tightening cycle, the risks of hard landing are tilted on the upside. Over the past few weeks, several large real estate firms such as Redfin Corporation or homebuilders such as Lennar (the second largest player in the United States) have warned against the risk of slowdown. Some of them have already introduced lower prices and incentives in certain areas to sustain demand. But it is too early to know whether this will be successful. At the moment, all the data confirm a material slowdown. The market is very unbalanced. In May, existing homes sales fell 3.4 % to 5.4 million units. This is a new post-pandemic low. They are down 17 % from January. The biggest and most worrying drops are in the Midwest, the West and the South. At the same time, median prices continue to jump (+15 % at $408 000 – this is a new all-time high). Inventory is very low at only 2.6 mo. Housing permits and housing starts are down in May too. Housing starts feel 14.4 %. This marks the third monthly decline in five months. Housing permits dropped by 7 % the same month. The market is a unique situation. The last time housing affordability was so low, it was in 2007 – see below chart. Expect it will get worse in the short- and medium-term. The surge in mortgage rates, which is only starting, is a major constraint for new home buyers. Adding to that the ‘rate lock’ at very low rates (this means the interest rate won't change between the offer and closing), expect also less housing mobility. This will have ripple effects on the whole economy, starting from the housing construction activity, with varying lags depending on backlogs. Upcoming data from the housing market will help us assess whether there is a material risk of recession or not. The latest survey of professional forecasters shows a 20 % recession probability. When we hit these levels, the economy is usually already in recession. Economists have a poor track-record to accurately forecast recession. There are only two exceptions : in the early 1980s when the Fed chair Paul Volcker jacked up rates to kill inflation (but it was so obvious that even economists saw it coming) and in 1995 when it ended up in a soft landing. We are currently not forecasting an upcoming recession in the United States. The probability it happens this year or next year will highly depend on the evolution of the housing market. But there is no debate we are going to be in much lower growth, especially in 2023 than many had expected, technical R or no R. The material growth slowdown is visible across all the data. Source: Chart of the Week Housing IS the business cycle | Saxo Group (home.saxo)
Equities retraced amid weak US consumer confidence and near completion of quarter-end rebalancing

Macro Insights: The perfect storm of Fed tightening and recession fears

Saxo Bank Saxo Bank 23.06.2022 13:13
Summary:  Markets have been battling the double whammy of inflation concerns and recession fears lately. Recession or not, U.S. economic momentum is set to slow into the second half of the year as pent-up demand cools and higher interest rates take a toll. This, along with an earnings recession, means that equity markets may have more room to run on the downside. Bonds may become relevant again as a tool for portfolio diversification but improving the ‘quality’ of a portfolio should be the consistent objective in bear markets. Demand side in focus While we have been talking about supply constraints for the last few months, the focus is now shifting to the demand side of the equation as pent-up demand starts to cool and central bank tightening begins to take a toll. The markets will continue to toggle between inflation and recession fears for the next few weeks, as a quick resolution remains unlikely. Inflation is likely to persist at high levels in the US and UK/Eurozone, while macro data will continue to weaken as higher interest rates start to take a toll on sentiment as well as activity. What we are more worried about is the rising risk of policy error as the Fed tries to do the balancing act while trying to catch the inflation train from the back. The doom and gloom A slew of misses in Fed surveys sparked caution on the US economy to begin with. But to be fair, survey data has been divergent and can be misleading depending on the way the survey questions are constructed. The University of Michigan survey for June dropped to a record low of 50.2 from 58.4 and both the expectations index (46.8 from 55.2) and the current conditions (55.4 from 63.3) plunged. Meanwhile, consumer confidence from the Conference Board has held up. The University of Michigan arguably focuses more on the inflation/cost of living dynamics, which is hitting the consumer now especially due to the increase in gasoline prices. As the chart below shows, inflation expectations in the University of Michigan survey have closely tracked retail gasoline prices, possibly because of the way the survey questionnaire is constructed. But the Conference Board survey phrases questions more on the job market and household incomes which haven’t taken a big hit so far. Still, real activity data has now started to turn dismal, including retail sales, housing and manufacturing output, suggesting there is reason for caution. A decline in retail sales has sent a warning on demand destruction, while weakening housing demand due to higher borrowing costs is setting the stage for a property market meltdown. Does that mean a recession is coming? A technical recession means two consecutive quarters of negative GDP growth. With US Q1 GDP at -1.5% and Atlanta Fed GDPNow pointing to a flat Q2, this means that the possibility of a technical recession is high. However, the National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months. These include real personal income less transfers, nonfarm payroll employment, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, employment as measured by the household survey, and industrial production.” Data on these counts has remained solid so far. Nonfarm payroll growth has slowed to 390k in May from levels of 500k+ seen in the months to January, but it still signals strong labor demand and a robust job market. Real income and spending has been rising with the Fed’s preferred core PCE measure up 6.3% y/y in April, beating estimates. There is no doubt that the US economic momentum will slow down, but it doesn’t appear to be crashing. The demand shift from goods to services will continue to aid growth in job, income and spending levels. However, the pressure on cost of living suggest households are running down savings and borrowing more to finance it. The consumer sentiment may turn in H2 as recession concerns pick up further, suggesting a lower contribution to overall growth from consumer spending in the second half. Heading for an earnings recession With interest rates rising, markets have been generally lowering the valuation placed in equities. But with recession concerns building, earnings prospects are getting hammered as well. We had most companies guiding for increasing cost pressures in Q1, and with supply and wage pressures rising, we are bracing for an earnings disappointment from mid-July. Factset estimates that earnings growth for the S&P 500 will fall to 4.3% in Q2, which will be the lowest earnings growth reported since Q4 2020 (3.8%). Market implications Recessions usually have the largest drag on cyclical stocks and sectors such as energy, and industrials and technology hardware. While the tight supply situation on the energy side may prevent them from being hit in a significant way this time, we cannot rule out caution on these sectors. Defensives such as consumer staples, utilities and healthcare usually outperform. With inflation having been more important than other macro concerns in H1, bonds haven’t been a great hedge for a portfolio either. We may be looking at the narrative turning in H2 as lower commodity prices help to cool inflation and central banks begin to focus on the growth side of the story. This could make fixed income products relevant again in a portfolio to provide diversification benefits, but this will depend on whether inflation is in retrenchment. But key to remember is that a long-term investor would likely make maximum profits in his portfolio from positions taken in a bear market. As equity markets fall further, dollar-cost averaging appears to be the best strategy to accumulate those quality (consistent cash flows, reliable profit streams, and manageable debt levels) growth stocks that will be the long-run bearers for your portfolio. Source: Bloomberg, Saxo Markets Source: Macro Insights: The perfect storm of Fed tightening and recession fears | Saxo Group (home.saxo)
Oil stocks charge again, are US equities on the brink of a huge disappointment and BHP attempts to rise out of bear market

How Are You EUR/PLN? FXO Market Update - EURPLN vols are elevated | Saxo Bank

Saxo Bank Saxo Bank 23.06.2022 13:07
Summary:  EURPLN back up to 4.7000 again and vols and risk reversals trades bid. 2 weeks and 1 month 25 delta calls both trades around 11.0 vol while 1 month realized spot vols is 7.7500. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these. FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: EURPLN spot EURPLN is back up above 4.70 after trading up 1.25% yesterday. Resistance comes in at 4.7250, previous highs from last week and May. Vols trading higher with 1 month up 1 vol from beginning of last week to trade 9.50. Risk reversals trades 3.25 for topside which is the high end seen over the last months. The risk premium also trades elevated with 1 month currently at 1.75. All the vol components expressing high values, i.e. making EURPLN calls expensive. With that in mind we like to sell EURPLN calls at these levels with strikes above the 4.7250 resistance. Both options below trades around 11.0 vol while the 1 month realized spot vol is 7.75, giving a high risk premium over current spot vol. Sell 2 weeks 4.7500 EURPLN callReceive 265 pips Alternative Sell 1 month 4.8000 EURPLN callReceive 330 pips Spot ref.: 4.7150 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: FXO Market Update June 23 2022 | Saxo Group (home.saxo)
Trading plan for Natural Gas on June 24, 2022

Financial Markets Today: Quick Take – June 23, 2022

Saxo Bank Saxo Bank 23.06.2022 13:01
Summary:  Equities tried to piece together a rally yesterday in the US, but only managed a very choppy session with no real direction by the close of trading. Elsewhere, crude oil plunged more than seven dollars per barrel intraday before cutting losses into the close and industrial metals continue to slide. In testimony before a Senate panel, Fed Chair Powell expressed the hope that the Fed tightening will not take the US economy into recession, but that it is possible.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Yesterday’s session was a volatile session that looked very weak initially before turning around and going briefly above the 3,800 level in the S&P 500. However, S&P 500 futures ended the session slightly lower and this morning the index futures are trading around the 3,755 level with the 3,800 level remaining the key one to watch on the upside; a close above 3,800 would confirm that US equities could continue their rebound from the recent lows. Today, we will get a new data point on initial jobless claims which will give a glimpse of whether the US labour market is continuing to weaken. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) ... climbed 1.3% and 0.7% respectively. Auto makers jumped following report that the Chinese government may extend tax exemptions on electric-car purchases. BYD (01211), Li Auto (02015), NIO (09866), XPeng (09868), Geely (00175) and Great Wall (02333) surged 6% to 10%. Alibaba (09988) rose over 6% following a Bloomberg report suggesting that Ant might apply to the PBoC to become a financial holding company as part of the effort to clear the way for a potential IPO of Ant. Industrial metal mining stocks declined. Jiangxi Copper (00358) was down 11% and China Molybdenum (03993) declined 9%. EURUSD and USD pairs  The price action in USD pairs remains inconclusive as the USD rally yesterday was reversed, seemingly in inverse correlation with the equity market, which rallied from early weakness. Still, AUDUSD continues to look heavy as the focus there is on weak commodity prices, particularly for industrial metals. Traders are watching the cycle lows near 0.6830 there, with considerable “white space” on the chart on a break. EURUSD is caught in tactical limbo between 1.0400-50 downside pivot levels and the upside resistance zone of 1.0600-50. Watching the Eurozone flash June PMIs this morning for the impact on the euro, while the US dollar will react to swings in risk sentiment and US treasury yields as we are set for another day of Fed Chair Powell testimony. USDJPY and JPY crosses As noted below, the JPY was sharply stronger overnight on comments from a prominent former official, but the recent extension of JPY weakness looks rather at odds with a considerable consolidation lower in global bond yields. In any case, we now have a modest reversal that provides a “hook” for a tactical bearish case in USDJPY as long as the price action remains below the cycle top of 136.70 as we watch for whether the pair follows through the next important area near 135.00. A further rally in US Treasuries that takes 10-year Treasury yields lower toward 3.00% would offer considerable background support for a JPY rebound. Crude oil (OILUKAUG22 & OILUSAUG22) trades weak on recession fears Prices hit a one-month low on Tuesday and have remained low since as worries about recession and its potential negative impact on demand rips through cyclical commodities like oil and industrial metals. Brent’s top to bottom correction since June 13 has almost reached 15 dollars, still a relative normal correction considering the moves seen during the past few months. Recession, for now, remains the key talking point and driver after Fed chair Powell warned achieving a soft landing could be very challenging. Tight supply, however, remains, and will likely cushion the market with focus now on the previous area of support around $100/barrel. EIA’s weekly stock report has been delayed due to systems issues while the API reported a 5.6 million barrel rise in crude stocks. Gold (XAUUSD) Gold remains rangebound, and while other commodities, including silver (XAGUSD) trades lower on mounting growth and demand fears, gold has been supported by safe haven bids and lower bond yields after Powell acknowledged that steep interest rate rises could tip the US economy into recession. Holdings in bullion-backed ETFs have remained unchanged during the past month when US yields surged and the Dollar Index hit a twenty-year high, a sign that investors hold onto their gold for other reasons, and as we have mentioned on a regular basis, one of the other reasons being the risk of stagflation, now rising. For now, however, gold remains stuck in a wide $1780 to $1880 range, but with recession concerns on the rise and US yields potentially topping out, the bullish outlook in our opinion remains. US Treasuries (TLT, IEF) US Treasury yields remain in tactical limbo here, with the 10-year benchmark yield pushing slight below the lower part of the pivotal 3.15-20% area (the pivot high from May on the way up was 3.2%). A rally in bonds that sees downside resolution would prove an interesting test of market sentiment elsewhere: something to be celebrated due to easing pressure on valuations and the economy or simply a crystallization of growing fears that the outlook for the economy is darkening as we move toward recession? What is going on? Yen gains on intervention possibility USDJPY was heavy in the Asian session, sliding to 135.18 from 136.26 at the open. The move unfolded after former FX chief at the Ministry of Finance Takehiko Nakao was speaking to Bloomberg TV and said that intervention in foreign exchange markets to stem the yen’s slide can’t be eliminated. He also said that the current weak yen is not good for Japan’s economy, a divergence from what we have been used to hearing that a weak yen is good for the economy but it’s the pace of depreciation that has been a problem. This reaffirms our view that yen’s weakness has gone beyond the point of providing any benefits to companies. He also blamed the monetary policy for the current weakness in the yen. Powell's testimony invokes more recession fears Fed Chair Powell’s testimony to the Senate Banking Committee yesterday jolted the markets as he endorsed the market’s pricing of future FEd hikes, and while hoping that this would not lead to a recession, said that it was a “possibility”. He has kept the doors open for everything, by not even ruling out a 100bps rate hike but also saying that he saw rates going modestly above neutral (~2.5%) by year-end as against the current market pricing of 3.50% through the December FOMC meeting. The market doesn’t seem to be buying his 100bps remark or really anything that he said yesterday, as rate expectations have moved little over the last week. The French central bank revised downward its growth forecast to 2.3%  ... which is (more aligned with our expectations) from a mid-March forecast of between 2.8 % and 3.4 % this year. It was overly optimistic. GDP growth contracted in Q1 and inflation continues to rise across the board (reaching potentially 5.6 % this year). Like in other eurozone countries, inflation is broad-based. The central bank expects GDP to reach 1.2% next year (the March forecast was at 2.0%). This is certainly optimistic. We believe that growth will probably be much lower, under the 1 % threshold. Several companies are currently reviewing their business plan for the second part of 2022 and 2023 and are looking to cut costs – meaning postponing investments and hiring, most of the time. There won’t be any golden decade for the French economy. Okwind Group is going public on Euronext Paris In June 2022, there were many IPOs on the Paris Stock Exchange. This year, there are almost none. Okwind, a small cap specialized in self-consumption of electricity from renewable energy, is going public in early July. The operation takes the form of a capital increase of 20 million euros. This company has solid financial figures (EBITDA margin of 7.9 % in 2021, for example). The world’s top five global miners (ex-China) loose 27% market cap since April 1 Led by BHP, RIO & Glencore the group have seen their market cap slump since peaking above $600 billion on April 1, and during this time, the Bloomberg Industrial Metal index has lost 22% with aluminum, tin and iron ore down by more than 30% while copper has lost around 15%. Weakness driven by China growth worries as lockdown continues to impact demand, global recession fears as central banks slam the brakes in order to kill inflation, and thirdly, investors booking profit on what for many has become a few remaining profitable positions. What are we watching next? Norway’s Norges Bank out this morning and set to hike rates Observers are divided on whether the bank will hike 25 or 50 basis points (from the current level of the official deposit rate at 0.75%), with a majority expecting another cautious 25 basis point move. The bank was one of the first G10 central banks to begin hiking rates, but has hiked at a very slow pace after lift-off last September. Forward guidance on the intended pace of future hikes will be particularly important for NOK as many expect the bank will begin hiking at every meeting even if it hikes by the smaller amount. EURNOK trades near the pivotal 10.50 area ahead of the meeting. US jobless claims today and Final Jun. University of Michigan sentiment and inflation expectations tomorrow. While most indicators on the US labor market remain very robust, including the payrolls growth, current unemployment rate and record levels of job openings, one of the classic leading indicators on the US labor market, the weekly initial jobless claims, has trended in the wrong direction for over a couple of months after posting record low levels, adjusted for population. The market is looking for 226k in new claims after 229k last week and the almost five-month high of 232k the week before last. Tomorrow, the market will closely watch for any revision to the 5-10 year inflation expectations survey within the final June University of Michigan sentiment survey after the initial reading of 3.3% raised eyebrows as it jumped well clear of 3.0% to the highest level since a one-off spike in 2008 (and before that since the mid-1990's). Inflation expectations are an important input into Fed considerations for setting the appropriate level of monetary policy. Earnings Watch Today's focus is FedEx which is expected to deliver 9% y/y revenue growth and EBITDA margin of 13.4% up from 10.4% in the previous quarter reflecting expectations that FedEx will begin harvesting the benefits from the TNT integration. Accenture is also reporting today expected to deliver 21% y/y revenue growth driven by its cloud business, but the key question to watch is to what degree its customers are dialing down on business spending. Today: FedEx, Accenture, Darden Restaurants, FactSet Friday: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0715-0800 – Eurozone Jun. Flash Services and Manufacturing PMI 0800 – Norway Norges Bank Deposit Rate Announcement 0830 – UK Jun. Flash Services and Manufacturing PMI 1100 – Turkey Rate Announcement 1230 – US Weekly Initial Jobless Claims 1345 – US Jun. Flash Services and Manufacturing PMI 1400 – US Fed Chair Powell to testify before House Panel 1430 – EIA Natural Gas Storage Change 1800 – Mexico Rate Announcement 1800 – ECB's Villeroy to speak 2301 – UK Jun. GfK Consumer Confidence 2330 – Japan May National CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 23, 2022 | Saxo Group (home.saxo)
WCU: Recession fears drive steep commodity declines

Mounting recession fears hammered commodity prices and pushed down bond yields

Saxo Bank Saxo Bank 23.06.2022 12:58
Summary:  Commodity prices were sold off amid rising fears of an incoming policy induced recession global with major central banks, with the notable exception of the BoJ, have been racing to tighten monetary policies. U.S. equities initially rallied on Powell’s testimony but flipped lower intraday refocusing on recession. U.S treasury yields were hit throughout the day, down about 15 basis points across the curve. What’s happening in markets? Commodities are getting hit in a big way due to recession fears Energy prices have continued to move lower amid the rising risk of demand destruction but also on reports of Biden administration’s gasoline tax holiday. WTI crude futures were down over 3% and sank below $103/barrel while brent futures slid below $109. But something to consider is that while US consumers at the pump would pay less under the proposed tax scrap, that would likely add to the global demand pressure for oil and oil products. That means further demand supply imbalance, so even tighter markets and more medium-term price pressures. Talk of a recession on the horizon gets louder Layoffs increase and commodities take another haircut, while the oil price fell to a one month low, and copper (a proxy for global growth) fell to 15-month low.  Meanwhile, amid the push for coal in Australia and Germany, the Newcastle Coal Price rose off its one month low. Clean energy stocks continue to slide as the world pivots back to fossil fuels for cheap, immediate energy needs and to ‘band aid’ over the energy crisis. APAC markets are mixed APAC central banks will need to up their game and play catch up with the Fed, which means Asian bonds have more to lose. But equities displayed some resilience on Thursday as fears of a recession mean that the Fed tightening cycle would be cut short.Singapore’s STI (ES3) was up 0.6% and led the gains in the region with REITs leading the way even as US futures stayed in red. Australia… Japan’s Nikkei (NI225.I) also remained in modest gains as yen weakness remained restrained. Fast Retailing led the move in the index. North Asian markets like Taiwan and Korea were in the red. Australia’s ASX200 is up 0.3% up on Thursday with property stocks leading the charge for two vital reasons Firstly US mortgage application rose the second week and secondly the Australian 10 year bond yield fell off its high, falling to 3.8%. Meaning property yields may not be in question and for many investors, as  many think property still offers attractive ‘stable’ rents (yields). As such shares is commercial landlords like Bunnings landlord, BWP Trust (BWP) is trading 3.69% up, with other commercial landlords like Growthpoint Property (GPT) and industrial property groups like Centuria Industrial REIT (CIP) trading up over 3% each. On the flip side, clean energy stocks continue to see carnage, with Lake Resources (LKE) falling over 17% today, continuing its slide after the company’s managing director left the group and sold his shares. Other lithium stocks are continue to slide like Liontown (LTR) and Novonoix (NVX) losing over 7%, while uranium stocks are also under the knife, with Paladin (PDN) down over 7% as much of the world pivots back to fossil fuels for cheap, immediate energy needs and to band aid over the energy crisis.Chinese industrial metal mining stocks were sold amid commodity price weakness Hong Kong and mainland China equities had lackluster trading with moderate gains.  Alibaba (09988) rose over 3% following a Bloomberg report suggesting that Ant might apply to the PBoC to become a financial holding company as part of the effort to clear the way for a potential IPO of Ant.  Industrial mental mining stocks declined. Jiangxi Copper (00358) was down 6% and China Molybdenum (03993) declined 8%.  Global industrial metal prices have recently been under pressure as fears of global economic slowdowns or even recession having picked up. Yen gains on intervention possibility USDJPY was heavy in the Asian session, sliding to 135.18 from 136.26 at the open. The move was sparked as former FX chief Takehiko Nakao was speaking to Bloomberg TV and said that intervention in foreign exchange markets to stem the yen’s slide can’t be eliminated. He also said that the current weak yen is not good for Japan’s economy, a divergence from what we have been used to hearing that a weak yen is good for the economy but it’s the pace of depreciation that has been a problem. This reaffirms our view that yen’s weakness has gone beyond the point of providing any benefits to companies. He also blamed the monetary policy for the current weakness in the yen. What to consider?  Powell's testimony invokes more recession fears Fed Chair Powell’s testimony to the Senate Banking Committee yesterday jolted the markets as he highlighted a aggressive tightening even if that comes on the cost of a recession. He has kept the doors open for everything, by not even ruling out a 100bps rate hike but also saying that he saw rates going modestly above neutral (~2.5%) as against the current market pricing of a peak at 3.75% ahead of his comments. The market doesn’t seem to be buying his 100bps remark, and that means there is still scope for short end yields to drop and USD to weaken further. Downside pressure worsens in equites Distressed debt levels are rising and separately, Goldman observed record selling last week at their company. Going ahead we think further downside is ahead again; with the Fed Chair telling congressional leaders achieving a soft landing without a recession will be ‘very challenging’. So markets will process this and digest likely weak company outlooks from July too. Plus, the Fed saying a potential hard landing will come, means employment will likely fall and unemployment will rise before the Fed stops rising rates, before the Fed then potentially flips and starts cutting rates. But what’s a risk now too, is the we’re just at the beginning of the cycle of seeing layoffs. JPMorgan, one of the world’s biggest banks is cutting 100s of home-lending employees and reassigning 1,000 workers. It’s likely they’re doing this in anticipation of a slowdown in lending and a fall in property prices. Overnight Ford (F) also announced it's going to European jobs as it goings through an EV overhaul.   Chinese authorities issued new guidelines asking internet platforms to  better manage the behaviors of live streamers China’s National Radio and Television Administration and the Ministry of Culture and Tourism jointly issued new guidelines which require the internet platforms to be responsible for the behaviors of the livestreamers broadcasting on their platforms.  The guidelines also require the livestreamers to adhere to the “right” direction of political value and not to spread fake news or disturb social orders.  Singapore May inflation will be out today Singapore May CPI on the cards today and will likely inch higher to 5.5% from 5.4% in April on rising food and fuel costs. Rents are also rising due to construction delays and demand is still high, and authorities have announced a fiscal package directed to vulnerable households recently highlighting the toll higher prices are taking on overall economic activity.  Accelerating inflation will likely cap recent retail sales momentum and moderate Q2 GDP growth. Still, we cannot rule out further tightening from the Monetary Authority of Singapore in October. Potential trading and investing ideas to consider? Softening in Eurozone PMIs may not spell trouble for EURUSD Eurozone PMIs have stayed modestly strong despite the weakness in the economy, but a further slowdown is likely in the cards as preliminary data is reported later today for June. While that could usually spell trouble for EURUSD as it further weakens the case for ECB tightening beyond the case of peripheral spreads, the US recession is shaping the market sentiment more for now. With US PMI due later today as well, this might mean that the potential for EURUSD to test recent lows at 1.0350 may remain restrained.           Investors to move to coal and fossil fuel and out of clean energy   With Australia’s government calling for ‘all the resources’ it can to scale up immediate energy needs with Australia suffering an energy crisis, the Coal price  in Australia, moved off its one month low and appears to head higher with demand rising and coal supply remaining short. Over in Germany, their government is about to kick off coal production to rid the country of Russian gas imports. This global issue will put upside in fossil fuel companies and further put downward pressure on lithium, hydrogen and uranium stocks. That being said coal stocks are some of the best performers this year on the ASX, so are subject to EOFY and end of half year (in the US) rebalancing. So some coal stocks, like Whitehaven Coal (WHC), New Hope Coal (NHC) and Yancoal (YAL) appear to be in correction (profit taking territory), before they likely head back up to higher ground. Inversely, lithium and hydrogen companies, face further selling pressure.   --- For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Mounting recession fears hammered commodity prices and pushed down bond yields | Saxo Group (home.saxo)
Energy Technical Update - Oil prices turning bearish. Gasoline gives relief to commuters

Energy Technical Update - Oil prices turning bearish. Gasoline gives relief to commuters

Saxo Bank Saxo Bank 22.06.2022 12:41
Summary:  Brent and WTI Crude oil turning bearish testing rising trend lines. Gasoline sell off will give some relief to car drivers. Henry Hub gas price collapses while Dutch gas is trading higher testing key resistance levels Brent Crude oil is testing lower rising trend line and 100 SMA. Technically it is in a short term down trend. (Lower highs and lower lows) However, RSI needs to close the day below 40 to confirm that picture.If Brent closes below the trend line, there is minor support at around $101.30 and strong key support at 96.75. To reverse the short-term bear trend and for long term bull trend too resume a close above 121.25 is needed. Source: Saxo Group At the time of writing WTI Crude oil is trading below rising trend line testing the 0.618 retracement and RSI is below 40 ie. Showing negative sentiment.If that is also the picture at the end of the day down trend is confirmed. Support at around at the 0.764 retracement at $100.2 and at 98.20. Key strong support at 92.90.To reverse the bearish trend a close above 118.97 is needed. Source: Saxo Group Gasoline has broken bearish out of rising channel establishing a down trend currently testing 0.50 retracement and the 55 SMA. If Gasoline closes below the medium-term rising trend line a minor support at around $350 and 330. Source: Saxo Group Several times Dutch TTF Gas has failed its attempt to close above strong key resistance at $127.50. Another attempt is seen this morning. If Dutch Gas closes above, we could see a test of last weeks peak around 149. IF it fails once again to close above resistance at 127.50, we could see a set back to around 111. A close below 111 is likely to set Dutch gas back below 100 Source: Saxo Group Henry Hub Gas has led the down trend in Energy markets. Close to test key support at around $6.40. A minor bounce should be expected from here. A close below could lead to continued sell off down to support around 5.52. To neutralise the down trend a close above 8.03 is needed Source: Saxo Group Carbon Emission is trading in a tighter and tighter sideways range forming a Symmetrical like triangle pattern. AS close outside of the trend lines is needed for direction.Upside breakout we could see Emission at 92.75 possibly 98.50A bearish breakout there is support at 75.85. Source: Saxo Group Source: Energy Technical Update - Oil prices turning bearish. Gasoline gives relief to commuters | Saxo Group (home.saxo)
German inflation comes down as government measures bite

UK Inflation Rate Met Expectations, Crude Oil Price Decreased, Powell (FED) Is Topping Headlines | Saxo Bank

Saxo Bank Saxo Bank 22.06.2022 09:25
Summary:  Yesterday’s strong session in US equity markets is spoiling quickly overnight as the mood turned more downbeat in Asia, with the US dollar pressing back higher. Crude oil prices plunged anew with benchmarks reaching their lowest levels in over a month on forward demand concerns. Fed Chair Powell is set for two days of testimony before Congress starting today before a Senate panel.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 and S&P 500 indices are reversing yesterday’s gains with S&P 500 futures trading around the 3,717 level this morning in early European trading hours. If the S&P 500 futures close today below yesterday’s open, then it is an obvious negative short-term signal and could indicate a new low for the cycle this week. So today is an important trading session for US equities as it will test the strength of buyers. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The two indices consolidated this morning, down 1.2% and 0.4% respectively, despite a strong U.S. session overnight. Alibaba Health (00241) and JD Health (06618) fell 15% and 12% respective, more than giving back all their impressive gains yesterday, following media reports saying the Chinese authorities might prohibit third-party e-platforms from selling medicines online. It reminds investors that regulatory risks in the platform economy are here to stay. Hang Seng TECH Index (HSTECH.I) fell 2%. EV makers did well. Li Auto (02015) jumped 7% after unveiling a new EV model. Geely (00175) surged over 5% as the company’s Swedish EV arm, Polestar, is on track to be listed via SPAC. EURUSD and USD pairs An important technical and sentiment test for the US dollar for the balance of the week as we are set for two days of Fed Chair Powell testimony before Congressional panels starting today and as several major USD pairs have been triangulating in the wake of the FOMC meeting last Wednesday. A setup re-establishing the momentum back to the downside in EURUSD looks like a close for the week towards at least 1.0400, while similar marks for GBPUSD are 1.2100 and for AUDUSD below 0.6900. USDJPY broke to fresh highs of 136.7 overnight ... as both the government and the Bank of Japan continued to press for easy policy. Pair turned lower towards 136 in the Asian session but the BoJ minutes from the April meeting reaffirmed the Bank’s dovish stance in order to stoke up inflation even though FX concerns were seen. Several members asserted that BOJ conducts monetary policy to achieve price stability, not at controlling forex moves. With energy and food prices coming off for now, it may signal some inflation respite for the authorities and the focus will likely stay on wage inflation and inflation expectations. Kuroda lives in the hope that a major recession comes and US yields top out, which will help the yen recover strongly. But until that plays out, markets are likely to continue testing Japan’s yield curve control policy. It is somewhat odd to see the new extension higher this week above the prior 135.59 high water mark despite US treasury yields remaining rangebound and oil prices trading to new 1-month lows (Japan entirely dependent on important fossil fuels). Tactically, watching the 135.00-50 area now for whether this latest jump higher can be sustained, with US long-term Treasuries an important coincident indicator. Crude oil (OILUKAUG22 & OILUSAUG22) Crude oil traded lower in Asia with WTI futures sliding to fresh one-month low at $105 while Brent crude futures traded near $110/barrel. In addition to a recovery in Libya’s production, broader macroeconomic developments, namely the rising risk of a recession hurting demand has in recent sessions managed to more than offset a continued tight supply outlook driven by sanctions, peak summer demand, and several OPEC+ producers struggling to raise output to agreed levels. President Biden’s fight against high gasoline prices ahead of the midterm election has also received some attention, although a potential gasoline tax holiday, while supporting consumers, would support demand, thereby prolong the period of tightness. Industrial metals seeing renewed selling pressure on mounting recession fears Just like crude oil hit the reverse overnight in Asia, industrial metals did the same with copper (COPPERUSSEP22) trading back below $4/lb and just above key support, while aluminum continues to challenge support around $2500, a level that has not been broken since last July. Firm central bank actions to curb inflation, thereby killing growth, remains a key focus in the market, while China is still struggling with covid outbreaks and declining activity. Below $3.95/lb HG copper may target $3.75/lb next. Gold (XAUUSD) Gold trades lower on renewed dollar strength ahead of Fed Chair Powell’s testimony to the Senate Banking Committee on Wednesday where the dominant topic will be inflation and how the Fed will balance the need to bring down prices without tipping the US economy into a recession. An economic downturn with inflation at elevated levels is likely to provide underlying support for gold, given the impact on riskier assets and with that the need for havens to weather the storm. For now, however, gold remains stuck in a wide $1780 to $1880 range, with an upside break unlikely to occur until recession concerns take over and US yields top out. US Treasuries (TLT, IEF) US Treasury yields are in tactical limbo here, with the 10-year benchmark yield caught between the pivotal 3.15-20% level (pivot high from May on the way up) and the 3.50% cycle top. A rally in bonds that sees downside resolution would prove an interesting test of market sentiment elsewhere: something to be celebrated due to easing pressure on valuations and the economy or simply a crystallization of growing fears that the outlook for the economy is darkening as we move toward recession? What is going on? UK May CPI out this morning in line with expectations ... at +0.7% MoM and +9.1% YoY, both as expected, and versus +9.0% YoY in April. The Core YoY reading dipped to +5.9% YoY vs. 6.0% expected and 6.2% in April. Expect U.S. housing to severely curtail in the coming months Existing homes sales fell 3.4 % to 5.4 million units in May according to data released yesterday. This is a new post-pandemic low. They are down 17 % from January. The biggest and most worrying drops are in the Midwest, the West and the South. At the same time, median prices continue to jump (+15 % at $408 000 – this is a new all-time high). Inventory is very low at only 2.6 mo. The market is very unbalanced and with housing affordability at the lowest level since 2007, the coming months will be very challenging. Lennar confirms housing slowdown he second largest US homebuilder delivered a strong Q2 result (ending 31 May) with revenue and earnings beating expectations, but new orders guidance for Q3 was 16-18,000 vs est. 17,750 suggesting downside risks to new orders as galloping US mortgage rates are reducing housing demand including new home construction. Lennar has already introduced lower prices and incentives in certain areas to sustain demand and the CEO called the current environment a complicated moment in the market. What are we watching next? US Fed Chair Powell semi-annual testimony today and tomorrow before House and Senate committees The Fed Chair will be in the hot seat today and tomorrow in the required semi-annual testimony before Congress, where politicians on the committees often take a chance to grandstand on their own political positions and observations, but after several months of decades-high inflation and record gasoline prices, will this week’s testimony show that the political pressure on the Fed is mounting? The market will also watch for any new comments from the Fed Chair, although we are just a few days removed from the FOMC press conference. UK teachers and postal workers warn of industrial action if pay doesn’t rise in line with inflation This is an important theme to watch in the UK and Europe at large for second round inflation effects as the major unions eye soaring inflation for coming wage negotiations rounds. Germany’s IG Metall union was out recommending 7-8% wage increases. Earnings Watch There are no important earnings releases today, but tomorrow investors will focus on FedEx and Accenture. Thursday: FedEx, Accenture, Darden Restaurants, FactSet Friday: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0840 – UK Bank of England’s Cunliffe to speak 1230 – Czech Central Bank policy rate announcement 1230 – Canada May CPI 1300 – US Fed’s Barkin (non-voter) to speak 1300 – Switzerland SNB Chairman Jordan to speak 1330 – US Fed Chair Powell semiannual testimony before Senate panel 1400 – Euro Zone Jun. Preliminary Consumer Confidence 1440 – Canada Bank of Canada’s Rogers to speak 1650 – US Fed’s Evans (non-voter) to speak 1700 – US 20-year T-Note auction Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 22, 2022 | Saxo Group (home.saxo)
Analysis and trading tips for GBP/USD on June 22

U.S. equities finally managed to rebound, at least for now | Saxo Bank

Saxo Bank Saxo Bank 22.06.2022 08:16
Summary:  U.S. equities rebounded after week-long decline amid quarter-end rebalancing and ahead of Fed Chair Powell’s semi-annual testimony before the Senate. Meanwhile, Hong Kong and China equities consolidated after recent outperformance. What’s happening in markets? Quarter end rebalancing and derivative expiry helped drive a rally in the U.S. equities After the drastic sell-off last week, U.S. equities managed to rally more than 2% yesterday, led by energy counters and assisted by portfolio rebalancing demand and hedging activities approaching the June quarter end.  The U.S.  yield curve steepened modestly as long-end yield rising 5 basis points but the front-end yield being up 2 basis points ahead of today’s US$14 billion 20-year auction and Powell’s testimony before the Senate Banking Committee. Mixed APAC markets as US futures turn negative While the Wall Street bounce from last night was a respite after a dreadful week, and more bounce backs can be expected in US markets as we approach month end, caution still prevails as we remain in a bear market. US futures are turning negative in the Asian hours, weighing on local APAC market sentiments. Singapore’s STI (ES3) was lower by 0.3% ahead of Singapore’s inflation report on Thursday which is likely to show price pressures building further. Travel stocks like Singapore Airlines (C6L) and Genting Singapore (G13) were lower on reports of a pick-up in Covid case numbers and Monkeypox making its way into Singapore as well. Tightening of movement restriction in neighboring countries like Indonesia also weighed on the reopening sentiment. Japan’s Nikkei (NI225.I) was in mild gains as the yen receded from its record lows. Hong Kong and mainland China equities’ recent rally is losing momentum After having outperformed global markets recently, Hang Seng Index (HSI.I) and CSI300 (000300.I) consolidated this morning, down 1.3% and 0.4% respectively, despite a strong U.S. session overnight.  Hang Seng TECH Index (HSTECH.I) fell 2.5%.  Alibaba Health (00241) and JD Health (06618) fell 12% and 9% respective, more than giving back all their impressive gains yesterday, following media reports saying the Chinese authorities might prohibit third-party e-platforms from selling medicines online.  EV makers did well. Li Auto (02015) rose 5% after unveiling a new EV model.  Geely (00175) surged 5% as the company’s Swedish EV arm, Polestar, is on track to be listed via SPAC.  Oil prices back lower in Asia WTI futures slid to fresh one-month lows of sub-$106 while Brent crude futures were slid below $112/barrel. While recession fears remain at play and risk remains from Fed Chair Powell’s testimony in the day ahead, we believe there are also concerns around Biden administration’s fight against high gasoline prices are summer gets underway. Officials from the Biden administration are set to meet oil company officials on June 23 to discuss the federal gasoline tax and how to bring down gasoline prices and price pressures ahead of the midterm elections. What to consider?  USDJPY lower in Asia after breaking through a key resistance earlier USDJPY broke to fresh highs of 136.7 overnight, as both the government and the Bank of Japan continued to press for easy policy. Pair turned lower towards 136 in the Asian session but the BoJ minutes from the April meeting reaffirmed the Bank’s dovish stance in order to stoke up inflation even though FX concerns were seen. Several members asserted that BOJ conducts monetary policy to achieve price stability, not at controlling forex moves. With energy and food prices coming off for now, it may signal some inflation respite for the authorities and the focus will likely stay on wage inflation and inflation expectations. Kuroda lives in the hope that a major recession comes and US yields top out, which will help the yen recover strongly. But until that plays out, markets are likely to continue testing Japan’s yield curve control policy. Expect U.S. housing to severely curtail in the coming months Existing homes sales were down 3.4% m/m to 5.41mn units in May, which is a new post-pandemic low. They are down 17% from January. The biggest and most worrying drops are in the Midwest, the West and the South. At the same time, median prices continue to jump (+15% at $408 000 – this is a new all-time high). Inventory is very low at only 2.6mn. The market is very unbalanced. Housing affordability is actually at the lowest levels since 2007 as mortgage payments have increased by 50% since last year. This signals stress and any slide in demand could potentially mean that property prices could crash going into the next year. Potential trading and investing ideas to consider? Respite in food inflation may not last While the easing of food price pressures, mainly led by wheat and edible oils, have been a welcome news, we remain concerned about the supply tightness in the markets. Weather worries are still a key focus in countries like India and key growing regions in France. In addition, and important from a food security perspective next winter, negotiations to export Ukrainian grain through a protected corridor in the Black Sea has made little progress, and unless Ukraine can empty its silos before the next albeit much reduced harvest arrives, the prospect of lower-than-expected available supply will linger on. Powell's testimony today and tomorrow Fed Chair Powell delivers his semi-annual testimony on monetary policy before the US Senate Banking Committee. He will likely be grilled on what a more aggressive Fed could mean for jobs and the economy. This could be key as the debate around a 50 vs 75bps rate hike in July is still open. Although Fed’s Barkin was slightly more hawkish yesterday, he is not a voter. With only a few days from the Fed meeting, not a lot is expected to change in Powell’s rhetoric and he will continue to signal that Fed is data dependent and will slow down the pace of rate hikes after the neutral rate is reached.   --- For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: US equities finally managed to rebound at least for now | Saxo Group (home.saxo)
Gold and stocks in the spotlight for investors

FX Update: USD triangulating. Fresh pressure on JPY.

Saxo Bank Saxo Bank 21.06.2022 14:22
Summary:  The US dollar has been triangulating since the FOMC meeting last week and will likely have to choose a direction this week, one that is determined by whether we transition to a summer doldrums scenario or to fresh angst triggered by new upward pressure on global yields, led by US treasuries. Certainly, the JPY is already under fresh pressure as yields pushed higher in core Europe yesterday. FX Trading focus: Fresh pressure on JPY as BoJ losing control. USD triangulating. USDJPY is already back pressing on the cycle highs even as US treasury yields have merely bounced from pivotal levels (the US 10-year Treasury yield benchmark zone around 3.15-3.20% looks critical for the tactical outlook). The recent EURJPY dip was far deeper than the dip in USDJPY, and the rebound there has been sharper as EU core yields hardly consolidated and are pressed back higher yesterday after the ECB talked up the intentions with its new tool to compress peripheral yield spreads, an operation that could allow core yields to rise more than they otherwise would as this would mean that shifting balance sheet priorities would proportionally increase the supply of core bonds into the market – especially with the new expansive fiscal programs that lie ahead to address military and energy security concerns driven by the war in Ukraine. If US yields push higher again as well and take the 10-year Treasury yield beyond 3.50%, the pressure on the JPY will mount to eventually unbearable levels – but this last BoJ meeting shows that Kuroda and company will put up a considerable fight before folding. Last week, the Bank of Japan’s operations to defend yield-curve-control saw it accumulate $81 billion worth of JGB’s, a record for a single week. The BoJ has entirely lost control of its balance sheet and the JGB market is dysfunctional. Chart: EURJPYThe EURJPY correction cut deep, but the rebound has come roaring back since the Bank of Japan meeting last Friday made it clear that the BoJ is refusing to budge, while core EU yields remain pinned near the highs of the cycle. The German 10-year yield is a remarkable 175 basis points this morning after trading below the BoJ’s yield cap of 25 basis points as recently as early March. The pressure on JPY crosses could become supercharged again if the key sovereign bond yields continue to rise to new highs for the cycle. And as we note above, core EU yields might find additional upward pressure from the ECB prioritizing a crushing of peripheral spreads. Source: Saxo Group Bank of England Chief Economist Pill was out this morning touting inflation risks and the importance of avoiding second round effects, while also noting that monetary policy is a “blunt tool” for moving against inflation, while admitting that the BoE is willing allow growth to weaken if that is what it takes to move inflation back to the target. The market hasn’t been particularly volatile during a series of comments this morning as short UK yields trade at cycle highs, but it was interesting to see Pill bring up the exchange rate in his comments, as something that needs to be taken into account. With global commodities priced in US dollars and the GBPUSD rate having fallen some 10% from its January highs, it is an important point. A speech from RBA governor Philip Lowe overnight took Australia’s short yields a notch lower as that the July hike from the RBA would be 50 basis points at most, moving the market to cut anticipation of a larger rate hike – and in a Q&A, Lowe said that the board would only consider a rate hike o 25- to 50 basis points. The RBA sees Australian inflation rising toward 7% in Q4 of this year. Given that the RBA is the only central bank that still meets on a monthly basis, this doesn’t have to look so dovish, as the bank can simply hike 50 basis points at every meeting if conditions dictate. More than from the RBA, the risk for further AUD weakening stems from any return of weak global market sentiment, and more specifically, to Chinese demand concerns as key commodity prices are struggling. Copper, for example, a bellwether metal is trading near the range lows stretching back and Australian mining giant BHP Billiton’s share price is hovering near its 200-day moving average. Noted hawk James Bullard, president of the St. Louis Fed, was out with fresh hawkish comments yesterday, but the market has not reacted to these. He emphasized that it is important for the market to move as quickly as the market is currently pricing and to prevent inflation expectations from coming “unmoored”. He highlighted the interesting divergence in actual inflation readings and falling inflation predicted by TIPS (inflation protected US treasuries), which “will have to be resolve, possibly resulting in higher inflation expectations”. US Fed Chair Powell is set for two days of testimony before Senate and House panels tomorrow and Thursday, respectively. For USD direction, I have eyes firmly pinned on whether the US 10-year treasury yield remains tamed. On Friday, we get the final June University of Michigan sentiment survey, which includes a longer-term inflation expectations survey that garnered huge attention when it suddenly jumped to 3.3% from 3.0% in the initial June release. Table: FX Board of G10 and CNH trend evolution and strength.As noted, the US dollar has been triangulating since last week’s FOMC and will need to choose a tactical direction soon. NOK is in for a test on Thursday on the Norges Bank and whether it is set to change its cautious pace of rate tightening. Elsewhere, CHF impulsive strength on the back of last week’s SNB has yet to blossom. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.The individual pairs are short on tactical developments but watching whether the USD comes under pressure or renews its bull trend in coming sessions. Note AUDCAD at a tipping point supposedly, but actually trading in a volatile range – likely to copy the direction of AUDUSD from here. And speaking of AUD charts – watching EURAUD for upside break potential if 1.5200 breaks. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1000 – UK Jun. CBI Trends in Total Orders and Selling Prices 1230 – US Chicago Fed National Activity Index 1230 – Canada Apr. Retail Sales 1400 – US May Existing Home Sales 1600 – US Fed’s Mester (Voter) to speak 1930 – US Fed’s Barkin (Non-voter) to speak 2350 – Japan BoJ Minutes of April Meeting Source: FX Update: USD triangulating. Fresh pressure on JPY. | Saxo Group (home.saxo)
Podcast: BoJ losing control. Geopolitical risks for Tesla

Podcast: BoJ losing control. Geopolitical risks for Tesla

Saxo Bank Saxo Bank 21.06.2022 12:45
Summary:  Today we continue our discussion on where markets are headed over the summer - into a period of calm, driven by an easing of the rise in yields and hopes for cooling inflation as economic data softens, or are we set for more shocks ahead on a fresh rise in especially US yields and the associated pressure on global financial conditions and risk sentiment? We also look at the geopolitical risks for Tesla due to Elon Musk's non-Tesla activities, discuss falling commodity prices as copper trades at important support, fresh pressure on the JPY as BoJ is losing control of its balance sheet and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are also found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: BoJ losing control. Geopolitical risks for Tesla | Saxo Group (home.saxo)
BTC update for June 22,.2022 - Breakout of the rising channel

Has Crypto Market Calmed Down!? Will Bitcoin Price Stay Above $20K?

Saxo Bank Saxo Bank 21.06.2022 12:41
Summary:  A quiet session yesterday with US equity markets closed saw the mood around the rest of the world brightening somewhat, as the crypto market stabilized again after a traumatic weekend, and US futures are up sharply again overnight after testing cycle lows late last week. The US Fed’s Bullard continues to beat the hawkish drum for the Fed, arguing that US inflation expectations risk becoming unmoored if the Fed doesn’t follow through with more tightening.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 and S&P 500 are rebounding with the S&P 500 futures trading around the 3,730 level this morning in Europe with the 3,744 level being the first resistance level to watch on the upside. Commodities are coming down due to increased risks of recession and China’s economy still struggling to shift gear easing pressures on inflation and companies’ margins. The VIX forward curve is mostly flat with the VIX sitting around the 31 level and the US 10-year yield rebounding a bit together with equities to 3.28%. Overall, our thinking is that the downward pressure on equities has slowed for now as recession fears will keep a lid on the factors that have been negative for equities, so a rebound to the 3,800 level in S&P 500 futures is potentially where the market goes next. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The two indices were up 1.6% and 0.2% respectively. Digital health service platform stocks surged, with Alibaba Health (00241) up 11%, Ping An Healthcare (01833) up 3% and JD Health (06618) up 4%. In A-shares, steel manufacturers rose. China is studying plans to help downstream manufacturers on rising input costs and to narrow the profitability gap between upstream and downstream industries. The Chinese authorities are also going to roll out relief measures helping coal-fired power plants. EURUSD and USD pairs Major USD pairs have generally triangulated within their ranges since the FOMC meeting last week and will likely have to choose a direction this week, one that will likely hinge on whether the market continues to ratchet rate expectations ever higher, which could drive a further tightening in liquidity conditions and a stronger US dollar. On the flip side, if sentiment brightens and we slip into a period of calm over the summer, the US dollar may be in for a bit of consolidation after its run to its highest level, by many measures in some twenty years. USDJPY and JPY pairs Yields rebounded in Europe yesterday and never really consolidated much, relative to their US treasury counterparts. If the global yield picture continues to rise again – and especially if the longer end of the US yield curve presses higher to new cycle highs of 3.50% and beyond, USDJPY and other JPY crosses are likely set for a renewed surge higher as the Bank of Japan has lost control of its balance sheet and the Japanese Government Bond (JGB) market is dysfunctional as it defends the 0.25% yield cap on 10-year JGB’s.  The BoJ bought $81 billion of JGB’s to defend the cap last week, a record amount. Cryptocurrencies The crypto markets are slowly making a comeback after the traumatic weekend, and Bitcoin is trading above $21k this morning. According to a newly published report by CoinShares tracking digital asset funds, the short-Bitcoin investment products saw a record-high outflow last week, hinting that negative investor sentiment has peaked for now. Crude oil Crude oil (OILUKAUG22 & OILUSJUL22) trades higher, and after Friday’s correction on global growth worries, the focus has already returned to a continued tight supply outlook driven by sanctions, peak summer demand, and several OPEC+ producers struggling to raise output to agreed levels. The cost of fuel products remains near a record level with refineries commanding record margins for their products. In addition, China’s economic activity is showing signs of picking up this month and hopes that mass testing in Shanghai may lead to a gradual reopening soon. Brent found support after correcting 50% of the April to June surge at $111.40 with a break above the 21-day moving average needed to signal renewed upside momentum. In the short-term we expect consolidation leading to sideways price action. Gold Gold (XAUUSD) and other precious metals are stuck in a range as the tug of war between inflation and recession concerns pans out. While gold remains an inflation hedge, the surge in US treasury yields will continue to cap gains especially if we get closer to pricing in another 75bps rate hike from the Fed in July. Only after recession concerns take over inflation and US yields top out do we see a case for sustained gains in Gold, but we maintain our bullish view on gold and expect it to print a new high in the second half of this year. US Treasuries (TLT, IEF) US Treasury yields in the futures market pressed back higher overnight after the important 10-year US treasury market yield failed to dip significantly below the prior cycle high of 3.20%. All eyes on the cycle highs at 3.50% for whether the market can keep a lid on yields or whether, as the US St. Louis Fed President Bullard says, inflation expectations risk becoming “unmoored”. Notable auctions this week include a 20-year T-note auction tomorrow and a 5-year TIPS auction Thursday. What is going on? US Fed Voter Bullard maintains his hawkish stance No surprise to see Bullard, FOMC voter and president of the St. Louis Fed out with his latest set of hawkish comments. He argued that it is important for the Fed to bring the tightening the market expects and to prevent the “unmooring” of inflation expectations that is currently a risk if the Fed fails to get ahead of the curve. “The current US macroeconomic situation is straining the Fed’s credibility.” The ECB is here to close the peripheral bond spreads   ECB’s president Christine Lagarde confirmed yesterday to the European Parliament the central bank’s willingness to design a new tool to counter bond market panic. Expect this new tool to have at least three main features : 1) it should be country-specific ; 2) it needs to be applied only when the debt sustainability of the countries in question is validated by a process that ensures political legitimacy (but it should not be conditional on European Stability Mechanism approval, for instance) and 3) it needs to be coordinated with interest rate decisions. Lagarde mentioned that risks to financial stability have considerably increased since the beginning of the year too. She fears we may see a correction of real estate prices in several countries. This is something to monitor closely. The Germany-Italy yield spread is at the low end of the range since early May, just under 200 basis points as of yesterday’s closing prices. Revlon (REV) shares will be on watch after jumping 91% in the prior session Revlon shares are still down a long way (78%) from their high as the ailing beauty brands business has seen revenue roll away, before filing for bankruptcy. The company will continue to operate but filing for bankruptcy gives the company time to reorganize debt and give the company a much needed makeover. This could also serve as an opportunity to be taken over. But the issue is Revlon’s debt exceeds revenue 1.5 times and it has weak liquidity in a very competitive market. Revlon expects to receive $575m in debtor-in-possession financing to support operations. Agriculture prices are finally showing signs of easing... ... with traders digesting an improved outlook for global food supplies. The weakness seen so far this month has been led by wheat and edible oil, the two categories which led the March surge after Russia’s attack on Ukraine raised concerns about supplies from a major exporter of food commodities. While those worries have not gone away, the outlook for wheat production in Russia and the U.S. have picked up, this to the point CBOT wheat (ZWN2) has broken support at $10.37 with the next level of support around $9.6. Palm oil futures in Malaysia has slumped by 20% this month on burgeoning exports from Indonesia. What are we watching next? US Fed Chair Powell semi-annual testimony this week before House and Senate committees The Fed Chair will be in the hot seat this week in the required semi-annual testimony before Congress, where politicians on the committees often take a chance to grandstand on their own political positions and observations, but after several months of decades-high inflation and record gasoline prices, will this week’s testimony show that the political pressure on the Fed is mounting? The market will also watch for any new comments from the Fed Chair, although we are just a few days removed from the FOMC press conference. U.S. housing data out today The US housing market is decelerating, and quickly. Prices are up almost 40 % since the outbreak, mostly reflecting stimulus-fueled demand during a period of record low rates in 2020-21 that now feels ancient history. With high inflation across the board pushing consumer confidence downward and mortgage rates surging following the U.S. Federal Reserve’s tightening cycle, the risks of hard landing are rising. Over the past few weeks, several large real estate firms such as Redfin Corporation have warned against the risk of slowdown. Expect a drop in May’s existing home sales and perhaps a new plunge in the number of new home sales after disappointing data in April (minus 16.6 %). The U.S. housing market is certainly the most vulnerable segment of the U.S. economy at the moment. It will be key to monitor the upcoming data in order to assess whether there is a material risk of recession. Earnings Watch Today’s earnings focus is Lennar, the second-largest US homebuilder, which is naturally going to see a slowdown in revenue growth and profitability due to the rapid rise in interest rates. The key thing to watch is their order book and how it has been impacted over the past three months. Today: Lennar Thursday: FedEx, Accenture, Darden Restaurants, FactSet Friday: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0715 – Bank of England Chief Economist Pill to speak 1000 – UK Jun., CBI Trends in Total Orders and Selling Prices 1230 – US Chicago Fed National Activity Index 1230 – Canada Apr. Retail Sales 1400 – US May Existing Home Sales 1600 – US Fed’s Mester (Voter) to speak 1930 – US Fed’s Barkin (Non-voter) to speak 2350 – Japan BoJ Minutes of April Meeting Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 21, 2022 | Saxo Group (home.saxo)
Finally, some good news as food prices ease

Commodity super cycle in hibernation, Biden throws cold water on recession fears, travel and oil sectors in focus

Saxo Bank Saxo Bank 21.06.2022 12:01
Summary:  Commodity markets edge up on travel optimism but also as China vows to provide support to manufacturing and housing seeing Copper rise for the first day in 7-days, Iron ore charge 2% after 8-days of falls. Also helping sentiment is that President Biden and RBA governor calmed recession nerves. Meanwhile, broad equites look set for a bear market recapture rally, yet long term downside risk remains as central bank hawkishness is in tact amid 1970s style inflation risks. Revlon’s shares catch excitement but we urge caution as debt exceeds revenue 1.5 times. The International Air Transport Association (IATA) expects the airline industry to book profits next year, which reinforces our thinking that pent-up travel demand will pick up this US and European summer, supporting global travel stocks and Europe’s Stoxx Travel & Leisure index. What’s happening in markets?   Bear market small recapture rally ahead The big picture remains to the downside, however when US equities open after the Monday public holiday, they’ll likely rally, taking their lead from Europe markets. The futures suggests the Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) could rise 1.4% at the open, with just 7 days of trade remaining before the end of half year. If sentiment remains positive the S&P500 could rally to 3,722. However, US housing data out on Tuesday will be a focus, with US home sales vulnerable of a big pull back. Home sales numbers for May will likely show a fall, but a broader slow down for the next 6-12 we think will be an issue,, that will further damage banks earnings and dampen consumer spending with the wealth effect likely to further restrict discretionary demand.   Revlon (REV) shares will be on watch after jumping 91% in the prior session Revlon shares are still down a long way (78%) from their high as the ailing beauty brands business has seen revenue roll away, before filing for bankruptcy. The company will continue to operate, but filing for bankruptcy gives the company time to reorganize debt and give the company a much needed makeover. This could also serve as an opportunity to be taken over. But the issue is Revlon’s debt exceeds revenue 1.5 times and it has weak liquidity in a very competitive market. Revlon expects to receive $575m in debtor-in-possession financing to support operations. A sense of calm in the APAC markets APAC markets snapped their losing streak after the holiday-thinned markets overnight as President Biden's comments helped recession concerns recede somewhat. Bitcoin also reversed the weekend slide, sending a sense of momentary calm to the markets. However, commodity markets edge up on travel optimism but also as China vowed to provide support to manufacturing and housing. Copper rose higher, snapping its 7-day decline, Iron ore rose 2% after 8-days of falls. Australia’s ASX200 is up 1.4% after the RBA governor threw cold water on the idea of a recession, while he also said inflation will likely peak this year. That seemed to calm investors nerves with buying in Financials and Staples picking up. However, the most action is in Energy, Materials after commodity markets rebounded. The next upper level for the ASX to hit is 6,589. Japan’s Nikkei (NI225.I) led the gains in Asia, up 1.8%, as energy stocks rallied with oil prices going higher. Singapore’s STI (ES3) was also in gains of 0.6% as Singapore Airlines rose close to 2% with IATA’s optimistic outlook for travel bookings into the next year. Hong Kong equites managed to bounce while Shanghai and Shenzhen consolidated Digital health service platform stocks surged, with Alibaba Health (00241) up 10%,  Ping An Healthcare (01833) up 2% and JD Health (06618) up 5%.  In A-shares, steel manufacturers rose.  China’s MIIT is studying plans to help downstream manufacturers on rising input costs and to narrow the profitability gap between upstream and downstream industries.  The Chinese authorities are also going to roll out relief measures helping coal-fired power plants. Shanghai released citywide passenger EV purchase subsidy. Crude oil in recovery mode Crude oil prices (OILUKAUG22 & OILUSJUL22) recovered on Tuesday morning in Asia as recession fears took a backseat and risk sentiment revived. President Joe Biden pushing back against the idea of a recession as well, bolstering the case for continued demand for energy. WTI crude jumped back to $112/barrel while Brent touched $115/barrel. Gold remains stuck in a range Gold (XAUUSD) and other precious metals are stuck in a range as the tug of war between inflation and recession concerns pans out. While gold remains an inflation hedge, the surge in US treasury yields will continue to cap gains especially if we get closer to pricing in another 75bps rate hike from the Fed in July. Only after recession concerns take over inflation and US yields top out do we see a case for sustained gains in Gold, but we maintain our bullish view on gold and expect it to print a new high in the second half of this yea AUD charges up, with more rate hikes penned Aussie dollar (AUDUSD) rises for the second day, heading back to towards 0.70. The RBA Governor said a 0.5% hike was business as usual. The RBA also warned of the lessons on 1970s style inflation when inflation changed people’s perceptions of expectations. Setting this tone give the RBA room to be more hawkish. This also reaffirms Saxo’s hawkish view that the door is open to a 0.75% hike at the next meeting. On top of that the RBA Governor Lowe also dismissed the idea of a local recession, and said more rate rises are certain, although a 4% rate at the end of the year is unlikely. If the AUD breaks above 0.7070 it could move up the next level of 0.712 or 0.718. Click here for more.   What to consider?    ECB speakers only confirm a modest July hike ECB President Lagarde testified before the committee on economic and monetary affairs of the European Parliament. She said the Bank intended to raise rates by 25bps July, which is a dampener after Fed’s 75bps rate hike last week. She said rates will rise again in September but lacked any information on an anti-fragmentation tool which will likely keep limiting the pace of tightening. EURUSD has been firmer above 1.05 but lacked momentum.   Potential trading and investing ideas to consider?   We don’t think the Commodity super cycle is dead but in hibernation While China’s lockdowns continue industrial metals demand remains pressured to grind down. Meanwhile, tighter liquidity will bite smaller companies. Keep an eye on positive news from China and if lockdowns end before 2023. If we see consistent good news from China and signals to lift restrictions, then commodity markets will be supported to move up taking commodity stocks higher. So, I'd be looking for buy signals later. Also consider, the the biggest commodity company, BHP, (BHP) trades down 21% from April as forward earnings growth remains in question with Chinese revenue to thin. --- For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Commodity super cycle in hibernation, Biden throws cold water on recession fears, travel and oil sectors in focus | Saxo Group (home.saxo)
AUD/USD Eyes 0.6945 on Strong Australia Retail Sales Data

FXO Market Update - Vols remain bid after last week's CB meetings

Saxo Bank Saxo Bank 21.06.2022 11:59
Summary:  Last week was volatile with several central bank meetings, where SNB delivered the biggest surprise with a 50bps hike. EURCHF dropped 2% on the announcement and vols spiked higher, 1 month trades 0.5 vol higher now than before SNB. GBPUSD vols also higher now compared to a week ago after a volatile week. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these. FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: EURCHF spot, Black: EURCHF 1 month vol Last week gave us a volatile week with several central bank meetings. SNB delivered the biggest surprise by hiking with 50 bps. FED delivered in line with expectations, BoE delivered a hawkish hike and BoJ was the outliner coming in on the dovish side. Vols were bid going in to last week but it proved to be priced correct with most currencies delivered inline or excided expected spot moves. SNB delivered the biggest surprise and CHF vols trades higher now than before the meeting. EURCHF 1 month traded 8.0 vol before SNB and trades 8.50 now after spot sharply dropped 2% on the surprise hike. EURUSD 1 month is down around 0.5 vol from beginning of last week and USDJPY is down 1.5 vol, both pricing out the event risk. GBPUSD 1 month is 0.25 higher after a choppy week, despite both the FED and BoE events are prices out. There are no big events in the coming weeks, US CPI first in 3 weeks. Bot EURCHF and GBPUSD vols are on the high side after last weeks move in spot and we think we will see vols gradually come lower over the next days. We see limited topside in EURCHF spot after the hawkish SNB and we like to sell EURCHF calls. Direction in GBPUSD is more difficult short term so we prefer to sell strangles. Sell 1 week 1.0250 EURCHF callReceive 20 pips Sell 1 month 1.0400 EURCHF callReceive 20 pips Sell 1 month 1.2000 GBPUSD putSell 1 month 1.2400 GBPUSD callReceive 175 pips Spot ref.: 1.0175 and 1.2245 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: FXO Market Update June 21 2022 | Saxo Group (home.saxo)
Japan: retail sales rise while consumer sentiment weakens

What does rising hawkishness from global central banks bring? Fears of economic slowdown, haircut in commodities and a rush to safe havens

Saxo Bank Saxo Bank 20.06.2022 11:03
Summary:  With an uptick in the hawkish rhetoric from global central banks last week (barring the ever-dovish Bank of Japan), we have seen stagflation concerns taking centerstage as we enter a new week. This means commodities, especially industrial metals, could take a further dip but remember that supply tightness needs to be considered. Crypto rout has also extended further with Bitcoin now below key levels, signaling broader panic in financial markets is still building as liquidity taps close out. What’s happening in markets? Big picture The global economy is on a runaway train; with growth likely to slow, and the biggest consumer of commodities, China, not likely to come out of lockdown till next year. This is at a time when the US, UK, Australia are raising rates and the ECB, is next. So far this year, Commodities are the strongest performers in Saxo’s equity theme baskets, but commodities are taking a haircut. The US benchmark – S&P500 is in a downtrend The S&P has already fallen 23%, but it looks like there is room to fall again still, with next support at 3,500. The next question is when do we think we will see the bottom, well not yet. We have to get through Q2 earnings season and see what companies guide for the year ahead. We will need to see corporate profit growth and upgrades to earnings, and consumer confidence levels pick up before we start to see markets move higher. And we think we are long way off those collective measures being in unison before we see the market move up.  Equities may pop before another move lower While the general downbeat mood from the slip in Wall Street last week and the double whammy of central bank tightening as well as recession fears has seen Asia Pacific equities start the week on a backfoot. Nikkei (N225.I) is down 1.5% as the yen continued to slide after the Bank of Japan’s divergence to global tightening continued last week. Australia’s ASX200 is in a downtrend, it’s already fallen 14% from its high, and the market is showing support for the 6,000 level. Meanwhile, Singapore’s STI (ES3) is down 0.3% with May CPI on the wires this week which will show a further uptick in inflation pressures and that would mean that Monetary Authority of Singapore needs to tighten policy further. Hang Seng Index (HSI.I) and CSI300 (000300.I) were fluctuating between gains and losses Chinese property names surged with COLI (00688) and CR Land (01109) rising more than 7%.  With COVID outbreak, Macao gaming stocks fell. China’s 1-year and 5-year Loan Prime Rate remain unchanged.  Yen stays under pressure after dovish BOJ USDJPY reprinted a 24-year high of 135.44 this morning after Bank of Japan refused to cave in to global tightening pressures on Friday. This means that the divergence between global yields and Japan’s capped low yields will continue to weigh on the yen. We believe BOJ’s resolve will be tested again by the markets especially as we approach the July FOMC meeting and if the expectations of a 75bps Fed rate hike start to build again. This means yen pressure is likely to stay unless we see real policy action from BOJ. Crude oil had a tough week on demand destruction concerns Crude oil prices (OILUKAUG22 & OILUSJUL22) tumbled with WTI crude down over 9% last week on global recession fears as tightening pressures have picked up lately. On top of that the short-term technical outlook has weakened following several failed attempts to break higher. However, the tight supply outlook is a big factor to consider, also highlighted by the IEA last week. Along with this, we are seeing a continued surge in the margins refineries earn from their production of fuels, especially diesel – the fuel that keeps the world and economies on the move.   What to consider? The tug of war between inflation and recession means room for policy error With the central banks bucking up on the tightening bandwagon last week, we are seeing a more serious fight against inflation which is set to rise further above 9% levels in the UK this week and remains in the 8% range for the US. However, this historic tightening pace following the Fed’s 75bps rate hike last week has meant further fears of an economic slowdown. A slew of weak US data reported last week also aggravated those concerns. Markets will continue to be choppy as investors weigh inflation/recession concerns but the long term bear trend is here to stay. The abrupt policy turn also means an increasing scope of policy error. Pivot from industrial metals to gold to continue As mentioned in our Saxo Spotlight, we’ve seen global growth already starting to fatigue and gold buying has been increasing being picking up. Our Head of Commodity Strategy says we see potential in gold hitting a fresh record in the second half. Crypto rout extends with Bitcoin down Bitcoin, the largest and one of the more stable crypto assets, plunged below the critical 20k level over the weekend after it slid 15% on Saturday. This signals not just further stress in the crypto space but also broader stress in financial markets as liquidity conditions tighten. Australia in Energy Crisis; and coal, oil, gas companies’ profits are being questioned As mentioned in our Saxo Spotlight, wholesale electricity is being removed from the grid, and this is hurting coal stocks like New Hope Coal (NHC) that was added the ASX200 today, just as an example. Given households are left limiting power, coal and gas companies are left with profits being squeezed.   Potential trading and investing ideas to consider? Dollar cost averaging for a long term investor Markets are tricky and volatile, and coordinated selloffs across asset classes have meant little choice of havens. While staying defensive is key, remember that maximum profits are made from positions taken in a bear market. For long-term investors, dollar-cost averaging is critical during this period but with the threshold for short-term losses in mind.           For a weekly outlook – tune in to our Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: What does rising hawkishness from global central banks bring? Fears of economic slowdown, haircut in commodities and a rush to safe havens | Saxo Group (home.saxo)
Short-term EURUSD analysis for June 29, 2022.

Can Gold Price (XAUUSD) Hit High Levels Again!? Is Recession Coming To US Economy!? Jerome Powell (FED) Is About To Speak!

Saxo Bank Saxo Bank 20.06.2022 10:40
Summary:  With a tug of war between inflation and recession concerns ensuing, central bank speakers (such as Fed Chair Powell’s testimony) and economic data (such as flash PMIs) will continue to be parsed closely in the week ahead. Asia’s trade and inflation data also out this week will press further the need for further tightening in the region. Commodities start to be pressured as well - we have an energy crisis brewing in Australia and US gasoline developments will be key. Focus will shift further away from industrial metals as China lockdowns will likely linger, to safe havens like Gold. Powell’s testimony to the government Fed Chair Powell delivers his semi-annual testimony on monetary policy before the US Senate Banking Committee in the week ahead. He will likely be grilled on what a more aggressive Fed could mean for jobs and the economy. This could be key as the debate around a 50 vs 75bps rate hike in July is still open. US recession fears continue to get tested A series of Fed surveys are due from the US this week, which will be scrutinized to signal if there are risks of a recession on the horizon. These include the Chicago Fed National Activity index, Kansas City Fed Manufacturing Activity index, as well as the final print of University of Michigan sentiment index. Also on the horizon is the preliminary print of the S&P Markit manufacturing PMI for June which is seen to be slowing down from May’s print of 57, but still remain strongly in expansion. Services PMI is however likely to gain some strength. Meanwhile, US home sales are tipped to show further strain on Wednesday with existing home sales data out for May. Gold (XAUUSD) is likely to see more strength if data disappoints, suggesting that stagflation fears are on the rise. Dollar topping out The US dollar top looks to be in place as other major central banks follow the Fed with strong tightening signals. Swiss National Bank announced a surprise 50bps rate hike on Thursday, along with Bank of England’s hawkish 25bps rate hike which has opened the door for a 50bps rate hike in August. Adding to the dollar’s weakness were reports that ECB President Christine Lagarde told finance ministers that the Bank’s new anti-crisis tool will launch if borrowing costs for weaker nations climbs too fast. While it is still hard to imagine a sustained case for any central bank to out-hawk the Fed, there may be signals that the dollar rally is peaking if yields start to top out. Pivot from industrial metals to gold to continue With global growth already starting to fatigue and now China is not likely to come out of lockdown this year; the biggest risk is the world enters a recession, before inflation is brought under control, and thus stagflation occurs. So we expect gold to shine as it historically does in such events. We anticipate further interest in gold equites this week with recession calls getting louder. Across Saxo globally last week we observed an increasing number of clients buying Gold Futures contracts, compared to the average number of trades over the last three months. And across the market on the ASX last week; gold stocks were some of the best performers as investors rotated out of industrial mining stocks and into gold equities, for their safe haven qualities. Our long-term bullish view in gold and sliver has strengthened of late. And as our Head of Commodity Strategy says we see potential in gold hitting a fresh record in the second half. Flash PMIs and Eurozone economic bulletin from the ECB Flash PMIs for the Euro area will be on watch to signal the extent of slowdown in the economy as shortage of natural gas supplies continues to weigh on business sentiment especially after the latest disruptions to Gazprom’s supplies to Germany. UK’s inflation is also out on Wednesday, and expected to climb higher to 9.2% y/y from April’s 9.0% y/y amid rising food and fuel costs. Asian inflation pressured higher Bank of Japan stuck to its easy monetary policy despite the pressures from global tightening and market participants challenging the Bank’s yield curve control over the last week as the Fed delivered a 75bps rate hike and other central banks jumped on the tightening bandwagon as well. Japan reports nationwide CPI in the week ahead, which is expected to stay above the central bank’s 2% target, but unlikely to threaten Kuroda to change his mind as wage growth pressures remain subdued. Singapore also reports May CPI which is expected to rise to 5.5% y/y from April’s 5.4%, likely led by food (with Malaysia’s chicken ban an added factor) and transport costs, but also due to the recovering demand as the economy reopens. Monetary Authority of Singapore is likely to tighten policy further at its next meeting in October. Malaysia also reports May CPI this week which will also show upside pressures amid supply-driven factors but also showing a reviving consumer demand. Korea export data for the first 20 days of June The data may offer investors a glimpse of the status of the industrial activities in the region given Korea being a key supplier of industrial intermediate goods. Fewer workdays (13 days) than the same period last year (15.5 days) will bias the data negatively and make the anticipated year-on-year decline difficult to interpret. China’s Standing Committee convenes The NPC Standing Committee is scheduled to convene from June 21 to 24.  Agenda items include reviewing and ratifying the State Council’s financial report and audit report of fiscal income and outlays for 2021. Investors tend to focus on if the NPC Standing Committee will increase this year’s local government special bond (LGSB) quota, which was determined in March this year at the “Two Sessions”, to boost infrastructure spending in the second half of 2022.  The NPC Standing Committee will also review the Anti-Monopoly Law amendment draft.    Gasoline on watch With gas prices surging above US$5 per gallon, the Biden administration has ramped up calls to increase and lower costs at the pump especially in light of the mid-term elections in November. Discussions around capping gasoline and diesel exports have also picked up and may see further announcements over the coming week. Even if the government were to change its stance on energy, and provide some capital investment, that won’t have an impact on prices immediately. The oil market will remain very tight until crude demand destruction becomes more noticeable in the fall. The US releases its weekly crude oil inventory report on Thursday and this will be keenly watched. Australia in energy crisis; blackouts to continue; coal, oil, gas companies’ profits in question Australia remains in an energy crisis, with no solution in sight. Parts of the East Coast of Australia suffering blackouts amid a lack of wholesale supply and rising demand due to an early onset of winter. Parts of QLD, NSW and the ACT are being asked to cut back energy use with Australia’s power operator, the Australian Electricity Market Operator (AEMO) operating on reserves. Last week, the AEMO suspended spot electricity trading after power generators were selling power above the maximum price range (due to lack of power supply). Prior to that, the AEMO was calling for supply to fill the gaps, and introduced a cap price at $300 per megawatt hour. However, wholesale electricity prices surged above that, and then some fossil fuel generators withdrew capacity saying they could not operate ‘profitability’ under the cap. So households are left limiting power and coal and gas companies are left with profits being squeezed. AEMO says it’s far too early to resume normal operations; as energy availability remains limited, some power generators are offline for maintenance/faults, and sourcing issues and fuel costs issues continue. Key calendar events Monday 20 Jun United States Market HolidayGermany Producer Prices (May)Eurozone Construction Output (May) Tuesday 21 Jun Hong Kong SAR CPI (May)United States National Activity Index (May), Existing Home Sales (May) Wednesday 22 Jun Bank of Japan policy meeting minutesNew Zealand Annual Trade Balance (May)United Kingdom CPI (May), PPI (May)United States Mortgage Market Index (Jun)Canada CPI (May)Eurozone Flash Consumer Confidence (Jun) Thursday 23 Jun South Korea PPI Growth (May)Australia S&P Global Flash PMI, Manufacturing & Services (Jun)Japan au Jibun Bank Flash PMI, Manufacturing & Services (Jun)UK CIPS/S&P Global Flash PMI, Manufacturing & Services (Jun)Germany S&P Global Flash PMI, Manufacturing & Services (Jun)France S&P Global Flash PMI, Manufacturing & Services (Jun)Eurozone S&P Global Flash PMI, Manufacturing & Services (Jun)US S&P Global Flash PMI, Manufacturing & Services (Jun)Singapore CPI (May)United States Current Account (Q1) Friday 24 Jun United Kingdom GFK Consumer Confidence (Jun), Retail Sales (May)Germany Ifo Business Climate New (Jun)Malaysia CPI (May)US University of Michigan consumer sentiment (June, final)US new home sales (May)   Source: Saxo Spotlight: What’s on investors and traders radars this week? | Saxo Group (home.saxo)  
Gold Price Or FX - What's More Volatile Now? What's Ahead EURCHF And USDCHF After SNB Decision? Price Of Crude Oil Dropped. Awaiting Powell's (Fed) Testimony | Saxo Bank

Gold Price Or FX - What's More Volatile Now? What's Ahead EURCHF And USDCHF After SNB Decision? Price Of Crude Oil Dropped. Awaiting Powell's (Fed) Testimony | Saxo Bank

Saxo Bank Saxo Bank 20.06.2022 10:26
Summary:  Equity markets tried to end last week’s grueling sell-off with a positive flourish on Friday, as oil prices dropped by the most in several weeks and firmness in safe haven bond markets kept bond yields at the low end of the week’s range. But are those developments down to investor concern that a recession is incoming? The week ahead features semi-annual testimony from Fed Chair Powell before Congress and global preliminary June PMI surveys.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Despite extreme volatility in cryptocurrencies and another “stablecoin (USDD)” losing its peg to the USD, US equities futures are starting the week on mild positive note. S&P 500 futures are trading slightly higher at the 3,690 level and will likely try to test the opening price from last Wednesday’s session at around the 3,743 level if risk sentiment remains positive today. There are no important macro events today so trading will be light, also due to today being a holiday in the US so cash equity markets are closed, and potentially take their lead from cryptocurrencies, although we expect the correlation to begin to decline with cryptocurrencies reducing itself to a small and isolated pocket of the market again. Hong Kong’s Hang Seng and China’s CSI300 Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) were fluctuating between modest gains and losses. Chinese property names surged with COLI (00688) and CR Land (01109) rising 9% and 8% respectively. According to Beke Research, secondary market home sales volume in China’s top 50 cities rose more than 20% in the first 10 days of June from last month. June Emerging Industries PMI came at 52.5, 3.6pp higher than May. With COVID outbreak, Macao gaming stocks fell. China’s 1-year and 5-year Loan Prime Rate remain unchanged. EURCHF and USDCHF The Swiss franc was in for a positive shock last week after a surprise hike – and a large 50-basis point one – from the Swiss National Bank altered the landscape for CHF traders, suggesting the central bank is less concerned with always lagging the ECB in its policy move and a moderating of concerns about the CHF level versus EUR, as a strong franc is potentially one tool that can help ease inflationary pressures. EURCHF reset lower to sub-1.0200 levels after trading between 1.04-1.05 before last week’s meeting. Focus now is on the parity level that was briefly touched in the wake of the Russian invasion of Ukraine. USDCHF is another focus, trading below 0.9700 after trading as high as parity before the decision. The 0.9500-0.9550 area is the next technical focus area there. USDJPY and JPY pairs A very challenging backdrop here for JPY traders, as the Bank of Japan’s insistence on maintaining its negative 0.10% policy rate and more importantly, the yield-curve-control policy by which it caps 10-year Japanese government bond yields at 0.25%, was seen as very JPY negative last week in the wake of a US Fed hiking the most since 1994 and the SNB executing a surprise large hike etc. At the same time, global bond markets rallied hard to close the week, particularly in the dominant US treasury market, with oil markets in a nosedive on Friday, both supportive developments for the Japanese yen. Focus for USDJPY traders remains on the 135.00+ cycle top, which may hold as long as US longer treasury yields are capped below cycle highs. To the downside, last week’s low near 131.50 was close to the prior major pivot high of 131.35. Crude oil Crude oil (OILUKAUG22 & OILUSJUL22) plunged almost 7% on Friday after growth worries signaled by the FOMC aggressive action to bring down inflation spread from the stock market and industrial metals to fortress oil and fuel. A sector which up until now has seen limited contagion risks given the tight supply outlook amid Russian sanction, OPEC+ producers struggling to raise production and lack of refinery capacity. Speculators turned net sellers of WTI in the week to June 14 following several failed attempts to break higher, potentially a signal we have entered another period of consolidation, but still with the underlying risk of eventually moving higher.  Gold Gold (XAUUSD) remains rangebound following a week of high drama that saw dramatic yield spikes being offset by growing unease about the economic outlook with recession worries on the rise as central banks step up their efforts to curb inflation. Focus on the dollar and Fed Chair Powell’s semi-annual testimony before the Senate Banking Committee on Wednesday (see below). Speculators cut bullish futures to a nine-month low ahead of last week’s FOMC rate hike announcement while total bullion-backed ETF holdings on Friday dropped to three months low, both highlighting the current uncertainty about the short-term direction. Copper HG Copper (COPPERUSSEP22) has returned to the key $4/lb support area after falling around 10% during the past two weeks on China and global growth worries. Iron ore (SCON2) traded in Singapore and metallurgical coal in Shanghai, both key inputs to the production of steel have lost around 20% during the same period. China’s slumping property market and the country’s inability to put the coronavirus behind it remain a major headwind, and one that inadvertently is supporting the efforts to curb inflation through lower input costs. Copper, rangebound for more than a year, is in the short-term at risk of breaking lower with the next level of support at $3.86 before $3.50. US Treasuries US treasuries (TLT, IEF) remained firm on Friday, keeping yields at the lower end of the week’s range and near the important tipping point around 3.20% for the 10-year Treasury yield benchmark, which was the prior yield high on the way up. US data surprises have tilted increasingly negative of late and a huge sell-off in crude oil on Friday may drive slightly lower inflation expectations if the lower prices stick. US Fed Chair Powell is up this week with semi-annual testimony before Senate and House committees on Wednesday and Thursday, respectively. Crypto rout extends with Bitcoin The largest and one of the more stable crypto assets, plunging below the critical 20k level over the weekend after it slid 15% on Saturday. This signals not just further stress in the crypto space but also broader stress in financial markets as liquidity conditions tighten. What is going on? French President Macron loses absolute majority in Parliament After the second round of parliamentary elections completed yesterday, President Macron’s centrist coalition will only win about 245 of of the 277 seats, with a leftist coalition headed by Jean-Luc Melenchon taking 131, and Marine Le Pen’s right populist National Rally at 89 seats.  The euro is taking the news in stride, but this result will hamper President Macron’s reform agenda, including his intent to raise the retirement age and reform the pension system. The tug of war between inflation and recession means room for policy error With the central banks bucking up on the tightening bandwagon last week, we are seeing a more serious fight against inflation which is set to rise further above 9% levels in the UK this week and remains in the 8% range for the US. However, this historic tightening pace following the Fed’s 75bps rate hike last week has meant further fears of an economic slowdown. A slew of weak US data reported last week also aggravated those concerns. Markets will continue to be choppy as investors weigh inflation/recession concerns, but the long-term bear trend is here to stay. The abrupt policy turn also means an increasing scope of policy error. Keeping an eye on corporate credit markets... ... after at least one measure of US high yield corporate spreads rose to a new cycle high last week above 500 basis points above US Treasury yields, above the mid-May high of 482 basis points and up over 100 basis points from the lows in early June. The two most widely tracked high yield ETF’s, HYG and JNK, closed sharply lower last week and are down around 15% (less in total return terms) from their late 2021 highs. What are we watching next? US Fed Chair Powell semi-annual testimony this week before House and Senate committees The Fed Chair will be in the hot seat this week in the required semi-annual testimony before Congress, where politicians on the committees often take a chance to grandstand on their own political positions and observations, but after several months of decades-high inflation and record gasoline prices, will this week’s testimony show that the political pressure on the Fed is mounting? The market will also watch for any new comments from the Fed Chair, although we are just a few days removed from the FOMC press conference. U.S. housing data are out on Tuesday The housing market is in a vulnerable position. Prices are up almost 40 % since the outbreak, mostly reflecting stimulus-fueled demand. But with high inflation across the board pushing consumer confidence downward and mortgage rates surging following the U.S. Federal Reserve’s tightening cycle, the risks of hard landing are tilted on the upside. Over the past few weeks, several large real estate firms such as Redfin Corporation have warned against the risk of slowdown. Expect a drop in May’s existing home sales and perhaps a new plunge in the number of new home sales after disappointing data in April (minus 16.6 %). The U.S. housing market is certainly the most vulnerable segment of the U.S. economy at the moment. It will be key to monitor the upcoming data in order to assess whether there is a material risk of recession or not. May UK CPI is out on Wednesday This will be painful. Expect a new increase to 9.1 % year-over-year in May against 9.0 % in April. Last week, the Bank of England (BoE) hiked rates by 25 basis points. This was expected. But political pressure is increasing on the central bank to do more while other developed market central banks have embraced a more hawkish tone (U.S. Federal Reserve, Reserve Bank of Australia, National Bank of Hungary, for instance). If inflation continues to rise (which is our baseline), we would not be surprised if we see the BoE go for an inter-meeting 25 basis points hike before the 4 August meet. Other central banks have done it recently, such as the National Bank of Hungary which decided a surprise 50 basis point hike to support the HUF last week. This only eased temporarily downward pressure on HUF. Earnings Watch This week’s earnings calendar is light but there are three important earnings releases to watch and those are Lennar, FedEx, and Accenture providing insights into the US housing market, logistics, and business spending dynamics (if you believe management consultancy is part of business spending). Today: Kanzhun Tuesday: Lennar Thursday: FedEx, Accenture, Darden Restaurants, FactSet Friday: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0800 – Switzerland Weekly Sight Deposits 0800 – UK BoE’s Haskel to speak 1300 – ECB President Lagarde to speak 1500 – ECB President Lagarde to speak 1645 – US Fed’s Bullard to speak 1930 – ECB Chief Economist Lane to speak 0000 – Australia RBA Governor Lowe to speak 0130 – Australia RBA Meeting Minutes Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 20, 2022 | Saxo Group (home.saxo)
Ichimoku cloud indicator analysis on Gold for Tuesday June 28th, 2022.

Have Tech Stocks Plunged!? FX: So Bank Of Japan Seems To Delay Supporting JPY, British Pound (GBP) Rallied| Stock Markets: S&P 500 Lost 3.2%

Saxo Bank Saxo Bank 17.06.2022 12:40
Summary:  The Bank of Japan continues to swim against the stream as it insisted on maintaining its yield-curve-control and negative policy rate at the meeting overnight, with daily operations to defend the yield cap on Japanese government bonds. Elsewhere, US equity markets continued to new lows even as US treasuries found strong support as a batch of weak US data points raises concerns on the US economic outlook.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The Nasdaq 100 and S&P 500 futures fully reversed and more the FOMC pump with S&P 500 futures closing at the 3,671 level yesterday down 3.2%, while technology stocks fell even more. The current drawdown is now the second deepest at the same time into the drawdown compared to previous historical drawdowns underscoring the seriousness of the current market regime. Initial jobless claims weakened yesterday, and the Philly Fed survey showed significant downward pressure on new orders hitting levels typical of recessions. The fear of recession could short-term keep a lid on interest rates and thus ironically support equities and maybe cause a mild rebound over the coming weeks. The VIX forward curve remains well behaved suggesting no panic yet in US equities. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The indices were up more than 1% despite ugly selloffs in overseas markets overnight. The fall in property prices in the top 70 cities slowed to -0.2% m/m vs April -0.3%.  Property prices in Tier-1 cities rose 0.4% m/m and the declines in Tier-2 and lower-tier cities moderated. On the other hand, JD.COM’s (09618) JD Retail CEO told Bloomberg that recovery in consumption in China had been slow from the reopening of cities, such as Shanghai. The Company was expecting that it would take a long time for household consumption to recover as the economy and household income had been severely hit over this wave of lockdown. EURGBP and GBPUSD Sterling rallied hard yesterday in the wake of the Bank of England meeting yesterday on the guidance the meeting produced rather than due to the smaller 25-basis point hike. its reversal yesterday took GBPUSD well away from the cycle lows of 1.2000 posted earlier this week, trading as high as 1.2406 late yesterday, just above a major local 61.8% Fibonacci retracement of the recent sell-off at 1.2387 and far above the prior low-water mark from May of 1.2156. A full reversal in GBPUSD requires another rally surge through 1.2500. Elsewhere, sterling hopefuls should have a look at EURGBP, where the latest leg higher above 0.8600 has been sharply reversed, suggesting a more well-defined reversal. Watching the 0.8500 area for whether we follow through lower and back into the range extending below 0.8300 again. USDJPY and JPY pairs With the Bank of Japan voting 8-1 to maintain course and the 0.25% cap on 10-year JGB yields, the JPY weakened sharply after a bout of speculation this week that Governor Kuroda and company might relent on its policy and bring a sharp resetting of the JPY higher. In the background, ironically, a powerful rally in global bonds yesterday was a JPY-supportive development that has eased the JPY-negative impact of the overnight BoJ decision. The BoJ statement did say that the Bank needs to pay attention to the FX level, from which one might infer that there is a JPY weakness level that the BoJ would find unacceptable and could prompt a change of course in the future. From here, the only route to a higher JPY is via a new drop in bond yields and shift away from CB tightening elsewhere or if the Bank of Japan is seen as giving up on its policy at a later date, possibly on coming inflation releases and risks of a weaker JPY raising the cost of living to an unacceptable degree. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil is heading for its first weekly decline in six with global growth concerns and prolonged lockdowns in China being the main catalyst. On top of that the short-term technical outlook has weakened following several failed attempts to break higher, but given the tight supply outlook, highlighted by the IEA earlier in the week. Support in Brent is likely to emerge already between $116 and $113.25. NY Harbor Diesel (HOc1) and gasoil (GASOILUKJUL22) both trades higher on the week, a reflection of the tightness that despite growth concerns, is likely to keep the energy sector supported.  Gold (XAUUSD)  Gold remains rangebound following a two-day rally that was supported by US growth concerns and a continued rout in cryptos and global stock markets. Together with another dose of weak U.S. data (see below) they helped send US treasury yields and the dollar lower on Thursday, thereby easing some of the recent pressure on bullion.  Total holdings in bullion-backed ETFs have declined by less than 0.25% this past week, a strong sign that investors look to gold for protection against the rout in global markets, together with increased focus on the need to hedge against the risk of stagflation.  On a relative basis gold’s year-to-date outperformance against the S&P 500 has reached 24%, long-end bonds 26% and 75% against blockchain (BKCH:arcx). US Treasuries (TLT, IEF) US treasuries rallied hard yesterday amidst ugly sentiment in the equity market and on a set of weak US data points pointing to a decelerating housing sector (more below), with weekly jobless claims remaining near the highs of the last few months. The US 10-year treasury yield has declined back to the pivotal area around 3.20%, which was the cycle high before the latest surge toward 3.50%. An extension of the rally that takes yields significantly back below that 3.20% mark would suggest that we have reached a cycle peak for now and further consolidation is set to follow, perhaps on concerns for an incoming recession. What is going on? Bank of Japan defies the global tightening wave The Bank of Japan maintained the negative 0.10% policy rate today, confirming that it won't join the Federal Reserve and other major global central banks in tightening monetary policy. The Japanese central bank will keep its target for the 10-year Japanese government-bond yield at+0.25% and announced daily operations to ensure the cap on yields is maintained. While the central bank said we will take additional easing measures without hesitation if needed, there was a rare reference to the yen weakness. Swiss National Bank surprises with 50 basis point hike yesterday The Swiss National Bank, according to surveys, was not expected to hike rates yesterday, though a rapidly growing minority of observers were looking for a rate rise. The hike of 50 basis points brought the policy rate to –0.25% and makes it clear that the SNB is happy to separate itself from ECB policy and allow the CHF to strengthen as one of the tools to combat rising inflation risks in the country. EURCHF sold off below 1.0200 after trading above 1.0400 ahead of the decision. USDCHF slid to lows of 0.9632 from above parity the day before the decision. The Bank of England hikes 25 basis points, sharpens forward guidance language The majority of observers were looking for the 25-basis point move from the BoE, with some residual uncertainty on whether the bank might hike by more due to the large Fed rate hike this week and the weakness in sterling. Three MPC members of the nine voting wanted a 50-bp hike. At the same time, the BoE predicted that CPI would peak slightly above 11% in October, said that it would respond “forcefully” on any signs of worsening inflation, language that kept the short end of the UK yield curve pinned near the cycle highs. China centric commodities remain under pressure China centric commodities such as iron ore SCON2), coal and copper (COPPERUSSEP22) remain under pressure after China advised its covid restrictions probably won’t ease until next year. In addition, the recent spate of weaker than expected economic US data combined with central banks stepping up their fight to combat inflation have raised concerns about the outlook for global growth in general. US economic indicators weaken US building permits and housing starts eased in May to 1.695mn and 1.549mn respectively while the initial jobless claims were at 229k versus 217k expected. Further, Philadelphia Fed manufacturing survey printed a negative figure of -3.3 for June, the first such contraction since May 2020. More so, the future activity index was contractionary for the first time since the GFC. Adobe shares slip 5% in extended trading on revenue outlook miss As we highlighted on our podcast yesterday Adobe’s earnings were a test of business investment in marketing and content activities. While the business remains sticky the company put out a revenue outlook at $17.7bn vs est. $17.9bn due some demand weakness, Russia impact and USD headwinds.   What are we watching next? US recession concerns rising The mix of data this week generally raises concerns that the US economy is decelerating, but the evidence is patchy and will need confirmation for this to become a a more entrenched theme. At the same time, equity traders have to figure out whether they should celebrate weak data as something that will eventually lead US yields lower and see the pace of Fed tightening eventually reversing or fret weak data because of the implications for corporate profits. The next US data points of interesting include the preliminary Services and Manufacturing PMI surveys for June next week. Fed blackout period ending The Fed speakers will be back in action as the blackout period ends. Chair Powell is speaking later today at the inaugural conference on the International Roles of the US Dollar. Other Fed speakers are due as well including Esther George who voted for a 50bps rate hike this week. Earnings Watch Next week’s earnings calendar is light but there are three important earnings releases to watch and those are Lennar, FedEx, and Accenture that all will give insights into the US housing market, logistics, and recruitment dynamics. Monday: Kanzhun Tuesday: Lennar Thursday: FedEx, Accenture, Darden Restaurants, FactSet Friday: Carnival, China Gas, CarMax Economic calendar highlights for today (times GMT) 0900 – Eurozone May Final CPI 1200 – Poland May Core CPI 1230 – Canada May Teranet/National Bank Home Price Index 1245 – US Fed Chair Powell to make opening remarks at a conference 1315 – US May Industrial Production / Capacity Utilization 1430 – UK Bank of England Chief Economist Pill to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 17, 2022 | Saxo Group (home.saxo)
Short-term EURUSD analysis for June 29, 2022.

Markets face the perfect storm of central banks tightening and weakening economic momentum; Bank of Japan defies tightening pressures while Swiss central bank steals the show

Saxo Bank Saxo Bank 17.06.2022 12:36
Summary:  Markets seem to have finally digested the Fed’s 75bps rate hike but along came the rising risks of an economic slowdown after a series of disappointing US macro data. Bank of Japan still avoided tightening pressure, although a rare mention to FX has been made in the statement. Swiss National Bank (SNB) threw a surprise with a 50bps rate hike, while the BOE stuck to 25bps. What’s happening in markets? Big Picture It seems the economy is at a boiling point with high growth and high employment. But there is a strong chance carnage is coming as central banks want to contain spiralling inflation by aggressively raising rates. The biggest risk to developed markets (the US, Australia, UK) is that consumer discretionary spending could crumble and property price growth could fall over 20%. This will unravel the wealth effect, causing GPD to further shrink; with business and personal spending to dwindle at a time when business and consumer confidence is falling in anticipation of more aggressive rate hikes. Company forward earnings for 2022 and 2023 are likely to slow, so we expect companies to downgrade earnings and more businesses to cut staff given the financial strain. Tesla’s 10% staff cuts have already began, Elon is calling for Twitter to cut staff numbers. Property groups in the US (Redfin, Compass) are cutting staff by 8-10%. Revlon will probably follow after filing for Bankruptcy. And given banks, businesses, and consumers are strained, we remain very bearish and think the US and Australian markets are likely to fall sharply. As such, we urge clients should exercise utmost caution, as we think global markets could fall just like we saw in the 1970s; we’ve been forewarning this since November last year. In this environment, we believe clients should consider being defensive, and look at what outperforms in recessionary periods. Asian markets respond to Fed’s 75bps rate hike today Following the Wall Street selloff, Asia Pacific markets were mostly in the red to end the week with losses. Markets finally reacted to the Fed’s 75bps this week and erased the post-Fed gains, but also visible for clear concerns on slowdown in the economy as macro data continued to disappoint. Japan’s Nikkei 225 (N225.I) and Australia’s ASX200 were both down over 2% in the morning, recording losses of 7-8% for the week. In Australia, the ASX200 has fallen 2.2% and is now down collectively 11% in the last three months, but we see the pain for the broad market getting much worse for now. The mining sector today is leading the market lower as risks emerged that China will keep its zero-covid policy the same till next year. So, the Iron Ore (SCOA) price fell for the 7th day losing 3% today, dragging down iron ore stock like Champion Iron (CIA) 6% and Rio Tinto (RIO) 5%. Meanwhile, investors chase the safe-haven play, buying into gold mining giants like Newcrest Mining (NCM), St Barbara (SBM), Evolution Mining (EVN) rising 3-5%, and all flagging technical rallies are ahead. Singapore’s STI (ES3) was down 0.6% in the morning, and over -3% for the week. More pain still likely ahead in the equity markets as higher energy and food inflation continues to challenge Fed’s hawkishness. Hong Kong and mainland China equity markets stabilized Despite ugly selloffs in overseas markets overnight, China and HK markets were somewhat stable. As of writing, Hang Seng Index (HSI.I) and CSI300 (000300.I) were up close to 1%. The fall in property prices in the top 70 cities slowed to -0.17% MoM (April: -0.3%).  Property prices in tier-1 cities rose 0.35% MoM and the declines in Tier-2 and lower-tier cities moderated.  On the other hand, JD.COM’s (09618) JD Retail CEO told Bloomberg that recovery in consumption in China had been slow from the reopening of cities, such as Shanghai.  The company was expecting that it would take a long time for household consumption to recover as the economy and household income had been severely hit over this wave of lockdown.  What to consider? US economic indicators weaken US building permits and housing starts eased in May to 1.695mn and 1.549mn respectively while the initial jobless claims were at 229k versus 217k expected. Further, Philadelphia Fed manufacturing survey printed a negative figure of -3.3 for June, the first such contraction since May 2020. More so, the future activity index was contractionary for the first time since the GFC. Bank of Japan defies the global tightening wave The Bank of Japan maintained ultralow interest rates on Friday, confirming that it won't join the Federal Reserve and other major global central banks in tightening monetary policy. The Japanese central bank kept its target for short-term interest rates at -0.1% and its target for the 10-year Japanese government-bond yield at around zero. While the central bank said we will take additional easing measures without hesitation if needed, there was a rare reference to the yen weakness. USDJPY rose from 132.50 to 134.63 but reversed most of the gains ahead of Kuroda’s press conference. Bank of England’s smaller hike to keep future ammunition BOE raised rates by 25bps, which was the lower end of the expectations. But GBPUSD rose to 1.2400 because the vote split was 6-3 with three calling for a 50bps rate hike and the door for a bigger August hike was left open given that the CPI inflation is expected to print over 9% during the next few months and may rise further in Q4. Still, the risk of a slowdown is higher for the UK and a slower pace of rate hikes may remain more sustainable. SNB (Swiss central bank) joins the tightening party The SNB surprised with a 50bps rate hike, and has kept the room for further rate hikes as well. SNB is by far one of the most dovish central bank and it was their first hike in nearly 15 years. It indicated the move was an attempt to ward off inflationary pressures as food and fuel prices rise worldwide. USDCHF slid to lows of 0.9632 from parity while EURCHF plunged to 1.02 from 1.045 previously. Potential trading and investing ideas to consider? Fed blackout period ending The Fed speakers will be back in action as the blackout period ends. Chair Powell is speaking later today at the inaugural conference on the International Roles of the US Dollar. Other Fed speakers are due as well including Esther George who voted for a 50bps rate hike this week. Any concerns on economic slowdown could mean equities could reverse some of the massive selloffs seen yesterday. Commodity investors move out of industrial metals into safe haven commodities Industrial Commodities (oil, gas, coal, iron ore) remain under heavy pressure and are taking a haircut. The big pivot comes as China advised its covid restrictions probably won’t ease till next year. Reflect that most stock market growth in the US and Australia has come from commodity stocks. But these commodities are taking a haircut, given commodity prices are starting to pivot lower expecting the China economic rebound trade to not kick off this year given China’s warning. So as its HY in US and EOFY in Australia, many commodity equity investors are taking profits in industrial metals given the downward pressure for now (iron ore, copper, aluminum, etc), and are moving to precious metals that are likely supported by rising stagflation risks, like gold. That being said, gold may act as a safe haven store of wealth, but so is the USD and the USD and Gold traditionally have an inverse relationship. For a global look at markets – tune into our Podcast.  Source: Markets face the perfect storm of central banks tightening and weakening economic momentum; Bank of Japan defies tightening pressures while Swiss central bank steals the show | Saxo Group (home.saxo)
Binance Academy: Sandbox (SAND), Decentraland (MANA) ENJIN (ENJ) And Bloktopia (BLOK) Explained

Which NBA franchise Sponsors are performing best on the market? | Saxo Bank

Saxo Bank Saxo Bank 17.06.2022 12:03
Summary:  We explore the best and worst-performing sponsors based on their respective share price performances over the last month, as well as the entire season. With the 2022 NBA Finals between the Golden State Warriors and the Boston Celtics entering its final stretch, the eyes of the major league sporting world will be transfixed on the NBA. This can only be good news for the major sponsors of the Warriors and the Celtics. However, it raises the question of whether all sponsors across the NBA feel the benefits of their affiliation with the franchise. As the dust settles on another exciting NBA campaign, it's worth reflecting on whether ludicrous NBA sponsorship deals do substantially affect businesses positively. We’ve used Saxo Bank data to look at whether companies that enter NBA sponsorship deals are benefitting from their broad-based exposure in the third most popular major league sport. The NBA itself has seen sponsorship revenues spike considerably in recent seasons. During the 2020-21 season, for example, the NBA raked in a record-high $1.46 billion in sponsorship earnings following a slew of new deals. Sports partnerships consultancy firm IEG revealed that the tech sector alone was contributing around $115 million per year alone in new sponsorship spending. Below, we explore the best and worst-performing sponsors based on their respective share price performances over the last month, as well as the entire season. The NBA sponsorships that performed best and worst this season Let’s check out the top three and the bottom three performing equities from the list of 2021-22 NBA franchise sponsors: Top three best-performing NBA franchise sponsors in the last 12 months Chevron (New Orleans Pelicans) – 73.07% up year-on-year (YoY) Energy corporation Chevron has been an official sponsor of the New Orleans Pelicans since 2013. Barclays Bank (Brooklyn Nets) – 63.15% up YoY In 2007, Barclays agreed to sponsor the new arena housing the Brooklyn Nets, forking out $20 million per annum in a 20-year deal. The recession 12 months later put paid to their full sponsorship plans, but the British bank still pays $10 million a year in annual sponsorships today. Mattress Firm Inc. (Sacramento Kings) – 45.16% up YoY America’s largest mattress specialty retailer saw its multi-year sponsorship partnership with the Kings renewed for the 2021-22 NBA season. It remains the Kings’ “Official Sleep Partner”. Three worst-performing NBA franchise sponsors in the last 12 months Eastside Distilling (Portland Trail Blazers) – 74.05% down YoY In November 2021, Eastside Distilling Inc. penned a three-year sponsorship deal with the Trail Blazers, becoming the franchise’s new “Spirits Partner”. Sharecare Inc. (Atlanta Hawks) – 71.87% down YoY Digital health firm Sharecare entered a multi-year sponsorship arrangement with the Hawks in 2017-18, with its logo appearing on Atlanta jerseys. PayPal (Phoenix Suns) – 67.16% down YoY Digital payments portal PayPal became the Suns’ inaugural jersey patch sponsor. In doing so, PayPal becomes the official payment partner of the Suns. DisclaimerAll trading carries risk. Any past performance stated is not an indication of future performance. Source: The companies that benefit most from NBA franchise sponsorship deals | Saxo Group (home.saxo)
Oil stocks charge again, are US equities on the brink of a huge disappointment and BHP attempts to rise out of bear market

Podcast: Three days that could shake the world

Saxo Bank Saxo Bank 15.06.2022 22:18
Summary:  Today features Saxo CIO Steen Jakobsen as we look at the tremendously important event risks set for the balance of this week, with a sudden emergency ECB meeting cropping up on today's schedule, the FOMC set for a likely super-size hike tonight, but is the market really prepared? Finally, and potentially most important for the risk of cross-market contagion, the Bank of Japan is set to meet on Friday and the market has thrown down the gauntlet and is already actively challenging the bank's yield-curve-control policy with heavy selling of JGB futures ahead of that meeting. All of this while cratering crypto markets are aggravating risk sentiment at least at the margin. Helmets on, as this could prove an historic week. Today's pod also features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are also located via this link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Three days that could shake the world | Saxo Group (home.saxo)
FX: How 1 NZD To USD Has Changed? NZD/USD Technical Analysis and Trading Tips for June 22, 2022

Financial Markets Today: Quick Take – June 15, 2022

Saxo Bank Saxo Bank 15.06.2022 10:00
Summary:  Markets are nervously eyeing the FOMC meeting tonight for new guidance from Fed Chair Powell and company in addition to whether the Fed is not set for two large rate hikes of 75 basis points at the meeting today and in July, the first hikes of this magnitude since 1994. Today’s meeting also sees the latest Fed projections on the economy and policy. Elsewhere, the market is challenging the Bank of Japan ahead of its meetings, as JGB futures are under massive pressure. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) futures continued slightly lower yesterday on a rather large intraday trading session indicating the market is trying to find a new equilibrium. This morning S&P 500 futures are trading slightly higher around the 3,755 level, but we expect muted price action ahead of the FOMC which is priced to deliver 75 bps rate hike, but the mechanical step has historically been 50 bps. While the market is pricing 75 bps our guess is that it will still spook the market, especially technology stocks, because retail investors have still not accepted or understood the big change that is coming. Given our big retail flow is today compared to 2007 we are guessing that it could add to selling pressures post a 75 bps decision tonight with the 3,700 level being the big level to watch on the downside in S&P 500 futures. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) continued to outperform the U.S market despite the COVID-19 outbreak in Beijing is yet to be contained. The gradual relaxation of pandemic control measures since mid-May has enabled a series of economic data showing better-than-expected improvements in May, in particular exports and credit numbers released last week as well as industrial production and retail sales released today. Hang Seng Index (HSI.I) and Hang Seng TECH (HSTECH.I) surged 1.3% and 2.7% respectively.  CSI300 (000300.I) climbed 2.6%. Renewed speculation about Ant Group IPO also contributed to the sentiment towards Chinese internet stocks. Alibaba (09988) surged more than 4%.  According to the WSJ, President Biden “is closing in on a decision to lift some tariffs on Chinese imports”. EURGBP, GBPUSD – GBPUSD slipped below 1.2000, a key chart level, for the first time since the brief move below that level during the pandemic outbreak panic in early 2020, and EURGBP has rusehd to new highs after breaking above the important 0.8600 level. With currency devaluation a prominent new risk, the Bank of England may be forced to go with the larger rate hike at tomorrow’s BoE meeting (market leaning more toward only a 25 basis point move) or sterling could face a further broad drubbing. USDJPY and JPY pairs – the pressure on the Bank of Japan is intensifying ahead of the Friday BoJ meeting, as speculators are mounting a direct challenge to the BoJ policy by selling JGB futures and taking the implied yields some several basis points above the BoJ’s 0.25% yield cap. The BoJ is busy with fresh interventions overnight to keep a lid on things, but with the Fed set to raise the pace of its rate tightening and the ECB getting priced to move to a faster pace of hiking than previously anticipated, the pressure may become intolerable on the Japanese yen and force the BoJ to capitulate soon. USDJPY is locked in a nervous range after poking to new highs above 135.00 yesterday. Beware the risks of two-way volatility through the end of this week. Crude oil (OILUKAUG22 & OILUSJUL22) trades steady around $120 per barrel after WTI briefly dropped below $117 on Tuesday, driven by news President Biden will meet the Saudi Crown Prince next month and after Democrats said they are considering more energy legislation including a windfall tax on energy companies. Both developments, however, are unlikely to mend the core problem that is lack of spare capacity. Ahead of IEA’s monthly Oil Market Report today, OPEC on Tuesday said global oil demand growth could almost halve next year to 1.8 million b/d from expectations of a 3.4 million b/d rise this year. Before tonight's FOMC rate decision the market will also receive the latest EIA inventory report with the API last night reporting a small 0.7-million-barrel increase in crude stocks and a 2.2 million barrel drop in gasoline. Gold (XAUUSD) trades near a four-week low after suffering another drop overnight as US treasury yields continued their historic surge with ten-year real yields touching 0.87%, a 0.55% jump since Friday’s bigger than expected US inflation print. The market will be trading nervously ahead of today’s FOMC meeting where a 75-basis point hike is now fully pricedin. In our latest update, we highlight the current battle between surging yields adding pressure and support from investors looking for a hedge against rising risks of stagflation. Key support in the $1780 area with resistance at $1844. US natural gas prices (NATGASUSJUL22) slumped by 16.5% on Tuesday while European prices (TTFMN2) jumped after the operator of a key Texas LNG export terminal said it would take much longer than previously stated to partially restart production following last week's fire. A prolonged shut down will keep supplies in the US thereby supporting stock building ahead of next winter while gas starved Europe will have to look elsewhere for supplies. Dutch TTF benchmark gas, already up on lower supply through the Nord Stream 1 pipeline to Germany, ended Tuesday’s session higher by 16.4% with Freeport LNG accounting for close to 20% of US overseas shipments, of which Europe had been getting the bulk in recent months. US Treasuries (TLT, IEF) US treasury yields rose further yesterday to new highs for the cycle as the market nervously awaits the Fed’s message at today’s FOMC meeting and whether a more hawkish Fed lies in wait, possibly driving a deepening inversion of the yield curve after the 2-10 yield curve slope briefly turned negative in recent days. The 30-year T-bond yield is not quite to new highs above the late 2018 cycle high just ahead of 3.50%. What is going on? Coinbase, the crypto-trading platform company, set to fire nearly a fifth of its staff, citing economic conditions, although clearly the move has been motivated by the cratering of prices in the cryptocurrency market. The CEO also uses words like crypto winter to describe what is coming for industry indicating that cryptocurrencies have potentially much further downside from current levels. Japan 10-year JGB futures are selling off as market challenges BoJ ahead of Friday meeting. The yield in the cash bond market remains close to the 0.25% cap that the Bank of Japan maintains on 10-year Japanese Government Bonds, but the JGB futures market has sold off sharply over the last couple of sessions and the implied yields on JGB’s have risen a few basis points above the 25 basis-point ceiling as speculators are challenging the Bank of Japan’s intent to m U.S. May Producer Price Index (PPI) is still uncomfortably high. The first estimate is out at 10.8 % year-over-year from 10.9% in April. This is a tad below expectations (10.9 %). Core PPI (excluding food and energy) is also below expectations, at 8.3 % year-over-year against 8.6 %. U.S. PPI matters for financial markets and policymakers because it is leading the U.S. Consumer Price Index. This is too early to assess whether inflation has peaked in the United States. One data point does not make a trend, especially when the month-over-month change is so small. We tend to believe that inflationary pressures will keep increasing in the short term, at least. Germany ZEW economic sentiment is still subdued. It was out at minus 28.0 in June, from minus 34.3 in April and expected at minus 27.5. The current situation rose from minus 36.5 to minus 27.6. Financial market experts are still worried about the economy (mostly the effects of the sanctions against Russia, the unclear pandemic situation in China and the policy pivot in monetary policy. On the bright side, Volkswagen announced it has resumed 24/7 production in its German electric vehicles factory on improved parts supply. This is likely true more broadly for the overall automotive sector. If sustained, this could serve as a major support for the German growth outlook in H2. China’s economic activities showed better-than-expected recovery in May. Industrial production grew 0.7% YoY (vs consensus: -0.9%, April: -2.9%) and 5.6% MoM, led by mining.  The services sector was down 5.1% YoY.  Retail sales fell 6.7% YoY in May (vs consensus: -7.1%, April: -11.1%). On a MoM basis, retail sales marginally improved by 0.05%.  Fixed asset investment for the first five months of the year grew 6.2% YoY but property investment fell 4%. Surveyed jobless rate fell to 5.9% in May from 6.1% in April.  However, the jobless rate for young people aged 16-24 year old rose to 18.4% from April’s 18.2%.  What are we watching next? ECB to call unscheduled meeting today to “discuss current financial conditions”. This is a breaking story this morning and could suggest that the ECB is not happy with the widening of peripheral EU yield spreads that has unfolded in aggressive fashion in the wake of the ECB meeting last week, with the Germany-Italy 10-year yield spread widening from around 200 basis points then to over 240 basis points as of late yesterday. The meeting comes a day after ECB governing council member Isabel Schnabel gave a speech touting the ECB’s willingness limitless will to defend against the risk of any “disorderly” jump in peripheral EU countries’ borrowing costs. FOMC meeting tonight: does the Fed super-size the rate tightening as expected? While the Fed made it clear that it was turning explicitly hawkish last November upon Fed Chair Powell’s and Vice Chair Brainard’s acceptance speeches, this Fed has nearly always met the market at its expectations for actual rate moves on FOMC meeting day. Ahead of today’s meeting, market expectations for a more rapid pace of Fed tightening have jolted higher since last Friday after recent survey-based data has shown a sudden rise in longer term inflation expectations, providing a sudden new twist that was not a prominent concern before any of the meetings for this cycle. So, will the Fed flash a greater concern level and hike 75 basis points as expected, try to get ahead of the market with a 100 basis point move, or decided that moving to g. The most likely option is the expected 75-basis-point move as it is fully priced, but the guidance for coming meetings and projections in the dot-plot (particularly on PCE inflation, which in the March projections was only raised to 2.6% for 2023 and 2.3% for 2024 (vs. 2.3/2.1 in December). Bank of Japan meeting Friday and JPY volatility risking global contagion. The market is challenging the Bank of Japan on its intent to maintain the yield-curve-control policy ahead of the Friday BoJ meeting as JGB futures sell-off and take implied yields above the BoJ’s yield cap. JPY volatility could prove tremendous, with risks in both directions if the BoJ promises unlimited support for now on its commitment to the yield cap, but especially to the upside is the Bank capitulates and allows price discovery for Japanese rates out the curve. The contagion could also go global as bond markets everywhere could come under pressure to rise, feeding into negative pressure on general risk sentiment. Earnings Watch. Today’s earnings focus is UK-based JD Sports which operates a chain of retail stores selling sports and leisure wear. Like all other retailers its share price is down a lot from the peak and margins are under pressure which will be the key focus for analysts. Wednesday: JD Sports Thursday: Adobe, Kroger, Jalma Economic calendar highlights for today (times GMT) 0800 – ECB’s Holzmann to speak on Financial Stability Report 0900 – Eurozone Apr. Industrial Production 1000 – ECB's Muller to speak 1215 – Canada May Housing Starts 1230 – US May Retail Sales 1230 – US Jun. Empire Manufacturing Survey 1400 – US Jun. NAHB Housing Market Index 1430 – EIA's Weekly Crude and Fuel Inventory Report 1620 – ECB's Lagarde to speak 1800 – FOMC Meeting 1830 – Fed Chair Powell press conference 2130 – Brazil Selic Rate announcement 2245 – New Zealand Q1 GDP 0130 – Australia May Employment Change / Unemployment Rate During the day: IEA’s Oil Market Report Source: Financial Markets Today: Quick Take – June 10, 2022 | Saxo Group (home.saxo)
How Will (ECB) Christine Lagarde Affect Euro To US Dollar? S&P 500 And Nasdaq Decreased. Can SPX Reach $3300!? Crypto: What About BTC/USD?

More pain ahead for tech as bond yields spike, banks on weak footing, US dollar index climbs to 19.2 year high

Saxo Bank Saxo Bank 14.06.2022 23:34
Summary:  The mood shifts from defensive to cautionary with the odds of a 0.75% rate hike from the Fed getting louder, with some calling for a 1% (100bps) hike. This has resulted in defensive plays gaining momentum; with the US Dollar Index rising to 19.2 year high. Elsewhere, oil stays firm around $120 and wheat holds its ground. Meanwhile, in equities the S&P is poised for further downside, to test the lower 3,510 level. Other riskier assets continue to be sold off with bitcoin falling below $23,000, hurting stocks like Block (SQ, SQ2). Elsewhere, commodity investors heavily take profits thinking iron, copper, nickel demand will fall as Beijing endures more covid outbreaks. What’s happening in markets?     Caution, and fear in the air ahead of more central banks hikes   As we’ve been saying and as we reiterated last week, we think more pain is ahead with inflation  to get worse and rates to rise more than expected which will cause further market shocks. We’ve already seen a lot of pain already, company earnings are slowing, and costs are likely to swell, all ahead of more powerful rate hikes, which will pressure the consumer. We know the S&P 500 shed 9.1% over the past four sessions, closing at 2021 March lows but we think a larger pull back is still ahead. The S&P 500's top 9 companies (by market cap) shed over $1 trillion in value the past four days. Apple Inc. (AAPL) has lost $242.94 billion; Microsoft (MSFT) has shed $205.00 billion; Alphabet Inc. (GOOGL) has lost $124.72 billion; Tesla Inc. (TSLA) has dropped $64.66 billion in market cap; Berkshire Hathaway Inc. has lost $62.97 billion;  The fundamentals look shaky and the technical indicators suggest more long-term pull backs are ahead in growth and tech names in particular. Asia Pacific equities slide with the onset of official bear markets on Wall Street As we have warned over the weeks, S&P closed in bear territory last night and is now poised to test 3510. The odds of a 75bps rate hike from the Fed has increased with some even calling for a 100bps hike. The consensus still stands at 50bps, but that may run the risk of being perceived as dovish now. APAC equities are weighed by a confluence of Wall Street pain, inflation worried and faster Fed tightening risks. Australia’s ASX200 fell 4.8% for their first trading day of the week, with the Australian Tech sector down 7.2% as most Aussie tech stocks are pegged to the US economy while more attractive Australian bond yields also seen ASX Tech stock carnage. Meanwhile, Australia’s mining sector is seeing a brunt of profit taking down 6%; with mining magnate Fortescue Metals (FMG) down 9.3% leading smaller iron ore stocks lower after the iron ore price fell 4% yesterday with commodity investors thinking Beijing’s covid outbreak could see commodity demand fall back again the short term. Japan’s Nikkei 225 (JP225.I) is down 2% and Singapore’s STI (ES3) down close to 1%. Indonesia’s Jakarta Composite Index however stayed in green, reaffirming our positive view on the back of favorable demographics, abundant natural resources and a strong reform progress. Hong Kong and Chinese equities are down moderately   The region remain relatively calm following a massive selloff in risk assets overnight with overseas equity markets down 2% to 4% and a massacre in U.S. treasuries jumping 34bps to 3.4% and 10-year rising 27bps to 3.36%.  The U.S. money market has raised their Fed hike expectations to 195bps for the next three FOMCs, pricing in a 75bps for this week, another 75bps in July and almost surely a 50bps in September.  The fear of a more aggressive path of monetary tightening and a slower global economy continue to put pressure on equity markets, including Hong Kong and China A shares.  The risk of resurgence of COVID-19 breakouts and strengthening pandemic control measures in China is another one that keep investors awake at night.  As of writing, Hang Seng Index (HSI.I) and CSI300 (000300.I) were down 0.5% and 1% respectively.    Oil holding up as supply concerns outweigh slowdown risks Crude oil (OILUKAUG22 & OILUSJUL22) remained firm in the Asian session with Brent at $122 and WTI around $120 despite concerns around China’s fresh lockdowns, India’s increasing imports from Russia and global economic slowdown. Market still remains tight with Libya's decline in production after a political crisis has hit output and ports, while other producers in OPEC+ struggle to meet their production quotas and remain short of covering for the lost output from Russia amid the bans What to consider?   The task for Bank of Japan keeps getting tougher USDJPY is back below the key resistance at 135.15 but the yields on long-dated bonds still keep the threat of a Bank of Japan (BOJ) policy tweak alive. The central bank boosted scheduled purchases of five-to-10-year debt to 800 billion yen ($6 billion) Tuesday from an expected 500 billion yen after the benchmark yield climbed to 0.255%, above the upper end of its 0.25% tolerance band. The selling threat for longer than 10-year bonds still continues and may prompt BOJ to conduct an unscheduled operation. RBA to get more aggressive with employment will soar, giving more market shocks and tech on notice again Australian employment is soaring and poised to hit another high with monthly unemployment for May set to hit another historical low (3.8% consensus expectation, with 25k jobs expected to be added). But wait, there’s more….the RBA sees unemployment falling to 3.5% by 2023. So the employment picture is bright and wages are growing. But on Thursday If the jobs numbers are better than expected, Australia bond yields will move higher, and continue their strong uptrend from August 2021 with the 10-year bond yield chasing the 4% level. This also means, Australian tech stocks will continue to be pressured lower, showing no signs of bottoming yet with Tech stock working inversive to yields. Weak UK April GDP weighed on GBP UK’s April GDP contracted 0.3%, coming in worse than expected (+0.2 % and prior -0.1 %). The drop is partially explained by the fact the UK government rolled back overall state support more quickly than other G7 countries (think France or Germany for instance). This is a worrying figure for the Bank of England. But we don’t think it will weigh on Thursday’s monetary policy decision (the consensus expects a 25bps interest rate hike). Extra government support will likely be needed to avoid a consumer-led recession. GBPUSD is at cycle lows below 1.2200, with sights on 1.2000. EURGBP pushed higher towards 0.8600 with European yields sharply higher.   Potential trading and investing ideas to consider?   Risk of further pain in bank stocks ahead We alluded to banks being susceptible for further selling in Australia and American too, with lending continuing to fall, savings rates falling and foreclosure rates being questioned given the average mortgage could increase by $800 per month if central bank rates rise to over 3%. Looking at the S&P Bank ETF (KBE) as an example, it fell to its lowest level since Feb 2021 after losing 27% from Jan 18 to now. Meanwhile, insurance companies in that time, have remained somewhat steady. UnitedHealth (NHH) for example rose 3% over the same period. By and large, we remain bearish on banks while inflation is punitively high. Risk of a galloping food crisis Food prices continue to face upside risks due to the rising cost of fertilizer and energy, as well as protectionist measures from some countries like India (wheat, sugar) and Indonesia (palm oil). Our colleague Peter has warned in a piece yesterday that Russia is using the war in Ukraine to stage a food crisis, and market participants are increasingly preparing for an energy and food crisis that will extend well into 2023 and put upward pressure on inflation and cause an economic recession in many emerging market countries. While that appears gloomy, it also suggests that the commodities sector still have scope for further gains. For exposure to agriculture commodities, you could consider ETFs like Invesco DB Agriculture Fund (DBA) or iShares MSCI Global Agricultural Producers ETF (VEGI). For a global look at markets – tune into our Podcast.  Source: APAC Daily Digest June 14 2022 More Pain ahead | Saxo Group (home.saxo)
"EURGBP, GBPUSD – the Bank of England is seen hiking rates at this Thursday’s meeting (...) " | Saxo Bank

"EURGBP, GBPUSD – the Bank of England is seen hiking rates at this Thursday’s meeting (...) " | Saxo Bank

Saxo Bank Saxo Bank 14.06.2022 13:00
Summary:  The market was crushed to new cycle lows yesterday by the market more fully pricing in the risk of super-size hikes from the Fed at the FOMC meeting this Wednesday and in July, with a 75 basis point hike now seen as a certainty tomorrow and very likely for the July meeting. This would be the first time the Fed has hiked more than 50 basis points since 1994. Some argue that the Fed may need to shock the market with a 100 basis point move. This has the market increasingly concerned that the Fed’s accelerated tightening will lead to a recession. Crude oil holding up as supply concerns outweigh slowdown risks with gold challenged by sharply higher real yields. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) were headed lower in yesterday’s session with Nasdaq 100 futures down 4.3% hitting a fresh new low for the cycle at the 11,327 level. The VIX forward curve is getting more inverted to levels around where a vicious volatility and liquidity driven selloff could start, so we remind everyone to be careful now. US equity futures are attempting a rebound in early trading hours here in Europe, which we believe is linked to the improvement in cryptocurrencies as no margin call on Microstrategy has surfaced despite Bitcoin breaking below 21,000. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) stabilised after an initial selloff following a massive risk-off day overnight in the U.S. Hang Seng Index was flat and CSI300 was down less than 1% as of writing. Alibaba (09988) was down 3% while Meituan (03690) climbed 2%. Semiconductors traded weak, with leading names down 2% to 4%. In addition to the prospect of a more hawkish Fed, potential resurgence of COVID-19 breakouts and restrengthening of pandemic control measures in China is another risk that keep investors awake at night. EURGBP, GBPUSD – the Bank of England is seen hiking rates at this Thursday’s meeting, with the market still leaning for a 25 basis point move, which looks out of touch with the market’s shift in the expected FOMC move this week. The Bank of England has loudly fretted the risk of an incoming recession and the unsuitability of its policy tools for addressing the cost-of-living and supply-side constraints that are dogging the UK economic outlook but may be forced to hike 50 basis points on Thursday to avoid the inflationary risks of aggravated currency weakness – and it will be interesting to watch whether that FX factor is rising in its observations. GBPUSD has poked to new cycle lows below 1.2150 ahead of the massive 1.2000 level, while EURGBP has remained bottled up below the key 0.8600 level. EURUSD and USD pairs – the rush to price two 75 basis points hikes at the next two FOMC meetings has driven a sharp USD rally that has taken it back toward the cycle highs and to new highs this week versus the JPY. For EURUSD the focus is on the 1.0350 low, which lies just ahead of the 1.0341 low of 2017, the lowest level in over 19 years. The market will key off the FOMC decision and guidance – with the Fed either needing to surprise with a 100 basis point rate hike or, regardless, for market sentiment to continue to deteriorate amid widespread deleveraging for the USD to continue higher. Yesterday, the Dollar Index hit its highest level in almost 20 years. Crude oil (OILUKAUG22 & OILUSJUL22) showed once again during Monday’s market rout in stocks and bonds that the sector remains relatively immune from the potentially negative demand impact of an economic slowdown and China’s current struggle with Covid19 outbreaks. Simply because the outlook for supply looks equally challenging with OPEC struggling to increase production, US producers adopting a much more disciplined approach, sanctions against Russia reducing flows to the US and Europe, and not least the latest news from Libya where another political crisis has almost halted production with ports and fields shut down. Monthly oil market reports from OPEC today and the IEA tomorrow should give the market some additional guidance from two major forecasters. Gold (XAUUSD) tanked on Monday after heavy US treasury selling lifted yields at a historic pace. Since Fridays higher than expected US CPI print, the market has been pricing in an even more aggressive pace of rate hikes, potentially starting with 75 basis points on Wednesday. The US 10-year real yield has reached a +3 year high at 0.68%, and back then gold traded around $1300, more than 500 dollars below the current level, and it has raised concerns about a deeper selloff. Combined with the stronger dollar, there is no doubt, the market will be trading nervously ahead of the FOMC meeting. However, developments in ETFs should provide some guidance to whether investors worrying about stagflation are prepared to ride out the current storm. Key support in the $1780 area with resistance at $1844. US Treasuries (TLT, IEF) US treasury yields jumped yet again yesterday, with the 10-year yield firmly clearing the 3.26% high from 2018 and trading to new 11-year highs north of 3.4%. That sharp gain was outpaced at the short-end as the market has rushed to price in super-size hikes from the Fed this week and at the July meeting, taking the slope of the US yield curve negative for the second time for this cycle after an episode in late March and early April as the market predicts this will eventually lead to recession. What is going on? April UK GDP contracted 0.3 %. This is worse than expected (+0.2 % and prior minus 0.1 %). The drop is partially explained by the fact the UK government rolled back overall state support more quickly than other G7 countries (think France or Germany for instance). This is a worrying figure for the Bank of England. Extra government support will likely be needed to avoid a consumer-led recession. The task for Bank of Japan keeps getting tougher. USDJPY is back below the key resistance at 135.15 but the yields on long-dated bonds still keep the threat of a Bank of Japan (BOJ) policy tweak alive. The central bank boosted scheduled purchases of five-to-10-year debt to 800 billion yen ($6 billion) Tuesday from an expected 500 billion yen after the benchmark yield climbed to 0.255%, above the upper end of its 0.25% tolerance band. The selling threat for longer than 10-year bonds still continues and may prompt BOJ to conduct an unscheduled operation. The BoJ meets this Friday. Crypto chaos on crypto lending firm Celsius halting withdrawals and concerns that Microstrategy, a large holder of Bitcoins, will be forced to liquidate some of its holdings on margin calls if the price drops below an unknown level – thought to be somewhere near 21,000, which is around the overnight lows. Oracle shares rise 15% on strong earnings. The old technology companies have not died yet as exemplified by Oracle’s FY22 Q4 earnings releases last night. Operating income was $5.6bn vs est. $5.4bn and revenue was $11.84bn vs est. $11.66bn, but it was the expected FY23 Q1 revenue growth of 20-22% in constant currency that was surprising the market driven by strong cloud performance. What are we watching next? FOMC Meeting tomorrow is a critical event risk as the market has to decide if the Fed can ever really catch up with the curve or whether the backdrop is simply forcing to the Fed to continue to do what it has to do to get ahead of galloping inflation and now inflation expectations, in other words, to continue down the road of tightening “until something breaks”. U.S. primaries are held in Maine, Nevada, North Dakota and South Carolina, as part of the 2022 midterm election. ECB’s Isabel Schnabel will give a speech at the French university Université Paris 1 Pantheon-Sorbonne today, focusing on monetary policy. She is one of the key ECB members. Expect interesting insights on the short-term evolution of monetary policy in the eurozone. Risk of biggest “stress point” in global policy breaking: BoJ yield-curve-control policy. Huge volatility risk in FX if the Bank of Japan finally abandons this policy, something that could happen at any time, for example at this Friday’s Bank of Japan meeting, but Governor Kuroda and company could try to hang on for a bit longer... VIX forward curve. The curve is now 8% inverted with the spot (VIX Index) surging indicating more stress in the system. The VIX forward curve has still not reached capitulation levels so based on the volatility market there is still room for a further leg down in US equities. Earnings Watch. Today’s earnings focus is DiDi Global, the Chinese equivalent of Uber, which is down 85% since its IPO as mobility stocks have been hit on their equity valuation by rising operating costs and higher interest rates impacting valuation. Tuesday: DiDi Global, Ferguson, Ashtead Wednesday: JD Sports Thursday: Adobe, Kroger, Jalma Economic calendar highlights for today (times GMT) 0800 – Norway May Region Survey 0900 – Germany Jun. ZEW Survey 1000 – US May NFIB Small Business Optimism survey 1230 – US May PPI During the day: OPEC’s Oil Market Report 1700 – ECB's Schnabel to speak 2030 – API's Weekly crude and fuel stock report 0030 – Australia Jun. Westpac Consumer Confidence 0120 – China Rate Decision 0200 – China May Industrial Production/Retail Sales Source: Financial Markets Today: Quick Take – June 10, 2022 | Saxo Group (home.saxo)
Macro Insights: Leaning in on Emerging Asia

Macro Insights: Leaning in on Emerging Asia

Saxo Bank Saxo Bank 13.06.2022 14:16
Summary:  Given our expectation of further pain in US equities, we believe it remains prudent to consider an optimum asset allocation. Exposure to Asia ex-Japan provides scope for long-term growth in a portfolio, despite the abundant risks faced by emerging Asian economies from tighter Fed policy, rising food and energy prices or the slowdown in China. We see pockets of opportunity in Indonesia, India and Vietnam, while Singapore remains a safe haven in choppy markets. When thinking of asset allocation, most investors need to look at emerging Asia (EM Asia) for the potential returns it can provide. This is besides the fact that there are ample risks, including 1) the Fed is tightening (which makes EM Asia prone to capital outflows); 2) energy prices are rising (and most EM Asia countries are energy importers), 3) food prices are going through the roof (with food being a major chunk of the consumption baskets in Asia) and 4) China’s growth slowdown is likely to weigh on Asia through the trade and investment channels. Still, we believe it is prudent to add exposure to select emerging Asian countries in a portfolio for long-term growth due to the following reasons: Asia’s post-pandemic recovery is picking up steam as borders reopen. Activity in the contact‐intensive services sector is likely to rebound quickly, lifting employment. These jobs tend to be in the low-to-middle income spectrum, so the bounce in activity will help ensure a broad‐based upturn in consumption.   EM Asia remains relatively more resilient to Fed tightening this time. Sustained strength in US demand should keep demand for Asia’s exports high. Meanwhile, a solid FX reserves position across most of EM Asian countries also reduces the possible ripples through the markets channel.   China’s flip-flop policy measures are keeping traders and investors cautious and prompting a look at other EMs. We look at pockets of EM Asia that show potential despite the global economic and geopolitical pressures. Singapore Singapore stocks are a safe-haven amid the choppy global markets, being up by nearly 2% year-to-date as compared to an over 15% decline in the S&P. Singapore’s macro conditions are relatively more robust with GDP growth set to decelerate, but still remain at above-trend levels as the reopening provides tailwinds. China’s slowdown remains a risk but we believe it will be offset by pent-up demand. Key sectors: Digital transformation and renewables remain a key focus area in Singapore as it leads ASEAN in these transformational spaces. REITs also provide a shelter against inflation, especially with 4-5% dividend yields. Vietnam Vietnam has been seeing the benefits of manufacturing moving out of China with its favourable government policies to attract businesses. The reopening after the pandemic has also been brought back tourism and consumption growth. In addition, Vietnam is the only food exporter in the region, making it less vulnerable to the global rise in food prices. Headline inflation still remains at sub-3% levels, and it is unlikely to go above 5% despite upside risks. Key sectors: manufacturing, solar and wind energy, food and agribusiness Indonesia Jakarta stock exchange has seen the biggest gains so far this year in Asia, up over 7% as Q1 corporate earnings were among the strongest in Asian markets. We attribute our bullishness on Indonesian markets to favourable demographics, abundant natural resources and a strong reform progress under President Joko Widodo on improving bureaucracy, boosting the infrastructure and the ease of doing business. Indonesia is a net commodity exporter, but a net oil importer. Therefore, it has benefited from the surge in prices of its main commodity exports (coal, palm oil, nickel, natural gas), helping to offset higher crude oil import costs. Many EV manufacturers are also looking to move their manufacturing units to Indonesia to be closer to the battery minerals. Meanwhile, inflation threat in Indonesia has been rather restrained, so the pressure on Bank Indonesia to hike rates is limited, and the rate hikes won’t necessarily need to be in step with the Fed. Key sectors: infrastructure, materials, fintech India India remains key in many investor portfolios due to its favourable demographics, rapid urbanisation and digitalisation. Regulatory oversight in India, compared to China, is more consistent and predictable, although not as entirely business-friendly. Any further progress on land and labor reform will provide further impetus to India’s favourable business climate. Despite inflation running higher than the central bank’s target, and the Reserve Bank of India’s tightening will mean a short-term pain in the markets, but these can be looked as buying opportunities for the high-growth potential in the long run. This stems from India’s focus on expanding manufacturing and innovation, along with the further potential to broaden the use of digital technologies. Lastly, as global stagflation/recession concerns pick up, there is bound to be more demand for India’s outsourcing services. Key sectors: tech (health tech, fintech), private banks, infrastructure Source: Macro Insights: Leaning in on Emerging Asia | Saxo Group (home.saxo)
Powell uses the “R-word” | Oanda

Podcast: Very very heavy.

Saxo Bank Saxo Bank 13.06.2022 11:21
Summary:  Today we break down what spooked the market on Friday: the massive surge in US yields after the US CPI came in hotter than expected and not least, as the long-term inflation expectations in the preliminary June University of Michigan sentiment survey jumped to new highs. The US yield curve is suddenly close to inverting again after Fed expectations were marked sharply higher for coming meetings. We also look at concerns that Chinese serial lockdowns will continue to dog global supply chains from here, the risks in the crypto space aggravated by the unfolding meltdown, and a rocky ride ahead this week with multiple major central bank meetings on tap, headed by the Wednesday FOMC and whether Powell and company will have to re-up the hawkish stance. Today's pod features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are also located via this link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Very very heavy. | Saxo Group (home.saxo)
Markets are betting the Fed has it wrong again

Saxo Spotlight: What’s on investors and traders radars this week? | Saxo Bank - 13.06.2022

Saxo Bank Saxo Bank 13.06.2022 10:58
Summary:  It is a week loaded with central bank decisions with the U.S. Fed’s FOMC on Wednesday front and centre. The money market curve is pricing a total 165 bp hikes in the next 3 FOMCs, June, July and September, with 80% chance of a 75 bp hike in this Wednesday. The EUR money market curve is fully pricing in a 25bp hike in July and a 50bp hike in September by the ECB. The market is expecting the BOJ to keep its loose monetary policy unchanged this Friday. Any modifications of the BOJ’s stance will be a surprise that can shake the bond, currency and equity markets. FOMC ready for another 50bps rate hike, but can we get 75bps? The Federal Reserve meets this week and a 50bps rate hike is on the table. The red hot CPI print on Friday has however brought Fed tightening calls to a cycle high. This puts the focus on this week’s meeting as a simple 50bps rate hike doesn’t look enough to fight the inflation threat. Either the Fed needs to go for a 75bps now, or provide an extremely hawkish commentary along with a 50bps rate hike, almost cementing another couple of 50bps rate hikes. There’s also a lot more for consideration in terms of Fed’s move to neutral rates and beyond as well as quantitative tightening, and for all that and more, the focus will be squarely on the Fed’s dot plot and economic projections, as well as Chair Powell’s press conference following the meeting. Bank of England (BOE), Bank of Japan (BOJ) and ECB speakers. A fifth 25bps rate hike is expected from the BOE on Thursday but weakening economic momentum is clouding the expectations around the tightening path going forward. However, recent fiscal measures have eased recession concerns and the labor market remains tight. Meanwhile, the risk of a BOJ move is also increasing with USDJPY nearing fresh record highs after printing 20-year highs last week. The BOJ is having a 2-day monetary policy meeting ending on Friday June 17 and will hold a press conference afterward. A 3-party meeting between Japan’s Ministry of Finance, BoJ and Financial Services Agency on Friday expressed “extreme concern” about the rapid decline in yen against the USD, which suggests a response is well due. Lastly, ECB’s most hawkish member Holzmann is due to speak next week, and we look for more signals of a 50bps move in September. Other ECB speakers like Guidos, Schnabel, Panetta and Knot will also be on the wires. Downside risks for industrial metals, volatility to continue in grains and oil. With parts of Shanghai back in a lockdown, industrial metals have had a tough last week with copper (HG1) down 4.5%. Now with more signs of central banks hawkishness in the week ahead, there is bound to be a further pickup in concerns of a global slowdown. This means more pressure can be expected in the metals space. In the medium-term however, we believe a tight supply situation along with the demand stemming from an increasing popularity of EVs provides room for further gains. Grain prices and stocks continue to look for more direction from the situation on Ukraine’s exports. OPEC and International Energy Agency issue monthly outlooks, and oil also has the volatility from China’s reopening to consider. Australian unemployment to plummet to new low, will business and consumer sentiment wane? Business and consumer confidence levels on watch Tuesday and Wednesday; are both to show further signs sentiment is falling and cost pressures are rising. In the NAB Business Confidence read out’s forward orders will be a good indicator to watch, which is tipped to show orders have continued to fall given the trajectory of rate rises and inflationary indicators (oil prices) peaking again. On Thursday June 16; the all-important Australian employment data will be watched like a hawk with monthly unemployment for May tipped to fall to yet another historical low (3.8% consensus expectation, with 25k jobs expected to be added). The RBA sees unemployment falling to 3.5% by 2023. If the numbers are better than expected, expect the AUD to be bid up and for bond yields to rise; as stronger employment gives the RBA ammunition to hike rates more aggressively. China’s Activity data for May is scheduled to release on Wednesday June 15. The focus will be on retail sales (consensus -7.1%; April -11.1%), industrial production (consensus -1.0%, April -2.9%) and fixed asset investment (consensus: 6.1%, April 6.8%).  In May, the number of cities under COVID-related lockdown came down to 16 cities from over 40 cities in April and restrictions were somewhat relaxed in those still being subject to lockdown.  May NBS PMI and Caixin PMI indicated some gradual recovery of economic activities from the trough of April. Trade data, passenger car sales and credit data released last week also showed improvements. The activity data this Wednesday is likely to show a similar trend of gradual recovery from April.  Oracle’s cloud earnings to ripen, Adobe revenue to sour? Another indication of tech spending patterns. Both tech giants’ earnings and guidance levels will be on watch, which will give an overall indication as to how much rising costs and a rising US dollar will slowdown earnings following Microsoft’s (MSFT) downgrade to earnings. Oracle (ORCL) is set to release FY4Q22 (ending May 2022) results Monday June 13 after market close. At a business level, we also know Oracle is vying for cloud market share, up against Microsoft (MSFT) and Alphabet’s (GOOGL) Google. But can Oracle’s March cloud revenue continue to rise, along with Microsoft? Oracle’s cloud revenue rose 24% to $2.8 billion in the prior quarter. Overall, consensus expects $1.37 a share profit on sales of $11.62 billion.  Later in the week, maker of Photoshop and other creative software Adobe (ADBE) will release quarterly earnings Thursday June 16 after market. The businesses forecasts are not expected to delight as non-discretionary and business marketing spending usually falls as rates rise; especially as Adobe has been suffering increased competition. Consensus expects $3.31 a share profit on sales of $4.35 billion. Also keep in Adobe also competes Salesforce.com (CRM) in marketing and e-commence. Key economic releases & central bank meetings this week Monday June 13 Australia Public HolidayUK Monthly GDP (April)India CPI (May) Tuesday June 14US PPI (May)Germany ZEW (June)Germany HICP (May-final)UK Employment (Jun)Australia NAB Business Survey (May) Wednesday June 15FOMC rate decisionUS Retail Sales (May)Eurozone Industrial Production (Apr)France HICP (May-final)Japan Machinery Orders (Apr)Australia Westpac-MI Consumer Sentiment (Jun)New Zealand Balance of PaymentsChina Retail Sales (May)China Industrial Production (May)China Fixed Asset Investments (May)China Surveyed Jobless Rate (May) Thursday June 16 US Housing Starts (May)US Building Permits (May)US Philly Fed Survey (Jun)Italy HICP (May-final)UK BOE Rate DecisionJapan Trade (May)Australia Labour Force Survey (May)New Zealand GDP (Q1) Friday June 17 US Industrial Production (May)Eurozone HICP (May-final)UK Retail Sales (May)BOJ Monetary Policy Meeting (end of 2-day meeting; press conference)Singapore Non-oil Domestic Exports (May)Malaysia Trade (May) Key earning releases this week Monday June 13: Oracle (ORCL)Tuesday June 14: DiDi Global (DIDI), Sino Biopharmaceutical (01177)Thursday June 16: Adobe (ADBE), Kroger (KR), Trip.com (TCOM) Source: Saxo Spotlight Whats on investors and traders radars this week | Saxo Group (home.saxo)
Japan: retail sales rise while consumer sentiment weakens

US inflation sends a bearish reminder to markets, brace for a ton of risk averse behavior this week with Fed meeting on tap | Saxo Bank

Saxo Bank Saxo Bank 13.06.2022 10:24
Summary:  The overshoot in US inflation is supporting our argument of higher-for-longer inflation and Fed rate tightening expectations have picked up. This has meant another round of coordinated sell-off in bonds and equities, with only commodities continuing to provide a room to hide for traders and investors with a shortage in supply for physical assets. The Japanese yen is closing in on a 24-year low and the duo of Fed and BOJ meetings this week risks a further run lower. What’s happening in markets? Asian markets brace for a fresh storm Risk aversion has picked up in the Asian session after a record high US inflation on Friday has meant Fed will need to be more aggressive. Meanwhile, a slip in US consumer confidence levels is also sending shock waves of concerns around an economic slowdown, which has increase the scope of a policy error by the Fed. In addition, Shanghai is returning to a lockdown for mass testing just days after returning from a 2-month shutdown, which affirms our view that China’s will stick to zero-COVID and that means lockdowns will keep returning throughout this year. Japan’s Nikkei 225 plunged over 2% in the morning, while Singapore STI index was down close to 0.8%. Australia market were closed for Queen’s birthday. Hong Kong and Chinese equities are on track to reverse last week’s gains on fear of re-tightening of lockdown in China and the expectation of a more hawkish U.S. Fed Last week, CSI300 (00300.I) and Hang Seng Index (HSI.I) were up more than 3%, led by Chinese Internet Stocks. Hang Seng TECH Index rose 9.7% last week.  Northbound net buying US$5.5 billion last week and was the highest weekly northbound net buying in 2022. The better sentiments was help by positive regulatory headline news on Chinese internet stocks. Starting this week, two black clouds gathered over the Hong Kong and Chinese equity markets.  First, investors are becoming concerned again about the likelihood of reintroduction of lockdown to more cities anytime.  Shanghai reported 37 new local Covid-19 cases and 5 of them were outside quarantine on Sunday.  Beijing reported 51 new local cases and said that it was hard to control the spread of a recent bar cluster, from which there had already been 166 cases found.  Last week, President Xi, during a trip to Sichuan, remarked that China adheres unwaveringly to the Zero COVID policy.  Second, a repricing of a more aggressive Fed tightening are putting pressure on the Hong Kong and China equity market.  As of writing, Hang Seng Index and Hang Seng TECH Index were down around 2.4% and CSI300 was 0.7% lower. USDJPY nears 24-year highs USDJPY hit the key 135 level in the Asian morning session, getting in close sights of the fresh 24-year highs of 135.10. With the Fed tightening expectations picking up further after the US CPI overshoot on Friday, there is little reason to believe that the trend will reverse. The verbal and written warnings from Japanese authorities on the decline in the yen will possibly be futile, and the widening yield differential with the US means more pressure on the yen is still in the cards unless the Bank of Japan considers real policy action. Gold (XAUUSD) returns to gains Gold prices bounced back on Friday to five-week highs as the focus shifted to growth slowdown risks after higher than estimated US inflation has increased the possibility for aggressive interest rate hikes from the Fed. Gold (XAUUSD) however reversed from 1880 in the Asian session as gains in the dollar weighed on the precious metal.   What to consider? US May inflation overshoot spurring more Fed tightening calls US May inflation print of 8.6% y/y came in above expectations and at a fresh 40-year high, crushing the peak inflation rhetoric in favor of our view of higher-for-longer inflation. Besides the usual food and energy, core CPI at 6% y/y saw largest contributions from shelter, airline fares, used cars and new vehicles. Services inflation was also at its highest since 1991. Rate-hike expectations are soaring to their highest during this cycle with the market expecting Fed rates at 3.00% by year-end. The odds of a third 50bps rate hike at the September meeting are now 100% but more importantly, we are starting to see calls for a 75bps rate hike this week. US consumer confidence at fresh lows Even as CPI climbs to a new peak, the University of Michigan consumer sentiment index has hit a historic low - a reminder of the extreme difficulty for the Fed as they attempt to squash inflation without hammering growth. The index plunged to 50.2 in June from 58.4 in the previous month, printing a record low. This has led to increasing calls for Fed rate cuts next year as fears of a recession have ramped up due to declining confidence and aggressive rate hikes this year.          China released better than expected credit data New aggregate financing rose to RMB2.79 bn in May from RMB0.91 bn in April.  Outstanding aggregate financing grew 10.5 YoY in May, having improved from April’s 10.2%.  The rise in aggregate financing however was mainly due to new government bond issuance and short-term corporate borrowing.  Medium to long-term corporate loans, coming RMB555bn and medium to long-term household borrowings (mainly mortgages), coming at RMB105 bn, were still weak in May.    Potential trading and investing ideas to consider? The duo of Fed and Bank of Japan meetings this week With the expectations of Fed rate hikes picking up, but the Bank of Japan (BOJ) still married to its yield curve control policy, there is likely more room for USDJPY to head above the 24-year high of 135.15 which will open the doors to 150. A 3-party meeting between Japan’s Ministry of Finance, BoJ and Financial Services Agency on Friday expressed “extreme concern” about the rapid decline in yen against the USD, which suggests a response is well due. Despite the verbal and written warnings, yen has continued to slide, which suggests any intervention may also be futile. There is some scope for tweaks to the BOJ’s yield curve control policy at the meeting on Friday, but these may still fall short to stall the decline in the yen.           For a weekly look at what’s on the radar for investors, and traders this week -  read, watch or listen to our Monday Saxo Spotlight.     For a global look at markets – tune into our Podcast.  Source: APAC Daily Digest 13 June 2022 | Saxo Group (home.saxo)
Crypto Weekly: Unfamiliar territory

What Does the World Know About Crypto? | Saxo Bank

Saxo Bank Saxo Bank 10.06.2022 12:56
Summary:  Around the world, people are researching how and where to buy crypto like never before. Read our data roundup to find out the top crypto countries in 2022. Over the past year, crypto has truly gone global in a way that few could have predicted. More people have bought, sold, and invested in top cryptocurrencies, and more people around the world are doing their own research to find out whether it's a worthwhile investment decision for them. If you're wondering what the current state of the crypto world is, then a good place to start is with people's search histories. We reviewed the data to find out what the residents of various countries are asking about the state of world crypto in 2022, and which coins people are most interested in. This study was conducted before the crypto market slump that has characterized the spring of 2022, and the ongoing market turmoil will likely impact the future behavior of investors around the world. If you're wondering what the best countries for crypto are, read our essential data roundup to find out. Which countries are most interested in crypto? First, it's worth breaking down which countries have been putting crypto-related queries into their search engines the most, as a proportion of the population. Leading the pack here are the United States and the United Kingdom, with 8.21% and 8.1% of all crypto queries coming from these two countries, respectively. Given that some of the largest crypto exchanges and institutional investors in the world are in these two countries, this might not come as a surprise to some. Which currencies are people interested in the most? When looking at the top crypto countries, it's worth looking at which coins people around the world are most interested in. From global search data, we see significant diversity across different countries and regions here. For example, Australians lead the world by far in queries about Cardano and XRP, themselves two of the biggest risers in 2021, although both have experienced significant and sustained price drops throughout 2022 so far. Meanwhile, crypto stalwart Ethereum attracted the greatest proportion of search queries in Canada, the US, and Nigeria. Some of the best countries for crypto in this regard also include several smaller nations, with numerous currency queries coming from the likes of Kosovo, Singapore, and The Netherlands. The top crypto keywords for 2022 If we look at the bigger picture, we get some fascinating insights into the most popular search terms for crypto globally. By far the most popular search terms in the world related to Dogecoin, with a staggering 18.65% of all searches related to the popular meme coin. Some of this probably relates to Doge's massive but short-lived price jump in May 2021 following Elon Musk's tweet about it, which greatly increased awareness of the meme coin. A famously volatile asset, the price of Doge has fallen by more than 40% since the beginning of 2022. Meanwhile, NFTs were the second-most-popular search query, comprising 15.74% of searches. This was followed by several emerging coins, including Shiba, XRP, and Solana. Where to buy top cryptocurrencies It's one thing to google a cryptocurrency out of curiosity, but another thing entirely to search with an intent to buy. That's why we broke down the data to find out exactly which currencies different countries were inquiring about investing in the most, prior to the current market slump. Again, we found some wide regional disparities. In Singapore, Canada, and the US, "where to buy Cardano" was the top search term reflecting the growing popularity of the coin. Meanwhile, "where to buy Ethereum" was a hot query in the US, UK, Philippines, and India, while the US and UK also topped the charts for purchase queries of Solana, TRX, and EXRP. World crypto price predictions In the crypto world, price is everything. For those holding cryptocurrencies, it makes sense to look for expert price predictions to get a sense of where your investment could be going. That's why we also broke down search queries about various price predictions by country, with some surprising results. In Kosovo, people were most interested in price predictions for the meme coin Shiba Inu, while people in Cyprus led the world in queries about the future price of Solana. Interestingly, Irish people were more concerned with the price predictions for Cardano, while Brits were more interested in the future price of Tether. The safety of cryptocurrencies Crypto is an emerging asset class, one that is inherently volatile and difficult to trace. It makes sense that queries about the safety and security of crypto would be a major theme in the crypto world. We saw huge numbers of queries around whether or not bitcoin can "be hacked" coming from the US and UK, while those in Nigeria, Kenya, and South Africa were most likely to ask "is bitcoin legit?". Some of us were more interested in answers to recent events, with those from the UK, Nigeria, and India leading the world in queries around why bitcoin crashed, likely as a result of the coin's massive price dive in November of 2021. Of course, the recent slump in Bitcoin may well prompt a new wave of similar inquiries from around the world. Which countries are the most interested in NFTs? 2021 was the year of the NFT. Across the globe, search queries around Non-Fungible Tokens skyrocketed, following a spate of headline news items around high-profile NFT sales. Likewise, the "popping" of the NFT bubble in early 2022 will likely have also stoked interest in this new and little-known asset. While some were quick to dismiss NFTs as a fad, certain countries were more interested in these assets than others. Singapore, the US, Australia, and New Zealand were most interested in learning more about NFTs, leading on queries such as "what NFT means" and "how NFT works". In addition, these same countries expressed the greatest interest in going one step further, leading queries around how to actually buy NFTs. Perhaps surprisingly, crypto enthusiasts in the UK were much less likely to show interest in NFTs. The carbon footprint of NFTs These days, environmental, social, and governance (ESG) principles are guiding a new generation of ethical investments. Alongside the rise of ESG and hot on the heels of COP26, we saw significant interest in the environmental impact of NFTs. The US, UK, and the Philippines were much more likely to search for terms such as "NFT environment impact" or "NFT bad for the environment" than any other countries. This likely reflects a growing awareness of the immense carbon footprint of many cryptocurrencies, and a desire to avoid contributing to that with NFTs. As market-watchers will already know, cryptocurrency mining is incredibly bad for the environment, with the carbon emissions from bitcoin mining alone being greater than the carbon footprint of the nation of New Zealand. What about Crypto ETFs? Based on the data from our clients, it's clear that market interest in crypto goes beyond buying and selling cryptocurrencies outright. We took a look at some of the most popular crypto tracking products offered at Saxo Bank, including Crypto ETNs, Crypto ETFs, and Crypto ETCs, which allow people to speculate on the price of crypto without buying any currencies themselves. Of these, we found ETNs, or exchange-traded notes, to be the most popular. These are similar to ETFs, except for the fact that they are unsecured debt securities issued by the bank, rather than holding the assets themselves. Of these, the most popular crypto ETNs were the Ethereum Tracker EUR XBT Provider, the Bitcoin Tracker EUR XBT Provider, and the VanEck Bitcoin ETN. Crypto forex rates explained Here at Saxo Bank, we offer crypto-forex trades between three cryptocurrencies (Bitcoin, Litecoin, and Ethereum) and three fiat currencies (USD, EUR, JPY). For our clients looking to trade on fluctuating exchange rates, several forex pairs have proven to be particularly popular. Chief among these is Bitcoin/USD, which made up 40.82% of crypto forex trading volumes on our platform. These are followed by Ethereum/USD and Litecoin/USD, which make up 35% and 10% of trading volumes, respectively. Meanwhile, crypto pairs featuring other, more minor fiat currencies only made up a minority of overall trades. We looked at what the crypto world was googling, and this is what we found. For more daily insights and updates on the fast-paced cryptocurrency markets, make sure to check our Insights pages for the information that matters. Source: What Does the World Know About Crypto | Saxo Group (home.saxo)
COT: Commodity specs jump ship on recession angst

Podcast: The unbearable tightness to be?

Saxo Bank Saxo Bank 10.06.2022 11:42
Summary:  Today we look at the market tilting hard to the downside in the wake of the ECB meeting yesterday, after the meeting jolted EU interest rates higher, with a blowout in peripheral spreads spoiling the recent euro rally and sending the single currency tumbling by day's end. We also look at the market eyeing today's US CPI release with trepidation, as a strong core rate in particular could further spook markets on the need to price even more tightening from the Fed as hopes for inflation rolling over may be spoiled for now. Thoughts on grains, gold, Tesla in trouble and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are also located via this link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: The unbearable tightness to be? | Saxo Group (home.saxo)
Video market update for June 29, 2022  | InstaForex

ECB Hasn't Helped Euro (EUR) (Yet?). US CPI Is Released Today. Many Factors Affect Crude Oil Price How Are FX Pairs With JPY Doing? Global Bond Yields Have Risen

Saxo Bank Saxo Bank 10.06.2022 11:31
Summary:  Markets rolled over badly yesterday as global bond yields surged anew in the wake of the ECB meeting yesterday, one that failed to support the euro even as forward rate tightening expectations from the central bank rose higher still. Today, the US CPI release for May is a critical focus on strong market hopes that inflationary pressure in the US is set to roll over, in part due to the base effects from last year set to shift in coming months. The market will not take an upside surprise well.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 futures broke down below the lower end of the consolidation range hitting the opening print from Friday’s big session two weeks ago. Unless we see a close above the 12,500 level in Nasdaq 100 futures our view is that the rebound trade has lost its momentum to the upside and a bigger consolidation range will establish itself. The hawkish narrative from ECB and rates moving higher yesterday are adding pressure to high equity duration assets such as technology stocks. Finally, the NHTSA is upgrading its probe into Tesla’s Autopilot software which could lead to Autopilot cars being recalled or even worse temporary pause on selling of Autopilot software. Given Tesla’s influence on the US equity indices this is a hidden risk to the market that cannot be underestimated. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) ... ... recovered from early losses and were little changed. The resumption of temporary lockdown to do PCR testings in some districts in Shanghai, and the CSRC saying that the regulator has not been evaluating or reviewing any IPO application from Ant Financials have initially set up for a weak tone at the open. Yesterday, a Bloomberg report suggested that Ant Financials was closed to getting approval from the Chinese regulator to list in overseas exchanges. Alibaba (09988/BABA) was down as much as 3.9% at the open but managed to rebound to the positive zone. Bilibili (09626/BILI) and NIO (09866/NIO) reported inline revenues but larger than expected losses due to deteriorating margins. Their share prices were down 9% and 1% respectively. China’s May PPI and CPI came at 6.4% YoY and 2.1% YoY broadly in line with expectations.  USDJPY and JPY crosses The JPY managed to rally yesterday despite the general push higher in global bond yields, with the EURJPY reversal back lower particularly sharp in the wake of the ECB meeting and despite a huge rush higher in yields there. Peripheral spread widening (more below) may be the reason there. Generally, we expect USDJPY to follow the lead from US Treasury yields at the long end of the curve, with today’s US CPI a critical focus on whether it supports the narrative that US inflationary pressure are easing (more below). A new burst higher in US 10-year yields above 3.20% could set the focus higher in USDJPY once again, with some modest JPY support in the crosses if risk sentiment is spooked by this development. EURUSD and EUR crosses The euro reversed hard to the downside after what appeared a rather hawkish ECB meeting that managed to clear the bar in terms of general rate expectations for the forward curve from the ECB (more below) as the German 2-year Schatz rose an impressive 13 basis points yesterday, further closing the yield gap with its US counterpart. And yet, the blow out in EU peripheral bond spreads despite ECB announcements that it will manage its PEPP portfolio reinvestments to prevent “fragmentation” is a euro-negative, with the euro falling against CHF, JPY and the USD after the meeting announcement. As well, the ECB has no real plans for actual quantitative tightening as the Fed does. In EURUSD watching 1.0500 as perhaps the last area of support ahead of the 1.0350 low. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil remains caught near a three-month high with strong demand for fuels, tight supply and sanctions being offset by global economic growth worries and signs China’s exit from virus restrictions is unlikely to be smooth. EIA’s weekly inventory report showed that stockpiles of crude and gasoline continue to shrink, while OPEC Sec-Gen said most members are ‘maxed out’. China’s effort to reopen the economy has received a setback as Shanghai will lock down seven districts this weekend for mass testing. Having been rejected twice at $124.40 this week, Brent may now spend some more time consolidating. Gold (XAUUSD) Gold trades softer ahead of today’s US inflation print, and after the ECB said it would start raising rates from July, thereby joining other central banks in combating rising inflation. The less hawkish outcome (see below) helped send the euro lower versus the dollar (see above), thereby adding downward pressure on bullion. Gold remains stuck in a range with leveraged traders in futures and investors in ETF’s currently showing no clear conviction with positions in both having been rangebound for the past month. For that to change we need to see a clear break above $1870, the key level of resistance US Treasuries (TLT, IEF) US treasury yields rose yesterday, partially in response to a tremendous surge higher in European yields in the wake of the ECB meeting yesterday. The US 2-year yield closed at a new high for the cycle yesterday above 2.80% as the focus turns today to the US CPI release and whether US inflation, particularly at the core, will show signs of cooling (more below). The focus at the longer end of the curve is on the 3.20% cycle high in US 10-year Treasury yields and the 3.26% high water mark from 2018, which is an 11-year high. What is going on? Clear commitment from the ECB to tighten monetary policy, but euro drops The ECB said it would start with a 25 basis point rate hike in July and could move by 50 basis points in September, depending on the inflation backdrop. Beyond September, the ECB appeared committed to a gradual rate path, a less hawkish outlook taking into consideration the risk of lower growth (especially if cost of living continues to rise, thus pushing consumption down). Following the press conference, the EUR/USD has fallen sharply, and core/periphery spreads have widened significantly. The gap between the German and Italian 10-year government bond yields continues to widen (near 220 bps yesterday and up over 15 bps). The ECB will have no other choice but to unveil a facility to manage sovereign spreads in the short-term in order to avoid a financial fragmentation within the eurozone. However, this won’t be easy. Designing such a weapon is more complex than many investors think. All the pre-existing solutions (OMT, especially) come with major political and technical drawbacks. Investing legend Druckenmiller says bear market set to continue The former trader for George Soros and head of the Duquesne Family Office said yesterday that “For those tactically trading, it’s possible the first leg [of a bear market] has ended. But I think it’s highly, highly probable that the bear market has a ways to run.” He added that “If you’re predicting a soft landing, it’s going against decades of history.” Consumption will drop In its latest forecasts, the OECD expects that real wages will fall in most developed and developing countries in 2022. In Europe, Greece is one of the most vulnerable countries with an expected drop of 7 % this year. This reminds us of the European sovereign debt crisis. There is one major exception within large European economies: France. The OECD forecasts that real wages will increase marginally by 0.24 % on average this year. This is probably a bit optimistic. At Saxo Bank, we believe that real wages are highly likely to decrease in France too. The combination of higher cost of living and higher interest rates will have a detrimental impact on consumption from H2 onwards in most countries. DocuSign shares plunge 23% on lower billing outlook While quite a few technology companies have recently surprised the market with stable revenue growth outlook and improved profitability through cost cutting, DocuSign delivered a downward revision revenue due to a lower billing forecast that outweighed its slight improvement on profitability. The size of the move in extended trading shows the current intrinsic risks in technology related to their earnings releases. Shifts in Saxo client behavior worth noting Over the last two weeks, across APAC when it comes to Stocks (shares and CFDs) clients are increasingly selling or shorting. We have observed Saxo clients changing their stance over the last couple of months. Large caps like Tesla (TSLA), Microsoft (MSFT), as an example, are increasingly being sold, or potentially shorted by clients, compared to prior months ago when larger positions were longs. As for what APAC Client are trading in FX: the most transacted pair is the USDJPY and a slightly larger majority are selling/shorting it. For Indices, APAC clients are seen increasingly selling/shorting the Nasdaq, the S&P500, Japan 225 and the Hong Kong Index.  Japan PPI unchanged from last month Japan’s May PPI rose 9.1% y/y but remained flat on a m/m basis. The y/y number was also slower than last month’s 9.8%. Increased fuel subsidies, along with other support measures, may have helped put a cap on rising price pressures. Still, the yen continues to weaken and likely to bring more inflationary pressures. The BoJ, Ministry of Finance and Financial Services Agency are set to meet today at 4 p.m. local time to discuss “international financial markets”. What are we watching next? U.S. May CPI today and its possibly considerable market impact The market is generally anticipating that inflation will roll over lower to some degree in coming months due to the “basing effects” of a string of strong rises in the inflation data a year ago that is easing out of the year-on-year comparisons this month and in following months. The focus will be mostly on core CPI with another strong increase expected at 0.5% month-over-month and the year-on-year readings for headline and core CPI are expected at +8.3%/5.9% versus 8.3%/6.2% in April. Risks are tilted to the upside, and the equity market may take this poorly, given that it will require more pricing of Fed tightening and higher bond yields. We think the data will show a continued pick-up in services prices, especially. This would be a further sign that too-tight labor markets are a key driver behind high inflation. Earnings Watch There are no earnings releases today, so we have filled out the list below with next week’s earnings releases which are running low. The key focus next is Oracle and Adobe, with especially latter holding the biggest potential impact on the technology sector. Monday: Oracle Tuesday: DiDi Global, Ferguson, Ashtead Wednesday: JD Sports Thursday: Adobe, Kroger, Jalma Economic calendar highlights for today (times GMT) 0700 – Czech May CPI 1230 – Canada May Payrolls Change/Unemployment Rate 1230 – US May CPI 1400 – US Jun. Preliminary University of Michigan Sentiment 1600 – USDA's World Agriculture Supply/Demand Estimates Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – June 10, 2022 | Saxo Group (home.saxo)
Oil well supported, gold dips

Worst day in US equities since mid-May with CPI on the horizon and ECB retaining a post-summer uncertainty

Saxo Bank Saxo Bank 10.06.2022 11:15
Summary:  Another coordinated selloff in US equities and bonds overnight after ECB clears the air about near-term rate hike path but retaining uncertainties for a post-summer outlook. Also, risk of a US CPI coming in above expectations is hurting market sentiment and China lockdown and regulation concerns are back on the radar. What’s happening in markets? US equities and bonds in a coordinated selloff again Some shivers seen from the ECB's hawkish message and that saw equities and bonds plunge across the board. US equities had the worst day since mid-May. China lockdown concerns are also back on the horizon, as we had thought, and the optimism on Chinese tech is unlikely to last as well with the flipflop in policy. US CPI on watch and risk of a further hawkish surprise is significant. Both Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) lost over 2%. Asian equities also started the day in red. Treasury yields were slightly firmer although the longer end yields were lower after a strong US 30yr auction. Hang Seng Index (HSI.I) and Hang Seng TECH Index (HSTECH.I) Both were down about 1% following global equity market sell-offs overnight, reintroduction of temporary lockdown to do PCR testings in some districts in Shanghai, and the CSRC saying that the regulator has not been evaluating or reviewing any IPO application from Ant Financials.  Late afternoon yesterday, a Bloomberg report suggested that Ant Financials was closed to getting approval from the Chinese regulator to list in overseas exchanges. Alibaba (09988/BABA) was down as much as 3.9% at the open but recovered to only 0.6% lower as of writing. Bilibili (09626/BILI) reported weaker-than-expected results and was down almost 10%. NIO (09866/NIO), also having reported weaker-than-expected results, fell as much as 8% in early trading and rebounded to only 2.6% lower. In A shares, CSI300 (00300.I) was little changed. EUR failed to impress The USD strengthened due to the downbeat risk tone and losses in its major counterparts including the EUR. EURUSD was bid up initially to 1.0774as Eurozone yields rose following the ECB setting out a rate hike path, but the lack of a fragmentation deal indicated that the potential for ECB tightening may remain limited and EURUSD plunged below 1.0700 subsequently. EURGBP also traded down to 0.8500, despite GBPUSD pushed below 1.2500 with the UK looking to move forward on cutting taxes. USDJPY was slightly firmer above 134 with the US CPI ahead. Crude oil (OILUKAUG22 & OILUSJUL22) suffers from China demand worries Crude oil was softer, remaining stuck around 120 as fresh lockdown fears from China sent demand shocks again. Still, with prices rallying over the last two months, Brent was on track for a fourth consecutive weekly gain and WTI was set for a seventh straight weekly increase as tight supply concerns persist. Meanwhile, peak summer gasoline demand in the US continues to boost crude prices. What to consider? Caution is thick in the air, but investors at not cautious enough   Central banks are likely to continue to get inflation forecasts wrong and that will cause further shocks to market. Forward indicators are telling us inflation will continue to get painfully worse, higher for longer. The RBA for example only has one tool to slow inflation, rising rates. We think as a central bank raises rates, interest costs rise, and debt the public owes swells, which will cause calamity and financial strain. To put it into context. if the average mortgage is AUD$700,000 and rates rise from 0.8% to 3% it will cost extra $800 per month. This is why we’ve been bearish on banks and continue to be bearish, expecting another very sharp pull back as foreclosures are likely to rise, bad debts and delinquency rates will soar, hurting the economy, and banks (one of the largest components of the ASX). The warning signs have been here for months, lending has been slowing for some time, and will continue to slow, as Aussies are hurt by higher grocery and petrol bills (30-year high inflation - which will get worse). As such we think there could be a potential 30% pull back from here and the technical indicators are also warning of a sharp pull back. ECB ready to move away from QE and negative rates In yesterday's ECB monetary policy press conference, there was some level of certainty for the near-term rate hike path with a 25bps rate hike cemented for July. Th September move still remains a call between 25 or 50bps, and will depend on if inflation outlook persists or deteriorates. The ECB also upgraded its Eurozone inflation forecast to 6.8% from 5.1% for 2022, 3.5% from 2.1% for 2023 and 2.1% from 1.9% for 2024. All remaining above 2% ECB inflation medium-term target, and the 2023 cooling remaining a tad too optimistic. The lack of a fragmentation tool, which is needed to protect the Italy-Germany bond spread was key, and may continue to cap the pace of ECB tightening in the months to come. Japan PPI unchanged from last month Japan’s May PPI rose 9.1% y/y but remained flat on a m/m basis. The y/y number was also slower than last month’s 9.8%. Increased fuel subsidies, along with other support measures, may have helped put a cap on rising price pressures. Still, the yen continues to weaken and likely to bring more inflationary pressures. The Bank of Japan will have enough room to stay dovish nonetheless. Bilibili (09626/BILI) earnings BILI reported in-line Q1 revenues but worse than expected operating margin of negative -33.9% (vs -29.3% in Q4, 21; -20.9% in Q1, 21) and net margins of negative -32.7% (vs. -28.6% in Q4, 21; -22.8% in Q1, 21). Net loss for the quarter widened to CNY1.65 billion (vs. consensus RMB1.57bn), a 86% deterioration from Q1 last year.   NIO (09866/NIO) earnings NIO reported in-line revenues but worse-than-expected net loss of RMB1.3bn due to mainly higher batter costs.  The Company’s gross margin was down 2.8pp from last quarter to 18.1%. The delivery of 25,768 units of vehicles in Q1 or growth of 28% YoY was lower than the +150%plus growth rates at rivals LiAuto and XPEN.  Management’s Q2 revenue guidance of RMB9.3 bn to 10bn was below market expectations. What orders are coming through for Saxo’s self-directed clients? Over the last two weeks, across APAC when it comes to Stocks (shares and CFDs) clients are increasingly selling or shorting. We have observed Saxo clients changing their stance over the last couple of months. Large caps like Tesla (TSLA), Microsoft (MSFT), as an example, both are increasingly being sold, or potentially shorted by clients, compared to prior months ago when larger positions were longs. As for what APAC Client are trading in FX: the most transacted pair is the USDJPY and a slight larger majority are selling/shorting it. For Indices, APAC clients are seen increasingly selling/shorting the Nasdaq, the S&P500, Japan 225 and the Hong Kong Index.  Moving to commodity and financial heavy Australia; two of the most transacted upon Stocks (shares and CFDs) are in lithium; Pilbara Minerals (PLS) and Core Lithium (CXO) are mostly sold/shorted. The next stock on the list is the biggest bank in Australia, Commonwealth Bank (CBA) with a lot of the clients are also taking a bearish view on as well, which reflects Saxo’s bearish view on Banks. CBA is increasingly being sold/shorted. In the positive corner, in Australia the most bought Stock (share and CFD) is Woodside Petroleum (WDS), Australia’s biggest oil company, the 10th biggest in the world after buying majority of BHP’s (BHP) oil assets.   Potential trading and investing ideas to consider? Upside surprise in US CPI will be key for the Yen US CPI is scheduled for release today ahead of the FOMC meeting next week. Consensus expectations are flat at 8.3% y/y with core at 0.5% vs. 0.6% last month and this will be key to watch. Even a slight upside surprise can further increase the chance of a third 50bps rate hike by the Fed in September. USDJPY and EURUSD are likely to react, with USDJPY on course to test resistance at 135.70. So how does Saxo think investors should be positioned now? Remain defensive consider being in commodities to offset the hole food and oil inflation is burning into your pockets. Bloomberg’s Commodity Index for example, continues hit another record high, tracking the most traded commodities. Food protectionism is continuing to be an issue as we’ve mentioned, and this will push up food price inflation at time when demand is outpacing supply. So, consider looking at Food sectors, stocks and ETFs, and Agricultural and Fertilizer stocks.   We also continue to see upside in oil The largest contributor to inflation (measured by CPI) is Oil. Crude oil (OILUKAUG22 & OILUSJUL22) is at a 3-month high despite falling almost 1% to $120.43. As guided previously, oil will set higher levels; we also mentioned this yesterday.  China’s oil demand will rise, and US and Europe Summer travel is going ramp up on roads and with air travel, while gas inventories are at their lowest levels since 2014, and we see supply constraints lingering on. So we think clients should consider being overweight to the energy sector, with oil and gas companies as well likely to guide for higher 2022 earnings.     For a weekly look at what’s on the radar for investors, and traders this week -  read, watch or listen to our Monday Saxo Spotlight.     For a global look at markets – tune into our Podcast.  Source: Worst day in US equities since mid-May with CPI on the horizon and ECB retaining a post-summer uncertainty | Saxo Group (home.saxo)
German inflation comes down as government measures bite

Podcast: A pivotal ECB meeting today. Watching CNHJPY

Saxo Bank Saxo Bank 09.06.2022 12:34
Summary:  Today we preview today's pivotal ECB meeting as rate expectations have rushed to new highs for the cycle this week in anticipation of the ECB's anticipated July rate lift-off, with the market divided on whether the ECB is ready to hike 50- or 25 basis points to initiate the tightening cycle at the July meeting. We also look at new highs for the cycle in crude oil yesterday, natural gas markets roiled by a fire at a US LNG facility, the ongoing JPY volatility, important stocks to watch today, including Credit Suisse, Meta, Roku and DocuSign. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast here, where a link to today's slides may be found. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: A pivotal ECB meeting today. Watching CNHJPY | Saxo Group (home.saxo)
Markets are betting the Fed has it wrong again

FXO Market Update - Bumpy road ahead

Saxo Bank Saxo Bank 09.06.2022 12:18
Summary:  A busy week ahead with ECB today, US CPI tomorrow and FED on Wednesday next week. EURUSD O/N trades around 20 vol, which is approximately 90 pips breakeven, while 1 week trades around 11.25 vol or 140 pips. This is the highest O/N vol seen over the last 10 meetings but then it also include the US CPI tomorrow. We prefer to be long 1 week over O/N to also get FED next week. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these. FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: EURUSD spot Busy week ahead, we kicking off with ECB today and follow up with US CPI tomorrow and round off with FED in a week. EURUSD spot has been stuck around 1.0700 for the last couple of weeks and we could probably see spot break out and start move again with all the events lined up for the next week. ECB is first out, market expect rates to be left unchanged with the first hike in July. The market is pricing around 120bps hikes in the 4 meetings from July to end of year so the focus for this meeting will be if a 50bps hike is in the cards for the next meeting. EURUSD O/N trades around 20 vol, approximately 90 pips breakeven, which is at the high end of the past 10 meetings. But then it also include the US CPI tomorrow which also has a high event risk priced in. 1 week EURUSD trades around 11.25 vol, approximately 140 pips breakeven, which include all three events. We think we could expect a choppy market over the next week and EURUSD could take off in either direction if all events align. We prefer to buy 1 week over O/N and either buy a straddle and trade spot around the strike or buy a directional option on either side. Buy 1 week 1.0715 EURUSD callBuy 1 week 1.0715 EURUSD putCost 136 pips Buy 1 week 1.0815 EURUSD callCost 32 pips Buy 1 week 1.0615 EURUSD putCost 31 pips Spot ref.: 1.0715 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: FXO Market Update June 09 2022 | Saxo Group (home.saxo)
Riksbank set to hike 50bp in a bid to get ahead of the ECB

Financial Markets Today: Quick Take – June 9, 2022

Saxo Bank Saxo Bank 09.06.2022 12:11
Summary:  Markets traded sideways to lower as global energy prices surged to new highs for the cycle, and with most global energy imports priced in US dollar, the elevated level of the US dollar means that crude oil prices are hitting records in local currency terms. Today features an important ECB meeting, with market participants watching for guidance on the size of the July rate hike Lagarde and company have flagged, as well as the new staff projections on inflation that may hint at the coming steepness of the impending rate tightening cycle.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equity volatility is still coming down with VIX setting a new low for the current short-term cycle. Nasdaq 100 futures are trading well in the consolidation range that has been established over the past 8 trading sessions with the index futures trading around the 12,610 level this morning in European trading hours. The key market event today is the ECB rate decision, which is expected to be unchanged, where the focus is on whether the ECB is warming to significant rate hikes during the rest of the year to combat inflationary pressures. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The indices ended the morning sessions with moderate losses. After impressive gains yesterday in Hong Kong and ADR trading in New York, Chinese technology gave back some of the gains. Hang Seng TECH Index (HSTECH.I) was down 0.8%. Bilibili (09626) fell 1.5% ahead of reporting results later today. In May, China’s exports grew better-than-expectations at 16.9% YoY and imports increased 4.1% YoY in USD terms. Trade surplus increased by 82.3% to USD78.8 billion.  USDJPY and JPY crosses The yen accelerated lower yesterday after comments from the Bank of Japan Governor Kuroda continue to emphasize his commitment to maintaining the current monetary policy course under which the BoJ caps the 10-year JGB yield at 0.25%. He brushed aside JPY volatility concerns, saying that these are for the Ministry of Finance to address and maintained that the BoJ’s monetary easing has been “half, not fully successful”. EURJPY rushed to fresh multi-year highs above 144.00 as EU yields rose to new highs in the wake of an upward revision of Eurozone Q1 GDP and ahead of today’s ECB meeting (more below). US yields are also higher, but still solidly below the cycle highs, but USDJPY rose nearly to the early 2000’s high water mark of 135.00. Any continuation of the current scale of JPY volatility could elicit an MoF verbal response that jolts the market. EURUSD and EUR crosses It is an important day for the euro as the ECB is set to deliver a new set of staff projections on GDP and inflation that will allow market participants to infer guidance on the pace and persistence of the coming rate tightening cycle from the central bank. The ECB has flagged that it is set to wind down its QE programme this month and to lift rates in July (likely by 25 basis points as discussed in the ECB preview below, but market is about 50/50 on a larger hike), but the market will scrutinize guidance on the size of rate hikes to follow the lift-off and in the staff projections, any notable upgrades to 2023 and especially 2024 inflation forecasts, which might indicate a more sustained and steeper tightening cycle is anticipated. EU yields at the front end of the yield curve are trading at cycle highs ahead of today’s meeting, with the market pricing some 125 basis points of tightening through the December meeting. EURUSD has coiled in the 1.0625-1.787 range for more than two weeks ahead of this meeting. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil continued higher after EIA’s weekly inventory report showed that stockpiles of crude and gasoline continue to shrink, while OPEC Sec-Gen said most members are ‘maxed out’. Crude oil inventories at Cushing, the delivery hub for WTI crude oil futures dropped to a three-month low while gasoline inventories are at their lowest seasonal level since 2014, just ahead of the peak summer demand season. Despite record high prices at the pumps, US motorists are showing no signs of leaving their cars in the garage with demand rising above 9 million barrels a day for the first time this year. China’s reopening, meanwhile, has received a small setback as Shanghai will lock down a district on Saturday for mass testing. The bullish technical outlook for both Brent and WTI shows the risk of a revisit towards the early March highs at $139 and $130.50 respectively. Gold (XAUUSD) Gold is edging higher after with growth concerns while rising US treasury yields have been offset by slowing dollar momentum. Earlier in the week the World Bank cut its forecast for global growth and a FED GDP tracker showed the US economy could be on the brink of recession. Leveraged traders in futures and investors in ETF’s are currently showing no clear conviction with positions in both having been rangebound for the past month. For that to change we need to see a clear break above $1870, the key level of resistance ahead of Friday’s key US CPI print. Silver (XAGUSD) is holding above its 21-day moving average at $21.82 but has yet to find a bid strong enough to challenge resistance in the $21.50 area. US natural gas (NATGASUSJUL22) US natural gas trades down by 14.5% from yesterday’s 13-year high after a fire broke out at Freeport LNG’s terminal in Quintana, Texas. A spokesperson said the terminal, one of seven US facilities exporting gas to overseas markets, will remain closed for at least three weeks, thereby halting roughly 16% of total US LNG export capacity. Dutch TTF benchmark gas (TTFMN2) trades up 12% in early trading with Europe receiving around 75% of those shipments. US gas stockpiles remain around 13% below normal levels with limited production growth at a time of surging export demand. The EIA publishes its weekly storage change later today US Treasuries (TLT, IEF) Yields rose modestly as energy prices galloped to a new cycle high, with the US 10-year benchmark trading above 3.00%, but still not posting a new highs this week, much less trading anywhere near the 3.2% high water mark from early May (which in turn is just shy of the late 2018 cycle high of 3.26%), while bond yields nearly everywhere else in DM (Japan excepted, naturally) have traded to new cycle highs recently. Demand at yesterday’s 10-year treasury auction was tepid. One of the next important event risks for the treasury market is today’s 30-year T-bond auction, followed by tomorrow’s US May CPI release. What is going on? ECB monetary policy meeting and new forecasts today Expect the ECB to announce an end to its bond buying program. This will open the door to an interest hike in July – the first time since 2011. While pressure is building to speed up the monetary policy tightening, we believe the ECB will favor a safe option next month – meaning a 25-basis point interest hike. New forecasts will be released too. Expect a clear downward revision to GDP growth and core inflation above the target longer out. The next statistic to look at closely will be the first estimate of the June eurozone HICP inflation on July 1. This will be painful. There will certainly be discussions about the creation of a facility to manage sovereign spreads too. This is a needed tool if the ECB wants to avoid financial fragmentation and be free to be more aggressive in tightening monetary policy (see our ECB review). Credit Suisse is in focus the day after its profit warning Credit Suisse issued a profit warning yesterday as capital is eroding due to losses from the hedge fund blowup of Archegos and the collapse of its supply chain partner Greenshill Capital. The Swiss bank says it will cut the number of employees, but the bank is also blaming the geopolitical situation and significant monetary tightening on its problems. A Swiss blog Inside Paradeplatz says according to one insider that State Street might be in play for a takeover. Meta halts development of smartwatch with two cameras This is another sign that technology companies are focusing on costs and dropping products that are not part of the core business. The smartwatch market is already quite competitive with Apple and Garmin having large market share. Exxon Mobil hits new all-time high The shares hit a new all-time high if one does not adjust for splits or other corporate actions. The US-based oil and gas giant has hit a market value of $440.6bn and $484.4bn including net debt reclaiming the energy sector’s importance in financial markets. Analysts expect free cash flow at $45.4bn this year translating into a roughly 9-10% free cash flow yield. The UK construction sector is still in expansion. But risks are tilted to the upside The PMI construction was out at 56.4 in May, slightly below expectations of 56.6 and a previous reading of 58.2. This is the slowest increase since January. The main point of worry is the stagnation in residential homebuilding, resulting mostly from higher cost of living and interest rates which become a strong constraint on demand. Expect further slowdown in the near term. What are we watching next? Ongoing JPY volatility as Jim O’Neill says a further yen weakening could lead to a financial crisis Jim O’Neill, famed former Goldman Sach Asset Management head, said that “if you told me that yen [USDJPY] hits 150, this could be a rerun of the Asian Financial Crisis.” He suggests that further JPY weakening ratchets up the pressure on China “which might have the influence to force Japan to change its policy.” and that it was China that was partly responsible for bailing out Asia during the late 1990’s crisis by “signaling to the US Treasury to reverse its strong dollar policy or China would devalue its currency”.  O’Neill says that he can’t see Japan sticking with the YCC policy, even if “it will be painful for financial markets [for the BoJ to end the policy], but it’s the right thing to do.” The recent rise in Chinese equities may have been a tradable bear market rally that may soon wane The prospect of concluding cybersecurity investigations into Didi and other tech companies, the approval of second batch of online games, and U.S. Treasury Secretary Yellen’s repeated signals, including the latest one from yesterday, to reduce or rollback tariffs on some goods from China to lower inflation in the U.S., contributed to this week’s strong performance in Chinese stocks, in particular tech stocks listed overseas.  It is important to note that the slope to climb is still steep for the Chinese economy and valuation of Chinese stocks in general is inexpensive but not cheap once we take into consideration of the plausibility of earnings downward revisions and misses.  Common prosperity and stability remain key focus of the Chinese leadership, instead of economic growth.   Earnings Watch Today’s focus is on DocuSign, Vail Resorts, and NIO. DocuSign is still sporting a high equity valuation with revenue growth coming down, so the pressure is on to show improving profitability to justify the valuation. Vail Resorts is part of the travel segment and thus the reopening trade. Analysts expect revenue growth of 30% y/y as consumers are coming back to leisure and travelling; expectations show that Vail Resorts will hit a new all-time high on revenue in FY22 (ending 31 July). NIO is reporting Q1 earnings today ahead of the US market open, but with figures being delayed by over two months relative to the reporting period we expect a muted reaction. Today: Acciona Energias Renovables, Nuance Communications, Dollarama, Brown-Forman, Five Below, Inditex, Campbell Soup, Aveva Group, Full Truck Alliance Thursday: Chow Tai Fook Jewellery, Sekisui House, China Resources Power, Saputo, DocuSign, Vail Resorts, NIO, Bilibili Economic calendar highlights for today (times GMT) 1100 – Mexico May CPI 1145 – ECB Rate Announcement 1230 – ECB President Lagarde Press Conference 1230 – US Weekly Initial Jobless Claims 1300 – Poland Central Bank Governor Glapinksi holds news conference 1400 – Canada Bank of Canada issues Financial System Review 1430 – EIA's Natural Gas Storage Change 1500 – Bank of Canada Governor Macklem press conference 1700 – US 30-year T-Bond Auction 2245 – New Zealand May Card Spending 0130 – China May PPI/CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Market Quick Take Jun 9 2022 | Saxo Group (home.saxo)
Analysis and trading tips for EUR/USD on June 28

Caution is thick in the air, bonds yields rise, oil moves up to 13-week high, and another growth warning

Saxo Bank Saxo Bank 09.06.2022 11:12
Summary:  Global banks, property and the consumer discretionary sectors look susceptible to further carnage with central banks joining the aggressively hike party, with the ECB decision next. Given inflation is at records and set to continue to march up, how much more damage can be done? Meanwhile, Crude oil jumps to a 13-week high and is supported higher on expectations China’s oil demand will rise, and US and European travel will pick up this summer while supply concerns linger on. Plus why the US equity rally from May could reverse, and the Chinese bear market rally could also wane. We share the stocks and ETFS to watch in Uranium and Hydrogen as the world attempts to play catch up with climate change. What’s happening in markets that you need to know? US stocks back pedal with caution thick in the air, ahead of Fridays US inflation data , next weeks’ Fed meeting and shortly after that we will get more updates ahead of Q2 earnings, (likely to be lackluster excluding commodities).On Wednesday The Nasdaq 100 (USNAS100.I) fell 0.7%, and the S&P 500 (US500.I)lost 1.1% with the technical indicators looking bearish suggesting the market could fall further and give back some of the gains made from the rally since May 20. Hong Kong and Chinese equities’ rally takes a pause this morning.  In earning trading, Hang Seng Index (HSI.I) and CSI300(000300.I) fluctuated between modest gains and losses.  After impressive session yesterday in Hong Kong and ADR trading in New York, Chinese technology also gave back some of the gains.  Hang Seng TECH Index(HSTECH.I) was little changed. Bilibili (09626) fell 4% ahead of reporting results later today. Australia’s ASX200 dropped to a three week low, with banks leading the sell off. We alluded to this happening for some time, cautioning the market of our bearish view on banks. We also think banks are susceptible for further selling, here is why. AUDUSD looks bearish and is likely to give back some fresh gains as the US dollar index rallies up on uncertainty rising. We have observed some Saxo clients placing short on the AUDUSD ahead of Friday US inflation data and the Fed starting its balance sheet reduction at next weeks meeting. For a look at the technical indicators, click here.  Click for an update on other currencies What to consider?  Another global growth warning. The OECD also slashed its global growth outlook for 2022 to 3% from 4.5% earlier in December. The comments that the world economy will pay a “hefty price” for the Ukraine war and the impact on supply chains would be long lasting were risk-negative especially as the inflation outlook has also doubled to almost 9% for its 38 member states. Supply/demand imbalance in Crude oil (OILUKAUG22 & OILUSJUL22) continues. UAE Energy Minister said the situation is not encouraging when it comes to the amount of crude OPEC+ can bring to the market and noted that conformity with the OPEC+ deal is more than 200%. He also said that prices are “nowhere near peak” and China reopening is likely to further aid demand pressures. US EIA weekly crude stocks declined for a 10th straight week. China’s May passenger vehicle retail sales fell 17% YoY but grew 30% MoM.  Whole sales were down 3% YoY but grew 64% MoM.  China is scheduled to release May trade data later this morning and aggregate financing data as early as today.  ECB meeting on tap today. The European Central Bank (ECB) is scheduled to meet today. While expectations are broadly set for a lift-off in July, eyes will be mainly on the Bank’s inflation forecasts and any hints of an earlier-than-expected 50bps rate hike moves. For in depth analysis, click here. Recall May CPI rose to a fresh record high of 8.1% y/y from 7.5% y/y previously, and ECB tightening expectations have picked up since this economic read. We expect more of the policymakers to tilt hawkish in the coming weeks, which will likely bring forward the expectation of the 50bps move to Q3 rather than in December. Potential trading and investing ideas? We maintain our view that the recent rise in Chinese equities has been a tradable bear market rally that may wane anytime. The prospect of concluding cybersecurity investigations into Didi and other tech companies, the approval of second batch of online games, and U.S. Treasury Secretary Yellen’s repeated signals, including the latest one from yesterday, to reduce or rollback tariffs on some goods from China to lower inflation in the U.S., contributed to this week’s strong performance in Chinese stocks, in particular tech stocks listed overseas.  It is important to note that the slope to climb is still steep for the Chinese economy and valuation of Chinese stocks in general is inexpensive but not dirt cheap once we take into consideration of the plausibility of earnings downward revisions and misses.  Common prosperity and stability remains a key focus of the Chinese leadership, instead of economic growth.   Clean energy remains on watch with the oil price likely to head higher. As tweeted yesterday Hydrogen stocks are in focus with a $36 billion Asian renewal energy hub seeking approval. The potential new Asian hydrogen hub aims to help tackle climate change by installing solar and wind capacity in Western Australia to produce green hydrogen. Most hydrogen stocks are not profitable. However the following two stocks are; Chart Industries (GTLS) that makes 51% of revenue from America, 32% EMEA, 17% from APAC. And Bloom Energy (BE) which makes 62% of revenue from the US, AND 38% from APAC. For more inspiration look at Saxo’s Energy Storage Basket and look at Hydrogen ETFs: like HGEN which tracks some of the biggest hydrogen companies globally. Uranium stocks, take a haircut, but appear supported following yesterday’s $4.3 billion pledge to support US uranium. So, the US wants to buy enriched uranium directly from domestic producers to wean off Russian imports, which is critically important especially if the Russia ceases exports. The ETF, Global X Uranium ETF (URA) that tracks some of the largest global uranium mining companies fell slightly overnight, 0.3%, after rocketing up 6% the day before on the stimulus news. US Uranium stocks to keep on your radar include Cameco (CCJ) that makes about 52% of its uranium income from the US, and the rest from Canada. Another company to look at is Energy Fuels (UUUU), which makes 100% of its revenue from the  For a weekly look at what’s on the radar for investors, and traders this week -  read, watch or listen to our Monday Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Oil gains Bond rise Equites ripe for a hair cut | Saxo Group (home.saxo)
German inflation comes down as government measures bite

Three elements to watch with higher interest rates in Australia

Saxo Bank Saxo Bank 08.06.2022 14:22
Summary:  Bye-bye ‘lower for longer’ interest rates, hello higher for ‘higher for longer’. If you are invested or investing, you need to know the Reserve Bank of Australia will likely continue to rise rates higher than most expect in 2022, especially as Australia’s central bank flagged that ‘extraordinary support is no longer needed’. This will cause markets shocks, and two different cohorts of stocks to move in opposite directions. So, here are the three elements to watch, given rates could sit at over 3% at the end of 2022. The RBA ripped off the interest rates band-aid for the second time in over a decade, rising the official interest rate by 0.5% yesterday (vs market expecting a hike of 0.25%). This takes the cash rate to 0.85%. The RBA decision was more aggressive than most thought; so it spooked the Australian share market; punishing stocks that traditionally suffer in higher interest rate environments; which is why the Australian Technology sector fell back down to two-year lows, and now collectively is 42% lower than its peak, the Consumer Discretionary sector fell to two-year-lows and is now down 24% from its high, while the Australian Property sector fell slumped to a new year-low, and is down 21% in total from its November high. The bottom line is, the market (or consensus) estimates, will probably continue to get rate predictions wrong, which will cause more volatility. So to get ahead, consider devising a simple checklist (or use ours below) of why we think the RBA will likely rise rates more aggressively. Secondly, consider looking at or investing in those potentially winning sectors, and maybe consider your exposure to those sectors that will likely continue to slide lower as rates continue to spike in 2022 (given the Australian economy is strong enough to stand on its own) . Rate hike checklist Consider what the RBA will be looking at month-on-month, ahead of their next meetings, so you can get ahead of the curve. Take yesterday’s RBA interest rate decision meeting for example; we knew they would have factored in the following; Consumer facing inflation is rising and could likely continue, fueled by raw prices rising. Month on month, compared to the last RBA meeting to yesterday’s they would have observed; the oil price had risen 15%, pressuring petrol prices up. Gas prices rose 28%, pressuring up power bills. The wheat price gained 5%, hurting food prices. (Separate to that, the RBA would have observed the Australian dollar gained 4%.) All of these price measures are reflected upon at bank meets and are expected to push up for the rest of 2022. Excluding that, Australia’s Energy Regular thinks utility prices could rise up to 14% this year from July. All this supports our view of higher for longer inflation, which means you could expect the RBA to be more hawkish at next month’s meeting and so on. For more on price inflation refer to our quarterly outlook and daily commentary. The RBA looks at economic indicators- which are strengthening. Better than expected economic news gives the RBA ammunition to rise rates. Of late a triple whammy of greater than expected economic news has been released. Recall Australia’s economy grew stronger than expected in Q1, Australia produced record Australian export income, and Labor’s childcare policy was pledged - which will see mums and dads return to the workforce (adding to the already full-employment picture, which will add to wage pressure- .i.e. wage price inflation). The icing on the cake will come from, Australia’s biggest commodity consumer, China, coming out of lockdown. A big first step was when Shanghai, China’s most populated city and its business hub, came out of two-month lockdown last week (June 1). This caused key commodity prices to rise to fresh highs (oil, iron ore, copper for example).  The next question is, as commodity demand grows again, will it put pressure on commodity prices? We think so. This means Australian export income will likely rise to another record high, and the AUD will likely be supported. Also consider if China reopens later this year, our services sector (which adds 70% to GDP) will likely get a boost. This breeds better economic fire power and gives the RBA yet more ammunition to rise rates. For weekly updates on China click here, or follow our daily commentary. Potential winners of higher rates? When it comes to investing with higher rates and yields in mind, it will likely pay to be invested in those companies that are beneficiaries and or contributors to inflation; energy, mining, and agriculture securities. In addition to that, as rates rise, yields rise, so insurance companies will likely be supported higher as well. Insurance companies for example, like Suncorp, QBE and IAG for instance could potentially see their profits rise by 20% if rates rise in line with consensus (up to 3% this year).   Potential losers of higher rates On the downside, as highlighted above, tech, property, consumer spending stocks will likely continue to face selling pressure as rates rise more than expected. And in this brand new cycle, banks will likely continue to fall too. Why? Well despite, record high employment, consumers are faced with record inflation. Consumers also have to cop higher interest rates, at a time when they’re borrowing and saving less. Property lending has fallen, household savings are dropping and Australia’s property boom will end. Banks are already facing margin (profit) compression, and now they face bad debts increasing, delinquency rates rising and losing more lending business as householders are forced to reluctantly sell their homes. This will add further pressure to property prices falling Source: Three elements to watch amid higher Australian interest rates | Saxo Group (home.saxo)
Ichimoku cloud indicator analysis on Gold for Tuesday June 28th, 2022.

Financial Markets Today: Quick Take – June 8, 2022

Saxo Bank Saxo Bank 08.06.2022 09:55
Summary:  Equity markets pulled back from a mild sell-off attempt yesterday, closing on a strong note ahead of a mixed session in Asia overnight, where the Japanese yen continued its freefall despite a modest dip in global bond yields yesterday. The VIX measure of market volatility dropped to a new low since late April. Elsewhere, the euro continues to trade in a tight range versus the US dollar ahead of a highly anticipated ECB meeting tomorrow, while   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 futures broke below the 12,455 level yesterday that we highlighted as a key support level, but in a sign of short-term strength the index futures pulled back ending the session above the prior day’s close. The move has brought Nasdaq 100 futures back into the consolidation range following the rebound that started two weeks ago. The key resistance level to watch on the upside is 12,894. The VIX Index pushed to its lowest level since late April closing at 24.02 and the US 10-year yield is still sitting around 3%. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) China’s National Press and Publication Administration announced the latest batch of approval of monetization licenses (banhao) for 60 new online games. China had stopped issued banhao since July last year amid a clamp down on the online gaming industry until the suspension ended in April with the approval of 45 banhao. Chinese gaming stocks surged, with Bilibili (09626) +15%, XD (02400) +5%, CMGE (00302) +4%. IGG (00799) +6%. While having been excluded from the two batches of approval, the share price of Netease (09999) still climbed 3% and Tencent (000700) was up 5%. Shares in Shanghai and Shenzhen traded higher initially but closed lower for the morning session. CSI300 (000300.I) was down 0.4%.  USDJPY and JPY crosses The yen continued its near free-fall overnight, this time without the usual source of pressure on the currency, as global bond yields actually consolidated a few notches lower in yesterday’s trade. Today sees an auction of US 10-year treasury notes and USDJPY will likely remain very sensitive to the direction in longer US treasury yields, with the cycle high (and late 2018 high) near 3.25% an important focus. The cycle high from early 2000’s of 135.00 is the next upside technical focus, but there is likely to be no effective ceiling until either global bond yields are in firm retreat or the Bank of Japan caves on its commitment to capping JGB yields under its yield-curve-control policy. EURUSD The EURUSD has been coiling in a range between 1.0627 and 1.0787 for over two weeks and ahead of the ECB meeting tomorrow. The ECB has guided that it will wind down its QE purchases ahead of a rate hike July meeting. A more hawkish tone from many ECB officials of late has the market looking for a steeper pace of rate tightening thereafter, but how aggressively the ECB is ready to guide the market, especially with its latest staff projections on growth and inflation, is a key uncertainty. The meeting is likely to trigger a move out of the range. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil trades around $120 with focus on US oil and fuel inventories and recovering fuel demand as China’s major cities relax Covid-19 curbs, and ahead of an expected busy summer driving and flying season. Weekly figures from the American Petroleum Insititute showed rising inventories of crude as opposed to expectations of an EIA drawdown, while both gasoline and distillate stocks rose.  In its monthly STEO report, the EIA left US 2022 production unchanged at 11.91m b/d while boosting the next year by 120k b/d to 12.97m b/d. In addition, they warned Russia’s production could drop by 18% by the end of next year. Refineries across the world are running at close to capacity to replace sanctioned barrels from Russia, and with supply being this tight, prices will likely need to go higher in order to kill demand, thereby balancing the market. Gold (XAUUSD) Gold has managed to hold above support in the $1843 area where the 21- and 200-day moving averages meet. This after the World Bank cut its forecast for global growth and a FED GDP tracker showed the US economy could be on the brink of recession (see below). Leveraged traders in futures and investors in ETF’s are currently showing no clear conviction with positions in both having been rangebound for the past month. Ahead of Friday’s key US CPI print, resistance at $1870 will likely curb the upside with continued inspiration until then being found in treasury yields and dollar movements. Uranium miners jumped on Tuesday Uranium miners jumped after the US administration pushed lawmakers to support a $4.3 billion plan to buy enriched uranium directly from domestic producers to wean the US off Russian imports. The US currently has only one remaining commercial enrichment facility and investments are needed, especially given the risk of Russia halting exports. The Global X Uranium ETF (URA:arcx) which tracks a broad range of companies involved in uranium mining jumped 6% with strong individual gains seen among major companies such as CCO:xtse, NXE:xtse,  PDN:xasx, EFR:xtse, DML:xtse and UEC:xase. What is going on? FED GDP tracker shows the US economy could be on the brink of recession A widely followed Federal Reserve gauge is indicating that the U.S. economy could be headed for a second consecutive quarter of negative growth, meeting a rule-of-thumb definition for a recession. In an update posted Tuesday, the Atlanta Fed’s GDPNow tracker is now pointing to an annualized gain of just 0.9% for the second quarter. Following a 1.5% drop in the first three months of the year, the indicator shows the economy doesn’t have much further to go before it slides into what many consider a recession. UK Chancellor Sunak promises tax cuts at the fall budget announcement The focus in Sunak’s comments is on cutting taxes for business at a time when those taxes were actually set for a rise to 25% from 19% currently. A pandemic-era tax incentive that provided 25% for every pound sterling invested in plant and equipment expired in April. World Bank cut its global growth forecast The World Bank has further downgraded its global growth forecast to 2.9% for 2022 from January’s prediction of 4.1% and April's 3.2%. Along with the cut to forecasts, it was noteworthy that the Bank also gave out a debt distress warning for the low- and middle-income countries, something we had been highlighting since the Sri Lanka crisis given the high dependence of frontier economies on energy and food imports. A similar warning was also seen from the IMF which called for countries to protect the poor. Japan Q1 GDP revised higher The final print of Japan’s Q1 GDP was upgraded but remained in contraction. GDP was down 0.5% q/q sa from -1.0% in the preliminary print. The revised data showed that private consumption increased 0.1% from the previous quarter, compared with a flat reading in the preliminary data. That is a positive sign, and we will possibly see more of that in Q2 as pent-up demand supports consumption. But a weaker yen and higher price pressures will weigh. Inditex reports Q1 revenue above estimates The Spanish based fashion retailer reports better than expected Q1 revenue of €6.7bn vs est. €6.2bn while Q1 EBIT is in line with estimates at €1.03b. The retailer expects gross margin to be stable in 2022. What are we watching next? First round of the French parliamentary election on Sunday Some polls suggest President Emmanuel Macron's centrist alliance may struggle to get a majority (289 seats) in the new National Assembly while others forecast a Macron victory. The difficulty here is that seat projections are based on national figures, past trends and surveys of key sets. This is basically impossible (and too costly) to poll 577 constituencies. Therefore, polls are likely less precise than for the presidential election. Overall, we still expect Macron to win a narrow majority of seats. He will therefore be able to implement his economic platform, including the most controversial proposals (such as pension reform). The left­-green alliance NUPES will likely be the second party in the National Assembly (currently averaging around 25.6 % of votes). But for how long? This alliance will not last for five years, in our view. There are too many disagreements on key issues between members (for instance on secularism). The second round of the parliamentary election is scheduled for 19 June. Expect little to no market impact. Retailer earnings may see further hits With Target (TGT) cutting its guidance on operating profit by half within three weeks of reporting earnings, it is clear that inventory issues at retailers are glaring. We wrote about this in our macro note suggesting that retailers will need mark-down prices going forward to clear their inventory, suggesting further earnings pressures. While strong household balance sheets may help retailers sail through with these higher inventory levels, especially after the stock outs of the last two years due to supply disruptions, it is certainly something to watch as a leading indicator of economic momentum. The key to watch will be if other retailers such as Walmart (WMT) also issue further inventory/profit warnings. Earnings Watch A quiet day ahead as Inditex has already reported (see earnings review above) in early European hours. Tomorrow’s focus is on DocuSign, Vail Resorts, and NIO. Today: Acciona Energias Renovables, Nuance Communications, Dollarama, Brown-Forman, Five Below, Inditex, Campbell Soup, Aveva Group, Full Truck Alliance Thursday: Chow Tai Fook Jewellery, Sekisui House, China Resources Power, Saputo, DocuSign, Vail Resorts, NIO, Bilibili Economic calendar highlights for today (times GMT) 0700 – Hungary May CPI 0830 – UK May Construction PMI Poland National Bank of Poland Rate Announcement 1430 – EIA's Weekly Crude Oil and Fuel Stock Report 2301 – UK May RICS House Price Balance   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Market Quick Take Jun 8 2022 | Saxo Group (home.saxo)
Green energy hype, Target misfires, World Bank cuts global growth estimates

Green energy hype, Target misfires, World Bank cuts global growth estimates

Saxo Bank Saxo Bank 08.06.2022 09:50
Summary:  US stocks rise for second day, but caution is thick in the air, with selective buying taking place and broad indices staying range bound awaiting global growth to slow, with the World Bank downgrading its forecast following the IMF. Australia joined global banks and started aggressively rising rates, which will likely squeeze Aussies out of the property market and damage banks fragile profits. So now all eyes are on India’s central bank meeting today. China approves 60 new online game monetization licenses. In FX the USDJPY surged to a new 20 year high, what’s next? In Commodities, uranium and hydrogen fly their flags, while heavy weigh iron ore marches up, supporting shares in the world’s biggest miners.   What’s happening in markets that you need to know      US stocks rise for second day, but caution is thick in the air, with selective buying taking place and broad indices staying range bound awaiting Fridays all important US inflation data. On Tuesday The Nasdaq managed to rise 0.9%, and the S&P500 gained 1%, despite Target(TGT) falling 2.3% after cutting its profit outlook. Apple (AAPL) drove the gains, rising 1.8% after entering the buy now pay later space which will likely boost its earnings. The market was also buoyed by Microsoft’s (MSFT) gain of 1.4% after the tech giant and DocuSign (DOC) expanded their partnership, integrating DocuSign’s technology across Microsoft’s business offerings. All in all, the key US indices, could be eyeing a pull back with the technical indicators suggesting the S&P500 and the Nasdaq could head lower on Wednesday morning; while green technology stocks and energy giants, could once again remain a bright spark. Australia’s ASX200 regained back half of yesterday’s loss, pushing up 0.8% with mostly all sectors higher except financials with aggressive rate hikes likely to push Aussies into financial duress, with big banks shares, like Westpac (WBC), NAB (NAB), CBA (CBA) and ANZ (ANZ) all featured in the bottom 10 worst performers down, over 2-5%. However today, the mood on the ASX is mostly elevated buoyed by likely uranium and hydrogen stimulus. In uranium, Paladin (PDN) shares are up 14%, while other uranium companies like BHP (BHP) also trade up 3%. China approves 60 new online games monetization licenseS (banhao).  The National Press and Publication Administration announced the latest batch of approval of banhao for 60 new online games.  China had stopped issued banhao since July last year in the midst of clamping down on the online gaming industry until the suspension ended in April with the approval 45 banhao.  Chinese gaming stocks surged this morning, with Bilibili (09826) +12%, XD (02400)+6%, CMGE (00302) +5%. IGG (00799) +9%.  While having been excluded from the two batches of approval, the share price of Netease (09999) and Tencent (000700) were up 3%.   Hang Seng Index (HSI.I) gained 1.8% and Hang Seng TECH Index (HSTECH.I) jumped 3.7%. In Shanghai and Shenzhen, CSI300 (000300.I) was 0.5% higher. USDJPY continues to rise unabated. A fresh new 20-year high of 133.21 was printed in USDJPY in Asian morning as US 10-year yields rose further widening of the monetary policy divergence between the Bank of Japan (BOJ) and the Fed. While the yen weakness may have been overdone, and the move above 133 in USDJPY was promptly reversed, but it still remains tough to reverse the overall bearish trend for the yen. Iron ore (SCOM2) rallied for the 5th  day with the steel making ingredient back at $144.61 trading at its highest level in 6 weeks, supporting stocks like Rio (RIO), BHP (BHP) and Champion Iron (CIA) rally in the Australian session on Wednesday. Copper (COPPERUSJUL22) trades lower but holds at its highest level since April, supporting stocks like Sandfire Resources (SFR), and Oz Minerals (OZL) in the Asian Pacific session surge to new three months highs and give off technical indicators signals they may be headed for higher ground still.   What do you need to consider?  World Bank cuts its global growth forecast. The World Bank has further downgraded its global growth forecast to 2.9% for 2022 from January’s prediction of 4.1% and April's 3.2%. Along with the cut to forecasts, it was noteworthy that the Bank also gave out a debt distress warnings for the low and middle income countries, something we had been highlighting since the food crisis unfolded well as the Sri Lanka crisis given the high dependence of frontier economies on energy and food imports. A similar warning was also seen from the IMF which called for countries to protect the poor. China expanded the eligibility for getting VAT rebates to companies in the wholesale and retail industry, agriculture, forestry and fishery industry, hospitality and catering industry, services to household industry, education industry, and sports and entertainment industry. The RBA surprised the market and increased the cash rate yesterday by 0.5% (vs a hike of 0.25% the market expected) taking the official rate to 0.85%. As we’ve been alluded to for some time now, we think the RBA will continue to get more hawkish than expected, as key inflationary measures in Australia; energy, utility bills, and food prices are likely to increase, giving the RBA more ammunition to rise rates. Excluding that, as we've also alluded to, Australia’s Energy Regulatory themselves said they think utility bills will rise as much as 14% for the rest of the year.  As mentioned last week, with the RBA to get more hawkish, caution remains for 2022 with delinquency rates likely to rise in the second half, according to Bloomberg. Also, as we stand the Australian interest rates futures now suggest interest rates could sit at 3.1% at the end of 2022.   Japan Q1 GDP revised higher. The final print of Japan’s Q1 GDP was upgraded but still remained in contraction. GDP was down 0.5% q/q sa from -1.0% in the preliminary print. The revised data showed that private consumption increased 0.1% from the previous quarter, compared with a flat reading in the preliminary data. That is a positive sign and we will possibly see more of that in Q2 as pent up demand supports consumption. But a weaker yen and higher price pressures will weigh. Reserve Bank of India poised to raise rates today. We have the RBI rate decision scheduled today and consensus expects a 40bps rate hike. There is likely room for the central bank to go beyond that if it is serious about capping inflation which has overshot expectations since the start of this year. We have seen a series of hawkish surprises over the past month from RBNZ, Bank of Canada and Reserve Bank of Australia this week. It will also be key to watch the inflation forecasts, especially as a signal for any likelihood of more grain export curbs if domestic price pressures fail to abate. The risk is mainly on rice exports now. Uranium companies in focus after Biden pushes a $4.2 billion plan to buy enriched uranium direct from domestic producers. Bidens’ nuclear fuel plan is aimed at weaned the US off Russian imports of nuclear-reactor fuel. Stocks to watch in Uranium include;  Energy Fuels and Cameco in North America. Yellow Cake, Kazatomprom, Berkley Energeia in Europe. And Paladin Energy, Deep Yellow, Boss Energy and Vimy on the ASX. Potential trading and investing ideas?   Retailer earnings may see further hits. With Target (TGT) cutting its guidance on operating profit by half within three weeks of reporting earnings, it is clear that inventory issues at retailers are glaring. We wrote about this in our macro note suggesting that retailers will need mark-down prices going forward to clear their inventory, suggesting further earnings pressures. While strong household balance sheets may help retailers sail through with these higher inventory levels, especially after the stock outs of the last two years due to supply disruptions, it is certainly something to watch as a leading indicator of economic momentum. More key to watch will be if other retailers such as Walmart (WMT) also issue further inventory/profit warnings. For a weekly look at what’s on the radar for investors, and traders this week;  read, watch or listen to our Monday Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Hydrogen hype Target misfires World Bank cuts global growth estimates | Saxo Group (home.saxo)
Ethereum rejection at channel resistance

Ethereum (ETH) Merge Is Coming! What Does It Mean?

Saxo Bank Saxo Bank 07.06.2022 18:45
Summary:  In August, Ethereum’s transition from proof-of-work to proof-of-stake known as the merge is expected to take place, and the first public test of the merge is set to occur tomorrow. The merge might be one of the most influential events in the history of crypto by impacting Ethereum both technically and economically. We look into the ways that the merge changes Ethereum. Since releasing the first Ethereum whitepaper in 2014, Ethereum’s developers have explicitly mentioned their desire to eventually adapt proof-of-stake instead of proof-of-work, but due to technical difficulties, it has not previously been feasible. Yet, Ethereum’s transition from proof-of-work to proof-of-stake - known as “the merge” - is now closer than ever. On the 8th of June, the first public test of the merge is set to occur subsequent to seven other minor tests. On this day, the existing test network Ropsten is set to perform a merge. If the Ropsten merge is successful, Ethereum will merge two other existing test networks, ahead of the actual merge. With this knowledge and insight from the Ethereum Foundation, it seems reasonable to consider that the merge will take place in August, considering that the tests turn out well. With the merge taking place in the near future, we look at the ways it changes Ethereum both technically and economically. From miners to stakers The most substantial change is the transition from proof-of-work to proof-of-stake, fundamentally changing by what method the network verifies transactions. Instead of tremendous computing power put at the network’s disposal by miners, holders of Ether are those to verify transactions. This means that holders have the option to lock their Ether as collateral to be able to verify transactions, in other words, stake their Ether. In return, they receive the transaction fees alongside the security cost. The latter is the newly issued Ether to financially encourage miners at this point in time, but it later goes to stakers for verify transactions. With proof-of-stake, the main security feature is that stakers can be slashed. In case the network determines that a staker has behaved unethically, for instance, tried to reverse transactions, the network can take some or all of their staked Ether. More environmentally friendly When adapting proof-of-stake, Ethereum reduces its energy consumption by around 99.95%. To understand why we must again consider the differences between the consensus mechanisms. With respect to Ethereum, a new block is currently finalized around every 13th second. In these 13 seconds, every miner fights to be the one to finalize the block. This involves applying computing power and thus requires electricity. However, in the end, it is solely one miner that finalizes the block and verifies the transactions, even though other miners have spent a tremendous amount of energy on the same block. In terms of proof-of-stake, one validator is randomly chosen to finalize a block based on one’s amount of Ether staked. This happens prior to the block, so no other staker is trying to finalize the same block, ultimately reducing Ethereum’s energy consumption by around 99.95%. Improved and fairer economics Because the energy required to verify transactions on Ethereum drastically decreases, the security cost can likewise decline massively. With proof-of-work, Ethereum’s security cost amounts to around 5.4mn Ether yearly. This means that 5.4mn new Ether gets issued yearly to the present supply of around 120mn Ether to encourage miners to verify transactions. At the time of the merge, the security cost declines to around 0.5mn Ether yearly being compensated to stakers. This is an extensive reduction in the inflation of Ethereum, which might even make Ethereum deflationary since the paid transaction costs are expected to outpace Ethereum’s security cost. With respect to transaction fees, a substantial part of these get burned, hence removed from the supply. Over time this might result in a supply shock because the market is used to absorbing 5.4mn newly issued Ether yearly but suddenly only around 0.5mn Ether is to be issued.One might also argue that proof-of-stake is economically fairer for holders of Ethereum than proof-of-work. With proof-of-work, you can technically verify transactions without holding Ether as long as you invest heavily in computing power. This means that holders are not compensated for the inflation and transaction fees, effectively diluting them. In the case of proof-of-stake, stakers are compensated fairly for the inflation and transaction fees. Not significantly more scalable, though By default, the merge does not make Ethereum significantly more scalable. If the merge turns out well, the merge decreases the block size from around 13 to 12 seconds but maintains the same block size. This ultimately leads to an increase in transactional output of 7.5% but not much more than that. Based on the present schedule, Ethereum will first significantly improve scalability sometime in 2023. It is intended that shard chains get implemented around here, which will massively improve Ethereum’s scalability and possibly require even less hardware to verify transactions. 12.8mn Ether to be unlocked later On December 1st, 2020, the proof-of-stake version of Ethereum went live, known as the Beacon Chain. The Beacon Chain is technically the one to be merged with proof-of-work based Ethereum when the merge occurs. The Beacon Chain has been finalizing empty blocks since it went live to ensure that it works as intended. To verify these blocks, Ethereum holders have been able to stake Ether on the Beacon Chain. Over 10% of the total supply of Ether, around 12.8mn Ether, is now staked on the Beacon Chain.However, by staking Ether on the Beacon Chain, the Ether has been locked. It was originally planned to unlock the staked Ether when the merge occurs, but to simplify the merge from a technical point of view, Ethereum’s developers have chosen not to unlock the staked funds at the time of the merge. The unlocking will likely follow 6 months after the merge, in which the 12.8mn Ether alongside the afterward staked Ether will be unlocked. The compensated security cost and transaction fees to stakers are likewise locked in these months. This means that presumably until next year no newly issued Ether nor transaction fees are expected to hit the circulating supply, potentially limiting selling pressure. On the other hand, when the staked Ether is unlocked, which is not unlikely to be above 15mn Ether at that time, it might result in severe selling pressure. More of the same The merge will not impact Ethereum by other substantial means. First, it is not planned to impact or require holders of Ether to take an active stance. The merge will occur without them noticing. Secondly, it should not influence tokens or decentralized applications presently utilizing Ethereum. This means that deployed tokens and smart contracts on Ethereum are planned to work like before the merge.Although Ethereum’s developers have worked on the merge for years, it can turn out bad or be further delayed. Just like everything else in crypto, there are simply no guarantees.   Source: What you need to know about the Ethereum merge | Saxo Group (home.saxo)
Christine Lagarde (ECB) Speaks Today! FX Pairs With Euro (EUR/USD) And (EUR/GBP) May Be Affected!

Once Again (USD) US Dollar Is Leading The Pack And Outperforming Weak Japanese Yen (JPY). USD/JPY Rallies | Saxo Bank

Saxo Bank Saxo Bank 07.06.2022 18:34
Summary:  USD trades higher after US10y yield trades back up above 3.0% while JPY underperform as rate differential comes back in play. USDJPY vols are sharply higher with 1 month up 2 vol since Friday close and risk reversals has flipped back to favor calls, 1 month now 0.25 for topside. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these. FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: USDJPY spot, Black: USDJPY 1 month vol USD trades stronger after US10y yield trades back up above 3.0% and JPY is sharply lower as rate differential comes back in play. USDJPY spot is up 200 pips from Friday close and touched 133.00 highs this morning, this is the highest level in 20 year. Vols are sharply higher with 1 month USDJPY up 2 vol from Friday, now trading around 11.65, while 1 week is up 2.5 vol to 12.0. The whole curve is lifted with 1 year up 1 vol to currently trade 10.0. Risk reversals have flipped back to favor USDJPY calls out to 9 months with 1 month trading 0.3 for calls and 1 week at 0.60. The sharp move higher in vol has pushed the risk premium to just above 2.0 vol which makes USDJPY the most expensive currency pair in G10. Next resistance comes in at 135-136 area and above that there is no targets before the 1998 highs at 147.66. We can’t rule out some corrections given the magnitude and speed of the recent move and we can expect BoJ to come in and try talk down UDSJPY when we get closer to 135. The trend is higher and the 135-136 resistance could easily be taken out if US10y makes new highs above 3.20. With that said we like to sell short dated USDJPY call with strikes at or above 135 after the sharp repricing of vol and risk reversals. Sell 1 week 135.00 USDJPY callReceive 20 pips Alternative Sell 2 week 136.00 USDJPY callReceive 30 pips Spot ref.: 132.85 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: Saxo Bank
Should Drivers Worry About Fuel Prices Again? Will Crude Oil Price Go Up!?

Can NIO Stock Price Be Affected Earnings? RBA Raised The Rate - What's AUD Reaction?

Saxo Bank Saxo Bank 07.06.2022 12:42
Summary:  Equity markets are trading on nervous footing as global bond yields are rising everywhere, even if US treasuries at the longer end of the curve are still slightly below the cycle highs. In the UK, Prime Minister Johnson survived a party leadership confidence vote, but his future remains murky. Overnight, the Reserve Bank of Australia hiked 50 basis points, stoking an AUD rally in the crosses, while the Japanese yen continues its collapse as the Bank of Japan’s yield curve control policy means that the currency asborbs the pressure of rising yields when Japan’s bond market can’t.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 futures are this morning trading around the 12,500 level with the 12,454 level being the key support level to watch on the downside should the selling pressure continue. The equity market remains weak despite the recent rebound from the cycle lows with commodity prices hitting a new all-time high recently and Larry Summers comments that the US is entering the “age of residential inflation” and will require Volcker style aggressiveness to tame inflation. The US 10-year yield is also surging on strong momentum hitting 3.05% this morning putting pressure on long duration technology stocks. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Chinese equities are weak today fluctuating between small gains and losses from yesterday. Chinese authorities were said to be completing their cybersecurity investigation into Didi Global Inc (DIDI), Full Truck Alliance Co (YMM), and Kanzhun Ltd. (BZ) and preparing to lift bans on adding new users and allowing their mobile apps back on domestic app stores as soon as this week. According to the Wall Street Journal, these companies would be subject to fines and must give 1% equity stake to the Chinese Government.  Didi jumped as much 68% before closing 24% higher yesterday in New York. The report did not generate much further hype in Chinese internet stocks today. USDJPY and JPY crosses The yen is practically spiraling into the abyss, dropping to new lows almost across the board as most major economies saw their longer-term government bond yields posting new cycle highs late last week, with a fresh rise in yields to start this week. Every uptick in yields is transmitted straight to the JPY as long as the Bank of Japan maintains its cap on 10-year JGB yields. The US 10-year yield, unlike most of its DM peers, has yet to post new cycle- and multi-year highs above 3.25%, but should it do so, the pressure on the JPY will mount further and at some point, the Bank of Japan may be forced down from its policy, which could trigger monumental volatility should it do so. Traders should tread carefully here. AUDUSD The Aussie got solid support in the crosses from the RBA decision overnight to hike rates by 50 basis points to take the policy rate to 0.85% (most were expecting either a 25-basis point move or a 40-basis point hike to get the central bank’s policy rate onto a standard quarter-point increment of 0.75%.) AUDNZD, for example, jumped to a new four-year high on the development. But weak risk sentiment in Asia saw the currency trading lower versus the US dollar as the AUDUSD pair last week found resistance right around the key 0.7260 area, which contains multiple longer term moving averages, including the 200-day SMA. A new sentiment rally and rally in key commodity prices will be needed to pick the AUD up again in the AUDUSD context. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil trades near $120 after last week’s OPEC+ production hike failed to ease worries about tight supply, and after Saudi Arabia raised its July sales prices to Asia by more than expected in anticipation of strong demand for its crude, not least from China where lockdowns continue to be eased. Brent has so far been rejected twice at $122, the key battleground ahead of $123.75, while fuel products, led by gasoline, already trade at record levels, as refineries scramble to supply a fuel market that has been upended by sanctions and robust demand. With supply being this tight, prices will likely need to go higher in order to kill demand and balance the market.  On tap today, EIA’s Short-Term Energy Outlook and API’s weekly stock report. Gold (XAUUSD) Gold trades below its 21- and 200-day moving averages, both around $1842, with the fresh loss of momentum being driven by rising yields and a stronger dollar after robust US data last week eased worries that a rapid succession of rate hikes would drive the US economy into a recession, thereby raising the risk of stagflation and a so-called policy mistake. US ten-year inflation adjusted yields trades around 0.25%, a key reason why some traders see gold as being overvalued at current levels. Support at $1830 and $1820. Copper (COPPERUSJUL22) and Silver (XAGUSD) meanwhile both trades lower on global growth worries, with silver’s three successive rejections around $22.50 raising the short-term downside risk US Treasuries (TLT, IEF) US yields jumped higher yesterday but are not providing the leadership for this cycle, as yields have posted new cycle highs almost everywhere else as early as late last week. The 10-year Treasury benchmark traded clear of 3.00%, but the big focus is on the 3.25% area that was near the cycle high of 2018. The US Treasury will auction 3-year notes today, 10-year notes tomorrow and 30-year T-bonds on Thursday. What is going on? UK Prime Minister Boris Johnson survives party leadership confidence with a 211-148 vote... ... but many suggest that Johnson’s days as Tory leader are numbered as this result is worse than the one Theresa May suffered during her short, embattled time as PM and party leader. Sterling tried to put together a rally on the news late yesterday after EURGBP poked toward the important 0.8600-area cycle highs, but after falling to 0.8525 overnight, was rallying sharply again already this morning. Larry Summers calls for Volcker style rates In a recent economic analysis, Larry Summers et. al. find evidence of the US core inflation rate being driven by rent inflation (OER inflation) which is expected to climb further from current levels. If historical inflation rates are adjusted for the shift in the CPI basket the current core inflation is well above the peaks in the 1950’s and early 1970’s, suggesting inflation is at risk of becoming unanchored. Larry Summers calls it the “the age of residential inflation” and argues for Volcker style aggressiveness on interest rates to tame inflation. Elon Musk says lack of “spam info” is breach of merger agreement Elon Musk is continuing to find all levers available to change the deal price of the Twitter acquisition or maybe pull out of the deal all together. We know from recent internal e-mails that Musk is getting very negative on the global economy and with his wealth being under pressure from falling Tesla shares the pressure is mounting on Musk. The ongoing dynamics make it less likely that the deal will go through. Swedish government says it’s not injecting more capital into SAS The signal suggests that the current negotiation between the airliner and its stakeholders is getting more critical as the current cost structure is not viable given the outlook for demand, fuel costs and competition. The comments from the Swedish government could lift other airliners in Europe in today’s session. What are we watching next? EU lawmakers look set to vote on a big chunk of the bloc’s landmark green legislation This includes proposals to raise its ambition on the carbon market, impose an emissions levy on energy-intensive products from abroad and phase out the combustion engine by 2035. The plans to slash emissions by 55% by the end of the decade have become even more pertinent following the Moscow’s invasion of Ukraine, as the region attempts to break its Russian fossil fuels habit. ECB meeting this week and new economic projections The ECB is widely expected to tip off a July hike at this Thursday’s ECB meeting after the flash estimate for the May Eurozone CPI rose to 8.1%. One key indicator of how seriously the central bank takes the longer term inflation threat will be in the staff projections of Eurozone inflation, which are due for a refresh after the most recent March projections forecast only 5.1% inflation for this year, 2.1% for next year, and 1.9% for 2024. Expect the central bank to announce an end to its bond buying program and that net asset purchases will be completed by the end of June. This will clear the way for interest rate hikes. This is a done-deal that the ECB will start lifting rates at the July meeting (it will take place just one day after the release of the eurozone Q2 GDP). A 25 basis interest rate hike is a reasonable and safe option, in our view. We see risks tilted towards a hawkish interpretation of Christine Lagarde’s message this week – meaning higher rates and a stronger euro. The deposit rate will continue to be lifted over the second half of 2022 and perhaps in 2023 depending on the trajectory of growth and inflation. Focus will be on the staff projections, especially the inflation forecasts for 2023 and 2024 too U.S. CPI in May is out on Friday This is the first estimate. The market consensus expects inflation to edge slightly lower at 8.2 % year-over-year. The core inflation is also expected to decrease from 6.2 % year-over-year to 5.9 %. But rents, new vehicles and food prices are likely to increase. Keep in mind inflation is very sticky. This is certainly too early to believe inflation has already peaked in the United States. Agricultural commodities will continue to attract attention... ... given the focus on global supplies of key stables from wheat and rice to edible oils. The USDA’s World Agricultural Supply and Demand Estimates are scheduled to be published on Friday. The Food and Agriculture Organization (FAO) of the United Nations also publishes its biannual Food Outlook on Thursday and will be key to watch for developments affecting the global food and feed markets. In addition, the market will focus on the Black Sea area and whether a deal can be reached that will allow Ukraine to ship up towards 25 million tons of grains currently blocked in. Speculators meanwhile have been net sellers of six crop futures for the past seven weeks, cutting bullish bets by 26% from a ten-year high. Earnings Watch A quiet earnings week is ahead of us but earnings releases from Inditex (parent company of the Zara brand) tomorrow will be monitored for guidance on consumer sentiment in Europe. Later on Thursday, DocuSign and NIO will be two closely watched technology companies with DocuSign being one of the big casualties since the peak last year in US technology stocks; analysts are expecting revenue growth to slow to 24% y/y with a big increase in operating income expected. Today: Sino Pharmaceutical, Kanzhun, Guidewire Software, J M Smucker Wednesday: Acciona Energias Renovables, Nuance Communications, Dollarama, Brown-Forman, Five Below, Inditex, Campbell Soup, Aveva Group, Full Truck Alliance Thursday: Chow Tai Fook Jewellery, Sekisui House, China Resources Power, Saputo, DocuSign, Vail Resorts, NIO, Bilibili Economic calendar highlights for today (times GMT) 1230 – US Apr. Trade Balance 1230 – Canada Apr. International Merchandise Trade 1400 – Canada May Ivey PMI 1600 – EIA's Short-Term Energy Outlook 1700 – US Treasury auctions 3-year notes 2030 – API's Weekly US Oil and Fuel Stock Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
FX: It's Time To Recover (CNY) Chinese Yuan! ING Forecasts - USD/CNY, USD/INR, USD/IDR

China Update: the busy economic calendar this week offers a glimpse of the state of the Chinese economy | Saxo Bank

Saxo Bank Saxo Bank 06.06.2022 13:07
Summary:  The Caixin Services PMI showed that the service sector in China was deep in the contractionary zone in May. Investors will be monitoring closely the trade data, aggregate financing and loan data scheduled to release this week for assessment of the direction of the Chinese economy. China’s May Caixin Services PMI came this morning at 41.4, much weaker than expectation (Bloomberg consensus 46.0; April 36.2) and staying deeply in the contractionary zone and being the second lowest since March 2020.  Service employment sub-index fell further to 48.5 (vs 49.3 in April), the fifth consecutive monthly decline and the lowest level since March 2021. Companied surveyed cited pandemic control restrictions as an important factor for the weakness in activities.  The improvement in May Caixin Services PMI number from April was notably weaker that what was suggested in the services sector sub-index of the official NBS non-manufacturing PMI that bounced to 47.1 in May from 40.0 in April.  In addition to the fact that the Caixin survey focusses on private enterprises, the differently might attribute to that difference in the timing of the survey.  The Caixin survey took place in mid-May when the COVID-related restrictions were more stringent than late May when the NBS survey was conducted.  One bright spot in the Caixin Services PMI was the improvement in the output price sub-index which improved to 50.7, entering the expansionary zone, from 48.5 in April.  The input price sub-index decelerated slightly to 52.4 in May from 53.7 in April.  The improvement indicates some pricing power of business enterprises in the services sector to pass on cost increases to their customers.  China has a busy economic calendar this week.  In addition to the Caixin services PMI mentioned above, the market will be focussing on the aggregate financing, loans and money supply figures that are expected to be released between June 9 and 15 (the exact date is not made known) and the trade data scheduled to release on Thursday June 9. New aggregate financing is expected to rebound to RMB2 trillion in May (Bloomberg consensus) from RMB910bn in April, being help by an increase in government bond issuance and a rebound of new RMB loans to 1.2 trillion from last month’s 545 billion.  This implies the growth rate of outstanding aggregate financing remains subdue at 10.2% YoY, partly due to base effect.  May money supply is expected to grow 10% YoY (Bloomberg consensus) in May (vs 10.5% in April).  May trade data is scheduled to release on Thursday June 9.  Container throughput data in the first 20 days of May suggests recovery in trade growth from the previous month as disruption to logistics and production eased.  Bloomberg consensus is calling for exports and imports to rise 8% YoY and 2.5% YoY respectively. We will also have the inflation data scheduled to release on Friday June 10. Inflation is less a concern for policy makers or the focus of the market for the time being in China.  May PPI is expected to fall 6.5% YoY (Bloomberg consensus) from April’s 8.0% as energy and raw materials prices having plateaued and due to base effect.  May CPI is expected to inch higher to 2.2% (Bloomberg consensus) from April’s 2.1%.  During the month, China added to its state reserves of pork to stabilize and reverse the decline in pork price.  Pork has a weight of approximately 4.8% in China’s CPI.Caixin China Services PMI Business Activity Index; Sources: Bloomberg LP; Saxo
Oil prices steady, gold in choppy waters | Oanda

Saxo Spotlight: What’s on investors and traders radars this week? | Saxo Bank

Saxo Bank Saxo Bank 06.06.2022 11:11
Summary:  It’s a huge week; US Inflation data due is poised to show inflation slowed in May, before running up again this year, ushering in the new term of 2022; 'higher for longer'. Plus, utility bills are poised to get higher for households, giving central banks room to rise rates further than mapped out. So all eyes are on the ECB meeting this week. In other eco news consumer confidence data remains at record lows; this week’s reading will probably show further signs the consumer is stretched. And can the Chinese economy show further signs of growth? Down under, Australia's central bank is poised to aggressively rise rates to combat higher than expected inflation. Meanwhile, in equities, Commodities and Defence remain the best performers this year, receiving the most flow of funds in anticipation of further earnings growth in 2022. US May CPI to re-affirm higher for longer. CPI rose 8.3% y/y in April, slightly slowing from March’s 8.5% y/y. Consensus expects a slight slowdown to 8.2% y/y in May, but we believe that talk of inflation slowing down from the peak is a stretched. US core PCE data came in as expected at 4.9% y/y and 0.3% m/m for May, but slower than last month's 5.2% y/y and have prompt further talk of inflation peaking out. While PCE is the preferred Fed metric, what cannot be ignored right now is that food and energy prices still have more room to run on the upside suggesting that inflation will remain higher for longer, and Fed needs to stay hawkish even beyond the couple of 50bps of rate hikes that remain the baseline for now. ECB meeting to prepare for July lift-off. The European Central Bank (ECB) is scheduled to meet this week on Thursday. While expectations are broadly set for a lift-off in July, eyes will be mainly on the Bank’s inflation forecasts and any hints of an earlier-than-expected 50bps rate hike moves. May CPI rose to a fresh record high of 8.1% y/y from 7.5% y/y previously, and ECB tightening expectations have picked up since the report. We expect more of the policymakers to tilt hawkish in the coming weeks, which will likely bring forward the expectation of the 50bps move to Q3 rather than in December. University of Michigan sentiment. While the sentiment has been generally positive over the last week, recent Fed surveys have been suggesting a loss in momentum in the US economy. The University of Michigan consumer sentiment index is due next on Friday, after it was revised lower to 58.4 in May, well below April’s 65.2. The index is a combination of the current assessment and expectations for the near future, and consensus expect the preliminary June reading at 58.9. Consumer confidence in the US is running at record lows, but spending continues to hold up. An increase in the reading would suggest consumers are more confident, a positive for stocks if that confidence translates into spending. Threat of a global food crisis. Agricultural commodities have more and more supply issues to deal with. After the war and unfavourable weather conditions, rising protectionism has threated the supply of key crops as Indonesia banned palm oil exports, India announced curbs on wheat exports and Malaysia staled chicken exports. Threat is now seen for India’s rice exports (which if initiated can also be followed up by other rice exporters like Vietnam) or shortage of eggs. Palm oil concerns also continue despite Indonesia removing the ban, amid smaller reserves and China demand coming back. China’s first batch of trade data for May, including soybeans, edible oils and meat imports, will be released Thursday, while the USDA’s World Agricultural Supply and Demand Estimates are scheduled to be published on June 10. The Food and Agriculture Organization (FAO) of the United Nations also publishes its biannual Food Outlook next week, and would be key to watch for developments affecting the global food and feed markets. China has a busy economic calendar this week.  May Caixin Services PMI came this morning at 41.4, much weaker than expectation and staying firming in the contractionary zone.  May trade data is scheduled to release on Thursday June 9.  Container throughput data in the first 20 days of May suggests recovery in trade growth from the previous month as disruption to logistics and production eased.  Bloomberg consensus is calling for exports and imports to rise 8% YoY and 2.5% YoY respectively. May PPI (Friday June 10) is expected to fall 6.5% YoY (Bloomberg consensus) from April’s 8.0% as energy and raw materials prices having plateaued and due to base effect.  May CPI is scheduled for Friday and is expected to inch higher to 2.2% (Bloomberg consensus) from April’s 2.1%.  During the month, China added to its state reserves of pork and triggered a rise in pork prices.  Pork has a weight of approximately 4.8% in CPI.  China is expected to release the aggregate financing, loan and money supply data between June 9 and 15 (the exact date is not made known).  New aggregate financing is expected to rebound somewhat to RMB1,975bn in May (Bloomberg consensus) from RMB910bn in April and it implies the growth rate of outstanding aggregate financing remains subdue at 10.2% YoY.  For equities, across the Baskets we track at Saxo; Commodities and Defense remain the best performers this year and the only two baskets in positive territory. Ahead of the US Fed starting to reduce its balance sheet next week (June 15), it could be worth considering adding Commodities and Defense securities to your portfolio, as the market expects these sectors to see greater earnings growth in 2022. The RBA is tipped to get aggressive with rate rises, with the second hike in a decade due tomorrow. Rate are tipped to rise from 0.35% to 0.6% as the RBA seeks to curb inflation and stabilize eco’ growth. Last week Aussie GPD and export income rose more than expected, ahead of Shanghai’s reopening. So as the economy is growing stronger than expected, and Labor’s new policy will see employment rise and wage pressure rise too, the RBA will have more room to rise rates across the year. The RBA Cash Rate Futures expect Australia’s interest rates to hit 2.8% this year. This will likely cause delinquency rates to rise across 2022, and could hurt some Australian banks as well, who are already facing margin (profit) compression, as borrowing rates have been steadily declining. At Saxo we’ve been hawkish, expecting higher for longer inflation, and now new research today from Bloomberg suggests more sustained and higher than expected inflation could linger in utilities too, with the Australian Energy Regulator suggesting prices could rise 4 to 14% from July, due to energy market disruptions. This supports our view that interest rates could possibly get close to potentially 3% in Australia this year. Key economic releases this week Monday 6 June South Korea, Switzerland, Norway, New Zealand Market HolidayHong Kong S&P Global PMI* (May)China (Mainland) Caixin Services PMI* (May)Thailand CPI (May) Tuesday 7 JuneJapan All Household Spending (Apr)Philippines CPI (May)Australia RBA Cash Rate (Jun)Germany Industrial Orders (Apr)Taiwan CPI (May)United Kingdom S&P Global / CIPS Services PMI* (May)United States International Trade (Apr)Canada Trade Balance (Apr) Wednesday 8 June South Korea GDP Growth (Q1, revised)Japan Current Account (Apr)Japan GDP (Q1, revised)India Repo and Reverse Repo Rate (8 Jun)Switzerland Unemployment Rate (May)Germany Industrial Output (Apr)United Kingdom Halifax House Prices* (May)Norway Manufacturing Output (Apr)Thailand 1-Day Repo RateTaiwan Trade (May)United Kingdom S&P Global / CIPS Construction PMI* (May)Eurozone GDP (Q1, revised)United States Wholesale Inventories (Apr) Thursday 9 June United Kingdom RICS Housing Survey (May)China (Mainland) Trade (May)Eurozone ECB Deposit and Refinancing Rate (Jun)United States Initial Jobless Claims Friday 10 June China (Mainland) CPI, PPI (May)China (Mainland) M2, New Yuan Loans, Loan Growth (May)Malaysia Industrial Output (Apr)Norway CPI (May)United States CPI (May)Canada Capacity Utilization (Q1)Canada Unemployment Rate (May)Canada Manufacturing Sales (Apr)United States UoM Sentiment (Jun, prelim) Source: Saxo Bank
Oil prices rise as demand outstrips supply

Oil price rallies back to $120. Better than expected jobs report supports a more prolonged rate hike cycle. | Saxo Bank

Saxo Bank Saxo Bank 06.06.2022 10:51
Summary:  Strong job data from the U.S. last Friday leaves the Fed on track to pursue a higher for longer rate hike cycle and aggressive quantitative tightening in its drive to fight inflation as well as to reestablish its institutional credibility. The speculation for a September pause has probably faded away. After a lukewarm response to the positive news of Shanghai reopening, investors are cautiously assessing the efficacy of stimulus measures announced and the direction and pace of the Chinese economy. What’s happening in markets? The mood is risk off again; with the Nasdaq and the S&P500 closing lower last week (down 1%) on stronger than expected US hiring data, which paves the way for aggressive Fed rate rises. The market managed to hold onto most the week prior gains of 7% for the Nasdaq and 6.5% for the S&P500, but on the weekly and monthly charts; with the RSI and MACD show buying is slowing and the market is overbought territory; with earnings tipped to slow in Q2. On top of that, the Fed starts reducing its balance sheet next week (June 15). Although there could be some more up-days, the technical indicators suggest another indices pull back is likely as market conditions weaken. S&P500 sectors show commodities rise to the top. There’s a lot to be said about looking at the best/worst performers, as the market can tell you where it thinks the best performers will likely be for the next 6,9,12 months. Although the S&P500 is down 13% YTD, The Oil and Gas sector is up 65% with stocks like Occidental Petroleum (OXY) up 143%. Another top performing sector is Fertilizers up 32% with Mosaic (MOS) shares up 53%, while the Agri product sector up 31% as well YTD with Archer-Daniels (ADM) up 31%. The reason for this is commodity companies are seeing the most earnings growth and are guiding for a bright 2022. Dollar resumed its incline. The USD had a run higher again late on Friday as upbeat non-farm payroll (NFP) data reporting a higher than expected jobs number in the US buoyed Fed tightening expectations. The Japanese yen was the biggest loser last week as USDJPY touched 131 levels on Friday following the NFP report bumping up US yields. Meanwhile, CAD and AUD have been the biggest winners, with CAD certainly supported by higher oil prices and BOC's hawkish tilt last week. AUDUSD could not sustain a bounce above 0.7250 with RBA on the horizon this week. EUR remains critical this week after being unable to find a direction last week, with the ECB meeting eyed. Crude oil extends its bounce. Crude oil jumped last week after OPEC+ decided to raise their monthly production output by around 50%, thereby making a futile attempt to soothe worries about a summer price spike as demand picks up. WTI and Brent are now back above $120/barrel where the last rejection was seen, as Saudi Arabia announced increases in prices to Asia to $6.50 premium above the Oman-Dubai benchmarks from a $4.40 premium for June. US inventories of crude oil fell more than 5 million barrels last week while gasoline stockpiles hit a five-year low. In addition, refinery margins hit a fresh multiyear high, all signs of tightness, pointing to the need for demand to be curbed and only higher prices or a global economic slowdown can make that happen. Copper at 6-week highs. HG Copper (COPPERUSJUL22) jumped 5% last week, breaking resistance at $4.35 to surge higher to $4.55, the 61.8% retracement of the April to May correction, with a break signaling a fresh push towards $4.86. The fundamental driver being the reopening of China raising demand expectations, thereby driving a sharp improvement in the technical outlook forcing speculators to reverse positions from a short back to a net long. In addition, a potential supply disruption in Peru, due to protests, also adding some tailwinds to price. Asia Pacific Equities tipped to start week lower, after rising for 3 straight weeks, bolstered by reopening trade. Australia’s ASX200 started the trading week down 0.5% on Monday, after rising for three straight weeks. Over the last three week, the Mining sector gained 10%, with shares in iron ore giants Champion Iron (CIA), BHP (BHP) rising 15%, and smaller diversified miners like Sandfire (SFR), South32 (S32) up over 15% as well, on hopes that earnings will grow with Shanghai reopening. China and Hong Kong equity markets’ reactions to the long-awaited Shanghai’s reopening from lockdown are cautious as investors are assessing the pace of economic recovery and the risk of re-introduction of lockdown as long as the Zero-COVID policy remains intact.  Technology and growth stocks however managed too outperformed last week and this morning. Regarding the series of implemental stimulus measures and pledges from the Chinese authorities, investors who have somewhat been disappointed by the magnitude of stimulus measures since the hype in mid-March upon Vice-Premier Liu He’s remarks and not entirely convinced of their efficacy and sufficiency.  This morning’s much-weaker-than-expectation Caixin Services PMI data re-confirmed their concerns.  As of writing, Hang Seng Index (HSI.I) and CSI300(000300.I) gained about 1% while Hang Seng TECH Index(HSTECH.I) rallied almost 2%.  Meituan(03690) surged over 6% after last week’s better than expected Q1 results.   Bilibili (09626) surged 5% ahead of reporting earnings on Thursday. What to consider? US jobs data signals tight labor market. US non-farm payrolls (NFP) printed headline gains of 390k, above the expected 325k. While this was a drop from last month’s 436k, the gains have been expected to moderate as 21.2mn of the 22mn jobs that were lost in March/April 2020 have been restored. Further slowdown is inevitable as most companies are guiding for margins being under pressure, but a somewhat softer wage figure (5.2% y/y in May from 5.5% prev.) reduces the wage-price spiral concerns and supports a more prolonged rate hike cycle. Fed’s Mester opens the doors for a third 50bps rate hike. We had one of the last Fed speakers on Saturday before the quiet period in the run up to the FOMC meeting on June 15. Loretta Mester did not just remove the September pause possibility, but in fact opened the doors to a third 50bps rate hike. She said September meeting could see a 50bps hike, or a 25bps hike if the inflation in on a downward trajectory. That may be the start of the Fed calling a third 50bps rate hike. China’s May Caixin Services PMI came this morning at 41.4, much weaker than expectation (Bloomberg consensus 46; April 36.2) and staying firmly in the contractionary zone and being the second lowest since March 2020.  Service employment sub-index fell further to 48.5 (vs 49.3 in April), the fifth consecutive monthly decline and the lowest level since March 2021. RBA tipped get more hawkish at their interest rate meeting tomorrow. Market expects rates to rise from 0.35% to 0.6% after stronger than expected GPD data came out last week, plus Australia’s export income surged to a record high.  And that will improve with Shanghai emerging from lockdown last week. So Aussie economy is in a good spot. Plus Labor Government’s childcare policy encourage more parent back to the workforce, and add to Australian ‘full employment’, meaning wages will likely rise, and give the RBA even more fire to hike rates. Investors think rates will be just shy of 3% in 2022. APAC client activity in June:Most clients are buying shares to start the moth June with 71% of orders beings buys. Tesla (TSLA) was the most bought and sold share. Followed by Apple (AAPL). Regarding Tesla 53% of transactions were shorting Tesla expecting 2022 margins to be flat compared to 2021 (according to consensus). However with Tesla considering cutting 10% of workforce and dangling the carrot of potentially buying a lithium mine; such potential measures may paint Tesla differently Most conviction across stocks/CFDs ETFs; the second most bought is iShares MSCI USA ESG Enhanced UCITS ETF In Bonds, transactions in bonds were mainly buys, with investors looking for yields and shifting away from equities. Potential trading and investing ideas to consider? US May CPI due this week. The May CPI data from the US is due this week, and the return of inflation peaking vs. higher for longer debate is set to return more forcefully. We remain of the camp that underlying pressures on inflation will likely keep it higher for longer, and a beat in CPI print this week could increase the Fed tightening expectations. That will mean more gains for the USD and more pressure on the Japanese yen which suffers at the hands of yield differentials. A weaker print, on the contrary, could bring focus back on recession concerns and boost risk assets. Key earnings release this week: Tuesday: Sinobiopharma(01177) Wednesday:  Kingsoft Cloud(KC) Thursday: Bilibili(09626/BILI), NIO(09866/NIO) For a weekly look at what’s on the radar for investors, and traders this week;  read, watch or listen to our Monday Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Saxo Bank
Broad markets rally for 2nd week. Curb your enthusiasm or consider crouching into champion commodities and FX? | Saxo Bank

Broad markets rally for 2nd week. Curb your enthusiasm or consider crouching into champion commodities and FX? | Saxo Bank

Saxo Bank Saxo Bank 03.06.2022 11:34
Summary:  Global markets lift after long term interest rates aka bonds yields fell after a weaker than expected jobs report came through. But do not get too comfortable and consider potentially building in downside protection, as yields are expected to rise later this year. Markets remain delicate ahead of Q2 earnings numbers being weak, with Microsoft being one of the biggest companies out of the gates to downgrade forward quarterly earnings. So who is next? Aside from that, commodity FX currencies pick up and Asia Pacific equities rally with ASX mining giants pushing up for the 3rd week. Plus, what to watch this weekend and next week, that could see volatility creep up. What’s happening in markets that you need to know? The S&P500 and Nasdaq trade higher for the second week but caution is in the air, so considering curbing long term enthusiasm. US stocks were buoyed on Thursday by tech stocks, consumer spending and economic reopening names rallying. Positive news hit the street from the likes of Apple (AAPL) upgrading its iPad software, and Lululemon (LULU) upgrading its yearly sales forecasts. Although, markets lifted after long term interest rates fell (measured by bonds yields) after a weaker than expected jobs report, yields are expected to rise later this year. Plus, markets still remain delicate; Q2 earnings numbers are tipped to be weak. Microsoft (MSFT) downgraded forward earnings numbers for the quarter, blaming an unfavorably high US dollar. Square (SQ, SQ2) announced it’s working with Apple (AAPL) to enable tap to ‘Pay on iPhone’. This makes it easier for smaller retailers to use Square’s point of sale system. So instead of retailers having the famous white Square tap and go system, a retailer say, in fresh food market for instance, can receive payment for goods or services via a new iPhone app. Early access for select retailers starts today, while mass market rollout is later this year. Square earns over 70% of its money from Bitcoin transactions so its shares not only move with tech stocks but with typically with Bitcoin as well. Lululemon (LULU) upgraded its guidance for the year as earnings and sales beat expectations in Q1. It sees full year 2022 net revenue rising to $7.61 billion to $7.71 billion. The market also estimates earnings growth of 26% in 2022. Lululemon is one of the most bought stocks across Saxo globally, and has a higher representation of women on its board, so it’s featured in our in our Women in Leadership basket. Asia Pacific equities trade mostly higher for the last trading day of the week; Australia’s ASX200 trades higher for third straight week. In company news a new entity, Woodside Petroleum (WDS)was born on the ASX and became the world 10th biggest oil company. Woodside effectively took over BHP’s (BHP) oil assets (with BHP retaining a a smaller stake). But stepping back and looking at the best performers, who are gaining the most momentum, you can see Mining and Energy sectors rising up 3% week to date, continuing to stand out as this years best performers. This weeks push comes after China’s biggest city reopened; meaning Aussie iron ore, copper and aluminum and coal exports can flow more freely to China. This is why large sellers of these commodities, like South32 (S32), Fortescue Metals (FMG) and BHP (BHP) are trading about 5% higher week to date, anticipating earnings to increase, which will likely support long term share price growth China markets are closed while Japan’s Nikkei 225 (JP225.I) trades up 1% following a strong US close with gains led by Fast Retailing (9983) and Tokyo Electron (8035). The weak ADP print overnight has ignited some caution over the NFP due later today, although it isn’t usually a good leading indicator of how NFP will do. But a miss in NFP will give the Fed some reason to slack off in its fight against inflation. Singapore’s STI index (ES3) however only saw minor gains as some of the key REIT players slid.Crude prices (OILUKAUG22 & OILUSJUL22) were eventually bid. Crude prices pared some of yesterday’s weakness as markets questioned whether OPEC will be able to handle the increased production quotas over July and August. As a reminder, they're aiming for 648k b/d while they have been undershooting production quotas at the initial 432k b/d monthly output hikes. USD weakened across the board. The risk-on tone ahead of NFP saw the USD plunge overnight. AUDUSD touched 6-week highs of 0.7283 as it rides the commodity gains especially with iron ore resuming a fresh uptrend. EURUSD has reclaimed 1.0760 with ECB hawkishness gaining an edge after record high inflation prints. The December ECB meeting is now priced for more than 100 basis points of rate hikes in total, meaning rising odds that one meeting will see a larger than 25-bp rate hike, assuming no June lift-off. What to consider?  ADP jobs report underwhelmed. US ADP posted a much-smaller-than expected rise of 128k jobs last month and revised the prior reading down from 247k to 202k. This was below the expected 300k. Jobless claims fell more than expected and, at 200k, continue to signal tight conditions in the labor market. While ADP isn’t a reliable indicator of NFP, there is some sense of caution. Fed hawkish commentary continues. Fed's Brainard said it is hard to make the case for a September pause while Mester reiterated that it is difficult to predict how high rates will need to go but she agrees with 50bps hikes at the next two meetings before considering the appropriate pace. RBA to rise rates next week, get even more hawkish. Next week, the RBA holds its June interest rate meeting, and the market expects rates to rise from 0.35% to 0.6% after receiving stronger than expected economic news this week. Plus we know Australia’s export income surged to a record high and that will only improve with Shanghai emerging from lockdown this week. Plus the Australian Labor Government’s new childcare policy will result in more employees being added to the labour market, adding to Australia’s ‘full employment’. This means wage price inflation is likely to rise, which will feed the fire of RBA hawkishnessMeaning, expect more rake hikes than the market has baked in (with consensus expecting rates will end the year just shy of 3%).   Singapore May PMI at record highs, so is South Korean CPI. S&P global PMI for Singapore rose to a record high of 59.4 from 56.7 in April. Output and new orders are both up, which is especially remarkable given that China was in lockdown and that might have impacted some manufacturing activity. Meanwhile inflation in the region continues to rise with South Korea reporting a 14-year high inflation print of 5.4%, coming in higher than the highest estimate. Potential trading and investing ideas? Cybersecurity earnings impress. CrowdStrike Q1 earnings delivered a beat with revenue up 61% and adj. EPS at $0.31 vs. $0.23 expected. Q2 forecasts were at adjusted earnings of 27-28 cents a share on sales of $512.7-516.8 million, above consensus of 24 cents a share on sales of $510 million. Other players such as Okta and Secureworks reported a loss but subscription revenue is on the rise and both also beat expectations. Overall, we remain bullish on cybersecurity theme basket amid rising demand for data security especially after the Ukraine invasion. How to trade the NFP? NFP remains a key mover for the forex markets. With consensus expecting a slowdown in trend from 428k posted last month to expectations of 320k for May, the scope for surprise is more on the upside. Key data points to watch are also the unemployment rate (which is expected to fall to 3.5% in May from 3.6% last month) and average earnings growth (which is expected to slow down to 5.2% from 5.5% earlier). A positive surprise, or better than expected jobs numbers, lower unemployment or higher average earnings growth, would be a hawkish surprise meaning that the Fed can continue to tighten aggressively and that will be positive for the USD and possibly negative for equities. EURUSD and USDJPY will be key. For a weekly look at what’s on the radar for investors, and traders this week; read, watch or listen to our Monday Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Saxo Bank
Crude Oil Marches Higher, Price Of Gold Yawns

Financial Markets Today: Quick Take – June 3, 2022 | Saxo Bank

Saxo Bank Saxo Bank 03.06.2022 11:26
Summary:  Equity markets jumped higher yesterday as risk sentiment weathered the fresh rise in global yields and even a strong comeback in crude oil prices yesterday after an OPEC meeting. The US dollar is lower and gold prices are pushing on resistance ahead of what is traditionally seen as the most important data of the month - the US payrolls change and earnings data and later the US May ISM Services survey. Particularly positive data may be the least supportive for the market should US treasury yields jump aggressively higher in response.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 futures staged a big comeback yesterday after briefly breaking below the prior session’s low taking the futures the highest close since 4 May. This morning Nasdaq 100 futures pushed as high as 12,945 getting closer to the 13,000 level but has since retreated a bit. Today’s macro event is naturally the US Nonfarm Payrolls figures for May which is expected to show more gains, but the key detail to watch is the hourly earnings data. Sentiment has changed for the better in equities and we can see an extension of the recent rebound over the coming week. The key risk to equities is still inflation and here commodities are a must watch and especially given the ongoing reopening of China. USDJPY The most sensitive of USD pairs traditionally to US data is poised near the 130.00 level, the last resistance ahead of the 131.35 top ahead of key US economic data (see more below) and yields rising globally this week at a faster pace than the US (note EU yields posting new cycle highs along much of the curve) has kept the JPY under broad pressure due to the Bank of Japan’s yield-curve-control policy, which means that any rise in yields elsewhere cannot be absorbed by the Japanese bond market and is instead absorbed by the yen. AUDUSD Watching whether AUDUSD “sticks the landing” this week after a strong rally week that has seen rising yields globally outpacing the rise in US treasury yields, with hopes for an improved Australian outlook, especially on China possibly transitioning out of Covid lockdown limitations, seeing Australian yields punching to new cycle highs. And yet financial conditions globally have generally eased as this fresh rise in yields has not spooked risk sentiment, encouraging a strong comeback in the Aussie. AUDUSD has been interacting with the key resistance around 0.7260, which includes the 200-day moving average ahead of important US data today. A significant follow through higher will essentially wipe away the bearish case for the pair, which is already on life support. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil jumped on Thursday after OPEC+ decided to raise their monthly production output by around 50%, thereby making a futile attempt to soothe worries about a summer price spike as demand picks up. Ahead of the meeting prices dropped on speculation Saudi Arabia would increase production but with the announced increase being shared according to existing rules, the impact is going to be minimal. Not least considering OPEC+ is already trailing their production target by around 2.5 million barrels per day and only a few producers led by Saudi Arabia have spare capacity to increase production. US inventories of crude oil fell more than 5 million barrels last week while gasoline stockpiles hit a five-year low. In addition, refinery margins hit a fresh multiyear high, all signs of tightness, pointing to the need for demand to be curbed and only higher prices or a global economic slowdown can make that happen.  Gold (XAUUSD) Gold trades near a three-week high as it mounts a fresh challenge on resistance around $1870, the 38.2% retracement of the April to May 211 dollar selloff. Economic growth worries once again lift demand from investors looking for a hedge against a policy mistake, i.e. central banks raising interest rates to the point where growth slumps. Focus on today’s US job report with the next level of interest being $1892. Copper HG Copper (COPPERUSJUL22) jumped 5.3% on Thursday, breaking resistance at $4.35 to surge higher to $4.55, the 61.8% retracement of the April to May correction, with a break signaling a fresh push towards $4.86. The fundamental driver being the reopening of China raising demand expectations, thereby driving a sharp improvement in the technical outlook forcing speculators to reverse positions from a short back to a net long. In addition, a potential supply disruption in Peru, due to protests, also adding some tailwinds to price.     US Treasuries (TLT, IEF) Traded in a tight range yesterday after selling off sharply the prior day. It is an important day for the treasury market as we have important US data up in early US hours that is likely to set the tone after yields reversed higher earlier this week, with the 10-year Treasury benchmark threatening the 3.00% level ahead of the 3.20% top. What is going on? OPEC+ agrees to increase production The meeting yesterday saw the cartel agreeing to raise the output quota by about 50%, or nearly 650k barrels per day for July and August and did not move to marginalize Russia at the meeting, as had been rumored ahead of the powwow of oil exporters. US May ADP payrolls underwhelmed US ADP posted a much-smaller-than expected rise of 128k jobs last month and revised the prior reading down from 247k to 202k. This was below the expected 300k. Jobless claims fell more than expected and, at 200k, continue to signal tight conditions in the labor market. While ADP isn’t a reliable indicator of NFP, there is some sense of caution. Fed hawkish commentary continues Fed's Brainard said it is hard to make the case for a September pause while Mester reiterated that it is difficult to predict how high rates will need to go but she agrees with 50bps hikes at the next two meetings before considering the appropriate pace. Microsoft cuts outlook on currency headwinds Microsoft surprised the market last night with a minor Q4 EPS guidance cut to $2.24-2.32 vs previously $2.28-2.35. While the headline has got some attraction it does not mean anything for Microsoft or the equity market as valuations are based on operations and not non-financial swings to earnings. Cybersecurity earnings impress CrowdStrike Q1 earnings delivered a beat with revenue up 61% and adj. EPS at $0.31 vs. $0.23 expected. Q2 forecasts were at adjusted earnings of 27-28 cents a share on sales of $512.7-516.8 million, above consensus of 24 cents a share on sales of $510 million. Other players such as Okta and Secureworks reported a loss but subscription revenue is on the rise and both also beat expectations. Overall, we remain bullish on cybersecurity theme basket amid rising demand for data security especially after the Ukraine invasion. What are we watching next? US May payrolls and earnings figures today, then US May ISM Services US May Nonfarm payrolls change out later today is expected at +320k versus the +428k posted in April. The Unemployment Rate is expected to settle to the modern historical low of 3.5%, which was posted a handful of times before the pandemic disruption of early 2020, although the participation rate has not yet fully normalized to the level prevailing before the pandemic, currently at 62.2% versus about a percent higher on average in late 2019. US Average Hourly Earnings are worth watching as well for any indication of a renewed concern on wage-price spiral risks after the moving average of the month-on-month earnings gains has declined over the last few months. The May data is expected to show a rise of +0.4% MoM and +5.2% YoY. The May ISM Services data is expected to show the pace of economic growth in services-related industries to cool slightly with a reading of 56.5 vs. 57.1 in April. If we get both strong jobs data and a better-than-expected services survey, US yields may rush toward the cycle highs in anticipation of a more hawkish Fed an more inflation, an important test for market sentiment, which this week has managed to maintain a positive risk-on tone despite the snap-back higher in yields. Earnings Watch No important earnings today, so the list of earnings below shows the expected earnings releases next week with the three most important ones to watch are Inditex, NIO, and DocuSign. Monday: Coupa Software, Futu Holdings, Gitlab Tuesday: Sino Pharmaceutical, Kanzhun, Guidewire Software, J M Smucker Wednesday: Acciona Energias Renovables, Nuance Communications, Dollarama, Brown-Forman, Five Below, Inditex, Campbell Soup, Aveva Group, Full Truck Alliance Thursday: Chow Tai Fook Jewellery, Sekisui House, China Resources Power, Saputo, DocuSign, Vail Resorts, NIO, Bilibili Economic calendar highlights for today (times GMT) 0700 – ECB's Holzmann to speak 0715-0800 – Eurozone final May Services PMI 1230 – US May Change in Nonfarm Payrolls 1230 – US May Unemployment Rate 1230 – US May Average Hourly Earnings 1400 – US May ISM Services 1430 – US Fed Vice Chair Brainard to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
It smells like a peak in US market rates

Podcast: Equities climb wall of inflation, yield rise worries | Saxo Bank

Saxo Bank Saxo Bank 03.06.2022 10:44
Summary:  Today we look at a market posting a strong session yesterday as it brushes aside the pressure from a fresh pop in commodity prices, especially crude oil, and the general rise in global bond yields. Market sentiment and the recently easing financial conditions and especially volatility face a key test today in the form of the latest US payrolls and earnings data and the May ISM Services survey. We also break down the OPEC+ meeting, which agreed on a production increase, but one that looks like political theater given that the cartel can't produce its current quotas. Copper popping higher, FX, earnings up next week and more also on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast via this link - slides may also be found here. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Saxo Bank
EURUSD rejected at Kumo (cloud) resistance

Forex: Strong US ISM = Strong USD (US Dollar)? USD/CAD After BoC's Decision | Saxo Bank

Saxo Bank Saxo Bank 02.06.2022 16:01
Summary:  The US dollar has made a modest show of turning stronger in the wake of a strong US ISM Manufacturing index, which saw US treasury yields jump higher. But yields are rising elsewhere even more quickly, suggesting that the US dollar may have a hard time impressing unless financial conditions come under pressure after the recent easing. The next couple of sessions through Friday’s US jobs report and ISM services are important for establishing the lay of the land. FX Trading focus: Yield rises elsewhere outpace US yield   While US treasury yields are an important coincident indicator for US dollar direction, the impact of a rise in yields like the one we saw yesterday may continue to prove rather modest as long as financial conditions aren’t likewise tightening. And over the last couple of weeks, financial stress measures have generally eased, whether its market volatility itself or in an important indicator like credit spreads. So the ability of the US dollar to post a turn back to the strong side is an open question through the key data for the remainder of this week: the May NFP change and earnings data and May ISM Services data points tomorrow. Further holding the USD in check is a string of more hawkish developments from other central banks, for example from the Bank of Canada yesterday (more below). These have yields at the short end and even at the long end of the yield curve for many currencies outpacing the rise in US yields. German Bund yields are posting a new high for the cycle today, while the US 10-year benchmark is still a full 30+ basis points below its cycle high. The same for the UK 10-year Gilt yield, which hit a new cycle high above 208 bps already yesterday and is following through higher today. In other words, when the impulse for new cycle highs in yields is driven by the Fed and market conditions tighten notably, the USD leads, when conditions are maintaining an even keel and other CB’s are leading the charge, the USD performance is likely to prove more mixed or even weak. The JPY, naturally, is suffering strong fresh downside pressure on the general rise in yields, with USDJPY touching above 130.00 this morning. But given the new highs in Bund yields, for example, could be interesting to watch whether some of the other JPY crosses like EURJPY will outperform and reach new cycle highs first – watching 140.00+ in EURJPY. Chart: USDCAD after Bank of CanadaUSDCAD broke down further in the wake of the Bank of Canada meeting, which delivered the expected 50 basis point hike to take the policy rate to 1.50%, but offered up quite hawkish guidance in the final sentence of its policy statement yesterday, that the bank is “prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target.” Between the lines, this means the willingness to hike by greater than 50 basis points. In response, Canadian short yields surged further and USDCAD punched down to new local lows well below the 200-day moving average before the modest USD comeback post-ISM Manufacturing release kept the action choppy. This 1.2600-60 looks the last gasp area for the pair to find any support – otherwise a capitulation toward the range lows to 1.2400 looks may lie ahead. Impressive that CAD has brushed off the oil market correction this week. Source: Saxo Group ECB hawkish talk intensifying. While the timing of the first hike for July seems too thoroughly flagged to expect a June 9 move, we have had the ECB’s Holzmann out yesterday calling for a 50 basis point hike to avoid inflation expectations spiraling out of control. And today the Bank of France’s Villeroy said that inflation is “too high and too broad” and this calls for a “normalization” of monetary, which he oddly tried to differentiate from “tightening”. ECB expectations are back to the highs for the cycle and some analysts are calling for the ECB to hike by 50 basis points at one of the meetings this year. The December ECB meeting is now priced for more than 100 basis points of rate hikes in total, meaning rising odds that one meeting will see a larger than 25-bp rate hike, assuming no June lift-off. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar looks in danger of a larger scaled capitulation and even full reversal in places if it can’t stick a more impressive rally through the end of this week. But the JPY will likely continue to lead the charge lower as long as yields continue higher. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Most pairs threatening a trend cross are of little consequence, but EURSEK is an interesting one as a downside break of the range is also potentially in play here if it continues lower and also would fit with the solid easing in financial conditions we have seen recently. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1130 – US May Challenger Job Cuts 1215 – US May ADP Employment Change 1230 – US Weekly Initial Jobless Claims 1400 – US Apr. Factory Orders 1515 – ECB’s de Cos to speak 1615 – Canada Bank of Canada’s Beaudry to speak 1700 – US Fed’s Mester (Voter) to speak 2300 – South Korea May CPI
Australia dollar dips as rate rally fizzles | Oanda

Energy dominates market performance in May | Saxo Bank

Saxo Bank Saxo Bank 02.06.2022 14:56
Summary:  With the continued Russian invasion of Ukraine, supply chain issues and a wild-running inflation, energy takes centre stage as the top performer in May’s market performance. Global equities ended up in a slight minus for the month. While this may lead to a conclusion that markets are steady, this is not the case. May was a rollercoaster ride, like most of 2022 has been, especially since the Russian invasion of Ukraine and China’s Covid shutdowns.   The same story holds true for the regions, where Europe is the biggest loser, falling 1.5 percent for the month. Asia and Emerging Markets end in a slight plus.     Looking at the equity sectors, energy tops the list, increasing 12.7 percent in May. This can again be attributed to the energy crunch with Russia, which among other things drives up the oil price. Consumer oriented sectors and real estate are the biggest losers, due to increasing interest rates and sticky, high inflation figures, making it harder to buy everything from groceries to houses.     Commodities continues to be a key asset class in these weary times. Global commodities increased almost two percent, but looking at gold and oil in comparison, there’s a significant difference. Much like with the equity energy sector, oil as a commodity rose more than 12 percent for the month.   Check out the rest of this month’s performance figures here:   Sources: Bloomberg & Saxo GroupGlobal equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g. MSCI World/Energy. Bonds are measured using the the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.  
Another bleak target outlook, World Bank worries about stagflation, bitcoin tumbles | Oanda

The bear market rally in equities waned further following the strong ISM Manufacturing data | Saxo Bank

Saxo Bank Saxo Bank 02.06.2022 13:59
Summary:  Markets are pricing in a more hawkish Fed upon the release of the strong ISM Manufacturing data. The belly of the U.S treasury curve jumped 8-10bps in yield. U.S. stocks were offered post the release of the data and closed lower. Asia pacific equities are having a negative day of trade with concerns about monetary tightening heightened. What’s happening in markets? US & European markets closed lower on the first day of June, kicking off a gloomy mood with the Fed Reserve beginning to wind down its $9 trillion bond portfolio by reducing bond holdings by up to $95 billion a month.  Strong U.S. ISM Manufacturing data raised market concerns about more for longer interest rate hikes by the Fed and triggered renewed selling in U.S. equities after opening higher. JPMorgan CEO Jamie Dimon’s warning of a “hurricane” coming towards the U.S. economy further dampened market sentiment and in particular financial stocks.  The Nasdaq lost 0.7% S&P500 0.8% on Wednesday, weighed down by the Agricultural product sector and Airlines Index taking a hair cut. While the best performers were in the Oil and gas sector Gas and Hotels with the oil price likely to hit new highs as China’s economy begins to reopen. At a stock level Salesforce rose about 10% after better than expected results were released. Asia Pacific equities on a decline as Fed hike bets pick up. Japan’s Nikkei 225 (JP225.I) was down close to 0.3% led by healthcare and Sony (6758) while Fast Retailing (9983) gained. Singapore’s STI index (ES3) was in loss of 0.5% as concerns around US economy grew with JP Morgan CEO Jamie Dimon giving a starker warning on the US economy from his earlier comments that there are storm clouds to now calling it a 'hurricane'. He said it could be a minor one or a Superstorm Sandy, we don’t know but Fed should address that. Australia’s ASX200 retreats 1.1% as tech stocks crumble as Fed tightens money flow and bond yields spike.  Meanwhile Australia’s biggest oil and gas company Woodside (WPL)  continued to rally up as this years best performer, after rising 5% today on expectations that the oil price will likely continue to rise over the year ahead. Hong Kong and Chinese equity markets are muted to incremental stimulus measures.  China’s State Council gave the two state-owned policy banks additional lending quota of RMB800 billion for the infrastructure sector.  The amount is equivalent to about 21% of aggregate new loans for the infrastructure sector in 2021.  The National Development & Reform Commission (NDRC) and eight other ministries and departments jointly released a development plan to boost investment in renewable energy.  Hang Seng Index (HSI.I) and Hang Seng TECH Index (HSTECH.I) fell almost 2%.  Chinese property stocks and pharmaceuticals were among the underperformers.  CSI300(000300.I) was little changed. Crude oil prices dipped in Asia. After strong gains amid China reopening hopes over the last few days, crude oil is down this morning as much as 3% on reports that Saudi Arabia is ready to pump more should Russian output decline substantially due to financial sanctions because of the war in Ukraine. The OPEC+ meeting is scheduled for today and has certainly gained more attention now, with room for other members such as UAE to follow Saudi Arabia too to raise production. USDJPY rose to 130+ as yield differentials in focus again. USD was stronger overnight as US yields rose and the pressure on the yen was obvious. USDJPY surged above the key 130 as BOJ continued to emphasize its dovish stance while US yields rose. Volatility in yen is likely to remain high as the tug of war between inflation and recession concerns continues. What to consider? ISM data puts more weight on NFP. US ISM manufacturing headline rose to 56.1 in May from 55.4, far better than expectations of a decline 54.5. However, the employment sub-index was disappointing, falling beneath the 50.0 neutral mark to 49.6. That makes the job data out this week from ADP and NFP more interesting. While momentum is set to slow, given expectations of 325k in NFP vs. 500k odd at the start of the year, but wage growth remains key. Hawkish Fed comments. Fed's Bullard, who is undoubtedly the most hawkish Fed member, has urged other FOMC members to move to 3.5% this year. This comes after Fed’s Bostic yesterday said that he didn’t suggest a Fed put with his comments last week which led to a September pause started to get priced in. We think that the inflation threat has come roaring back with the Eurozone embargo on Russian oil and that might mean upside risks to tightening paths for both the Fed and ECB. Bank of Canada’s hawkish surprise. BOC reaffirmed its hawkish stance not just with a 50bps rate hike and the QT, but it said that it is "prepared to act more forcefully if needed" to meet its inflation target. This opens the door to a potential 75bps moves in the future if it is required. Lithium stocks were adjusted for a likely fall in lithium prices, but profitable lithium stocks found their fee in APAC today. Credit Suisse advised that it expects the lithium price to fall, adding to Goldman calling the end of the battery metal bull market, citing oversupply could kick-in in 2023 and pressure lithium prices slightly lower this year and heavily in 2023. Morgan Stanley has also been calling a hard pull back in 2023. Adding weight to this, Argentina yesterday set a reference price for lithium, noting ‘irregularities’ in prices over the last two years. ASX lithium stocks were the first to react to the news and tumbled. However today nerves have calmed after investors dived0deeper in the research; drawing a conclusion that the most oversupply of lithium will come from China. Secondly, Bloomberg published a research report saying EV sales will triple by 2025. Australia’s Pilbara Minerals (PLS) shares trade 0.7% lower today after yesterday’s tumbling 22% yesterday. Allkem (AKE) is down just 0.3% after yesterday’s drop of 15%. Overnight US giant Albemarle (ALB) shares fell 8% and SQM (SQM) fell 5%. Australia’s exports hit a new record high rising 1% month on month to AUD$50.4 billion, while imports fell 0.7% to $39.9 billion, meaning Australia’s surplus income grew to $10.50 billion in April. This is the second time in two days Australia has received better than expected economic news. Yesterday’s GPD data was stronger than expected, meaning the RBA will likely be more aggressive with rate rises than expected. Potential trading and investing ideas to consider? ECB hawks are back. ECB’s Holzmann was more vocal yesterday about the potential 50bps rate hike to be considered, after Eurozone inflation reached record highs in May. While we are now getting into a quiet period ahead of the June meeting next week, the ECB rhetoric is likely to shift to a more hawkish stance thereafter ahead of key Q3 meetings. EURUSD has plummeted back below 1.0660 and support at 1.0640 remains on test with the NFP on cards this week. AUDEUR; Australia's trade surplus data as mentioned above, rose to $10.495 billion, vs the $9.3 billion expected. And given Europe’s trade deficit is expected to get bigger, this supports the case for going long AUDEUR. Also supporting the AUD is that Chinese manufacturing in Shanghai resumed. Source: Saxo Bank
Rates Spark: The hawks are circling | ING Economics

FXO Market Update - EURHUF universe on the highs | Saxo Bank

Saxo Bank Saxo Bank 02.06.2022 13:26
Summary:  NBH hiked as expected with 50bps earlier this week and with a statement that was on the hawkish side. EURHUF spot and vols little changed on the highs. Risk reversals and carry also on the highs which makes EURHUF calls rich. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these. FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: EURHUF spot, Black: EURHUF 1 month Hungary hiked as expected with 50bps on Tuesday, slowing down from 100bps hikes in the previous meetings. The statement was on the hawkish side confirming the end of the tightening cycle is far away and that the 1 week deposit will continue to rise with 30bps/month. EURHUF spot little changed after the rate decision and continue to trade at the highs. Vol remains bid with 1 month at 13.0 and risk reversal at 4.0 for topside, both at 2 months highs. HUF carry is also on the highs with 1 month forward trading 225 pips above spot. All the above makes EURHUF calls rich and we like to sell EURHUF calls. Sell 1 month 410.00 EURHUF callReceive 250 pips Alternative Sell 1 month 420 EURHUF callReceive 125 pips Spot ref.: 396.25 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: Saxo Bank
Record low consumer sentiment and lower stock prices

USD/JPY Rallying Again, AUD/USD - US Dollar Is Still Really Strong. Is OPEC+ Decision A Market Mover? How Are Nasdaq 100 And S&P 500 Doing? | Saxo Bank

Saxo Bank Saxo Bank 02.06.2022 13:10
Summary:  Equity markets rolled over to the weak side after a choppy session yesterday, closing at a three-day low, in part as strong US economic data yesterday, especially the May ISM Manufacturing, boosted US treasury yields sharply. Treasury yields and US data will likely remain an important focus through tomorrow’s May US ISM services report as well as the May US payrolls and earnings numbers. An OPEC+ meeting today will test markets belief in whether Saudi Arabia and other OPEC members can boost production to compensate for reduced Russian supplies.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Nasdaq 100 futures continued lower yesterday erasing more of the recent rebound. This morning the futures are trading around the 12,550 level with yesterday’s low at 12,455 being the key level to watch on the downside. The ISM Manufacturing report for May was better than expected and Delta Air Lines ticket sales are back to pre-pandemic levels with the CEO saying that demand looks strong. On the flipside of these two positive indicators, Jamie Dimon (CEO at JPMorgan Chase) said the US economy is headed into an economic “hurricane”, but it was unsure of the severeness of the hurricane at this point in time. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The indices were down 1.8% and 0.1% respectively. Markets are muted over incremental stimulus measures. China’s State Council is providing the two state-owned policy banks with additional lending quota of RMB800 billion for the infrastructure sector. The amount is equivalent to about 21% of aggregate new bank loans for the infrastructure sector in 2021. The National Development & Reform Commission (NDRC) and eight other ministries and departments jointly released a development plan to boost investment in renewable energy. USDJPY USDJPY has rushed back higher, trading above 130.00 this morning, with the rally almost more aggressive than the rise in the coincident US treasury yields, underlining the ongoing sensitivity to the latter that will prove interesting to watch through the treasury market reaction to tomorrow’s key US data as discussed below. There is no ceiling for USDJPY as long as US long treasury yields are rushing higher unless the Bank of Japan is ready to climb down from its commitment to the yield-curve-control policy under which it caps the 10-year Japanese Government Bond yield at 0.25%. The nominal top in USDJPY for the cycle is 131.35. AUDUSD The US dollar pulled back higher yesterday, showing once again a sensitivity to the direction in US treasury yields, which were also sharply higher on the day. AUDUSD peaked out yesterday above 0.7220 and a bit shy of the major resistance near 0.7260 and was trading 0.7150 as of this writing, a hook for newfound bears to get involved for a move back lower if the US dollar is set to rally further on a rush higher in US treasury yields (see discussion of this risk below). First major key lower is that huge 0.7000 demarcation line that has featured since well back into 2019. Bitcoin Bitcoin slipped below the USD 30k level overnight, following the moves in the equity market. Also, the revenue for Bitcoin miners is at eleven-month low, but the activity of the miners has not gone down, despite the lower profits. Crude oil (OILUKAUG22 & OILUSJUL22) All eyes on the OPEC+ meeting today, after oil prices were smashed down from local highs at the start of this week on the story that OPEC is ready to boot Russian production levels from its quotas, theoretically paving the way for Saudi Arabia and possibly UAE to increase production. But do they really have the extra capacity they claim? US weekly DoE oil and product inventories data are also in the spotlight today, with 112.00 looking pivotal for the August Brent contract and the 110.00 area in July WTI. Gold (XAUUSD) An interesting day for gold yesterday, as the precious metal jumped off the lows despite US yields and the USD rising sharply yesterday, in part in the wake of strong economic data. Gold versus the euro rose very sharply from just ahead of the 1700 EUR/ounce area that was the support back in late March and posted an outside day reversal. It is an interesting development in the face of unsupportive developments, but the price action needs to pull back above at least the 1866 area pivot in XAUUSD and really above 1900 to suggest more bullish momentum is building again. US Treasuries (TLT, IEF) See thoughts below on whether US treasury yields are set to run higher. The first key is perhaps the 3.00% level in the US 10-year treasury benchmark, but the cycle high back in early May was near the 2018 highs of 3.26% If yields run above that level, it would be the first 10-year+ high in that benchmark since 1981. What is going on? Bank of Canada hikes 50 as expected, guides hawkish  The Bank of Canada was universally expected to hike the policy rate 50 basis points to take the rate to 1.50%, but the guidance got a hawkish upgrade yesterday as the end of the Bank of Canada’s policy statement said that the bank is “prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target.” Does this mean potential rate hikes of greater than 50 basis points? Short Canadian rates rose sharply on the news, with the market pricing the BoC now for a policy rate closer to 3.00% than 2.75% by year-end. USDCAD spilled lower through and well below its 200-day moving average near 1.2660, but trade back above that level this morning. ISM data puts more weight on Friday’s US May jobs data The US ISM manufacturing headline rose to 56.1 in May from 55.4, far better than expectations of a decline to 54.5. However, the employment sub-index was disappointing, falling beneath the 50.0 neutral mark to 49.6. That makes the job data out this week from ADP and NFP more interesting. While momentum is set to slow, given expectations of 325k in NFP vs. 500k odd at the start of the year wage growth remains key. Hawkish Fed comments Fed's Bullard, who is undoubtedly the most hawkish Fed member, has urged other FOMC members to move to 3.5% this year. This comes after Fed’s Bostic yesterday said that he didn’t suggest a Fed put with his comments last week which led to a September pause started to get priced in. ECB hawks are back ECB’s Holzmann was more vocal yesterday about the potential 50bps rate hike to be considered, after Eurozone inflation reached record highs in May. While we are now getting into a quiet period ahead of the June meeting next week, the ECB rhetoric is likely to shift to a more hawkish stance thereafter ahead of key Q3 meetings, with July widely believed to be the “liftoff” meeting. EURUSD has plummeted back below 1.0660 and support at 1.0640 is the next focus ahead of the US payrolls and earnings data tomorrow. United Airlines CEO said there is “no hint” of consumer demand weakness This was mentioned yesterday at a conference, though he does say that business demand for travel has a long way to go to recover from the pandemic. US earnings recap MongoDB delivered stronger revenue in Q1 than expected at $285mn vs est. $267mn while seeing a bigger loss with EPS at $1.14 vs est. $1.04. The company raised its FY revenue outlook slightly, but it was the much lower than estimated FY EPS of $-0.16 to $-0.31 vs est. $-0.36 that lifted shares in extended trading. This is a sign that the market is rewarding cost-cutting exercises and improvements in profitability over revenue growth at all costs; MongoDB shares up 6% in extended trading. Elastic delivered much stronger revenue growth than expected in the previous quarter and better than expected EPS of $-0.16 vs est. $-0.22. However, Elastic’s FY23 (ending April 2023) outlook surprised positively with EPS guidance of $-0.28 to $-0.36 vs est. $-0.39 suggesting profitability is improving faster than expected; shares rose 6% in extended trading. UiPath followed MongoDB and Elastic delivering a better-than-expected FY outlook on adj. operating income at $10-15mn suggesting the company is cutting back aggressively to move to profitability.   What are we watching next? US treasury yields to run higher? This is an extension of our thoughts from yesterday, that global markets could be pivoting again here after the consolidation lower in US treasury yields – the most important benchmark for the “price of global money (USD)” proved very modest from the top earlier in the month. Yesterday’s far stronger than expected ISM Manufacturing was one data point that helped treasury yields back higher, as well perhaps as the de facto start of Fed balance sheet reduction, or quantitative tightening, which started yesterday. The key data points through tomorrow that will establish whether for example the US 10-year treasury yield benchmark is set for a new peak above the recent 3.2% high (and thus high since 2018) as soon as next week are the May US payrolls and earnings report tomorrow, together with the May ISM Services survey up 90 minutes thereafter. Today we get the May US ADP private payrolls change, although the market is sometimes uncertain on whether to trust this data point for reaction. Fresh highs in yields could put fresh pressure on global equity markets after their recent strong consolidation off the lows. Earnings Watch Today’s earnings focus is Meituan and Lululemon with Meituan expected to see revenue growth slow to 22% y/y with operating income remaining negative at $-2.8bn for the previous quarter. Lululemon is expected to see revenue growth continuing at a healthy clip of 26% y/y with some uncertainty over operating margin due to rising input costs. Today: Trip.com, Pagseguro Digital, Remy Cointreau, Toro, Cooper Cos, Meituan, Crowdstrike, Lululemon, Okta, RH, Asana, Hormel Foods Economic calendar highlights for today (times GMT) 0900 – Eurozone Apr. PPI 1000 – Sweden Riksbank’s Jansson to speak 1130 – US May Challenger Job Cuts 1215 – US May ADP Employment Change 1230 – US Weekly Initial Jobless Claims 1400 – US Apr. Factory Orders 1430 – US Weekly Natural Gas Storage Change 1500 – US Weekly DoE and Product Inventories 1515 – ECB’s de Cos to speak 1615 – Canada Bank of Canada’s Beaudry to speak 1700 – US Fed’s Mester (Voter) to speak 2300 – South Korea May CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
USD/JPY Technical Analysis and Trading Tips for June 29, 2022

Can OPEC Exclude Russia? US Data May Support Treasury Yields, Wheat Prices Change, What About Forex Market? | Saxo Bank

Saxo Bank Saxo Bank 01.06.2022 16:16
Summary:  Today we look at yesterday's choppy market session, which was buoyed off the lows by a crushing blow to Brent crude prices intraday on a story that OPEC may be ready to exempt Russia's production and allow for production increases from Saudi Arabia and other members. But is there really any spare capacity that can come online? We also look at strong US data points yesterday supporting the rise in US treasury yields and whether we are in for another narrative shift across markets if yields are set to rise further just after consensus was developing that yields had reached a major top. The dump lower in wheat prices, perspective on MongoDB ahead of its earnings report, FX and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast here, where you also find the associated slides. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Saxo Bank
Analysis and trading tips for GBP/USD on June 22

Macro Insights: Inflation threat means upside risks to tightening path for Fed and ECB | Saxo Bank

Saxo Bank Saxo Bank 01.06.2022 15:37
Summary:  Inflation concerns continue to mount with energy and food prices on the rise, and a Fed pivot is still no where in sight. ECB may likely see a further divide as calls for an aggressive move ramp up following the record high inflation. China’s reopening aids sentiment but is unlikely to ease the supply chain pressures. The official start of QT and no Fed pivot yet. The Fed starts to reduce the size of its balance sheet from today, starting with $30 billion in Treasuries and $17.5 billion in mortgage-backed debt, but picking up pace to a monthly cap of $95 billion by September. The big risk-on move we saw in the US equities last week has led to some easing of financial conditions. But higher oil prices following the Eurozone’s embargo on Russian oil are bringing inflation concerns back to the table. Not that they ever went away. Comments from Fed’s Waller have confirmed that there isn’t a Fed pivot in sight yet, and Fed’s Bostic has also said that he didn’t suggest a Fed put with his comments last week after a September pause started to get priced in. We are bracing for more hawkish Fed commentary with Williams and Bullard on the wires next. China reopens but supply chain pressures to persist. While the sentiment has been supported recently as China resumes manufacturing in Shanghai, but we remain sceptical about the impact on shipping delays and supply chain pressures. As China’s factories resume operations, demand for raw materials is also likely to pick up and further congestion cannot be ruled out. My colleague Chris Dembik has noted in this piece that lingering supply chain difficulties will continue to weigh on economic activity and push up prices. Eurozone inflation leaves the door for 50bps rate hike open. The Euro-wide CPI rose to all-time highs of 8.1% y/y in May, higher than last month's 7.5% and the consensus estimate of 7.8%. The print is likely to make the ECB policymakers open to more aggressive tightening moves after a move to exit negative rates in Q3. Core inflation was above expectations as well at 3.8% y/y and with inflation broadening to services, it will likely be stickier too. Furthermore, oil sanctions announced by the EU have added to expectations of oil prices remaining at an elevated level as well. While many ECB policymakers, including chief economist Phillip Lane yesterday have tilted towards preferring the gradual path of President Christine Lagarde of 25bps in July and September, we cannot rule out further support for a more aggressive move as well. Vietnam outperforms Asia’s manufacturing PMIs. Vietnam’s manufacturing PMI rose to the highest since April 2021 at 54.7 in May from 51.7 earlier, with both output and new order rising. Other regional PMIs were marginally lower but remained broadly in expansion. Vietnam’s move away from the pandemic curbs is broadly helping with the expansion of the manufacturing sector and China’s reopening adds further tailwinds. Headline inflation has surged to a 12-month high of 2.9% y/y in May, still remaining below the target of 4% but threat of further gains remains. Source: Saxo Bank
Crude Oil Higher, Gold Price Slips, Crypto: Bitcoin (BTC/USD) Vulnerable

Markets in tug of war with reopening VS QT and earnings slow down | Saxo Bank

Saxo Bank Saxo Bank 01.06.2022 14:31
Summary:  Markets are at tug of war point to kick off the second half of the year. On the downside we await more bad news from US Q2 earnings, while investors increase their FX exposure pre-empting broad indices to react poorly to Quantitative tightening in June and July. Meanwhile, on the positive flip side, traders and investors bid up reopening stocks and currencies across the Asia Pacific today with China’s largest city emerging from its two-month lockdown. Meanwhile energy stocks outperform global equities for the second month. Can this momentum continue? Meanwhile, we also reflect on stocks and sectors garnering the most attention amid the market tug of war. What’s happening in markets that you need to know      US & European markets close mostly lower for the last day of May ahead of QT and Shanghai reopening, while energy stocks outperform reflecting where money is flowing. The Nasdaq lost 0.4% S&P500 0.6% on Tuesday, while for the month of May, the Nasdaq fell for the 2nd straight month, while the S&P500 and Dow Jones, closed slightly higher by the skin of their teeth - up 0.01% and 0.04% suggesting investors are searching for direction and are cautious. Outperforming stocks were in energy; lithium giant Albemarle (ALB) surged 35% in May, followed by oil and gas companies like Devon Energy (DVN), NRG Energy (NRG) and Marathon Oil (MRO) and Occidental (OXY) all up over 25% each in May. In Europe the benchmark the Euro Stoxx 50 fell 1.4% on Tuesday, closing lower across the month as well, marking the 5th straight month of falls. Outperforming stocks in Europe in May were led by online gambling company Flutter Entertainment (FLTR), and gas and oil companies like TotalEnergies (TTE)  as well as global banks and bond issuers like ING Groep (INGA) rising 15-18% each. Asia Pacific equities are having a mostly negative day of trade – weighting up QT starting and China’s reopening plans. Australia’s ASX200 weights up the good with the bad but rises slightly to kick off June. The ASX200 fell 3% in May following April’s 0.9% fall, but if today’s news is something to go by, June could be another saggy month. Reopening stocks are getting bought up like Auckland International Airport (AIZ) and toll road operator Transurban (TCL), while stocks with large exposure to China like Fortescue Metals (FMG) are charging up 2.3% benefiting from China’s reopening plans. Meanwhile, on the economic news front, Australian GPD grew more than expected last quarter and YOY, which gives the RBA more room to rise rates. And second, Australian house prices dropped for the first time since September 2020. Australia’s property sector has been showing signs of cracks for some time with lending falling continuously off its peak ahead of larger rate rises. But we can see the property sector playing tug of war with this and the reopening theme. The Australian property sector index (XPJ) is down 17%, but property stocks are attempting to claw off their lows. One of Australia’s biggest shopping center owners Vicinity Centres (VCX) rose 11% in May benefiting from issuing bonds, and expanding its rent roll. So let’s see if this momentum continues and what carnage rates rises have. Separately, and on the downside today, lithium stocks are being mauled; Pilbara Minerals (PLS) shares down 19%, and Allkem (AKE) lost 13% after Argentina set a reference price for lithium, noting ‘irregularities’ in prices over the last two years. Separately, Credit Suisse downgraded PLS and AKE. Japan’s Nikkei led the gains in Asia, up 0.6% despite a selloff in US equities overnight. The reopening of China is sparking hopes of supply chain pressures to ease, and Daikin (6367) comprised the largest portion of the index gains. Toyota (7203) and Sony (6758) also gained. Singapore’s STI index (ES3) was up close to 0.5% and remains a safe haven amid the storm in global equities amid stable macro conditions and gains from border reopening. Chinese auto makers stocks gained following the passenger car purchase tax rate being halved.  China’s Ministry of Finance cut passenger car purchase tax from 10% to 5% starting today and through the end of 2022.  As electric vehicles are exempted from purchase tax, the beneficiaries from the cut tend to be auto makers that focusing on internal-combustion-engine cars.  Geely (00175), Great Wall Motor (02333) and Guangzhou Auto (02238) gained about 3%.  The well anticipated reopening of Shanghai today did not generate much excitements in the equity markets as the latter’s attention having shifted back towards the beginning of quantitative tightening in the U.S. and the coming back of hawkish Fed speaks and the perceived pressure from President Biden on the Fed to contain inflation, as well as the fact that China is facing a steep climb to recovery. Hang Seng Index(HSI.I) and Hang Seng TECH Index(HSTECH.I) were down 1% and 0.8% respectively as of writing.  CSI300(00300.I) was little changed. KE Holdings (BEKE) jumped 16% overnight in U.S. trading after reporting in-line revenues but better than expected earnings due to margin improvements in Q1. USD remains bid in Asia. Even as the risk sentiment was more upbeat in Asia following the China reopening, USD was bid higher. The yen weakened with USDJPY rising above 129 as the US yields rose higher with Fed kicking off QT today. EURUSD slid below 1.0720, mainly hit due to the Russian oil ban sparking growth concerns. Still, higher than expected inflation prints in the Euro-area will garner some reaction from the ECB ahead of their meeting next Thursday. What to consider? Caixin China manufacturing PMI came at 48.1, weaker than market expectations. Broadly in line with the contractionary but improving trend shown in the official PMI data yesterday, today’s Caixin China manufacturing PMI, which focuses on private enterprises and has a larger weight for the Eastern coastal areas, increases to 48.1 in May from 46.0 in April. Supply chain and logistics disruptions were cited in the survey as key factors in dampening manufacturing activities.  US data upbeat but consumer confidence getting hit by higher prices. Chicago PMI saw an upside surprise after rising to 60.3 from 56.4, against expectations for a decline to 55.0. Consumer confidence, although still upbeat and higher than expectations, declined to 106.4 from a revised higher 108.6. Higher prices are hitting consumer sentiment, but not enough to materially impact economic momentum for now. Bank of Canada is likely to hike rates by 50bps at its meeting later today but CAD remains hit by the fall in oil prices. Biden meets Powell. President Biden met Fed Chair Powell yesterday and said he respects central bank independence – the obvious statement to make in a public setting. He made Powell in charge of fighting inflation, kind of laying the ground for putting the blame of economic slowdown on him a few months down the line. Euro PMI at record highs. The Euro-wide CPI rose to all-time highs of 8.1% y/y in May, higher than last month's 7.5% and the consensus estimate of 7.8%. The print is likely to make the ECB policymakers open to more aggressive tightening moves after a move to exit negative rates in Q3. Australian GDP grew more than expected. Australian GPD grew more than expected last quarter which gives the RBA more ammunition to rise rates. GPD grew at 0.8% in Q1, vs 0.5% consensus expected, and 3.3% annually, vs the 2.9% expected. All in all, growth is slowing, as recall, the last GPD read showed Australian GPD grew at 4.2% YOY. But the takeaway is, growth is not slowing as much as the RBA expected. Thus, expect more aggressive rate rises, particularly as wages are expected to grow following Labor’s new childcare policy and unemployment is tipped to fall again (according to censuses). Vietnam outperforms Asia’s manufacturing PMIs. Vietnam’s manufacturing PMI rose to the highest since April 2021 at 54.7 in May from 51.7 earlier, with both output and new order rising. Other regional PMIs were marginally lower but remained broadly in expansion. Australia’s manufacturing PMI fell to a four-month low of 55.7 in May from 58.8 in June, while Japan’s fell to a seasonally adjusted 53.3 in May, a three-month low, from previous month's 53.5. Factory activity in the Philippines also slowed to 54.1 in May from 54.3 in April, while that for Malaysia fell to 50.1 from 51.6 in April. Taiwan's manufacturing activity stood at 50.0 in May, down from 51.7 from April. Potential trading and investing ideas? AUDEUR and AUDUSD; Australian GPD grew more than expected, which gives the RBA more room to rise rates. This means the AUD could extend its uptrend from May 13 low. The next catalyst for the AUD is Australia's trade surplus data due tomorrow. Australia’s surplus income is poise to increase – vs the US’s and EU’s deficits expected to widen. This is perhaps why some traders are going long  the AUDEUR. Also supporting the AUD is that Chinese manufacturing in Shanghai resumed today. Short-term downside pressures in wheat. Chicago wheat futures fell by their exchange limit on improved prospects for Ukraine grain shipments as Russia has opened up the possibility of removing the blockade on Black sea. Meanwhile, a good monsoon is India is also erasing output concerns due to the heatwave earlier, and US June weather forecast also looks favorable for much of the farm belt. Wheat planting has picked up from 49% in the prior week to 73% but still remains below the 5-year average of 92% which suggests that the respite in prices may be short-lived unless we continue to see further progress on weather and planting.Auto and auto part makers, semiconductors, restaurants, beverage and specialty retails, leisure facilities and travelling stocks may be among those most benefit from the reopening of Shanghai and nationwide improvements in COVID outbreaks.  ICE auto makers also benefit from the passenger vehicle purchase tax mentioned above.  For a weekly look at what’s on the radar for investors, and traders this week; read, watch or listen to our Monday Saxo Spotlight. For a global look at markets – tune into our Podcast.  Source: Saxo Bank
US Premarket for June 22: US markets fall before Powell's speech in Congress

Financial Markets Today: Quick Take – June 1, 2022 | Saxo Bank

Saxo Bank Saxo Bank 01.06.2022 14:17
Summary:  A choppy session for global markets yesterday as an equity market sell-off, partially inspired by a fresh spike in crude oil prices on new EU sanctions against Russia, was reversed intraday when the bottom suddenly fell out of a steep oil market rally on a story that OPEC may exempt Russia from its oil output targets, allowing OPEC members with any spare capacity to increase production. Elsewhere, the US dollar has firmed on US yields are higher all along the curve ahead of key US data through the Friday May jobs report.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)   Nasdaq 100 futures lost momentum yesterday closing below Friday’s strong close suggesting the market is unable to carry through with the positive sentiment. In early European trading hours Nasdaq 100 futures are trading around the 12,640 level and if risk-off continues today we see the 12,224 level as the 50% retracement level that will attract attention. Yesterday showed mixed manufacturing PMI figures from Chicago (good) and Kansas (bad), while the US house price index showed a strong 21.2% y/y increase highlighting that the Fed will have to move more aggressively in the coming FOMC meetings to tighten financial conditions further. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) The two indices were off 1% and 0.2% respectively. The anticipated reopening of Shanghai today has not generated much excitement in the equity market as the Chinese economy is still facing a steep climb to recovery. After the Ministry of Finance cut passenger car purchase tax from 10% to 5% starting today and through the end of 2022, shares of ICE carmakers surged about 3% in early trading before paring much of their gains. KE Holdings (BEKE) jumped 16% overnight in U.S. trading after reporting in-line revenues but better than expected earnings due to margin improvements in Q1.  USDJPY The consolidation in USDJPY proved rather shallow just as the consolidation in US longer treasury yields likewise never threatened significantly lower yields. Suddenly we have 130.00 back in view from the 129.25 area trading this morning after trading as low as 126.36 last week. The reaction in the US treasury market to the start of the Fed’s quantitative tightening set to begin today as well as the latest US data through this Friday’s US jobs report bears watching for JPY traders as the yen is the most interest rate sensitive of currency. Any fresh surge in the US 10-year yield benchmark beyond 3.00% would likely see this par challenging its cycle highs. AUDUSD The Aussie rally has softened up in recent days, about half a figure ahead of the key resistance zone that would further threaten a reversal of the downtrend, which is already under fire after the rally back well above the pivotal 0.7000 level. Hopes for a Chinese growth comeback and a further rise in commodities that Australia exports, as well as general risk sentiment are key factors for whether the rally can seal the deal with a reversal above the 0.7260 area, which is near the 200-day moving average and a key early May pivot high. Higher US yields driving a stronger US dollar are the key factors for a move back lower. Crude oil (OILUKAUG22 & OILUSJUL22) Crude oil dropped sharply on Tuesday after the WSJ reported some OPEC members are considering exempting Russia from its oil-production deal, thereby paving the way for others, especially Saudi Arabia and the UAE, to pump more. The move comes at a time when fuel prices around the world have reached record levels and after EU signaled its intent to stop buying Russian crude oil. In addition, the prospect for a revival in Chinese demand may add further upside pressure at a time of tight supply, and the combination of all these factors may eventually begin to kill demand, something the major oil producers would like to avoid. OPEC+ meets tomorrow and from expectations of another pointless meeting rubberstamping an elusive production hike, the meeting has suddenly become a potential major market moving event. For now, Brent is holding above resistance-turned-support at $114.80/b. EIA’s weekly stock report delayed until Thursday with the API on tap tonight. Gold (XAUUSD) Gold tumbled back below its 200-day moving average at $1841 on Tuesday, after stronger than expected US data and the beginning of Quantitative Tightening helped send the dollar and Treasury yields higher (see below). In addition, comments by Fed Governor Waller on Monday suggesting the Fed should keep raising rates in 50-bp steps and yesterday’s Biden Powell meeting also kept the bullion market under pressure. Equally important, however, has been the yellow metals recent and failed attempt to break above key resistance at $1870, resulting in renewed selling from short-term focused momentum traders. The risk of a central bank policy mistake is likely to continue to attract interest from investors, hence the intense scrutiny of incoming economic data for any signs of weakness. Next key data point being ISM and Friday’s US job report US Treasuries (TLT, IEF) A strong technical reversal for US treasury yields is an important development across markets, as it appears to spell the end of the consolidation phase in yields that took the US 10-year benchmark Treasury yield near 2.70%. A further cementing of the comeback in yields would be a rise to the 3.00% area or above. Focus for treasury traders in coming days and weeks will shift to the impact of the Fed’s balance sheet reduction, or QT, that is set to kick off today. As well, any further increase in hawkish Fed rhetoric is on the radar after Fed Chair Powel met with President Biden at the White House yesterday. Important US data for the balance of the week, including the ISM Manufacturing survey up tomorrow and ISM Services survey up Friday after the May jobs report will also weigh in the mix. The May 9 cycle highs in the US 10-year treasury yield of 3.20% fell just a few basis points short of the late 2018 high. If the 10-year benchmark rises to above that 2018 high, it will be a more than 10-year high in yields, the first since 1981. What is going on? US data upbeat but consumer confidence getting hit by higher prices Chicago PMI saw an upside surprise after rising to 60.3 from 56.4, against expectations for a decline to 55.0. Consumer confidence, although still upbeat and higher than expectations, declined to 106.4 from a revised higher 108.6. Higher prices are hitting consumer sentiment, but not enough to materially impact economic momentum for now. Biden meets Powell. President Biden met Fed Chair Powell yesterday and said he respects central bank independence – the obvious statement to make in a public setting. He made Powell in charge of fighting inflation, kind of laying the ground for putting the blame of economic slowdown on him a few months down the line. Euro CPI at record highs The Euro-wide CPI rose to all-time highs of 8.1% y/y in May, higher than last month's 7.5% and the consensus estimate of 7.8%. The print is likely to make the ECB policymakers open to more aggressive tightening moves after a move to exit negative rates in Q3. Salesforce shares rose 9% on higher earnings outlook. The company reported Q1 revenue of $7.4bn vs est. $7.4bn and adjusted EPS of $0.98 vs est. $0.95 while lowering its FY revenue guidance to $31.7-31.8bn from previously $32-32.1bn. But investors reacted to the FY EPS outlook which the company raised to $4.74-4.76 vs previously $4.62-4.64 indicating that profitability is improving remaining strong. Vietnam outperforms Asia’s manufacturing PMIs Vietnam’s manufacturing PMI rose to the highest since April 2021 at 54.7 in May from 51.7 earlier, with both output and new order rising. Other regional PMIs were marginally lower but remained broadly in expansion. Australia’s manufacturing PMI fell to a four-month low of 55.7 in May from 58.8 in June, while Japan’s fell to a seasonally adjusted 53.3 in May, a three-month low, from previous month's 53.5. Factory activity in the Philippines also slowed to 54.1 in May from 54.3 in April, while that for Malaysia fell to 50.1 from 51.6 in April. Taiwan's manufacturing activity stood at 50.0 in May, down from 51.7 from April. Short-term downside pressures in wheat Chicago wheat futures (ZWN2) fell by their exchange limit on Tuesday while Paris Milling wheat futures (EBMU2) dropped by 3.6% on improved prospects for Ukraine grain shipments as Russia has opened the possibility of removing the blockade on Black Sea. Meanwhile, a good monsoon is India is also erasing output concerns due to the heatwave earlier, and US June weather forecast also looks favorable for much of the farm belt. US wheat planting picked up last week but still at a record slow pace while the winter wheat crop ratings remained the worst in 16 years, both suggesting that the respite in prices may be short-lived unless we continue to see further progress on Ukraine, planting and weather. What are we watching next? Market narrative shift underway? The brief period of consolidation US treasury yields and the weaker US dollar have helped ease the pressure on risk sentiment over the last two weeks or so. This period of improved sentiment arrived just after the US S&P 500 index nearly fell into “official” bear market status (although the greatest draw-down from intraday all-time high to low earlier this month did exceed -20%, the close-to-close drawdown has only been –18.7%). The pressure on the equity markets may pick back up, somewhat ironically, if US data through Friday’s May jobs (and earnings) report, and the May ISM Services suggest that US growth is humming along at a solid clip, taking US yields back toward cycle highs. Uncertainty on the impacts of Fed QT that kicks off today and ramps up to full force over the next three months to a pace of $95 billion/month could also prove a factor weighing on sentiment. Bank of Canada Rate Decision today The bank is expected to hike 50 basis points today to take the policy rate to 1.50%, keeping the BoC rate tightening cycle a bit more than a rate hike ahead of the US Fed’s pace of tightening, although the policy rates are priced to converge by the end of this year. USDCAD has sold off heavily recently and is interacting with its 200-day moving average near 1.2660 on the recent comeback in crude oil and risk sentiment more than due to any relative move in yield spreads to the US, which are relatively flat over the last two weeks. Today’s meeting is an important market check on whether the CAD rally finds support from BoC guidance. Earnings Watch Today’s earnings focus is MongoDB, UiPath, Elastic and Weibo in terms of their potential impact on the technology sector. MongoDB is one of those companies that is still trading around 13x on 12-month EV/Sales despite taking a big hit to its market value over the past year and is a showcase of how the market is reacting to revenue growth vs improved cash flow generation. Today: Acciona Energias Renovables, China Resources Power, Veeva Systems, HP Enterprise, MongoDB, NetApp, Chewy, GameStop, UiPath, SentinelOne, Elastic, Weibo Thursday: Trip.com, Pagseguro Digital, Remy Cointreau, Toro, Cooper Cos, Meituan, Crowdstrike, Lululemon, Okta, RH, Asana, Hormel Foods Economic calendar highlights for today (times GMT) 0715-0800 – Eurozone Final May Manufacturing PMI 0900 – Eurozone Apr. Unemployment Rate 1100 – ECB President Lagarde, others to speak on green transition 1400 – Bank of Canada Rate Decision 1400 – US May ISM Manufacturing 1400 – US Apr. JOLTS Job Openings 1515 – ECB Chief Economist Lane to speak 1530 – US Fed’s Williams (voter) to speak 1700 – US Fed’s Bullard (voter) to speak 1800 – US Fed’s Beige Book 2030 – API’s Weekly Crude and Fuel Stock Report (delayed by a day) 0130 – Australia Apr. Trade Balance Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
FX: It's Time To Recover (CNY) Chinese Yuan! ING Forecasts - USD/CNY, USD/INR, USD/IDR

China Update: Shanghai reopening and May PMI data bouncing off lows | Saxo Bank

Saxo Bank Saxo Bank 31.05.2022 23:11
Summary:  The situation of COVID-19 outbreaks and related lockdowns have been improving in China. Shanghai is scheduled to orderly reopen from June 1. With the reduction in the number of cities being under strict pandemic control and relaxation of lockdown measures, May PMIs have bounced off from their April lows and shown some early signs of potential recovery. COVID-19 outbreaks are waning and lockdowns are gradually being lifted. At the highpoint of almost 30,000 cases back in mid-April, it was estimated that 360 million people (25% of China’s population) in 44 cities (accounted for about 38% of national GDP) were under some sorts of lockdown in China.  The situation has been improving with daily new local cases having fallen to 97 cases as of May 30 (Figure 1).  The number of cities under lockdowns or some kind of mobility restriction came down to 16 cities (accounted for about 10% of China’s population and 14% of national GDP) towards the end of May.  On May 30, only six provinces (Jilin, Sichuan, Yunnan, Henan, Guangdong and Jiangsu) and three municipalities (Shanghai, Beijing and Tianjin) still recorded new locally transmitted cases.  After Shanghai coming out of full lockdown from June 1, there will be no city being under full lockdown and the 15 remaining will be under partial lockdown or district-based mobility restriction and pandemic control.  Shanghai will start lifting the lockdown on June 1, except for high/medium risk areas. The opening includes orderly resumption of public transport as well as private vehicle transport and allowing movements in and out of residential compounds.  Factories will be allowed to resume production and economic activities will gradually resume towards normal.  Residents are required to show negative results from nucleic acid (PCR) tests conducted within the preceding 72 hours in order to get into many public venues and to use public transport.  While remaining in contractionary zones, May PMI data bounced off their April lows. Official manufacturing PMI came at 49.6 in May, beating street consensus (Bloomberg survey 49) and bouncing 2.2 points from April’s 47.4.  Non-manufacturing PMI rose to 47.8 in May, well exceeding the 45.5 expected by economists and the 41.9 print in April.  The rate of contraction in economic activities has slowed as less cities being under lockdown or district-based mobility restriction and pandemic control.  Production rose to 49.7 from 44.4.  New orders increased to 48.2 from 42.6.  New export order recovered to 46.2 from 41.6.  Economic activities represented by these key sub-indices were still contracting in May but were much less so than in April.  Large enterprises led the recovery in manufacturing PMI and was back to expansionary zone with a 51.0 print.  Among non-manufacturing activities, the construction sub-index moderated to 52.2 in May from 52.7 in April while the services sub-index bounced to 47.1 from 40.0. Caixin manufacturing PMI is scheduled to release on June 1.  Bloomberg survey is calling for 49 (vs 46 in April). If the trend of improvement in COVID-19 outbreaks and relaxation of lockdown continues, it is likely that PMI data will improve further in June.Figure 1: China Daily New Local Cases; Source: Bloomberg LP; Saxo Source: Saxo Bank
Markets are betting the Fed has it wrong again

FXO Market Update - NOK set to move higher | Saxo Bank

Saxo Bank Saxo Bank 31.05.2022 10:00
Summary:  EU has agreed on a ban of Russian oil delivered by boat, which account for 2/3 of the imports. Oil push higher and a higher oil price should benefit NOK. EURNOK trades at relative high levels at 10.1300 compared 9.6000 in April. EURNOK 1 month vol is down 3 vol to 10.25 over the last two weeks while risk reversals still trades on the highs, bid for topside. EURNOK puts looks cheap at these levels. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these.FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: EURNOK spot, Black: Brent spot, Red: EURNOK 1 month vol EU has agreed on the next sanctions package against Russia including a ban on imports of Russian oil delivered by boat, pipelines are a carve-out. This is around 2/3 of the EU imports. Brent trades higher and has taken out the 123.75 highs from 24 March, next levels are 139.10 intraday-highs from beginning of March and then all-time-high at 147.50 from 2008. Higher oil price should benefit NOK which still trades relative weak against EUR around 10.1300. A push higher in oil and the improving risk sentiment we have seen over the last week could take EURNOK back down to 9.6000 again, levels spot traded at just 6 weeks ago. EURNOK vols have traded sharply lower over the last weeks with 1 month down from 13.25 two weeks ago to now trade at 10.25. EURNOK 1 month risk reversal trades at the highs at 1.50 favor EURNOK calls, the high over last year was 1.80 back in December. The selloff in vol and the high risk reversal makes EURNOK puts look cheap. Buy 1 month 10.0000 EURNOK putCost 625 pips Alternative Buy 1 month 9.8000 EURNOK putCost 190 pips Spot ref.: 10.1300 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars   Source: Saxo Bank
Global equities staged a notable rally | Saxo Bank

We Could Say High Prices Of Crude Oil, Metals And Other Commodities Are About Not Only Negative Effects, But Also About A Profit For Some People | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 12:42
Summary:  Commodities have seen hefty prices increases in the past two years, which is bad for inflation and for life in general but is one of very few asset classes where a profit can be made in very depressed markets.​ It’s hardly news that the cost of living – or inflation – is going up at a rate which the world hasn’t seen for decades. Food is getting more expensive, electricity is going up, it is more costly to buy and build stuff. In short, everything you want to do and consume costs (a lot) more than it did a year ago.There is one area – or in finance lingo, asset class – which is the root cause of this situation, and it has politicians and economists scratching their heads to find solutions: commodities. Commodities are the basic input to everything we do. It covers energy production, raw materials, metals, food, etc.When you look at commodities from a societal point of view, there isn't a lot of good news:“In short, what happens in the commodity sector is troubling. The Bloomberg Commodity Index is up 24% on the first quarter and if you look at average annual returns it has almost doubled since 2020,” says Ole Hansen, Head of commodity strategy at Saxo. In this quote, Hansen points to something interesting when dealing with an asset class like commodities, because it affects both the financial markets, and day-to-day life. When investing in an index, which is up that much in such a short time, you would usually be celebrating, but it isn’t always a good thing for commodities to climb so high, so fast.“Commodities are the basic input for everything we do, which means that when they get more expensive, so does everything else. Commodities need to find a more stable level for consumers and companies alike to feel comfortable, which no one is now,” says Hansen.As Hansen describes, surging commodity prices can have grave effects on society at large especially in less wealthy parts of the world, and its solution can be a self-fulfilling prophecy. “Most people will have to wind back on their spending. This will cause an economic slowdown, which hurts, but unfortunately seems to be the only cure right now against high inflation,” he says.The other edge While commodities need to become more stable for its societal impact, the asset class remains an enticing investment opportunity in a market where it seems like it is almost the only one you can look for a profit, even if there’s an economic slowdown. This is due to the supply and demand dynamics we are experiencing right now.Central banks are hiking rates to kill – or slow – the demand side, which is yet another reason why companies and thus equities are struggling. This should, in theory, also push the prices of commodities down, but then let’s turn our heads towards the supply side.Here, especially the Russian invasion of Ukraine, and the strict COVID-19 lockdowns in China, suppress the supply of many key commodities. This creates a dramatic imbalance between supply and demand, which means that even a global economic slowdown most likely wouldn’t bring it back to an equal footing.“If I had to pick one area to look for inspiration, it would be the metal industry. There’s a lot of amped up construction in China due to the lockdowns, which means that once they are lifted, the metal space could see a substantial increase in demand from them,” says Hansen.Queued up construction in China can push metal prices, which also could be a long play on the mining sector within equities."The equity market is probably the most difficult since the 2007-2009 financial crisis years due to a combined factor of persistently high inflation and equity valuation compression from higher interest rates. We believe that the world will be in a commodity super cycle and thus should be exposed to this through mining companies both short and long term. China's slowdown is just short-term noise. It changes nothing regarding mining companies over the coming years," says Peter Garnry, Head of Equity strategy.
New US home sales bounce, but it won’t last

Will Stock Market Performs Equally Well As In The Previous Week? Next Earnings (e.g. HPQ, GME) Are Printed, Brent Crude Oil Trades Higher | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 12:29
Summary:  Today we look at the squeeze in equity markets that extended aggressively into the close of last week, with this week off to a strong start, in part on hopes for a shift in Chinese covid policy. We also look at the dissonances in the narrative should China drive new global demand that reaggravates inflationary dynamics as some of the recent market rally has been on hopes that inflation fears and anticipated Fed tightening policy have peaked for the cycle. We also highlight the stress in the VC space, Hungary's Orban boxing above his weight class, the dynamics in the crude market as Brent crude posted its second highest weekly close for the cycle last week, earnings ahead and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Saxo Bank
In Times Of Hawkish ECB, This Week's Eurozone Inflation Plays A Vital Role, As Euro (EUR) May Need Some Boosting, So Does Hungarian Forint (HUF)... On Tuesday We Meet HP Earnings, So Better Let's Watch HP Stock Price Closely! | Saxo Bank

In Times Of Hawkish ECB, This Week's Eurozone Inflation Plays A Vital Role, As Euro (EUR) May Need Some Boosting, So Does Hungarian Forint (HUF)... On Tuesday We Meet HP Earnings, So Better Let's Watch HP Stock Price Closely! | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 11:01
What is going on US core PCE prices.  US core PCE data was out on Friday, and it came in as expected at 4.9% y/y and 0.3% m/m. This was slower than last month's 5.2% y/y and may prompt more talk of inflation peaking out. While PCE is the preferred Fed metric, what cannot be ignored right now is that food and energy prices still have more room to run on the upside suggesting that inflation will remain higher for longer. The May CPI print is due on June 10, so that will be the next one on the radar for further cues in terms of Fed's rate hike trajectory but for this week, the focus will be on the jobs report due on Friday Goldman predicts end of battery metal bull market – saying that the prices for key battery metals cobalt, lithium and nickel will fall over the next two years after an over-eager speculation phase. Goldman predicts that lithium prices could drop slightly this year to $54k from recent spot prices near $60k and fall to near $16k in 2023 before rising again further down the road. There’s been “a surge in investor capital into supply investment tied to the long-term EV demand story, essentially trading a spot driven commodity as a forward-looking equity,” the analysts said. “That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend.” Oil prices are becoming an important cross-asset driver.  Brent crude oil closed last week just shy of the $120/barrel level (see above) and also just shy of the highest weekly close for the front month contract since the outbreak of war in Ukraine. As the $120 area was often a resistance area during the high oil price period during 2011-14 (although at that time, the US dollar was far weaker), any further significant advance from here will likely dominate market attention and work against further strong improvements in risk sentiment as high energy prices cloud the growth outlook and would erode corporate profit margins. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM Benchmark Capital and Sequoia Capital put out a dim outlook for technology.  Both venture capital firms were around during the dot-com bubble run-up and burst, and they have both put out perspective and action plans for the companies they have invested in. Those presentations talk about a much dimmer outlook and investors are shifting focus from revenue growth and revenue multiples to that of free cash flow here and now. Cost-cutting and focus on profitable unit metrics are now paramount to survive the coming years. What are we watching next? US Memorial Day Holiday today. This is a major national holiday, so all US markets are closed today. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM Eurozone inflation prints out this week.  The energy price shock has been bigger for Europe, and May prints are due for Spain, Germany, France, Italy and the Euro-area in the week ahead. Food price pressures continue to build up amid the supply shortages and protectionist measures, and further gains in May will add more weight to the ECB’s resolve to exit negative rates from Q3 with more aggressive tightening. Special meeting of the European Council today and tomorrow.  Talks will focus on the implementation of a proposed embargo on oil imports from Russia (from 2024 onwards according to the latest draft). Hungary is the only EU country against it. The problem is that any new sanctions against Russia require the unanimous agreement of the 27 member states in order to pass. Expect tough negotiations. Hungary’s Prime minister Viktor Orban has recently passed on a “wish list” of demands he wants met to support oil sanctions. This includes a swap line with the European Central Bank and end to the rule of law Article 7 and “conditionality mechanism” procedures, amongst other things. Australian GPD and balance of trade on watch and could disappoint.  Australian GPD data due Wednesday is expected to show economic growth fell from 4.2% YoY to 3% YoY in Q1. Quarterly GPD is expected to grow just 0.7%, following the 3.4% rise in Q4. If data is stronger than what consensus expects, the RBA has more ammunition to rise rates more than forecast, so the AUDUSD might rally. If GPD is weaker, then, the AUD will likely fall. For equities, Australian financials could rally if data is stronger than expected. Secondly, Australian Export and Import data is released Thursday. The market expects Australia’s surplus income (Export income minus imports payments) to rise from $9.4b to $9.5b in April. But given the iron ore price fell 13% in April, the trade data could miss expectations. Follow FXMAG.COM on Google News Several central banks in focus this week.  Tomorrow, the National Bank of Hungary (NBH) will likely deliver a hike of 50 basis points to 5.9 %. The NBH has recently flagged a slowdown in the pace of rate hikes which had a detrimental impact on the Hungarian currency. What the central bank needs to do now is to define more explicitly the risks to growth, the effect that it would have on inflation this year but especially in 2023, the pace of rate hike and how financing conditions could evolve in the next 12-18 months. On Wednesday, the Bank of Canada is expected to increase interest rates by 50 basis points, from 1% to 1.5% (it has downplayed the possibility of a 75-basis-point hike in the short term). The move has already been priced in the market. Further interest hikes will come in the coming months in order to fight inflation which is running at a 31-year high of 6.8% YoY in April. Last week, former Bank of Canada governor Stephen Poloz mentioned the risk that the country will fall into stagflation this year. Earnings Watch.  This week’s earnings releases are weak in terms of impact expect from earnings from Salesforce, Lululemon and Meituan. Analysts are expecting Salesforce to report FY23 Q1 revenue (ending 30 April) growth of 24% y/y on top of a significant operating margin expansion expected to boost free cash flow generation substantially. Monday: Sino Biopharmaceutical, Huazhu Group Tuesday: DiDi Global, Salesforce, HP, KE Holdings Wednesday: Acciona Energias Renovables, China Resources Power, Veeva Systems, HP Enterprise, MongoDB, NetApp, Chewy, GameStop, UiPath, SentinelOne, Elastic, Weibo Thursday: Trip.com, Pagseguro Digital, Remy Cointreau, Toro, Cooper Cos, Meituan, Crowdstrike, Lululemon, Okta, RH, Asana, Hormel Foods Economic calendar highlights for today (times GMT) 0900 – Euro zone Economic, Industrial, Services Confidence surveys 1200 – Germany May Flash CPI 1500 – US Fed’s Waller (Voter) to speak 1700 – ECB's Nagel to speak 2030 – New Zealand RBNZ’s Hawkesby to speak 2300 – South Korea Apr. Industrial Production 2330 – Japan Apr. Jobless Rate 2350 – Japan Apr. Jobless Rate 2350 – Japan Apr. Industrial Production 0030 – New Zealand May ANZ Business Confidence survey 0130 – China May Manufacturing/Non-manufacturing PMI 0130 – Australia Apr. Building Approvals 0130 – Australia Apr. Private Sector Credit Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Trading plan for Dow Jones for June 29, 2022

China: Uplifting COVID News May Finally Move Markets In A "Positive" Way. Australian-Chinese Exports May Affect AUD/USD In The Near Future. Where Is EUR/USD Heading To? | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 10:54
Summary:  The squeeze higher in equities in the US finished with a punchy flourish on Friday, as dire sentiment readings finally gave market contrarians something to celebrate. Sentiment stayed buoyant to start this week on hopes China is set to ease Covid restrictions, although this in turn may be driving global oil prices higher after Brent closed last week just shy of the highest weekly close of the cycle. Any new rise in oil prices could quickly dominate market focus from here and drive fresh inflation fears. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  - Nasdaq 100 futures are extending the rally that started on Wednesday last week interrupting the seven-week long decline in technology stocks. Nasdaq 100 futures are trading around 12,865 this morning in early European trading hours and the 13,000 level is likely a short-term key point to test for the market. We see little to stop this short-term sentiment rally as some short positions are likely being squared adding to the upward pressure. Overall, nothing has changed except maybe except for pressures in commodities, in particularly energy, that have gotten worse. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I)  - both trades higher with Covid cases falling in Shanghai and Beijing, and after the Shanghai municipal government announced an economic support package of 50 measures.  Starting from June 1, factories in Shanghai are allowed to resume production without having to apply for pre-approval from the authorities. Domestic consumption stocks gained on the prospect of reopening. Restaurant stock Jiumaojiu (09922) jumped over 10% and beverage counter China Resources Beer (00291) gained 8%. Chinese internet stocks followed through on last week’s post result rallies and continued to surge 2% and 10% on Monday. Meituan (03690) surged 7% ahead of reporting Q1 results on June 2.  EURUSD  – the most traded USD pair has worked higher and is now threatening the next layer of resistance, which perhaps starts with the 38.2% Fibonacci retracement of the move from the February and 2022 highs near 1.1500 to the low at 1.0787. Above there, the old range low just above 1.0800 is another focus ahead of 1.0872, the 61.8% Fibo of the local wave. The EURUSD bear trend is so well entrenched that a trend reversal requires significantly higher levels towards 1.1500, although a quick move to 1.1200 (a major cycle low back in late 2021) and near the 200-day moving average, would significantly weaken the structural picture. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM AUDUSD  – The AUDUSD pair an interesting one to watch for the status of the USD trend against more pro-cyclical currencies, as already the rise back above the 0.7000 has placed a question mark next to the status of the USD rally, as this was a major level on the way down. But the really important resistance in the local context is the 0.7260 area, which is a local pivot high from early May and near the 200-day moving average. The sentiment from news flow from China will weigh heavily from here, as will the impact of that news flow on key Australian commodity exports like iron ore, with general risk sentiment also an important driver. Crude oil (OILUKJUL22 & OILUSJUL22)  trades higher after closing at an 11-week high on Friday on continued signs of tight fuel inventories ahead of an expected busy summer driving season, and with China slowing easing anti-virus lockdown curbs the added demand is likely to continue to force prices higher until demand starts to ease. With refinery capacity coming back online after maintenance demand for crude oil from refineries, the ultimate buyer of crude, is likely to rise at a time where global supply and supply chains has been severely disrupted by sanctions against Russia. Having broken above resistance-turned-support at $115, Brent may now take aim at $124. OPEC+ meets on Thursday to rubberstamp another illusive 430k barrels per day production increase. The group has fallen well behind its own target with several countries, led by Russia, struggling to reach their quotas. Gold (XAUUSD)  trades higher with a softer dollar and lower bond yields, as well as rising fuel prices supporting a fresh attempt to challenge key support at $1868/70, the 38.2% retracement of the April to May 211-dollar correction. Silver (XAGUSD) meanwhile trades near a three-week high relative to gold supported by recovering industrial metals on hopes China’s easing of anti-virus curbs will drive a recovery in demand. The recent recovery in gold was supported by investors hedging themselves against a central bank policy mistake with aggressive monetary-policy tightening driving concerns over a potential US recession. Despite these latest tailwinds, the recovery has yet to show enough strength to challenge those looking for lower gold prices, hence a continued focus on economic data, the dollar and yield developments. Follow FXMAG.COM on Google News US Treasuries (TLT, IEF)  - some softer data last week from the US and weak sentiment readings have longer rates settling in the 2.75% area and the market pricing of the Fed tightening regime easing slightly lower as the market prices in a Fed funds rate of 2.50-2.75% by the end of this year. But uncertainties abound on how the market will behave as the Fed withdraws liquidity via quantitative tightening (reduction of its balance sheet), which is set to kick off this week and ramp up to a pace of $95 billion/month over the following three months. Source: Saxo Bank
Crude Oil Higher, Gold Price Slips, Crypto: Bitcoin (BTC/USD) Vulnerable

Traders become short term bulls in a bear market, but are on edge after oil creeps up | Saxo Bank

Saxo Bank Saxo Bank 27.05.2022 11:26
Summary:  The Bear market bounce continues, with end of half year in the US, and end of financial year in Australia rebalancing causing a short term secular buying spree, while lower bond yields help to calm market jitters. But don’t get too comfortable, strap in as the big picture remains bearish, with inflation pressures mounting, for example, the oil price jumped back to a 2-month high extending its long term rally up, and Gas prices are at record highs all ahead of another big interest rate decision by the Fed in 3 weeks. We share what APAC clients are buying and trading and why. What’s happening in markets that you need to know      Big picture for equities? We have had some short reprieve so markets are rallying from the Fed’s minutes this week, plus its end of month, end of half year in the US approaches, as does Australian EOFY. So portfolio rebalancing may have triggered a selective short-term technical rally in some downbeat names. Meaning fund managers are being forced to bring their assets allocations back into alignment, meaning, they are compulsory buying into tech. As we said on the podcast last night, this will likely continue for now. For clients, some are taking this bull run in a bear market, as a potential opportunity for a short term gains, before locking in profits before the markets resumes its long term bearish downtrend. At Saxo across the APAC region, we’re seeing clients take on a short term tactical view on markets over the last week: 70% of clients are buying shares - the most bought names this week include Tesla, Apple, Amazon, Microsoft, NVidia, Alphabet (Google). Secondly, options have picked up too, with many clients using option to hedge their long term positions in stocks. And thirdly in Indices, there has been the most trades in the Nasdaq 100, 51% of clients are buying for the short term likely continued rally, while 49% are shorting the Nasdaq amid the long-term bearish tone. In Futures, there’s also been a lot of trading in light crude with buy orders picking up as China looks to continue to ease restrictions, which will likely cause oil to rise in demand and price. Asia Pacific equities extended Wall Street rally on month end flows and China tech earnings. The risk-on tone from the overnight markets found further legs in the APAC session. After the big drop in US equities this month, portfolio managers are likely to buy into the month-end to bring allocations back in line with their strategy. (side note Monday is a US holiday). Japan’s reopening also spurred gains in Asian airlines while higher oil prices supported Asian energy stocks. Japan’s Nikkei (NI225.I) was up over 0.6% as airlines and consumer stocks got a bid, and Singapore’s STI index (ES3) also gained close to 0.6%. Singtel was down close to 2% after it reported earnings this morning, and missed revenue and profit estimates for the full year. Australia’s ASX200, is trading up 0.9%, at its highest level in a week, beefed up by commodity companies this week. However today, Square (SQ, SQ2) is trading up 6%, after the payment giant, who makes over 70% of its money from Bitcoin transaction rallied on the back of bond yields falling. However, the best performer today is arguably being caused by traders exercising their short positions on gambling company PointsBet (PBH). PBH is up the most today 14% after tumbling 66% this year. This reflects that in this climate, volatility will continue, and investors must read between the lines of a rally. That being said, fund managers might also be buying small exposures in down beat tech ahead of end of financial year. In company news, Rio Tinto (RIO) said the iron ore market will likely pick up as China is ‘very determined to meet’ its growth targets and accelerate infrastructure. This is in line with what we've been saying for some time. Also today, lithium companies like Allkem (AKE) hit new highs rising 3% after the lithium sector had a fire cracker put under this week for two reasons, the Labor Govt brought in an EV policy and secondly, the world’s biggest lithium company Albemarle (ALB), upgraded its earnings for the 2nd time this month expecting the lithium price to push higher on rising demand and lack of supply. China internet stocks boosted by better than expected results from Alibaba (09988) and Baidu 09888). Alibaba’s revenues in the March 2022 quarter grew 9% YoY.  While net profit was down 24% YoY to RMB21.5 billion, it was well above the RMB18.5 billion expected by analysts.  Management refrains from giving forward guidance, citing the outlook for the pandemic situation and the trend of retail demand being uncertain.  Baidu’s Q1 2022 total revenues grew 1% YoY.  Net profit declined 10% YoY to RMB3.8 billion but it was more than double the market expectation.  Baidu’s cloud revenue, up 45% YoY, was notably better than what peers recently reported.  Hang Seng Index (HSI.I) climbed 2.9% and Hang Seng TECH Index (HSTECH.I) surged almost 4%. Alibaba rose 12% and Baidu surged 14%.  The less hawkish than feared speech from U.S. Secretary of State Antony Blinken laying out the Biden’s administration’s policy towards China help improve sentiment. In A shares, CSI300(000300.I) rose 0.8%, being led by computing, oil and gas, ferrous metal, food and beverage, defense and electric equipment. What to consider? Pricing out the Fed hikes. As we’ve said previously, we don’t think we have reached peak capitulation in US equities yet, we think inflation probably won’t come down as the Fed expects. Rate hikes have start to being priced out, and we now have the terminal rate at 2.77% compared to 3% on May 3 before the latest Fed meeting. But we think there could be surprise hawkishness. US GDP 2nd estimate came in lower than expected at -1.5% and pending home sales were down 3.9% m/m vs. estimates of -2.0%. Initial jobless claims were better than expected after the spike last week, but continuing claims were worse than expected. PCE prices remain on watch today, and inflation is likely to stay higher for longer. US consumer back in focus as retailer earnings turn. Retailer earnings turned the table with Macy’s (M), Dollar General (DG) and Dollar Tree (DLTR) not just beating estimates but still remaining upbeat on guidance for the year. (DLTR’s guidance for Q2 was weak but FY guidance was maintained). Despite mixed US eco data, this helps to calm recession fears and continues to show the strength of the US consumer although spending patterns are shifting. China’s industrial profits fell 8.5% YoY in April and decelerated to a growth of 3.5% YoY in the first four months of the year. In April, profits in the manufacturing sector dropped 22.4% YoY while the mining sector continued to outperform and surged 142% YoY, with the coal mining industry and oil & gas exploration and development industry leading the charge.  Non-ferrous metals and chemicals were among the outperformers in the materials sector.  First signs of an exit plan from the BOJ. USDJPY saw a pull back on Thursday on the very first hints from BOJ about an exit from the easy monetary policy. Kuroda said the BoJ will likely combine rate hikes and balance sheet reduction through specific means, with timing to be dependent on developments. Meanwhile, Kuroda said FOMC rate hikes may not necessarily result in a weaker JPY or outflows of funds from Japan if it affects US stock prices. Tokyo inflation reported this morning has stayed around the 2% mark – but underlying price pressures still remain restrained.  Potential trading ideas to consider? Crude oil resuming its uptrend. Crude oil pumped up to a two-month high, with Brent breaking the key 115 level as the US summer driving season demand underpins, in addition to the broader risk appetite improvement. Also, the UK government announced it will impose a windfall tax on energy firm profits. Oil (and commodities in general) remain in a long term bullish uptrend amid structural supply constraints. The US oil giant, Occidental Petroleum (OXY)is up 136% year to date. Marathon Oil (MRO) is up 74% YTD, Halliburton (HAL) up 75% YTD on the NYSE with companies like these to continue to see momentum as the oil price resumes its uptrend. Japan’s Inpex (1605) has gained over 100% in the last 1 year and is still expected to record solid revenues and earnings growth next year. However, Japan’s power companies like Kyushu Electric (9508) and Tohoku Electric (9506) will continue to see further pressures.Chinese mining and materials stocks and ETFs (e.g. Global X MSCI China Material ETF, CHIM:arcx) may benefit from the resilience of profitability in the mining and materials sectors despite macroeconomic headwinds as well as the potential rise in demand from infrastructure construction. For a global look at markets – tune into our Podcast. 
A decrease in US inflation will return market optimism

Fed to start QT in days, World’s biggest chip company, guides for earnings drop, sign of more pain to come? | Saxo Bank

Saxo Bank Saxo Bank 26.05.2022 12:40
Summary:  Semiconductors stocks follow their tech peers down but market remains broadly steady as minutes from the May Fed meeting fail to surprise or add any guidance beyond the few 50bps rate hikes priced in. Next to watch will be the beginning of Fed’s quantitative tightening next week which will suck liquidity out of the system. Risks of a negative Q2 GDP print from China are increasing, and policy support is likely to ramp up further. What’s happening in markets that you need to know      Big picture themes?  On Wednesday Bubble Stocks and Payments companies rose the most out of the Equity Basket we track globally, but these sectors remain very bearish still are down 49% and 28% respectively so far this year. At S&P500 sector level on Wednesday, Computer Electronics and AgTech rose the most. Nvida (NVDA) the largest chip maker in the world (by market size) reported better than expected results and rose 5.1% in normal hours trading, but its shares fell 6.9% after hours when the market began to price in their weakening guidance. Revenue rose 46% to $8.29 billion (that's a record and beat the $8.1b expected). The reason the stock is down after hours is because its Q2 revenue is expected to fall to about $7.9 to $8.2 billion, and diluted earnings per shares is predicted to fall from $0.76 Q1 FY22 to $0.64 Q1 FY23. This reiterates why we advocate for backing companies with growing earnings. These tech stocks, the down-and-outs and big tech firm, will have their day in the sun again, but not soon. Maybe consider letting the QT dust settle, before considering buying 'the dip' Asia Pacific’s stocks are having a mixed day after Fed minutes fail to add anything new. Taking a bid from the higher close in the overnight markets, APAC markets opened in the green today. Australia’s ASX200, opened higher but fell into the red, and is trading down 0.4%. However, the market still seems to be in a very short uptrend from the May 12 low, supported by commodity stocks rebounding. Today Takeover talk beefed up the tech sector 1.4% after co-creator of Siri, Appen (APX) rose 28% upon receiving a takeover offer. Codan (CDA) Metal detection and tech company is also doing well, but more the major theme is that tech stocks are being led high as M&A talks are heating up, given Aussie tech is down 40%, with some names like Tyro (TYR) down 75% from their highs. Singapore’s STI index (ES3) was up about 0.8% led by 6% gains in Jardine Matheson. Japan’s Nikkei (NI225.I) lost 0.1% as Fast Retailing and SoftBank shares jumped higher but Tokyo electron remains under pressure following the dismal guidance from Nvidia (NVDA) amid the supply issues.  In Greater China, the massive scale video conference of Premier Li Keqiang and four Vice Premiers with over 100,000 local government officials to boost confidence and mobilize ranks and files to carry out the State Council’s stimulus measures does not stir up much excitement in the equity markets.  In his speech, Premier Li pledges to do more to ensure “reasonable” rate of growth in Q2 and to push down unemployment rate.  The last time that such a large scale conference was held was Feb 2020 when 170,000 local government officials were called onto a televised conference on pandemic control.  After opening slightly higher, Hang Sang Index (HSI.I) and CSI300 (000300.I) were fluctuating between moderate gains and losses this morning. Alibaba (09988) fell 3% ahead of reporting results. What to consider? Fed minutes remain short of a surprise. The Fed has refrained from surprising on the hawkish or the dovish side, surprising as it has actually raised the PCE inflation guidance for 2022 and 2023 – we are now at 4.3% for this year and 2.5% for 2023. In fact, with the increasing hints of flexibility, Fed is increasing the pricing in of a pause for September. There was no mention of 75bps or the risk of a recession which acted as a relief for markets and led to the financial conditions loosening slightly – the reverse of what the Fed actually intends to do. We discussed more on the Fed's stance in our macro note yesterday. Geopolitics at the forefront again. While Russia is said to be opening two sea corridors from Ukraine ports to help ease the global food supply crunch, the war still doesn’t seem to be getting to a close even after three months. Russia is still making progress in the east of Ukraine. Meanwhile, US-China relations are on the burner again after President Biden made comments on Taiwan. Investors need to be comfortable feeling uncomfortable, as we haven’t seen the bottom in the market yet. So what’s next? We’ve already seen liquidity dry up (mass selling in stocks, fund managers are seeing large outflows) PLUS idle trading accounts are collecting dust. And Quantitative tightening (QT) has not even started yet. It starts in June. The US Fed minutes overnight revealed two different Fed members talked about how QT can create 'un-anticipated effects in the financial markets'. The Fed is not only rising rates but in an unprecedented move, we know they are reduced their $9 trillion balance sheet and removing that stimulus from the market. The takeaway? We will likely see professional investors reassess the landscape over the next few months after QT grips. And then, see how stocks with low PEs and earning growth are looking before buying the dip. Semiconductor stocks weighed down by the poor tech sentiment. While supply pressures, China lockdowns and rising input costs have weighed on semiconductor firms this year, the general sentiment has also been fragile due to PC demand peaking. Adding to the mix, general rotation out of the tech sector in the current market downturn also means some pressure on semiconductor stocks. Japan’s Tokyo Electron is down 11% YTD while Lasertec has lost over 50% and TSMC is down 18% since the start of the year. Some ECB policymakers remain wary of aggressive tightening. ECB’s aggressiveness in tightening policy is still a question, but most policymakers remain ready to support President Lagarde’s plans to exit negative rates in Q3. EURUSD is likely to see 2-way moves in the run up to a change in policy settings, but there still is upside potential as ECB exits negative rates while Fed’s hawkish surprises are getting limited. Negotiations on avoiding delisting of Chinese companies in US. exchanges is continuing to stall. Despite repeated optimism from the Chinese authorities, Y.J, Fischer, director of the U.S. SEC’s international-affairs office says that significant issues remain and Chinese companies may face delisting as soon as in March 2023 if the China Competitiveness Bill, which incorporates bills to shorten the audit paper compliance deadline by a year, got legislated by the Congress later in the year.  Shanghai announces immediate resumption of speed-post service and partial resumption in-person classes from June.  With new local cases having fallen to 338, Shanghai’s postal offices resumed domestic speed-post and parcel delivery service yesterday.  Students in senior high 2nd and 3rd year will resume in-person classes from June 6 and students in junior high 3rd year will resume in-person classes from June 13.  Other students will remain studying from home till end of term. Key company earnings to watch this week: Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications For a global look at markets – tune into our Podcast.  Source: Saxo Bank
Japan: retail sales rise while consumer sentiment weakens

Macro Insights: US economic momentum is slowing even before Quantitative Tightening begins | Saxo Bank

Saxo Bank Saxo Bank 25.05.2022 14:41
Summary:  The US economic data is worsening, and the Fed has not even started to tighten liquidity in a meaningful way yet. Starting June 1, the Fed will begin reducing the size of its balance sheet, amplifying its tightening beyond the rate hike measures. We continue to watch incoming economic data from the US to look for further signs of a slowdown after Richmond Fed survey, May services PMI and new home sales missed expectations. Fed’s communication will be key as well especially with the choppy equity markets. Mixed US economic data raising recession concerns.  The recession/stagflation rhetoric is gaining momentum, relatively more so than the inflation rhetoric which has been predominant since November now. Overnight we had a host of dismal economic data from the US including a miss in the services PMI (which is still in the expansion zone at 53.5 in May), Richmond Fed manufacturing index and new home sales. Gold has resumed its uptrend, suggesting stagflation concerns are on the rise, while Copper continues to be weak (China’s demand compression is into play as well). However, some of the other indicators of the US economy such as retail sales and Chicago Fed national activity index are still holding up well. Household balance sheets remain strong and labor markets are still robust. Even if we see a deterioration in labor markets as the Fed raises rates, the strength of the private sector balance sheets will likely smoothen the slowdown in consumption levels, thereby limiting the extent of a recession if one was to occur. Inflation will be sticky.  While the year-on-year CPI levels will be distorted by base effects, it will be more important to watch month-on-month prints to gauge how far the Fed will go with its tightening cycle. Energy prices continue to underpin underlying price pressures, and the rising food protectionism around the world also means food inflation will be sticky. China still doesn’t have a clear exit plan from its zero Covid policy and while port congestions may have passed the peaks, labor shortages are still hurting everything from production to logistics to supply chains. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Looking beyond Fed’s rate moves.  Fed minutes of the May meeting are due later today. While consecutive 50bps of rate hikes remain locked over the next two policy meetings and another 25bps rate hike is fully priced in for September, the odds of a sixth 25bps rate hike in September have dropped to 37%, from 65% on Monday, following Fed Atlanta President Bostic’s comment suggesting an interest-rate pause in September. With markets being choppy, the Fed needs to be extra cautious on its communication if it intends to tighten liquidity. For instance, Powell ruling out a 75bps rate hike at the May meeting actually saw some loosening of financial conditions on the day after the meeting even though we saw the first 50bps rate hike of this cycle, which goes against the objective of demand slowdown and anchoring inflation expectations. The warnings from consumer staples.  The slew of poor retailer earnings in the past week is sending a warning sign not just on the consumers trading down or the cost pressures sustaining, but also on their inventory build-ups for these essentially defensive plays. Inventory build-up is a typical sign of a slowdown as it generally indicates drier liquidity conditions hampering demand. What this means is that the retailers will need mark-down prices going forward to clear their inventory, suggesting further earnings pressures. While strong household balance sheets may help retailers sail through with these higher inventory levels, especially after the stock outs of the last two years due to supply disruptions, it is certainly something to watch as a leading indictors of economic momentum. Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM Source: Bloomberg Source: Saxo Bank
Podcast: BoJ losing control. Geopolitical risks for Tesla

Financial Markets Today: Quick Take – May 25, 2022 | Saxo Bank

Saxo Bank Saxo Bank 25.05.2022 10:23
Summary:  US equity markets bobbed back higher after a sharp intraday sell-off never quite poked at the cycle lows from Friday. US yields dropped sharply at the short end of the curve in the wake of a very weak US New Home Sales number for April and the flash Services PMI for May, helping to keep the US dollar on its back foot. Overnight, New Zealand’s central bank hiked rates 50 basis points, boosting the kiwi sharply.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - Nasdaq 100 futures were under pressure yesterday with Tesla shares down 7%. Nasdaq 100 futures broke lower through key support levels but found support and bounced back, but still ended the session lower locking in the lowest close price since the current drawdown began. This morning the futures are attempting to move higher but have already lost momentum with yesterday’s close at 11,771 being the big level to watch on the downside. If sentiment improves today the 12,000 in Nasdaq 100 futures will likely be the gravitational level to watch on the upside. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) - both indices gained modestly.  China’s banking regulators called on banks to make more lending. The People’s Bank of China (“PBoC”) held an internal meeting to call on ranks and files at the central bank to step up efforts to encourage banks to lend to SMEs.  In addition, the PBoC jointly with the China Banking and Insurance Regulatory Commission to meet with 24 financial institutions and to call on the latter to lend to SMEs, home buyers, truck drivers and households. Kuaishou Technology (01024) rose 4% after reporting results beating market expectations.  EURUSD – the pair marked out new territory on this rally with a move above 1.0700 yesterday in the wake of solid flash EU Services PMI, easing a tad lower after posting a high just shy of 1.0750 overnight. The US dollar was weighed down by lower US yields in the wake of soft US economic data points (more below). If US yields continue lower, the pair could continue to rise and threaten the 1.0800+ zone that would open up for a possible consolidation all the way to 1.1000 and possibly even 1.1200 on a more profound reassessment of the Fed’s potential to tighten. But those latter levels may require new specific positive catalysts in Europe. USDJPY and JPY pairs – USDJPY broke down through the 127.00 area support yesterday, just as the entire US yield curve dropped on weak US economic data points, with the 10-year yield dropping below 2.75% at one point to trade its lowest since late April. The price action was orderly, suggesting that heavy short-JPY speculative positioning is not driving any immediate panic (relatively stable risk sentiment and a fresh rise in oil prices working against the yen’s favour), with a low of 126.36 before bouncing back toward 127.00 overnight. The 125.00 area is the next focus if the sell-off continues amidst lower treasury yields. In the crosses, the JPY moves tell us that USDJPY punching lower yesterday was only briefly about the JPY strengthening and more about the USD weakening. Crude oil (OILUKJUL22 & OILUSJUL22) trades higher with Brent once again challenging resistance in the $115-area after the American Petroleum Institute reported a 4.2 million barrels decline in gasoline stocks. If confirmed by the EIA later today, it will mean US stockpiles are at the lowest level for this time of year since 2013, just ahead of an expected busy driving season. An offer from the US DOE to sell up to 40 million barrels of crude had no impact with Saudi Arabia saying they have done what they can and there is no shortfall of crude. The current oil market strength happening without the support from a struggling China where demand remains challenge by covid-19 related lockdowns. A break above $115 in Brent may signal a fresh attempt being made towards $124. Gold (XAUUSD) as expected has found resistance at $1868, the 38.2% retracement of the recent 210-dollar correction, with silver (XAGUSD) in need of a break above $22.20 before focusing on $22.65. Renewed strength driven by weak US economic data (see below), a weaker dollar, Wall Street getting beaten up and concerns over a central bank policy mistake with aggressive monetary-policy tightening driving concerns over a potential US recession. Despite these latest tailwinds, the recovery has not been strong enough to seriously challenge those looking for lower gold prices, hence a continued focus on economic data, the dollar and yield developments. US Treasuries (TLT, IEF) - weak US data yesterday (more below) punched US yields lower all across the curve, with the 10-year Treasury benchmark nearly touching the pivot lows from late April around 2.71% and the two-year yield dropping as much as 15 basis points intraday before settling near the 2.50% level. The next key US data point for the treasury market is the April PCE inflation data point up this Friday, with 5-year and 7-year Treasury auctions set for today and tomorrow, respectively, after a 2-year auction yesterday went off smoothly despite yields having dropped to their lowest level in nearly a month. What is going on Very weak US data yesterday. The flash US May S&P Global Services PMI was out at 53.5 versus 55.2 expected and versus the 55.6 reading for April. This survey has often undershot the traditionally more influential ISM Services survey many times in recent months, but the market reaction was clear as Fed expectations seem extremely tuned to any hint of slowing activity that might drive a drop off in inflation. As well, the US April New Home Sales release (annualized pace of sales dropping to 591k versus 748k expected and 709k (revised from 763k) in March) pointed to a massive deceleration in activity in the new housing sales after the steep rise in US mortgage rates this year.  Finally, despite a strong flash May survey for the S&P Global US Manufacturing PMI, the regional Richmond Fed manufacturing survey dropped into negative territory at –9 versus +10 expected and +14 in April. This is the third US regional manufacturing survey in the US this month after the Empire  and Philly Fed surveys to show a steep drop from April levels. RBNZ stays hawkish, supporting NZD. Another 50bps rate hike by the RBNZ along with no signs of parting with its ahead-of-curve tightening path put in a further bid for the kiwi. NZDUSD shot up to 0.6500 from intraday lows of 0.6423 while AUDNZD gave up the key 1.1000 level to plunge to 1.0928. Even though RBA is catching up now, RBNZ remains ahead of other central banks, having tightened by 175 basis points since last October, and will likely be the fastest to reach neutral rates. Guidance was key in driving further kiwi strength as the RBNZ raised its projection for peak cash rates to 3.95% from 3.35% earlier. What are we watching next? Food protectionism increases the odds of inflation being sticky. India will limit sugar exports as a precautionary measure to safeguard its own supplies, after banning wheat sales just over a week ago. While the overall impact of this move is smaller than the wheat ban, it is more a concern in terms of the rising food protectionism trend at a time when the weather conditions are weighing on output and Russia is hoarding its food exports. Fitch said in a report that around 30 countries have now taken steps to limit their food exports since the start of Ukraine/Russia war. Fed meeting minutes from the May meeting are due today. While the hunt for any mention of a possible 75bps rate hike may be futile, the base case stays at a series of 50bps rate hikes to follow. But investors are also increasingly parsing Fed talk to look for signs of stagflation or economic slowdown and that really is driving the market sentiment for now. Fed minutes will be especially key for the FX markets, and the focus will be on EUR and JPY, but also the commodity currencies. USD bulls may be back in action, but lower long-term yields may mean more gains for the yen too. AUDJPY remains a key risk sentiment play. Earnings Watch. Today’s key focus is Nvidia and Snowflake with the former being the one with the biggest sentiment impact given its $404bn market value and still elevated equity valuation (2% free cash flow yield). The worry around Nvidia is to what extent the decline in cryptocurrencies is beginning to weigh on sales due to a slowdown in crypto mining. This was a negative driver for Nvidia’s stock back in the years 2018 and 2019 following the big drawdown in Bitcoin. Snowflake was one of the hottest IPOs in recent memory attracting even Berkshire Hathaway as one of its investors and top line growth has been strong, but the market is getting increasingly nervous that growth is decelerating faster than initially expected. Today: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications Economic calendar highlights for today (times GMT) 0800 – ECB President Lagarde to speak 0945 – ECB Chief Economist Lane to speak 1100 – US Weekly Mortgage Applications 1105 – Japan Bank of Japan Governor Kuroda to speak 1230 – US Apr. Durable Goods Orders 1430 – EIA's Weekly Crude and Product Stock Report 1515 – UK Bank of England’s Tenreyro to speak 1615 – US Fed Vice Chair Brainard to speak 1800 – US FOMC Minutes 1800 – US 5-year Treasury Auction 2110 – New Zealand RBNZ Governo Orr to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Trading plan for Natural Gas on June 24, 2022

Tech wreck broadens but US economic signals are mixed; RBNZ stays hawkish and Gold and consumer staples back in focus | Saxo Bank

Saxo Bank Saxo Bank 25.05.2022 08:29
Summary:  The tech rout continued to gain traction in the overnight markets, and weak US data further eroded sentiment. The Reserve Bank of New Zealand raised its peak cash rate projection, boosting the kiwi. Food inflation is likely to remain sticky as protectionism moves continue to ramp up. Focus returns to consumer staples earnings and Fed minutes due today with an eye more for economic slowdown concerns rather than inflation now. What’s happening in markets? Big picture themes? Of the Equity Baskets we track across different sectors, Commodities were the best performers last night, followed by Energy Storage and Blue chips (Mega Caps). The US Futures are higher, suggesting the US market could potentially again see a short-term rally. But we think that the long-term risks remain, (rising long-term inflation, interest rates, tightening liquidity conditions) and this will likely continue to fuel commodities and commodity stocks up the most over 2022. We also see Gold and the USD dollar acting as a hedge in times of market turmoil, and urge clients to potentially consider what a balanced portfolio means to them. Asia Pacific’s stocks are trading mixed following more Tech disappointment in the US. While the US tech rout may have more room to run, focus is squarely on the economic momentum for now. Japan’s Nikkei (NI225.I) was down 0.2% amid the Wall Street sell-off and the stronger yen with eyes now on the Fed minutes due later today. As for Australia’s ASX200, it is up 0.8%, and is now trading at its highest level since May 6. This has been fuelled by mining stocks getting a huge win after Australia’s new Prime Minister ushered in an Electric car policy for the first time in Australia’s history. As such this week, Chalice Mining (CHN) is up the most 25%, followed by Allkem (AKE) up 21% (Allkem is one of the world’s top lithium producers). Also in mining, we are also seeing iron ore stocks like Champion Iron (CIA) make monumental moves up this week, after China cut its interest rates. For a technical update on iron ore please read our Technical Analyst’s note. Singapore’s STI index (ES3) traded close to neutral as Singapore revised its Q1 GDP growth higher and maintained its full year GDP growth forecast at 2-5%. China’s incremental stimulus measures once again fail to excite the equity markets. At the time of writing, Hang Seng Index (HSI.I), Hang Seng TECH Index (HSTECH.I) and CSI300 (000300.I) have been down three days in a row despite a cut in China’s 5-year Loan Prime Rate last Friday and a series of policy meetings and measures aiming at boosting the economy and confidence. This morning, early gains waned and turned into modest negative territory. Kuaishou Technology (01024) outperformed other Chinese internet stocks, rose as much as 6.8% after reporting results beating market expectations.  In blue chips, consumer brands did well overnight; McDonalds (MCD) shares rose 2.7% and Coca-Cola (KO) rose almost 2%, along with Procter and Gamble (PG) who sells essentials like Oral-B tooth brushes and toothpaste, to Gillette razors, Vicks, Pantene Shampoo, Old Spice etc. Of these stocks, what’s interesting is, in the GFC when the market fell almost 50%, McDonalds shares went up by 11%, showing people still want a Big Mac in a recession. That’s food for thought. Snap (SNAP) shares fell 43%, marking their biggest ever drop upon guiding for a weaker outlook, dragging down social media peers. Snap’s CEO highlighted it’s continuing to “face rising inflation, interest rates, supply chains issues and labor disruptions”. This reflects the dark cloud we have been talking about hanging over tech and social media stocks for some time. And our preference in long term Tech exposure is in the Blue chips like  - Apple, Microsoft, Google who are growing their earnings and forecasting brighter outlooks through innovation and pricing power. However, that being said, we do see further downside is ahead for these names too. Reopening economy stocks beat expectations. America’s Car Mart (CRMT) shares surged 31% - it’s the biggest one-day-gain since 2008. It comes as used car sales grew far more than expected to a record $352 million in the fourth quarter. This reflects what’s going on globally, the second hand car market is continuing to see rising sales.   What to consider? RBNZ stays hawkish, supporting NZD. Another 50bps rate hike by the RBNZ along with no signs of parting with its ahead-of-curve tightening path put in a bid for the kiwi. NZDUSD shot up to 0.6500 from intraday lows of 0.6423 while AUDNZD gave up the key 1.1000 level to plunge to 1.0928. Even though RBA is catching up now, RBNZ remains ahead of other central banks and will likely be the fastest to reach neutral rates. The central bank raised its projection for peak cash rates to 3.95% from 3.35% earlier. US eco data giving mixed signals. While the Flash manufacturing PMI came in as expected, the Flash services PMI missed expectations, coming in at 53.5 versus a 55.1 forecast. New home sales was a bigger disappointment, coming in at 591K versus an estimate of 748K. Richmond Fed manufacturing index also slid to negative territory at -9 from 14 in April. While concerns around the US economic momentum are rising, overall the economy is still showing signs of above-trend growth and may likely be able to sustain the tighter liquidity conditions. China’s banking regulators called on banks to make more lending. The People’s Bank of China (PBoC) held an internal meeting to call on ranks and files at the central bank to step up efforts to encourage banks to lend to SMEs. In addition, the PBoC jointly with the China Banking and Insurance Regulatory Commission to meet with 24 financial institutions to and to call on the latter to support SMEs, home buyers, truck drivers and household consumption.  EUR looking at exiting negative rates. EURUSD extended its recovery to 1.0750, supported by ECB’s hawkish comments that the negative rates regime could come to an end by September. The results of the S&P flash PMI indicators for the eurozone also showed activity continued to rise in both the services and the manufacturing sectors. GBPUSD saw a run lower to 1.2472 on weak PMI numbers which saw UK bond yields falling sharply. Food protectionism increases the odds of inflation being sticky. India will limit sugar exports as a precautionary measure to safeguard its own supplies, after banning wheat sales just over a week ago. While the overall impact of this move is smaller than the wheat ban, it is more a concern in terms of the rising food protectionism trend at a time when the weather conditions are weighing on output and Russia is hoarding its food exports. Fitch said in a report that around 30 countries have now taken steps to limit their food exports since the start of the Ukraine/Russia war. That’s almost a wrap for earnings season. What did we learn? 479 of the S&P500 companies reported results slightly better than expected. However, although average earnings growth came in a 9.4% for the quarter, and sales growth came in at just 13%, if you removed where the most growth came from, Energy stocks, with 273% average earnings growth and 59% sales growth, then overall S&P500 sales and earnings would be negative. That being said, the Material sector (Miners) also did well, producing average earnings growth of 42% (the second highest earnings out of the S&P500 sectors). We continue to see commodities; energy, mining companies and agricultural companies outperforming in 2022 and offering inflation and downside protection.   Potential trading ideas to consider? Fed meeting minutes from the May meeting are due today. While the hunt for any mention of a possible 75bps rate hike may be futile, the base case stays at a series of 50bps rate hikes to follow. But investors are also increasingly parsing Fed talk to look for signs of stagflation or economic slowdown and that really is driving the market sentiment for now. Fed minutes will especially be key for the FX markets, and focus will be on EUR and JPY, but also the commodity currencies. USD bulls may be back in action but lower long-term yields may mean more gains for the yen too. AUDJPY remains a key risk sentiment play. Gold is reversing back lower in Asia. Gold traded to its highest levels since May 9 overnight as falling Treasury yields helped pressure the USD. Gold tends to benefit from a drop in yields because it reduces the opportunity cost of holding the non-yielding asset, and a weaker USD drives foreign demand. The big challenge is still at the 38.2% retracement level of $1868 to signal a firmer uptrend in play. Consumer staples back in focus. BestBuy (BBY) – like most consumer companies last week – has missed profit expectations. More consumer earnings due this week from Macy’s (M), Dick's Sporting Goods (DKS), and Ulta Beauty (ULTA), the Wall Street may be bracing for more bad news.   Key earnings release this week: Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications   For a global look at markets – tune into our Podcast.  Source: Saxo Bank
WCU: Recession fears drive steep commodity declines

Commodities are the new black and your inflation fighting friend | Saxo Bank

Saxo Bank Saxo Bank 25.05.2022 07:42
Summary:  A protracted market correction looks to be happening, and the recovery is expected to be slow. Inflation is likely to continue for the longer term. So, investors might like to consider that commodities offer inflation protection. With the cost of raw materials and energy likely to go up, investors could turn to commodity-focused stocks to take shelter in the storm. We cover three reasons to look at commodities stocks, and six stocks to perhaps take a look at that have garnered a lot of attention and also outperformed the market since the November market downturn. Many investors have seen markets rise over the long-term, while newer investors might be accustom to seeing sharp falls and a quick recovery, almost -V-shape like, which have helped to smooth over market blips. However, the markets in Australia and the US are currently very bearish against a backdrop of rising inflation and the first increases in interest rates in over a decade, which is affecting companies’ ability to make more money. A protracted market correction looks to be happening, and the recovery is expected to be slow. This is reminiscent of what occurred in 1973, 2000, and 2007, where it took the markets about four years to recover. So, what can investors consider to ride out the market? In the next year or so, with inflation, the cost of raw materials and energy are likely to go up, investors could turn to commodity-focused stocks to take shelter in the storm.The following Three considerations present compelling reasons to invest in commodities: 1- Inflation is an ally to commodities Some of the largest companies in the world have flagged that wage inflation and supply issues have caused blowouts in expenditures, and have passed cost increases onto consumers, while also accepting slimmer margins. Being at the starting point of production value chains, commodity companies are better equipped to thrive in the current market with earnings growth from the price increase of raw materials being better able to keep pace with costs. Furthermore, central banks are expected to announce more aggressive interest rate rises. This means that inflation is expected to persist and pull up commodity prices. 2- Commodities have been a proven bet Generally when inflation rises, commodity stocks do well. We saw this since November. In fact, in the first quarter of this year, average earnings in the energy and materials sector have surged, and bucked the trend of declining earnings growth in the general US market. With scale, large commodity companies with strong balance sheets and free cash flows are more likely to withstand the bearish conditions. The market has already begun to appreciate this, with share prices of quality commodity companies being on the up and up. 3- Free cashflows to activate share buybacks With stellar performances bolstering the earnings and cashflows of some commodity companies, they may conduct share buybacks. This reduces the number of their shares available to the market. This should have a hand in driving up their share prices too. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM A key takeaway from all this, is to look out for resource-focused companies who are growing their earnings and cashflows into the future. Some companies that are showing that kind of promise are: In the US Sociedad Quimica y Minera de Chile (SQM shares are up 83% from November) Halliburton (HAL shares are up 77% from November) Barrick Gold (GOLD shares are up 13% from November) On the ASX BHP (BHP shares are up 30% since November) Woodside (WPL shares are up 35% since November) Graincorp (GNC shares are up 59% from November)   In addition, as uncertainty taints the broad market with increased volatility, the US dollar appears to be a good hedge in being the preferred holding currency of investors. There are Exchange Traded Funds (ETFs) that offer exposure to the rising US dollar. Investing in such ETFs may also help to diversify risk. And lastly, to summarize;  with wealth preservation in mind, now’s the time for investors to turn their focus towards resilient and defensive investments; offering rising cashflows and earnings, as the previously white-hot market spots continue to cool down. Follow FXMAG.COM on Google News More details on potential market opportunities for 2022, more can be found here. Source: Saxo Bank
Crude Oil Marches Higher, Price Of Gold Yawns

US stocks snap 7-day downtrend. Commodity stocks in wheat, energy and lithium brighten | Saxo Bank

Saxo Bank Saxo Bank 24.05.2022 14:34
Summary:  A technical rally occurred overnight, seeing the S&P500 gain after 7 days of declines, while Agriculture and Energy stocks shone the most, gaining even more momentum proving they are an inflation hedge. In quality tech, Apple shares rose 4% with long-term investors dripping in buy orders. Meanwhile, in big banks JPMorgan gained 6% upon forecasting net interest income to rise, which supported gains in Bank of America, Citigroup. We don’t think the market is at breaking point yet. However see Commodity gains intensifying and offering further upside, as the world worries global wheat supplies could run out in 10 weeks, while demand for lithium batteries rises seeing lithium companies upgrade their earnings and rally. What’s happening in markets that you need to know Big picture themes? Of the Equity Baskets we track across different sectors, we can see select risk appetite is starting to come back in to the market; China’s little giants are up the most month-to-date, supported by China’s fresh interest rate cut. Meanwhile, Cybersecurity stocks were up overnight (but are still down 24% YTD). Year-to-date though, our high conviction asset class, Commodities continues to see the most growth, followed by Defence. In the S&P500 oversold Ag and Bank stocks shine; Agri and Farm Tech stocks were up the most overnight, followed by Diversified Banks. In terms of standout stocks; Ross Stores and Deere (DE) rose the most (9%, 7%), after being two of the most oversold stocks last week. In S&P500 Deer was THE most oversold member. Deer makes 65% of its revenue from Agricultural equipment and selling turf. Earnings are expected to grind higher in 2022 and Deer pays a small dividend yield (1.25%). Asia Pacific’s stocks are trading mixed following more Tech disappointment in the US. While risk sentiment was upbeat overnight on Wall Street, Asia Pac’s markets turned most lower following Snap’s warning that it is unlikely to meet revenue and profit forecasts. Tech sentiment eroded again and further consumer staples earnings results this week are keeping investors cautious. Australia’s ASX200 trades flat, weight by tech falling,  with Block (SQ) down 6% after Bitcoin trades under $30k (Block makes most of its money from BTC transactions). Meanwhile, ASX lithium stocks continue to surge, supported by the new Australian government’s EV stimulus, seeing Liontown (LTR), Allkem (AKE), MinRes (MIN), Pilbara (PLS) dominate the leaderboard and rise 3-4%. Japan’s Nikkei (NI225.I) is down 0.3% led by Recruit (6098) which operates the popular HR engine “Indeed” and company information website “Glassdoor”. Singapore’s STI index (ES3) was however up 0.2% despite a record high inflation and a potential chicken-price shock. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Chinese and Hong Kong equites see lackluster trading despite incremental stimulus measures from the State Council and Biden’s remarks on reviewing tariffs on goods from China.   The attempt to rally in the opening hour in response to positive news of 33 stimulus measures from China’s State Council failed.  Overnight news that Biden will discuss with Treasury Secretary Yellen about reviewing tariffs on goods from China as part of the Biden administration’s effort to ease U.S. inflationary pressures did not incur much excitement. Hang Seng Index (HSI.I) fell 0.8% and CSI300(000300.I) was 0.3% lower. Among the 33 measures was a reduction of RMB60 billion in the purchase tax on passenger cars Great Wall.  Great Wall Motor (02333), Geely (00175) and Guangzhou Automobile (02238) rose 3% to 10% while shares of EV makers fell 3%-9%.  Although reporting a larger than expected 159% YoY increase in revenues and a 30bp improvement of gross margins to 10.4% in Q1, XPeng’s (09868) share fell almost 9% on cautious Q2 guidance.  What to consider? Fed speakers remaining flexible. Fed’s Bostic backed a series of 50bps rate hike moves overnight but hinted at a pause in September if inflation comes down but also opened doors to more aggressive moves if inflation doesn’t cool. Fed’s George said she expects the central bank to raise interest rates to 2% by August (which also means about 100-125bps of rate hikes from the current 0.75-1% rates or 2-3 50bps rate hikes). While the base effects may make headline inflation appear to be softening into the summer, real price pressures aren’t going anywhere and Fed’s hiking pace is likely to continue to prove to be slow. AUD and NZD unable to sustain gains. A fresh slide was seen in NZD this morning following the unexpected decline in retail spending reported today. RBNZ decision is due tomorrow  (in early Asian hours) and it is still a close call between 25 and 50bps rate hike. But it’s more important to note that RBNZ is way ahead of other central banks and getting close to neutral faster than others, which means room for further upside in NZD is limited. AUDUSD is also back below 0.7100 and remains prone to a reversal in risk sentiment more than any domestic developments. While the AUDUSD rose to a 3-week high yesterday, supported by the Australian Labor Government being sworn in after winning the election and bringing in an EV policy ($2k tax incentives), vowing to keep Defense Spending at over 2% of GPD and pledging to offer more childcare support to keep employment high. The USD will likely remain favored for now as risk aversion returns and cut the rally of the AUD.  ECB getting ready to move to exit negative rates. ECB President Lagarde’s comment that the central bank is likely to exit negative rates by the end of the third quarter put a massive bid into the EUR overnight but the pair turned lower from 1.0700 with focus on Fed Chair Powell and PMIs due today. With Fed comments getting repetitive, there is room for ECB’s hawkishness to support the EUR even as Lagarde continues to downplay the possibility of a 50bps rate hike. Germany’s economy shows signs of unexpectedly strengthening in May. Germany’s IFO reading was out at 93.0 versus prior 91.9 in April. The increase is mostly explained by an improved current assessment. The expectations component is almost unchanged and close to levels last seen at the start of the pandemic. Several factors are pushing respondents to be careful regarding the future: supply chain frictions, the Shanghai lockdown, persistent inflationary pressures and lower real disposable incomes of households etc. The German economy will not plunge as it did at the start of the pandemic, of course. But we think that risks of a stagflation are clearly titled on the upside. We will watch closely the first estimate of the May PMIs this morning to have a better assessment of the economic situation in Germany and in the rest of the eurozone.  Potential trading ideas to consider? Singapore’s inflation pain is rising. Core CPI was at a decade high in April at 3.3%, and this is still not a peak. Singapore’s national lunch meal chicken rice is set to get expensive as Malaysia is halting exports of chicken. About 34% of Singapore's chicken imports come from Malaysia. While alternate sources of fresh chicken and options such as frozen chicken may be possible, this is not the last inflation shock to hit the island economy. Vegetable prices are also on the rise due to shortages of supply and the high fertilizer prices. In times like this, we would reiterate the possible inflation hedges remain gold, REITs and commodities. In summary, it is important to look for value investments or stocks that have a solid cash flow generation ability and pricing power but still priced below their fair value. The plot for investing in Lithium thickens.Lithium remains one of our preferred metal exposures for 2022 for upside. Albemarle Corp, the world’s largest lithium producer upgraded its outlook for the second time this month expecting higher lithium prices and demand to further boost their sales. We’ve seen many EV companies sell out of some of their electric vehicles, and this highlights the lack of supply in battery metals, which is also pushing up the lithium price. Albemarle Corp, expects sales to now be as high as $6.2 billion this year, up from its previous estimate of up to $5.6 billion. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM If have a long time horizon for investing, you could consider dripping money into the market (this is called dollar cost averaging). Remember Shelby Davis said you can make most of your money in a bear market, you just don’t realize it at the time. But the key is to look at quality names that are in a position to return cash to shareholders. So if you want to be in tech for example, you could look at names like Apple, Microsoft and Google, who lead the S&P500 and Nasdaq indices and are growing their earnings and this is likely to continue over the next several years and longer term. The idea is that names like these, will likely lead a secular bull market, once the Market eventually begins to recover. And you ideally want to be in names with growing earnings, rather than throwing darts at some of those names with patchy results that are akin to Ark innovation ETF for example. China’s State Council announced 33 stimulus measures.  An additional VAT credit refund of RMB140 billion brings the overall target of tax refunds, tax cuts and fee reductions to RMB2.64 trillion in 2022.  China is also introducing a reduction of RMB60 billion (equivalent to about 17% of auto purchase tax last year) in tax on passenger car purchases.  The Government is increasing its supports to the aviation industry and railway construction via special bond issuance and loans and is rolling out a series of energy projects.  It is doubling the lending quota for banks to lend to SMEs and allow certain borrowers to postpone repayments.  The State Council also reiterates its support to promote legal and compliant listings of platform companies in domestic as well as overseas markets. Key company earnings to watch this week: Tuesday: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications   For a global look at markets – tune into our Podcast.  Follow FXMAG.COM on Google News Source: Saxo Bank
Oil rises on OPEC+, gold gains ground | Oanda

Can Finally Japenese Yen (JPY) Switch To Consistent Rising? Bitcoin Price And Ether Price Below Their Milestone Quotes. How Are Crude Oil And Copper Prices? | Saxo Bank

Saxo Bank Saxo Bank 24.05.2022 12:21
Summary:  The US equity market closed on an even keel yesterday only for Snap to report ugly earnings guidance in its quarterly report after hours, knocking sentiment and equity futures sharply lower, with other social media megacaps also feeling the heat. Elsewhere, Bitcoin is struggling as it slipped below 30k overnight, and the US dollar bounced after EURUSD closed at a four-week high yesterday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - Nasdaq 100 futures closed above 12,000 yesterday in what looked like a strong session, but things have turned around overnight with Nasdaq 100 futures now trading around the 11,815 level. The 11,784 level (yesterday’s low) is naturally the first important support level followed by the much more important 11,700 level which if broken would solidify that market weakness will likely continue. Key macro events today are May preliminary PMI figures in Europe and the US providing the first broad-based signs of whether the economy is really slowing down. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) - fell 1.7% and 1.4% respectively. The attempt to rally in the opening hour in response to positive news of 33 incremental stimulus measures from China’s State Council failed to sustain. Overnight news that Biden will discuss with Treasury Secretary Yellen about reviewing tariffs on goods from China did not incur much excitement either. Among the 33 measures was reduction of RMB60 billion in the purchase tax on passenger cars. EURUSD – the pair with the heaviest weighting in the overall USD index rushed higher yesterday, with order flow perhaps triggered by the price action rising above the 1.0642 pivot high from May 5. Headlines yesterday touted ECB President Lagarde’s specific guidance on coming ECB rate tightening, to start in July and reach zero percent by the end of Q3 (a rise overall of 50 basis points from the current –0.50% policy rate), this had already been priced into the forward curve. Bears will want a quick reversal below 1.0600 to suggest that this is a false dawn in the well-established bear trend that began back in late 2021, though the chart offers room for the squeeze higher into the 1.0800 area without threatening a change of trend. USDJPY and JPY pairs – USDJPY continues to look heavy within the local range, with all eyes on the 127.00 area on whether a break lower will be set in motion, where the 125.00 area is a natural focus, but that level may not corral the action if the US 10-year Treasury benchmark, for example, punches back toward 2.50% (currently 2.84%), as yields are the dominant driver for JPY, given the Bank of Japan’s capping of 10-year JGB yields under its yield-curve-control (YCC) policy. Heavy speculative short JPY positioning is an additional consideration, given the spectacular move on the break of the old range capped by 116.35 to above 131.00. Bitcoin and Ethereum are still strongly correlated with the sentiment in the stock market, and both slipped overnight and are now trading just below the key levels at $30k and $2k, respectively. Crude oil (OILUKJUL22 & OILUSJUL22) remains rangebound with Brent currently struggling to mount a strong challenge at the key $115-area. Along with copper (COPPERUSJUL22) and iron ore (SCON2), crude oil traded lower in Asia overnight with the market underwhelmed by China’s efforts to cushion the impact of China’s increasingly controversial Covid Zero approach which has seen growth projections slump. On the supply side, the EU ban on Russian oil is going nowhere amid opposition from Hungary while US gasoline trades lower after imports from Europe soared to a six-month high last week. Until China gets its house reopened for business, the upside for crude oil seems limited, despite expectations elsewhere for a post-covid busy summer driving and travel season. Gold (XAUUSD) is consolidating following four days of gains, and after finding resistance at $1868, the 38.2% retracement of the recent 210-dollar correction. The market has been supported by last week's recovery above $1840, the 200-day moving average, a break that is likely to have caused fresh buying from speculators after they cut bullish bets on COMEX gold futures to an eight-month low in the week to May 17. For now, however, the recovery has not been strong enough to seriously challenge those looking for lower gold prices driven by expectations for higher yields and a stronger dollar, hence the development in these two remains a key focus and driver. Wheat futures (WHEATDEC22 & ZWZ2) rebounded from last week’s losses as unfriendly crop weather in the US and Europe continued to raise concerns about the availability of supply next winter. Drought has hurt the quality of the soon to be harvested US winter wheat with the latest survey from the USDA showing a good to excellent rating of just 29%, compared with 48% last year. After the recent rains, weather models point to a renewed period of hot and dry conditions in the southern Plains while in France, the crop continue to deteriorate amid extreme heat. Corn and soybeans meanwhile doing better with the pace of planting accelerating last week, thereby reducing the first major risk of not getting the seeds into the ground. US Treasuries (TLT, IEF) - US treasuries sold off modestly yesterday as risk sentiment remained steady, but caught a bid late yesterday on the equity market turmoil after Snap’s profit forecast took down equity futures. The recent low in the 10-year yield was just above the 2.75% level and the major support to the downside is perhaps 2.50% if treasuries are bid again on concerns for the economic outlook and as inflation fears have cooled. What is going on German IFO unexpectedly improved in May. It was out at 93.0 versus the prior 91.9 in April. The increase is mostly explained by an improved current assessment. The expectations component is almost unchanged and close to levels last seen at the start of the pandemic. Several factors are pushing respondents to be careful regarding the future: supply chain frictions, the Shanghai lockdown, persistent inflationary pressures, and lower real disposable incomes of households etc. The German economy will not plunge as it did at the start of the pandemic, of course. But we think that the risks of stagflation are clearly tilted to the upside. We will watch closely the first estimate of the May PMIs this morning to have a better assessment of the economic situation in Germany and in the rest of the eurozone. Lithium producer Albemarle Corp. (ALB) upgrades outlook again. Albemarle Corp is the world’s largest lithium producer and has upgraded its outlook for the second time this month as it expects higher lithium prices and demand to further boost their sales. We have seen many EV companies sell out of some of their electric vehicles, and this highlights the lack of supply in battery metals, which is also pushing up the lithium price. Albemarle Corp, expects sales to now be as high as $6.2 billion this year, up from its previous estimate of up to $5.6 billion. Fed speakers remain flexible. Fed’s Bostic backed a series of 50bps rate hike moves overnight but hinted at a pause in September if inflation comes down but also opened doors to more aggressive moves if inflation does not cool. The Fed’s George said she expects the central bank to raise interest rates to 2% by August (which would require a hike of 50 basis points and one of 62.5 basis points if the current 0.75-1% Fed funds rate is to reach an even 2.00% ). While the base effects may make headline inflation appear to be softening into the summer, real price pressures aren’t going anywhere, and Fed’s hiking pace is likely to continue to prove to be slow. JPMorgan Chase pre-releases strong NII and credit outlook. Shares of the largest US bank rose 6% yesterday as JPMorgan Chase said that it sees a positive credit outlook and net interest income rising to $56bn vs previously $53bn. CEO Jamie Dimon said that he sees a strong US economy, but big storm clouds are visible on the horizon, and the company made an interesting comment on cyber security saying it is seeing a dynamic threat landscape. US earnings recap (XPeng and Zoom Video). XPeng reported a larger than expected 153% y/y increase in revenues and a small 20 bps improvement in the gross margin, but the Q2 revenue outlook of CNY 6.8-7.5bn vs est. 8.3bn took the shares lower in extended trading. Zoom Video is one of those stocks that have been under enormous pressure the past year and sentiment was rock-bottom ahead of yesterday’s earnings release. However, Zoom delivered a big surprise with Q1 revenue in line with estimates and EPS of $1.03 vs est. $0.86, and the Q2 revenue outlook was in line with estimates. Zoom Video shares rose 5% in extended trading. Snap outlook deteriorates. A month ago, Snap said that it expected 20-25% revenue growth in Q2 disappointing the market with sell-side consensus at 28%, but yesterday the company said Q2 revenue growth would fall below the low end of the guidance. That is a quick deterioration over just one month ago suggesting businesses are cutting back on online advertising relative previous plans. What are we watching next? Flash global and Eurozone PMIs in focus today. With forward inflation concerns cooling somewhat, according to measures like inflation breakevens, focus is now shifting to the possibility and extent of economic slowdown, and Eurozone likely faces a significant threat in that regard in coming months. Flash Eurozone PMIs will be on watch today to gauge the extent of damage to the economy, although despite concerns, the surveys for Germany, France and the Eurozone are generally expected to come in well above 50 for this month, with Services PMI expected several points higher than manufacturing PMI, suggesting a solid expansion continues despite all the headwinds. New Zealand’s RBNZ to hike rates tonight. The RBNZ, one of the earliest G10 central banks out of the box with actual rate tightening last year after an early end was declared to its QE regime, is seen hiking 50 basis points tonight to take its Official Cash Rate to a 2.00%, the highest among G10 central banks. Forward guidance will be the focus as the central bank has declared that it would like to front load its rate tightening to get ahead of inflation risks. Earnings Watch. Meituan ended up not reporting Q1 earnings yesterday making it the second postponement relative to expectations. Today’s Chinese earnings focus is Kuaishou and NetEase which are both expected to see revenue growth decline from the previous quarter. AutoZone is releasing its Q3 earnings (ending 7 May) today and is thus the timeliest earnings release in the world on the current activity. Analysts are expecting revenue growth to decline to just 2% y/y. Today: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications Economic calendar highlights for today (times GMT) 0715 – France Flash May Services and Manufacturing PMI 0730 – Germany Flash May Services and Manufacturing PMI 0800 – Eurozone Flash May Services and Manufacturing PMI 0830 – UK Flash May Services and Manufacturing PMI 1000 – UK May CBI Retailing Reported Sales 1345 – US Flash May Services and Manufacturing PMI 1400 – US May Richmond Fed Manufacturing Index 1400 – US Apr. New Home Sales 1620 – Fed Chair Powell makes opening remarks at event 2030 – API's Weekly US Crude and Product stocks 2345 – Australia RBA’s Ellis to speak 0200 – New Zealand Official Cash Rate Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
ECB's Marathon. Earnings Season Is Coming! What's Up Equities?

How to fight inflation in falling markets | Saxo Bank

Saxo Bank Saxo Bank 23.05.2022 13:25
Summary:  Volatile markets aren’t the most attractive to invest in, but with surging inflation it is still a (risky) way to preserve the value of your cash. Inflation – the silent assassin of cash – is raging across the globe. Many countries are experiencing higher inflation than in the past 40 years. For instance, the US inflation for April came in at 8.3% while the European was 7.5%. This is significant, if you compare it to most central banks’ stated goal of inflation at or below 2%. It means that you can buy less with your money- clearly not an ideal situation. If you ask someone in finance how to prevent this, they’ll most likely tell you to invest your money. This is because the returns you get from investing can even out your wealth – i.e., you can keep your purchasing power.But when you log in to your trading platform, or if you just follow the news, you will notice that the financial markets on a broad scale aren’t doing that well. In fact, they are doing badly: both the American stock index S&P 500 and the European Euro Stoxx 50 are down almost 15% for the year. It seems like a dire situation, but there are still places where you can look to try and preserve your purchasing power.We have asked our Head of Equity strategy, Peter Garnry, and our Head of Commodities, Ole Hansen, where one could look to avoid losing to inflation, but without nose diving into falling markets. They supply three ideas to potentially look at and suggest an approach which can help in times like these.Inflation-linked bonds“If you want to try and protect your savings against inflation, you could consider investing in inflation-linked bonds. Put shortly, if you invest in e.g., an ETF (Exchange Traded Fund) investing in inflation-linked bonds, then you will get exposure to bonds that will have their principal increased with the consumer price index. This means that the value of the instrument goes up if inflation goes up. Of course, the risk is like that if inflation goes down, the value will too, and higher interest rates will also negatively inflation-protected bonds” says Garnry.Commodities“Another way to potentially fight inflation can be to invest in broad commodity products. Since commodities are the most basic input to everything we produce, the price of commodities has a relatively strong connection to inflation. For instance, anything from building a house, a new car to the much-needed green transformation will require an abundance of industrial metals from aluminum and copper to lithium and nickel. The prices of these are likely to remain supported despite the risk of an economic downturn” says Hansen.Gold“Gold is considered a safe haven within investing. This means that it is a place to look when times get tough. Gold has historically had a relatively strong connection to inflation and is generally believed to be one of the better protections against losing your purchasing power. Previously it was difficult to invest in gold because you needed to buy it, but today there are gold-based products you can trade online. But you need to be aware of the type of product you choose and make sure you understand how it works, including its risks, before diving into it,” says Hansen.Protect your portfolio by spreading your investments.Apart from ideas on what to invest in Garnry also offers another thing to consider, including a word of caution. “It is a very tough time for investing, so you need to make sure your risk is under control. Markets are wild these days, so you need to be careful. Generally, it is probably time to revisit what is called your asset allocation. This means the mix of investment assets like stocks, bonds, etc. as it could be time to move some money from equities into other instruments,” Garnry says.Inflation explainedWhen we call inflation the silent assassin of cash, it is because that is exactly what it is. Inflation means that prices in society have increased, and this is an important measure for how society – financially – is evolving. But even though it is seen as an important and positive part of the global financial infrastructure today, it is less positive for large cash reserves and savings. Because when prices increase, it means that you can buy less for your savings. Let’s look at this example – you have saved up 10,000 USD to buy a new car. The car you want costs 10,000 USD, but you decide to wait a year to have a bit of a buffer. Next year – if inflation is at 8 pct. – the car will cost 10,800 instead, so if you haven’t saved 800 USD dollars more, you can’t afford the car anymore. While 800 dollars in a 10,000-dollar budget might not seem like a lot, the compound price increases over time can be significant. That is why banks in general will recommend that you invest your money, as the potential positive return you might get over time can help you keep your purchasing power. Source: Saxo Bank
Chart of the Week : Is a recession inevitable in the United Kingdom ? | Saxo Bank

Chart of the Week : Is a recession inevitable in the United Kingdom ? | Saxo Bank

Saxo Bank Saxo Bank 23.05.2022 12:38
Summary:  In today’s ‘Macro Chartmania’, we focus on the UK economy following the release last week of worrying data about consumer confidence. All the data are collected from Macrobond and updated each week. Click here to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. A global recession is not our baseline. But we acknowledge that several countries are likely to enter into technical recession this year. We are very pessimistic about the United Kingdom’s outlook, especially. All the statistics released last week tend to indicate the economy will experience negative growth this quarter : the GfK consumer confidence fell below all-time low, at minus 40 in April, due to the surge in cost of living, retail sales look stagnant in the medium-term despite the short-term April rebound (+1.4 % MoM in volumes) and the April CPI jumped by two percentage points in just a month, from 7 % YoY in March to 9 % in April. Expect it to climb above 10 % in the coming months. Add to that the effect of the extra bank holiday which is likely to reduce activity this quarter. The pool of savings accumulated through the Covid crisis remains abundant. But it is mostly concentrated among higher-income households. Therefore, it is very unlikely to help much with consumption. All the major leading indicators of the UK economy confirms the worst is yet to come. The UK OECD leading indicator, which is designated to anticipate turning points in the economy six to nine months ahead, fell in April at 100. The year-on-year rate was at 10.4 % in April 2021 ; it now stands at minus 0.4 %. This is quite a swing over a one-year period. In addition, new car registrations, which are often viewed as a leading indicator of the wider UK economy, are in free fall driven by a massive drop in consumer confidence – see below chart. In June 2021 (post-Covid peak), new car registrations were at 1.88mn. It is now at 1.61mn – a stunning drop of 11 %. We think that at least two major developed economies are on the brink of a technical recession this year : the United Kingdom and France (which experienced stagnant growth in Q1 driven by a worrying drop in domestic demand). Australia is also a reason for worry, in our view. The Reserve Bank of Australia is tightening aggressively in a global inflation surge and business cycle that is already very long in the tooth. A policy error can easily happen, in this context. A larger number of developed economies are going through some form of stagflation (this is the case of Germany, for instance). In the United States, domestic demand remains solid (April retail sales and April industrial production figures were encouraging despite the surge in prices). A soft landing will be a complicated task for the U.S. Federal Reserve. But this is still possible. As a warning, we may adjust our forecast for global growth in the coming months if the contraction in new export orders in Germany and China (the two main global exports) last. This would give more credibility to markets’ call of global recession. This is too early to say, however. Source: Saxo Bank
Riksbank set to hike 50bp in a bid to get ahead of the ECB

Saxo Spotlight: What’s on the radar for traders and investors this week? | Saxo Bank

Saxo Bank Saxo Bank 23.05.2022 09:39
Summary:  The US equity markets remain on the verge of a bear market after a brief foray into that territory on Friday. We are entering the last week for major Q1 earnings with retailers on watch again, and it is also the week before the Fed starts to tighten its balance sheet from June 1. PMI releases will be keenly watched for any recession risks while a global food crisis also remains a key focus especially as the World Economic Forum kicks off. Will more pain come from consumer spending stocks reporting this week? Costco, Best Buy and Dollar General report earnings this week. Will their stocks freefall like Walmart and Target did last week, amid weaker guidance levels for the year ahead? $550 billion in market value was wiped from consumer stocks over the last five days, while experiential economy/reopening stocks like United Airlines and American Airlines finished virtually steady. That reflects what’s going on at the moment and our preference for reopening stocks over household goods stocks. Also on watch will be earnings from pandemic era favourites such as Zoom. Fed minutes and US core PCE inflation. As we head into the final week before the Federal Reserve begins to tighten its balance sheet from June 1, focus will be entirely on the Fed minutes due Wednesday to again looks for any hints of possible 75bps rate hikes in the coming months. While the base case stays at a series of 50bps rate hikes to follow, investors are also increasingly parsing Fed talk to look for signs of stagflation or economic slowdown and that really is driving the market sentiment for now. Fed minutes will especially be key for the FX markets, and focus will be on EUR and JPY. April core PCE inflation data will also be key to parse the strength of the US consumer through the high inflation periods especially after the shock retailer earnings last week. Flash global and Eurozone PMIs. With inflation concerns being increasingly priced in by the markets, focus is now shifting to the possibility and extent of economic slowdown, and Eurozone likely faces the biggest threat in that regard. Flash Eurozone PMIs will be on watch to gauge the extent of damage to the economy. China’s economic calendar is light this week with only April industrial profits on Friday.  Investors have already discounted extremely weak economic activities in April and are now looking beyond the month of April and focusing on if economic activities have recovered in May.  Korea’s May 1-20 Exports to China coming at +6.8% YoY, bouncing back from the +1.8% print in April.  Being an important supplier of intermediate good to China, this probably offers a moderately positive glimpse of the Chinese manufacturing industries for May.  Agricultural sector & stocks front and centre. With only 10 weeks of global wheat supplies left, agricultural stocks are once again in the spotlight, fuelled by record price rises in wheat, corn and soybeans and grain, pushing ag stocks to the best performing posts for the month, and year. Local grain producers and sellers like Elders (ELD) and Graincorp (GNC) are up over 10% YTD and are hitting new record levels, with Elders for example saying Australian crop conditions will bolster, and cattle and sheep prices will remain high, which will push its earnings 30% higher than last years record. Fertilizer stocks like Nutrien (NTR) and Mosaic (MOS) are also riding high, up over 20% this year. Davos meeting. Global leaders gather in Davos, Switzerland as the World Economic Forum holds its in-person annual meeting after two years. The theme of the summit is “History at a Turning Point: Government Policies and Business Strategies”, and it will focus on key topics such as pandemic recovery, tackling climate change, the future for work, accelerating stakeholder capitalism, and harnessing new technologies – most of which are key inputs for our equity theme baskets. Alibaba (09988) reports March 2022 quarterly results on Thursday.  Consensus estimates are calling for a 7% increase in revenues and a 29% fall in earnings YoY.  Analysts are concerned that the Company may report a decline in customer management revenues (ads & commissions) and slower growth in cloud revenues.  Tencent’s disappointing results in its cloud business and glim assessment of the prospect of cloud services in China have intensified investors’ worries about Alibaba’s cloud service revenues.  RBNZ to hike. The Reserve Bank of New Zealand is pushing for aggressive tightening amid the high inflation concerns as energy prices rise. They aim to raise rates to above neutral by the end of the year, and risk of jumbo rate hikes is looming large. Source: Saxo Bank
EUR & ECB preview: No hawkish surprise unless Lagarde hints at 50bp hike

Recession fears sent S&P 500 briefly into bear market territory | Saxo Bank

Saxo Bank Saxo Bank 23.05.2022 09:23
Summary:  U.S. equity index futures rallied today in Asian trading after S&P 500 dipped into but finally avoided entering bear market territory at the close last Friday. Chinese equities, on the other hand, retraced from recent rally amid surge of COVID cases and partial lockdowns in five districts in Beijing. What’s the big picture? Investors have shifted their focus from the pace of Fed rate hikes and slowdown in the Chinese economy to the risk of a U.S. recession.  After hitting a high at 3.20% on May 9, U.S. 10-year treasury note yield has retraced 40bps lower to 2.80% in response to the prospect of slower U.S. growth.  We remain cautious of general equities amid the risk off mood, while S&P 500 closed lower for the 7th consecutive week and briefly entered bear market territory. Meanwhile, select Agri business stocks and industrial metals continue to hit new highs. What’s happening in markets? Agricultural stocks shine as Wheat prices remain elevated with global wheat supplies running out. Diversified agribusiness Elders (ELD) upgraded its earnings guidance, upon citing Australian crop conditions will bolster, and cattle and sheep prices will remain high, which will push its earnings 30% higher than last year’s record. Meanwhile, US dollar on a bearish trend in Asia amid risk-on. The US dollar continued to lose ground in the Asian hours as risk sentiment was rather upbeat, and gains were led by commodity currencies. NZDUSD rose above 0.6450 as RBNZ is expected to announce a 50bps rate hike this week. AUDUSD caught a bid as well following a clear victory for the Labor party in Australia’s election at the weekend but AUDNZD saw a downside bias. USDJPY broke below the key 127.50 level again but Fed minutes due this week will be a key input for yield spread direction. GBPUSD gained 1.8% last week and was seen extending the gains to 1.2500+ in Asia. AUDUSD rallies to new two-week high after the Australian Labor Party gets sworn in after winning the Australian Federal Election. Coal, oil and LNG companies were left unscathed, while Australia’s Prime Minister elect is set to bring in an electric vehicle policy, offering a $2k tax incentives. The Labor Party also vowed to provide stimulus for select green metals (steel, alumina and aluminium), hydrogen electrolysers, and waste reduction. And Labor vowed to increase Defence Spending over time and keep it at over 2% of GPD). Gold (XAUUSD) marches past 1850. Gold prices continued to be bid on Monday and the yellow metal surged above $1850/USD. We still remain bullish long term on gold as noted by Ole here, and a move above $1868 (38.2% retracement of the 210-dollar April to May correction) will be key to reverse the bearish momentum. Hong Kong and mainland China equity markets’ week-long outperformance is being tested by the surge in Beijing Covid-19 cases.   Last week, as investors shifted their focus to the U.S. recession risk, Chinese equities outperformed over 500bps (CSI300 +2% vs S&P500 -3%) despite very poor April data in credit, industrial production and retail sales.  Premier Li Keqiang’s reiteration of front-loading of stimulus measures, Vice-premier Liu He’s remarks on supporting the healthy development of the platform economy and private enterprises and a larger than expected cut in 5-year Loan Prime Rate cut, plus Shanghai’s plan to gradually lift lockdown in June, helped trigger investors flows into Chinese equities.  The bar was probably low for a tradable rally as the sentiment and position had been quite low for sometimes. The medium trend of the market, however, remains down.  The surge in COVID cases in Beijing dampened sentiment and contributed to an over 1% retracement in Hang Seng Index (HSI.I) and CSI300(000300.I).  The Beijing municipal government tells residents in five districts, including the central business district Chaoyang and the IT hub Haidian to work from home through May 28.  Asian equities were mixed on Monday after Wall Street sees a late rebound on Friday. With the backdrop of a mixed US session overnight on Friday, Asian equities started the Monday session on a positive note but pared some gains later as overall sentiment remained fragile. Japan’s Nikkei (NI225.I) remained in gains of 0.6% at last look led by insurance as Tokio Marine (8766) reported a jump in earnings. Singapore’s STI index (ES3) was still down 0.5% led by DFI Retail (DFI) and Jardine Matheson (JM). What to consider? US Gas prices hit record and will likely move up again with power grids stretched. This is all ahead of World Gas Conference, which will intensify the spotlight on the energy sector. Meanwhile, Exxon Mobil, Chevron Corp and Shell will hold shareholders meetings this week. While sweeping energy shortages threaten prices to go higher, they’ll face questions about what they are doing to reduce emission. UK retail sales stayed upbeat but consumer confidence was at record lows. UK retail sales rose 1.4% in April beating expectations of a 0.3% decline, a significant surprise given the general sentiment of inflation biting the consumers. Customer confidence however fell to a 50-year low of -40, and with further tightening to come after 9% inflation print reported last week, more economic pain will likely remain on the radar. Flash global and Eurozone PMIs. With inflation concerns being increasingly priced in by the markets, focus is now shifting to the possibility and extent of economic slowdown, and Eurozone likely faces the biggest threat in that regard. Flash Eurozone PMIs will be on watch this week to gauge the extent of damage to the economy. First up, German IFO index release today will further signal the reverse effect of sanctions on Russia. The business expectations index edged up to 86.7 in April from 84.9 in March, but that’s still well below the 10-year average of about 97.4. Alibaba (09988) is reporting March 2022 quarterly results on Thursday.  Consensus estimates are calling for a 7% increase in revenues and a 29% fall in earnings YoY. Analysts are concerned that the Company may report a decline in customer management revenues (ads & commissions) and slower growth in cloud revenues.  Tencent’s disappointing results in its cloud business and glim assessment of the prospect of cloud services in China have intensified investors’ worries about Alibaba’s cloud service revenues.  This morning, the share of Alibaba fell over 4%. China releases its plan to boost healthcare.  The State Council released the country’s 14th Five-Year National Health Plan (2021-25) aiming at increasing the life expectancy of its population by 1 year and other healthcare targets.  The Plan will boost government spending on healthcare and may have a positive impact on the share prices of leading companies in the Chinese healthcare industry.  Potential trading ideas to consider? Safe haven currencies will be in focus again if risk sentiment turns sour. We do not think we have seen all the bad yet on equities. More retailer earnings due this week may show a further dent to consumer spending, while China’s rise in Covid cases will continue to be closely watched as well. The more upbeat Monday morning mood has meant a slide in safe haven currencies like dollar, swiss franc and yen while the risk-on currencies like AUD and NZD have been boosted. Apple reshoring from China to Vietnam and India.  Over the weekend, the Wall Street Journal reported that Apple was planning to boost its supply chain outside China to countries such as Vietnam and India.  Investors who are interested in this potential development may take a look at some equity ETFs such as VanEck Vectors Vietnam EFT (VNM:bats), Premia MSCI Vietnam ETF (02804:xhkg) and iShares MSCI India ETF (BATS_BZX). Key earnings release this week: Monday: Meituan, Sino Biopharmaceutical, Zoom Video, XPeng Tuesday: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications   For a global look at markets – tune into our Podcast.  Source: Saxo Bank Follow FXMAG.COM on Google News
Energy crisis to worsen as Russia cuts German gas supply | MarketTalk: What’s up today? | Swissquote

Weaker US Dollar (USD) Helps Gold Price. In Beijing Number Of COVID-19 Cases Confuses Many | Saxo Bank

Saxo Bank Saxo Bank 23.05.2022 09:21
Summary:  US equities plunged to new cycle lows on Friday, but quickly found support at a major technical level and rallied back toward unchanged on the day, with some brightening in sentiment to start this week as well, though a rise in Covid cases in Beijing is driving fears of new lockdowns there. The focus this week is on whether sentiment can stabilize and whether the USD rally is done for now as the sell-off last week has extended into the start of this week. Gold has enjoyed the combination of a weaker USD and lower yields.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - another choppy US equity session on Friday with Nasdaq 100 futures pushing to new lows for the cycle hitting 11,491 before bouncing back to close at 11,840 the weakest close since the current drawdown cycle started. This morning Nasdaq 100 futures are trading just above the 12,000 level, but the backdrop is still negative with US economic data weakening and inflationary pressures continuing to impact households. The resistance level to watch today in Nasdaq 100 futures is 12,096 and the key support level is 11,840. April Chicago Fed National Activity Index out today expected to remain significantly above trend growth, but a negative surprise could be in store given latest negative economic surprises. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) - retraced 1.7% and 0.8% respectively, as newly reported COVID cases surged, the Beijing municipal government tells residents in five districts, including the central business district Chaoyang and the IT hub Haidian to work from home through May 28. More Chinese cities relaxed mortgage lending with banks in Beijing lowering the mortgage rate for first-time buyer by 15 bps to 5% and Changzhou cuts down payment ratio for second-home purchases. Stoxx 50 (EU50.I) - Stoxx 50 futures were less impacted by the late session selloff on Friday in US equities and are responding positively this morning surging to 3,700 with the 50-day moving average at 3,728 being the key level to watch on the upside. IFO survey figures for May is out this morning in Europe expected to decline again m/m and could reverse the current positive momentum should the survey show a bigger negative surprise. AUDUSD – the AUDUSD has jumped through the local resistance above 0.7030, which was a prior major pivot low as sentiment picked up on Friday from new lows for the cycle and followed through higher in Asia to start the week, with rallying metals prices in recent days supporting the AUDUSD rally off the 0.6829 cycle low from the week before last. The recovery back above the huge 0.7000 level is significant as this level was an important pivot as far back as early 2019, but the rally has not yet more profoundly threatened the sell-off from the 0.7600+ top in early April, which would require a full reversal of the current sell-off wave from the 0.7250 area, also near the 200-day moving average (currently 0.7260). More on the Australian election below. USDJPY and JPY pairs – the potential for JPY volatility is still in play as long safe-haven bond yields settled toward multi-week lows on Friday and USDJPY settled back toward the low 127.00’s overnight, as 127.00 is an important range support. US treasury yields will remain an important coincident indicator, together with energy prices, for JPY crosses, with the risk of aggravated volatility if the 127.00 area falls in USDJPY as speculative short-JPY positioning has built heavily on the huge move after breaking above 116.35 to the top above 130.00. Looking lower, the 125.00 area is a natural focus, but may not corral the action if the US 10-year benchmark, for example punches back toward 2.50% (currently 2.82%). Gold (XAUUSD) trades higher for a fourth day supported by a weaker dollar but with headwinds from higher bond yields and the improved risk sentiment seen through higher stocks. Speculators cut bullish bets on COMEX gold futures to an eight-month low in the week to May 17 while the silver net returned to neutral for the only the second time in three years. Both highlight metals that have their work cut out to attract fresh buying interest. For the technical situation to turn more price friendly gold will soon need to break the next significant hurdle at $1868, the 38.2% retracement of the recent 210-dollar correction. Crude oil (OILUKJUL22 & OILUSJUL22) pushed higher in Asian trading, supported by a weaker dollar and tight product market, offsetting ongoing worries that tight monetary policies will drive an economic slowdown and lower demand. In addition, Beijing reported a record number of new Covid-19 cases, thereby highlighting the prolonged economic fallout from China’s increasingly controversial Covid Zero approach. Hedge funds rushed into crude oil futures in the week to May 17, boosting their net long by the most in six months as prices attempted a fresh break to the upside. Continued focus on the tight product market and refinery demand ahead of the driving season as well as China. A break above $115 in Brent may signal a move towards $124, the recent peak. US Treasuries (TLT, IEF) - US treasuries seem to have reverted to their old behavior of negative correlation with equities in times of stress, as Friday saw the 10-year benchmark Treasury yield closing at a more than three week low near 2.80% as equities tested new lows for the cycle, even as risk sentiment improved markedly late Friday and to start this week. As shorter yields have fallen less during this corrective episode, the Treasury yield curve is near the flattest it has been since early April at about +20 basis points for the 2-10 spread, suggesting a darkening outlook for the economy and perhaps the assumption that inflation will ease. If yields continue to correct lower, the natural next focus could be 2.50% if the 2.75-72% area is taken out. What is going on Australian election sees new Labor prime minister, but final vote tallies not yet in place. Former Prime Minister of the National/Liberal coalition has conceded defeat to Labor’s Anthony Albanese, but the final vote tallies are not yet in which will determine whether Labor has a slim majority or will need to form a coalition, perhaps with the Green party. The incoming Labor government, like all governments, will have to deal with accelerating inflation, while the Australian left faces the dilemma of dealing more aggressively with climate change when so much of its economy is dependent on extracting iron ore, coal and natural gas that are huge drivers of carbon emissions. UK April retail sales stayed upbeat but consumer confidence registered a record low in May. UK retail sales rose 1.4% in April beating expectations of a 0.3% decline, a significant surprise given the general sentiment of inflation hitting consumers. Consumer confidence, however, fell to –40, its lowest level ever registered in the 48-year history of the survey. With further tightening to come after 9% inflation print reported last week, more economic pain will likely remain on the radar. Orpea is going through a rough time again. In February, the French retirement home group was accused of allegations of systematic mistreatment, patient abuse and hygiene negligence in order to maximize profit margins. Investigations are still ongoing. Now, Orpea is embroiled in a financial scandal. Last week, the French media Mediapart and Investigate Europe revealed the existence of a financial company parallel to Orpea, based in Luxembourg, which has accumulated €92 million in assets and carried out questionable financial operations. There are suspicions of misuse of corporate assets. Orpea’s shares were down almost 30 % last week and collapsed by 72 % since the beginning of the year. A few weeks ago, the operator managed to secure €1.73 billion of financing from several banks to face increasing costs (related to the ongoing investigations) and debt maturities. For the moment, the risk of bankruptcy is limited. The company announced it won’t pay a dividend this year, of course. What are we watching next? Flash global and Eurozone PMIs in focus this week. With inflation concerns being increasingly priced in by the markets, focus is now shifting to the possibility and extent of economic slowdown, and Eurozone likely faces the biggest threat in that regard. Flash Eurozone PMIs will be on watch this week to gauge the extent of damage to the economy. First up, German IFO index release today will further signal the reverse effect of sanctions on Russia. The business expectations index edged up to 86.7 in April from 84.9 in March, but that’s still well below the 10-year average of about 97.4. “Averting a global food crisis” is one of the first sessions at the annual gathering of the business and political elite in Davos. Last week the UN warned of a catastrophe that could last for years as the war in Ukraine and global weather changes reduce the availability of key food items. Ukrainian farmers have almost completed the sowing of spring wheat for the 2022 harvest, and it is down 25% from 2021 while agriculture analysis firm Gro Intelligence said the world has only 10 weeks’ worth of wheat consumption in reserves. Investors are on alert for more government moves to protect crop flows after India’s wheat curbs roiled markets last week. Speculators meanwhile in the week to May 17 increased bullish bets on Chicago wheat to the highest in more than 14 months US Economic calendar focus this week on FOMC minutes Wednesday, Apr. PCE inflation data Friday. But another key focus across markets is the crude oil price, which is threatening the top of the range since late March near 115.00 for both Brent and WTI. The April Core PCE inflation readings are expected at +0.3% MoM and +4.9% YoY after March saw the YoY drop to 5.2% after the cycle high +5.3% in February. Earnings Watch. Today’s Chinese earnings focus is Meituan expected to deliver another big loss in the first quarter. US earnings will focus on Zoom Video which is expected to see its revenue growth moderate to 12% y/y in Q1 (ending 30 April) and the EV-maker XPeng which is expected to deliver 150% y/y revenue growth in Q1 despite Chinese lockdowns disrupting supply chains. Later this week on Thursday Alibaba is reporting Q1 results.  Consensus estimates are calling for a 7% increase in revenues and a 29% fall in EPS YoY. Analysts are concerned about the decline in Alibaba’s customer management revenues (ads & commissions) and growth prospect of cloud business. Today: Meituan, Sino Biopharmaceutical, Zoom Video, XPeng Tuesday: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications Economic calendar highlights for today (times GMT) 0800 – Germany May IFO Survey 1230 – US Apr. Chicago Fed National Activity Index 1415 – ECB's Holzmann, Nagel to speak 1415 – UK Bank of England Governor Bailey to speak 1430 – ECB's Villeroy to speak at Davos 2245 – New Zealand Q1 Retail Sales 2330 – US Fed’s George (voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank Follow FXMAG.COM on Google News
German inflation comes down as government measures bite

Momentum rotation to hit technology and financials | Saxo Bank

Saxo Bank Saxo Bank 20.05.2022 13:45
Summary:  The biggest momentum ETF in the US is about to rebalance and based on the current momentum factor scores technology and financial stocks are going to be cut with the biggest effect on the biggest index weight names such as JPMorgan Chase, Tesla, Microsoft, and Bank of America. Momentum strategies are adjusting to the new trend of value stocks suddenly being where momentum is and this rotation could add to the selling pressure in technology stocks. Tesla has also recently been kicked out of the S&P ESG Index and thus multiple funds will likely soon begin reducing Tesla shares. The biggest rotation on record in momentum funds is coming According to a recent Wells Fargo research note, the $9.8bn momentum fund iShares MSCI USA Momentum Factor ETF (MTUM) could be on its way to make its biggest rotation on record due to a dramatic shift in the momentum factor away from information technology and financials, and into health care, consumer staples and energy stocks. MTUM is down 28% mimicking the downfall of the Nasdaq 100 underscoring the overlap between the momentum factor and the recent years of technology outperformance, and now the unwinding of that alpha. Based on the MSCI’s methodology behind the momentum factor we calculated the combined momentum score for the 30 largest positions in the MTUM fund. As the table shows, stocks such as BlackRock (what an irony being the owner of the fund itself), Goldman Sachs, Adobe, Alphabet, Oracle, Moderna, Bank of America, and JPMorgan Chase are some of the big losers. The winners are Eli Lilly, Costco (not for long with carnage in US retailing), ConocoPhillips, EOG Resources, Devon Energy, and Occidental Petroleum. But momentum in Tesla and Microsoft has also faded and will be reduced upon the next rebalancing, and due to the momentum factor methodology those with the highest underlying weight in the index (in this cases the MSCI USA Index) will be hit harder. Source: Bloomberg This week Tesla was also removed from S&P’s ESG Index due to the company lacking on the S and G driven by questionable working conditions at its factories and investigations related to accidents with its autopilot, according to the S&P statement. Other ESG funds are still holding Tesla, but the tide is shifting and Tesla could experience more selling from ESG funds going forward. Combined with the momentum rotation this could lead to a sizeable selling from multiple funds. Momentum strategies come in many different shapes and across private accounts, advisory accounts, ETFs, mutual funds, hedge funds etc. and thus the combined rotation is a lot bigger than the MTUM would suggest. The momentum factor explained The MSCI Momentum Factor methodology is defined in this paper and is basically a combined measure of the 6-month and 12-month price momentum (that is total return over that period), where the last month is removed due to short-term mean-reversion effects in the market (what has risen a lot recently tends to go down the following month). These raw measures of momentum is then standardized using the annualized volatility of the stock using 3 years of weekly observations. This combined momentum score is then further standardized to a Z-score which is then winsorized to 3 or -3 which means that any value above or below 3 or -3 are capped at these thresholds. This avoids dramatic outliers to cause a big weight change which is costly for the fund and very high Z-score values would most likely be noise anyway. These Z-scores are then turned into a momentum score which is multiplied by the underlying weight in the tracking index and then normalized to 100%, so the fund becomes a long-only fund with 100% investment. This means that a dramatic shift in the momentum score for those stocks with a large weight in the underlying will get increased or decreased in an amplified manner. Source: Saxo Bank
Video market update for June 29, 2022  | InstaForex

FX Update: Poking at pain points for USD bulls. | Saxo Bank

Saxo Bank Saxo Bank 20.05.2022 13:32
Summary:  After avoiding new cycle lows in US equities yesterday, risk sentiment bounced strongly overnight on China easing a key lending rate. In FX, this pushed the US dollar lower and the JPY lower still after yesterday’s fuss and bother in JPY crosses that ended leading nowhere. The status of the USD rally is the current burning question as we head into next week, and the remarkable volatility in USDCHF is a novel diversion. FX Trading focus: Further important USD supports under pressure Yesterday, I looked at the potential for JPY volatility to come unglued should risk sentiment continue to deteriorate in combination with a significant further drop in long US treasury yields amid mounting evidence that the US economy faces headwinds. Yesterday, treasury yields did dip to new three-week lows in the wake of weekly US jobless claims ticking up to the highest levels since late January and an ugly miss for the Philly Fed survey (2.6 vs. 15.0 expected and 17.6 prior), now the second US regional manufacturing survey in May to hit a huge air pocket after the volatile Empire figure turned suddenly negative this month. But while USDJPY poked below the first pivot lows of 127.50 in the wake of the US data yesterday, there was little follow through and then both the JPY and the USD were sent back lower. Boosting that move and sentiment overnight was a larger than expected rate cut in China (for the 5-year Loan Prime Rate generally associated with real estate loans) of 15 basis points has helped to buoy sentiment further. The USD pair showing the most volatility over the last few sessions is USDCHF, which managed to pull all the way above parity at the peak of the strong USD wave before retreating sharply all the way to below 0.9700 as of this morning before finding support. Surprisingly, that more than 300 pip retracement has only seen the pair testing slightly through its 38.2% retracement from the end-March lows below 0.9200 (!). The franc has found support on lower safe-haven yields that have also supported the JPY recently, but also after yesterday saw the SNB President Jordan out with the first firm hint that the bank is concerned about the inflation outlook and the risk of second round effects. No specifics, and Swiss rates haven’t really responded, but the CHF jumped on the news. All of this after the recent EURCHF attempt on 1.0500 has failed and USDCHF posted that parity milestone. Will revisit this if EURCHF Is down through 1.0200 support, for now the CHF move looks a bit of an overreaction. Chart: USDCHFUSDCHF has managed the rare feat of providing significant volatility in recent weeks after a long period of choppy action as both currencies have often been classified as “safe-havens” in recent years. After launching a rocket ride from the sub 0.9200 base, USDCHF rose as high all the way above parity on the extreme Fed-SNB policy divergence story (Swiss short government debt will be some of the last negative yielding stuff standing for this cycle) as well as the disproportionate pressure on all things European in the wake of the Russian invasion of Ukraine. The consolidation has been sharp for the reasons noted above, but is still far above the break-out line below 0.9500. Looks like the pair has staked out the new range above that figure and at least to the old range highs into 1.000-1.0200 for now. Looking cheap here? Source: Saxo Group The chief question for me heading into next week is whether the US dollar is set to find support here or fall to the next layers of support perhaps 2-3% lower, depending on the pair (EURUSD structural bears can easily stand a move to 1.0750, but above 1.0800 and the bearish stance comes under fire. For AUDUSD, the next layer of resistance is into 0.7250+, near a previous pivot high and the 200-day moving average). A chunky USD rally into the close today on a weak equity market would be just the signal USD bulls are looking for to establish fresh positions, while another leg lower suggests next week could be about poking around for new lower support levels. Next week’s calendar highlights include a German IFO survey up on Monday, flash Euro zone and global PMI’s on Tuesday, a presumed 50 basis point hike to the OCR from the RBNZ and the FOMC minutes on Wednesday, and on Friday, the Apr. PCE inflation data. Next week will be the last week before the beginning of actual Fed balance sheet tightening to begin on June 1 of the following week. Table: FX Board of G10 and CNH trend evolution and strength.The JPY volatility didn’t happen, although don’t write off its potential if the US equity lurches into bear market territory, which is demarcated at the 19.9% drawdown of the cycle lows. Note that the USD has lost nearly all of its positive steam – needs a boost or it is at the risk of falling farther. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.The USDJPY pair didn’t stick the move to the downside yesterday, so the trend reading has not yet flipped – although it is threatening to do so today as the moving averages settle. Note USDCHF and USDCAD having a look at a trend-flip as well today – although as we note above, the USDCHF picture would require more downside to suggest the prior large rally has failed, while USDCAD does indeed look beyond the local tipping point as of this writing.Source: Bloomberg and Saxo Group Source: Saxo Bank
Rates Spark: taking the inflation blinkers off

China easing saves the day for Asia even as US indices on the verge of a bear market | Saxo Bank

Saxo Bank Saxo Bank 20.05.2022 12:01
Summary:  China’s cut to 5-year loan prime rate brings a relief to Asian markets on Friday and will likely boost industrial metals and commodities in general. Japan’s inflation touched new highs but BOJ remains in a position to shove it off amid growth pressures and an improving positioning in the yen. Our cybersecurity theme is reaffirmed by strong Palo Alto earnings. What’s the big picture? The outlook for broad equities remains dim in 2022 and 2023, as financial conditions tighten, logistics issues continue, and commodity prices remain elevated. Investors return to safety in bonds, sending bond yields lower, yet yields remain elevated. The US dollar index trades at close to its highest levels since 2003, with investors bunkering in the safe haven currency. Overnight Goldman said there’s a 35% chance the US economy will enter a recession in the next two years. What’s happening in markets? The S&P500 remains pressured and has now fallen 18% from last year after falling back to its lowest level in a year overnight. Further falls are likely ahead as company earnings weaken, and financial conditions are set to get tighter, plus we will likely see company earnings downgrades, reflecting weaker fundamentals. Okay so the S&P500 trades at 16.5 times 12-month estimated earnings and is below its 10-year average, but we don’t think we have seen the bottom of US equities yet - the technical indicators suggest further downside is ahead too.  Nasdaq has now lost 27%, but some of the stay home economy names (Netflix, Docusign, Zoom, Paypal are down 60-70%) and further selling is likely ahead, while business spending linked companies like IBM and Cisco are guiding for weaker outlooks. The technical indicators suggest further downside is ahead for tech too. Hong Kong and mainland China equity markets rallied over 1% on improvement of sentiment towards China internet companies overnight in New York trading and this morning’s larger than expected 15bps cut in Chinese banks’ 5-year Loan Prime Rate (5yr LPR) from 4.6% to 4.45%. Coal mining stocks surged 5% to 7% following Premier Li Keqiang vowed to ensure no disruption to electricity supply.  Xiaomi (01810) reported revenues in line with market expectations but operating income and EPS disappointed due to higher operating expenses and losses in investments. Asian equity markets rejoice China’s big LPR cut. After a mixed US session overnight, Asian equities were relieved from China’s LPR cut that exceeded market expectations and may provide support to the ailing property sector. Tech stocks got a boost as well. Japan’s Nikkei (NI225.I) was in gains of over 1% as consumer discretionary made a comeback as well and Fast Retailing (9983) rose over 2.5%. Singapore’s STI index (ES3) rose 1.5% as Chinese EV maker Nio rose at its debut in Singapore. USD makes a recovery in Asia mainly on the back of AUD. AUDUSD unable to find a firm direction and was seen struggling even after the PBOC rate cut. USD was heavy overnight as the longer end of the US yield curve is struggling to go back above 3% amid recession concerns and risks of an inversion are increasing again. This, along with the yen’s appeal as a safe haven returning, make a case for a stronger rebound in JPY. John Hardy’s piece highlights how market positioning is also stretched for the yen. Block (SQ, SQ2) – a proxy for both Bitcoin and tap and go – saw its shares rise 6.1% in NY overnight, but they are still down 70% from their high. Meanwhile on the ASX, Block rose 9% today. Block held its investors day; giving hints of long-term profitability and expanding opportunity to drive growth. Its stock was upgraded by several investment banks.  We like Block’s business model and note it is a profitable business. The market also thinks its gross profit, earnings and income will all see growth margins rise in 2022. The technical indicators suggest Block faces long-term indicators as does the entire tech sector. However, over the short term, the technical triggers (MACD, RSI) suggest short term buying could pick up. SQM – another lithium company shines – putting a spotlight on the sector. Lithium and agricultural company giant SQM shone overnight 5.6%, taking its yearly gain to 87% after delivering stronger than expected results and guidance. But we are also seeing most lithium stocks rally on their strong outlook. As mentioned this week and previously, SQM looks poised to deliver stronger than expected results, following peers Albemarle and Livent. And it did. Overnight, SQM, a top lithium producer delivered stronger than expected revenue and income results. What’s also exciting for shareholders is it estimates lithium demand to grow 30% in 2022 and said it would lift resources spending in Chile and abroad. SQM’s sales hit a record high, and income rose 12 times the profit over last year’s record. The company makes 41% of its profits from lithium and 59% from fertilizers and plant nutrients including potassium. Palo Alto earnings reaffirm our cybersecurity theme. PAW Q3 FY2022 earnings delivered a beat with EPS $1.79 vs. $1.68 expected on a revenue of $1.39 billion vs.  $1.36 billion expected. Outlook was upbeat as well and the stock jumped higher by 11% in after hours trading to 484.50. Other cybersecurity firms like Crowdstrike (CRWD) and Zscaler (ZS) got a lift as well in the post market session. The evolution in global digitalisation demands an equivalent increase in cyber protection, and with the growing volume and complexity of cyberattacks, we expect the cybersecurity industry to continue to show high growth numbers relative to the general equity market. Gold (XAUUSD) resumed its downtrend after hitting a one-week high. Gold prices gained upward momentum on Thursday amid the weakness in US dollar and the slide in yields, and as it bounced off the psychological $1800 levels. But the yellow metal has lost momentum again in Asia and sideway trading between $1780 and $1883 is likely to continue. We still remain bullish long term on gold as noted by Ole here, and a move above $1868 will be key to reverse the bearish momentum. What to consider? Weak US data but Fed speakers remain hawkish. Existing home sales in April fell to 5.61m annualised (est. 5.65m, prior 5.75m), the lowest reading since June 2020 but still above pre-pandemic levels. The Leading Index for April fell 0.3% m/m (est. flat, prior revised lower to +0.1% m/m) amid weak consumer expectations. Weekly initial jobless claims were 218k (est. 200k, prior revised from 203k to 197k). The Philadelphia Fed business survey for May disappointed as well at 2.6 (est. 15.0, prior 17.6). FOMC member George reiterated what Powell said about raising rates till inflation backs down even if that means soft landing, and that they won’t back off due to the slide in equities. The Australian Federal election is being held at the weekend. But both parties, Labour and Liberal don’t have a policy to reduce carbon emissions from coal, and both have not pledged large scale funding for clean energy. This continues to support our view that Australian large producers in oil, gas, and coal stocks like Whitehaven Coal (WHC), Worley (WOR), Woodside Petroleum (WPL), Beach Energy (BPT) will likely be supported higher. These stocks have momentum and are the best performers on the ASX this year. Japan’s headline inflation at 7-year highs. Japan April CPI accelerated at the steepest rate since October 2014, up 2.5% y/y from 1.2% y/y in March. Core inflation (ex food) increased to 2.1% y/y, the highest since March 2015 from 0.8% y/y last month. This was above the BOJ target of 2% for the first time since 2015, and reflected gains in energy prices especially as cheaper phone fees faded away. Pent-up demand may shield the economy from the impact of rising prices for now, and provide room for the BOJ to stay accommodative especially as trade data and private investment hint at a slow Q2 GDP growth as well. Potential trading ideas to consider? Commodity stocks and ETFs will likely garner increased attention, especially those in industrial metals, after China cut its interest rates again (the biggest cut to its 5-year rate since 2019) – to stoke fire into its economy. The largest commodity companies to look would be BHP (BHP), Rio Tinto (RIO) as example, which would you assume could see increased orders in iron ore (essential for steel) and copper for construction works as well, as well as aluminium. You can also look at commodity ETFs like BetaShares Australian Resources ETF, VanEck Australian Resources ETF, and SPDR ASX200 Resources given Australia is the largest exporter of iron ore and coal to China and China relies heavily on coal for its electricity. Indonesia lifts palm oil ban as expected. We had noted in this piece earlier that Indonesia’s palm oil ban is unlikely to extend beyond a few weeks given their production levels exceed the local consumption. Indonesia has now resumption of palm oil exports from May 23 and this suggests palm oil prices may have further downside. Prices for other edible oils such as soybean may also see a relief. While the move maybe a positive for Asian food makers like Singapore’s Wilmar, Malaysia plantation stocks like will suffer.   For a global look at markets – tune into our Podcast. 
Financial Markets Today: Quick Take – May 20, 2022 | Saxo Bank

AUD/USD Is Interacting With China. Stock Market Investors Looking Forward To Dell, Lenovo And Zoom Earnings | Saxo Bank

Saxo Bank Saxo Bank 20.05.2022 11:07
Summary:  Equity markets steered away from the cycle lows in the US but failed to close yesterday’s session with any conviction. In the UK, the GfK consumer confidence report for May out overnight registered a record low in the almost 50-year history of the survey. Currency markets are on edge as falling safe-haven bond yields could threaten significant Japanese yen volatility, while the USD has been on its back foot as a growing cohort of economic data suggests a slowing economy.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - a choppy US equity session yesterday with a large intraday trading range relative to the overall change (close-to-close) for the session. This morning the market is attempting a push higher with Nasdaq 100 futures trading above the 12,000 level which has turned out to be a key pivotal area where buyers are coming in. Economic data yesterday showed renewed weakness in the labour market (initial jobless claims) and the leading indicators, which have now flatlined over the past couple of months and could continue to add to the negative sentiment. The key level to watch on Nasdaq 100 futures is around yesterday’s high at 12,076. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) - rallied 2% and 1.8% respectively after Chinese banks cut their 5-year Loan Prime Rate (5yr LPR) by a larger than expected 15bps to 4.45%. 1-year LPR remains unchanged at 3.7%. Coal mining stocks surged 5% to 7% after Premier Li Keqiang vowed to ensure no disruption to electricity supply. Xiaomi (01810) reported revenues in line with market expectations but operating income and EPS disappointed due to higher operating expenses and losses in investments. Stoxx 50 (EU50.I) - Stoxx 50 futures briefly pushed below the 3,600 level before quickly rebounding to end yesterday’s session above 3,600 and this morning they are rebounding further to around 3,650 finding themselves in no man’s land. The 50-day moving average (currently around 3,726) has been tested four times recently and continues to be an important gauge of strength for European equities. AUDUSD – the AUDUSD is one of the key USD pairs to watch at the moment as it trades up in a pivotal area above 0.7000 that could suggest a more profound reversal of the late USD bull trend, one that could open up for a move as high as 0.7250 if not yet fully reversing the USD rally (A prominent pivot is at 0.7266 with the 200-day moving average currently near the same level). The Aussie rose above a local high-water mark near 0.7050 late yesterday, but faltered in Asian hours before rising again, perhaps on hopes that Chinese stimulus plans and a record cut in long term loan rates by Chinese banks will buoy the Chinese economy and demand for Australian exports. The Chinese yuan was sharply higher overnight as well. USDJPY and JPY pairs – the JPY rallied sharply again yesterday as the safe-haven sovereign bonds rallied again – taking USDJPY down through the local pivot low of 127.50, if only briefly, as yields failed to stick lower. As well a sharp intraday crude oil sell-off (nominally JPY supportive due to Japan’s import reliance) reversed sharply.  Still, the volatility shows how sensitive JPY pairs are to the combination of risk sentiment and safe-haven yield direction. As well, the speculative positioning in JPY is quite extended, such that any fresh forward concerns on the longer-term economic outlook that takes global bond yields lower could drive significant JPY volatility. After yesterday’s action, we’re watching 127.00 as the next important area in USDJPY, followed by the 125.00 level, which was a significant sticking point on the way up. Gold (XAUUSD) closed above its 200-day moving average at $1838 yesterday with the next significant hurdle being $1868, the 38.2% retracement of the recent 210-dollar correction. Fragile risk sentiment driven by worries about the outlook for growth and high inflation has given bonds a boost while softening the dollar (see above), both positive drivers for gold. Total holdings in bullion-backed ETFs rose yesterday for only the second time out of the last 19 trading sessions. Silver (XAGUSD) meanwhile has returned to relative safety around $22 after recently hitting a 22-month low at $20.46. Crude oil (OILUKJUL22 & OILUSJUL22) remains rangebound, caught between focusing on tight monetary policy driving an economic slowdown and a tightening global fuel-product market. A situation that may worsen once China manages to lift lockdowns which has battered its economy while reducing demand for commodities from metals to fuel products. China’s import of cheap Russian crude rose to a three-month high in April as the country sent about 2 million barrels per day of crude oil into storage tanks. The mentioned tightness in global fuel products will underpin fuel prices, already at record levels around the world, ahead of the summer driving seasons. So, despite the prospect for slower global economic growth, the price of crude oil remains supported. US natural gas (NATGASUSJUN22) trades lower after earlier in the week twice finding resistance around $8.5/therm. The price trades higher by 200% compared with the same time last year with record exports via LNG, flat production growth and a recent heatwave across the southern states increasing demand for cooling. However, the weekly injection of 89 billion cubic feet (bcf) to 1732 bcf was in line with expectations and helped reduce the deficit to the 5-year average to 15.2%. In addition, milder weather ahead and Europe suffering from a temporary bout of LNG indigestion could suggest a period of stable prices, but overall rising global demand and a sharp discount to prices in Europe and Asia is likely to prevent any significant weakness during the coming months. US Treasuries (TLT, IEF) - US longer yields dipped sharply yesterday to the lowest levels in three weeks on weak US economic data (more below), but the move faded a couple of basis points above 2.75%, with new selling coming in and driving the yield back toward 2.85% later in the day. An auction of 10-year inflation-protected treasuries saw the weakest demand since a late 2020 auction fo the same securities. What is going on Comeback week for industrial metals, up close to 5% and its first weekly gain in eight led by zinc and aluminum. Supported by a weaker dollar and focus on China lockdowns easing and after Chinese banks cut a key interest for long-term loans (see above) to boost loan demand, as consumer and business confidence has been battered by Covid lockdowns. cut in borrowing rates. HG copper (COPPERUSJUL22) trades above its 21-day moving average for the first time in a month. Weak US data but Fed speakers remain hawkish. Existing home sales in April fell to 5.61m annualised (est. 5.65m, prior 5.75m), the lowest reading since June 2020 but still above pre-pandemic levels. The Leading Index for April fell 0.3% m/m (est. flat, prior revised lower to +0.1% m/m) amid weak consumer expectations. Weekly initial jobless claims were 218k (est. 200k, prior revised from 203k to 197k). The Philadelphia Fed business survey for May disappointed as well at 2.6 (est. 15.0, prior 17.6). FOMC member George reiterated what Powell said about raising rates till inflation backs down even if that means soft landing, and that they won’t back off due to the slide in equities. Bipartisan group of US Senators introduce legislation aimed at breaking up Google’s ad business. The proposed Competition and Transparency in Digital Advertising Act would prohibit companies with more than $20 billion in annual ad business from participating in more than any single link in the advertising business. Currently, Google, a unit of Alphabet Inc. (GOOGL:xnas) operates both an exchange for ads and tools that companies can use for buying and selling ads on the exchange. Japan’s headline inflation at 7-year highs. Japan April CPI accelerated at the steepest rate since October 2014, up 2.5% y/y from 1.2% y/y in March. Core inflation (ex food) increased to 2.1% y/y, the highest since March 2015, from 0.8% y/y last month. This was above the BOJ target of 2% for the first time since 2015 and reflected gains in energy prices especially as cheaper phone fees faded away. Pent-up demand may shield the economy from the impact of rising prices for now and provide room for the BOJ to stay accommodative especially as trade data and private investment hint at a slow Q2 GDP growth as well. Palo Alto earnings reaffirm our cybersecurity theme. PAW Q3 FY2022 earnings delivered a beat with EPS $1.79 vs. $1.68 expected on a revenue of $1.39 billion vs. $1.36 billion expected. Outlook was upbeat as well, and the stock jumped higher by 11% in after-hours trading to 484.50. Other cybersecurity firms like Crowdstrike (CRWD) and Zscaler (ZS) got a lift as well in the post market session and reports earnings next week. The evolution in global digitalisation demands an equivalent increase in cyber protection, and with the growing volume and complexity of cyberattacks, we expect the cybersecurity industry to continue to show high growth numbers relative to the general equity market. What are we watching next? The number of M&A operations in Euronext Paris is increasing fast. Several operations have been announced over the past few days in various sectors: logistics (Air France-KLM and the French shipping firm CMA CGM), green transition (Albioma and the U.S. investment fund KKR), collaborative supply chain (Generix Group), and software intelligence (Cast and Bridge Point), for instance. There are also takeover rumors for the French video game company Ubisoft and Olgroup Multimedia. Ubisoft’s takeover is unlikely to be successful, however. The founding Guillemot family is reportedly looking to buy out all company shares and take the company private to prevent the operation. The share is up 36 % month-over-month. In some cases, the increase in M&A operations is partially explained by lower valuations due to the ongoing market turmoil. US economic data. The past week we have had another weak surprise in initial jobless claims, and two weaker than estimated regional manufacturing surveys (Empire and Philly Fed), and yesterday’s leading indicators index showed that the US economy is losing momentum. Earnings Watch. There are no material earnings releases today and in general the Q1 earnings season is now ebbing out with minor relevance to the equity market. The list below shows next week’s earnings releases: Monday: Meituan, Sino Biopharmaceutical, Zoom Video, XPeng Tuesday: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications Economic calendar highlights for today (times GMT) 0730 – UK Bank of England Chief Economist Pill to speak 0800 – Poland Apr. Average Gross Wages 0800 – Poland Apr. PPI 1140 – ECB's Centeno to speak 1400 – Euro zone May Consumer Confidence  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
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Has a long and painful journey to the bottom in equities just begun? | Saxo Bank

Saxo Bank Saxo Bank 19.05.2022 16:31
Summary:  S&P 500 is down 18% and we are 95 trading sessions into the current drawdown. Investors basing their decisions today on the experience of the past 12 years would argue that now is the time to buy equities, but unfortunately the past 12 years are worthless for the decision making today. The two drawdowns of the 1970s and one post the dot-com bubble are more aligned with the current dynamics and based on these three drawdowns investors are in for more pain and for much longer than most expect will happen. History suggests the current drawdown could be long and brutal The current drawdown feels brutal with Nasdaq 100 down 28% and S&P 500 down 17% since their respective peaks. We are 95 days into the current drawdown in S&P 500 and a drawdown that is currently the 15th largest since 1928. As we wrote the other day, many strategists and investors are talking more about buying the dip in technology and downplaying inflation, than looking at the hard reality; the world has hit a physical limit with a galloping energy crisis and a global food crisis that is only to get worse. Many argue that drawdowns are short and that equities will quickly come back, but this type of thinking is misguided as it is mostly driven by the drawdown structure since 2010 which has been an outlier in the greater history of capital markets. The longest drawdown since 2010 was the period 2015-05-22 to 2016-07-11 which took 286 trading sessions. The current drawdown is the 4th largest since 2010 and the average number of days to the trough of the 10% or worse drawdowns since 2010 (there are seven of those) is 76 days, so if we apply the post financial crisis years as our baseline of course investors should buy the dip and the sunset is near. Unfortunately these samples are the wrong ones to apply. If we look at the 30 largest drawdowns since 1928 in the S&P 500 there is a striking pattern. Either a drawdown reaches its trough fast or it takes a long time. The middle ground seems to be small. The total length of a drawdown, that is the combined length of first going to trough and then a full recovery to the past peak, is a function of the drawdown depth itself but also the length to the trough. Instead of naively applying the same weight on all historic samples some should have a higher weight as they are more relevant for the current regime. We would argue that the drawdown after the dot-com bubble has similarities to the current drawdown due to above average equity valuation we reached this time in the MSCI World. The two other drawdowns during the early 1970s and late 1970s have similarities to the current inflation shock, supply constraints, and commodity crisis that we observe today. These three drawdowns had trading sessions to trough of 360 to 637 days (1.5 to 2.5 years before reaching the bottom) and a full length of 820 to 1898 days, that is around 3 to 7.5 years. In other words, the painful reality is that we might have just started on a very long journey into the unknown and something that looks very different than our past 12 years of experience. The VIX forward curve as we have recently described is still relatively flat and is not suggesting panic or capitulation mode in US equities, so the worst is likely to come. The best investors can do is to think about balance. What will work during these times? Blend equities with short-term bonds, inflation-linked bonds, real estate, and then within themes get exposure to commodities, logistics, defence, cyber security, semiconductors, India, and renewable energy. The only thing investors must not do is to base decisions on their experience over the past 12 years.Source: BloombergSource: Bloomberg and Saxo GroupSource: Bloomberg and Saxo Group Source: Saxo Bank
A week of consolidation

FX Update: Is the JPY finally ready to roar? | Saxo Bank

Saxo Bank Saxo Bank 19.05.2022 15:33
Summary:  The backdrop has increasingly weighed in support of the JPY as safe haven seeking in sovereign bonds has eroded the negative implications of the Bank of Japan’s yield-curve-control policy. And speculative positioning is very short the Japanese currency. Last week’s brief blow-up in the JPY crosses may have been a trial balloon for a far larger squeeze on JPY shorts. FX Trading focus: JPY focus on supportive backdrop The market action yesterday and overnight was at times rather out of synch with recent cross-market correlations. Yes, the worst day in two years for US stocks did see the US dollar rallying in most places, but only modestly so relative to the negative energy in risk sentiment that has been the "norm" in recent months. One possibly source of this was the big mark-down in USDJPY intraday yesterday, which shows that attention may be shifting more towards the old safe-haven role of the Japanese yen on the latter’s traditional sensitivity to the strength in safe-haven bonds, which picked up a powerful bid yesterday, flattening the US yield curve and suggesting a weaker economic growth/inflation outlook. Since much of the early USD buying in the aggravated rally in the greenback since late February was in USDJPY due to the rise in US long treasury yields, any further fall in these yields will likely continue to support the JPY the most among major currencies. A potential “after-burner” for the risk of a tremendous bout of JPY volatility here is market positioning, with the US futures speculative positioning at historically stretched levels.  That’s it for today’s update – JPY volatility is likely to dominate for the coming sessions if it is properly unleashed. Chart: USDJPYUSDJPY poking at the important local 127.50 support and other JPY crosses on the verge of (EURJPY and AUDJPY) or already having broken down (GBPJPY and NZDJPY) through some key support levels. The next obvious focus here could be the 125.00 round-level area, but when the yen works up a head of steam, it has a tendency to overshoot – so potential to 120.00 can’t be ruled out if equity markets are suffering a real liquidity event and safe-haven seeking in US treasuries sends the US 10-year yield benchmark, for example, back to 2.50%. Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strength.Holding breath here for JPY volatility potential – and with USDJPY under so much pressure, it could block the USD from serving as a safe haven in the crosses. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Apropos JPY crosses – USDJPY is on the verge of crossing over to negative finally if it closes near or below the 127.50 trigger level. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1130 – ECB publishes minutes of April ECB meeting 1230 – ECB’s Guindos to speak 1230 – US May Philadelphia Fed survey 1230 – US Weekly Initial Jobless Claims 1400 – US Apr. Existing Home Sales 1500 – Sweden Riksbank’s Floden to speak Source: Saxo Bank
Singapore REITs: Potential to tap on reopening gains; undeterred by higher interest rates | Saxo Bank

Singapore REITs: Potential to tap on reopening gains; undeterred by higher interest rates | Saxo Bank

Saxo Bank Saxo Bank 19.05.2022 11:40
Summary:  After strong gains in March when Singapore started to reopen domestically, Singapore REITs (S-REITs) have seen a slide into May due to the concerns around rising interest rates. Singapore stands to benefit from the global and regional reopening, and REITs with a manageable debt profile and a solid distribution history stand to benefit from this trend. Singapore REITs have underperformed recently. The FTSE ST Real Estate Investment Trusts Index (FSTREI) is now down over 4% since the start of the year, compared to STI’s gain of 3.6%. This is partially due to the rise in inflation which could potentially lower distributions, but also due to the increases in interest rates as that has a material impact on REITs’ finance costs especially if they carry a large floating rate debt. General risk-off sentiment and the flight to safety has also diverted most investments to safer asset classes, primarily cash/US dollar. Still, Singapore REITs have outperformed the global REITs portfolio this year Asia’s reopening to boost interest in S-REITs. The reopening theme is playing out well in Asia with most countries now allowing international travellers with reduced testing requirements. Singapore especially stands to benefit from this trend as it was one of the first movers in the reopening space and is a preferred tourist destination. This has boosted rental incomes especially for retail and office spaces, and property values are also holding up. Hospitality sector is a key beneficiary as well with room rents increasing. Strong financials provide buffer against higher inflation and interest rates. A modestly higher inflation is good for the REITs sector, as it also means higher rents. Persistently higher inflation, on the other hand, can mean higher utility costs for REITs that may weigh on distributions. Some of these higher costs may be defrayed through higher rents and service charges, but REITs still need to bear a part of these. If interest rates rise as well, this will also mean higher interest liabilities for the REITs. But most REITs have a strong dividend yield (5-year average of ~5%), which is the most attractive to those seeking an income solution especially when compared to government bond yields of 2.6% and fixed deposit rates of 1%. Generally speaking, a rising interest rate environment signals strong economic growth and higher inflation – both of which are key reasons to stay invested in the real estate sector. Still, it is wise to consider REITs that have a strong distribution history, as well as ensure diversification in your portfolio. One key area of concern is the level of floating debt that a REIT holds – given that higher floating debt could mean a higher interest burden as interest rates rise, resulting in lower distributions. Suntec REIT has higher exposure to rising interest rates than most peers with aggregate leverage ratio of 43.7% (MAS mandate is a limit of 50%) at the end of last year and fixed rate borrowings of 53%. Keppel REIT is also exposed with aggregate leverage of 39% and fixed rate borrowings of 71% as of March 2022. By comparison, Capitaland Integrated Commercial Trust (CICT) has aggregate leverage of 39% with 85% of the borrowings in fixed rate as of March. This means Suntec REIT is more likely to cut distributions if interest rates rise substantially as compared to CICT which has a more sustainable debt portfolio. Office and Retail REITs offer value proposition. With the broad reopening theme playing out, we see bright spots in office and retail REITs in Singapore. Most employees are heading back to work now, although companies still seem to be offering flexibility. With supply remaining restrained, there is potential for office REITs like CICT, Mapletree Commercial Trust and Suntec REIT to increase rents. Shopping activities are also moving increasingly offline, and retail spaces have become attractive again as well which may benefit retail REITs like Frasers Centrepoint Trust. We also expect the reopening benefits to flow to hospitality REITs such as Ascott Residence Trust and CDL Hospitality Trusts. Lastly, high growth industrial REITs delivered the highest returns in 2021 as new economy assets like data centres gained interest, and demand for logistics spaces is likely to remain high his year as well. Singapore REITs offer diversification benefits not just across industrial, hospitality, retail, office, and healthcare sectors, but also geographically with most owning real estate properties across the world. Investors can also look at ETFs in this space, such as Lion-Phillip S-REIT ETF (SREITS) and NikkoAM-StraitsTrading Asia ex Japan REIT ETF (AXJREIT) for a more diversified exposure to Singapore REITs. Key risk to watch will be inflation worsening rapidly, resulting in a sharp increase in interest rates. Source: Bloomberg, Company reports, Saxo Markets Source: Saxo Bank
Forex Analysis & Reviews: How to trade EUR/USD on June 3, 2022. Simple trading tips and analysis for beginners | instaforex

Financial Markets Today: Quick Take – May 19, 2022 | Saxo Bank

Saxo Bank Saxo Bank 19.05.2022 09:26
Summary:  Yesterday, US stocks suffered their worst day since the Covid outbreak panic of more than two years ago. A second large US retailer in two days, this time Target, suffered a massive loss after reporting weak margins and a weak outlook due to inflation. US treasuries rallied sharply as a safe-haven and the yield curve flattened sharply, suggesting a darkening of the economic outlook. The USD and JPY both rallied yesterday on wobbly sentiment, but eased lower overnight.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities experienced their worst selloff since June 2020 with Nasdaq 100 futures declining 5% erasing this week’s gains taking the technology index back to the lows for the current cycle. This morning Nasdaq 100 futures are trading below 12,000 at around the 11,890 level with the big support level to watch at around 11,700. The VIX Index increased to 30.96, which is still not a steep enough inversion of the VIX forward curve to conclude that this is capitulation. Initial jobless claims today are very important as we 8 weeks into a rising trend from the lows in March. If initial jobless claims rise even further, then we might have evidence that the US labour market is beginning to hurt. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) - Following the overnight US equity market sell-off which is the worst since June 2020, Hang Seng Index (HSI.I) slumped as much as 3.5% intraday and Hang Seng Tech Index (HSTECH.I) fell almost 4%. Tencent fell 8% after reporting Q1 results below market expectations dampened sentiment further. Tencent’s Q2 revenue and EPS outlook came out at flat and -23% YoY respectively and both were 4% below consensus estimates. Online games revenues (PC + mobile) declined 2% YoY and online advertising revenue dropped 18% YoY. Investors were also troubled the management’s remarks saying support initiatives from the Chinese Government to the tech industry takes time and will not benefit the company much in the near term. Stoxx 50 (EU50.I) - Stoxx 50 futures closed below its 50-day moving average, failing to sustain momentum above the average for the fourth time in six weeks with the futures trading around the 3,639 level this morning. European equities are showing less impact from the US session as European equities have less aggressive equity valuations and as such are less sensitive to rising financial conditions. The key level to watch on the downside in the Stoxx 50 futures is the 3,600 level. AUDUSD – an odd session for AUDUSD as for JPY crosses noted below, in that the pressure from risk sentiment on USD pairs is there, but seems to be easing relative to recent history, perhaps as US yields are backing off this time on the safe haven appeal of US treasuries, rather than serving as a driver of weaker risk sentiment. Overnight, AUDUSD suddenly rebounded above 0.7000 in a delayed reaction to a solid Australian employment report – are we seeing signs of a USD rally exhaustion or is this just a one-off head-scratcher. It is somewhat remarkable that the worst day for US equities in over two years only saw approximately 75 pips of AUDUSD selling, most of which was erased overnight even as sentiment remained downbeat in Asia. USDJPY and JPY pairs – the JPY rallied sharply yesterday as risk deleveraging drove safe haven sovereign bonds to rally sharply – taking USDJPY back toward 128.00 at one point, just ahead of the spike lows to 127.50 from a week ago. But the pair failed to stick lower and rose most of the way back toward 129.00 overnight, with many crosses even more aggressively erasing their losses yesterday. The scale of the overnight comeback is confusing relative to the JPY-supportive backdrop. Will have to reserve judgment for now, but lower yields and lower energy prices are JPY positive if that’s what we see more of I the near term, with 127.50 the major downside trigger area for the USDJPY chart. Gold (XAUUSD) closed a tad higher on Wednesday while other asset classes, including most commodities, traded lower following another troubled day in the stock markets where a nosediving retail sector raises fresh concerns about the direction of the US economy. Lower ten-year US real yields also provided some support after breaking the uptrend from March. The strong dollar-led weakness this past month has sapped investor demand with total holdings in bullion-backed ETFs seeing reductions in all but one of the last 18 sessions. Weaker economic activity and high inflation are the main reasons why investors look to gold but in the short term, a break above $1838, the 200-day moving average is needed to attract fresh interest. Crude oil (OILUKJUL22 & OILUSJUN22) once again failed to break higher yesterday after slumping stocks led by the US retail sector raised concerns about growth and with that demand for fuels. On the ground, however, this worry has yet to be reflected with inventories of crude oil and gasoline still falling while US implied gasoline demand, despite record prices, remains robust. Earlier this week, the Fed officials reaffirmed their quest to quell inflation by tightening monetary policy aggressively. Meanwhile, in China the easing of lockdowns is not going well with fresh outbreaks slowing the pace towards normalisation. Until then the market is likely to focus on the general level of risk appetite which is currently challenged. US Treasuries (TLT, IEF) - US 10-year yields fell sharply on safe-haven seeking and likely as an expression of concern for the economic outlook, flattening the yield curve sharply as 2-year yields remain in a tight range above 250 basis points.  The local pivot low in 10-year yields is 2.81%, with 2.50% the major chart focus if a proper consolidation move swings into motion after the persistent rise from well below 2.00% that started in early March. The US Treasury will auction 20-year T-notes today. What is going on? Larger foreign currency outflows in China. Offshore investors’ bond selling and smaller inflow of foreign currency from trade settlement might have contributed to the depreciating pressure on the renminbi. Offshore investors were net sellers in onshore RMB bonds for the third consecutive month. In April, foreign investors sold RMB 88bn worth of onshore RMB bonds.  Net trade settlement was only 42% of China’s trade surplus in April, below the 2021 average of 58%. The key driver for the low net inflows seems to be coming from higher than usual demand from importers to buy foreign currencies, staying at an escalated level of 65.1% versus 2021 average of 55.8%.  Exporters repatriated 60.8% of the total goods exports in April. It was down from March’s 65.8% but still well above the 2021 average of 54.6%.  Target shares plunge 25%. The inflationary environment is getting tough for retailers and in the US, we have seen many retailers struggling with profitability including Amazon. Target delivered adj EPS $2.19 vs est. $3.06 as operating margins are under severe pressure from multiple cost pressures as the CEO said on the conference call. Target also said they expect cost pressures to persist in the coming quarters. Solid Australia Apr. Employment report, despite weak headline number. Australian unemployment fell to its lowest levels since 1979 at 3.9%, which was expected. Payrolls rose only 4k at the headline, but the good news was a massive jump in full time payrolls of +92.4k, while part-time positions fell –88.4k. The strong employment data gives the RBA more ammunition to raise rates, although wage growth in Q1 somewhat underwhelmed in the data released yesterday. Cisco issues a very weak outlook. The communication equipment maker says it expects revenue growth in the current quarter of –1 to –5.5% y/y vs est. +5.7% y/y due to the lockdowns in China constraining available supply. Cisco says that they are not seeing a demand destruction but rather a supply issue. Tesla (TSLA) shares slide 7% as S&P 500 boots it out of ESG Index, at a time when market anticipates earnings growth to fall and costs to rise. S&P explained why it kicked Tesla out of its ESG index saying Tesla’s “lack of a low-carbon strategy” and “codes of business conduct,” along with racism and poor working conditions reported at Tesla’s factory in Fremont, California, affected the score. Separately, new research suggests battery cell prices will surge 22% from 2023 to 2026 amid the scarcity in raw materials needed to make EV batteries. What are we watching next? US equities and whether a capitulation is near as cycle lows are in the market’s sights. The negative momentum in equity markets resumed with a vengeance yesterday, taking the major US indices back toward the lows for the cycle in both the Nasdaq 100 and the S&P 500. For perspective on how far the US markets have come since the ever-so-brief pandemic outbreak wipeout, consider that the pre-pandemic 2020 high for the S&P 500 was 3,393, still some 13% below yesterday’s close, while the respective Nasdaq 100 high was 9,736, some 18% below yesterday’s close. Major points of focus on the way down are 3,815 in the S&P 500 (38.2% retracement of the rally off the pandemic outbreak lows) and in the Nasdaq 100, the 10,700 area, which is the 61.8% retracement off the pandemic outbreak lows. Earnings Watch. Today’s focus is Xiaomi in China which is expected to report after the close. Given the recent lockdowns which have impacted production and physical stores the market will nervously be watching Xiaomi’s outlook and result for Q1. Palo Alto Networks is the key earnings focus today in the US and with many factors adding tailwind for cyber security companies we expect a strong outlook from the company. Today: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Economic calendar highlights for today (times GMT) 1000 – UK May CBI Trends Total Orders and Selling Prices 1130 – ECB publishes minutes of April ECB meeting 1230 – ECB’s Guindos to speak 1230 – US May Philadelphia Fed survey 1230 – US Weekly Initial Jobless Claims 1400 – US Apr. Existing Home Sales 1430 – Weekly US Natural Gas Storage Change 1500 – Sweden Riksbank’s Floden to speak 1630 – ECB's de Cos to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Surprise OPEC decision could be a turning point for oil! | MarketTalk: What’s up today? | Swissquote

Tough day for retailers and Tesla in the US, and Tencent broadens the rout in Asia | Saxo Bank

Saxo Bank Saxo Bank 19.05.2022 08:15
Summary:  Asian markets joined the overnight selloff in US equities although some reversals were seen subsequently. Risk sentiment saw a mild recovery but the outlook for consumer discretionary remains murky amid rising cost pressures and inventory building. Australia’s unemployment rate dipped to record lows and watch for Japan’s CPI and China’s loan prime rates due on Friday. What’s happening in markets? Wall Street stocks hit new lows as the market anticipates earnings declines and further slowdowns in consumer spending, amid tighter financial conditions. This is what’s dragging tech and consumer spending stocks (ex-reopening stocks) to new lows. The S&P500 fell 4% on Wednesday, eroding most of its recent gains. The Nasdaq fell 4.7%, taking the top 100 stock index to its lowest level since November 2020. We think the market is not yet at capitulation point - further selling is ahead. The extra risk now is that volatility, is causing boutique investment managers to be on the brink of margin collapse, which could add to further selling pressure in markets and stocks that are down heavily. Asian equity markets join the global sell-off. Japan’s Nikkei (NI225.I) was down over 2.5% led by tech such as Tokyo Electron (8035) and consumer discretionary with Fast Retailing (9983) down over 3%. Singapore’s STI index (ES3) also dropped close to 1% on Thursday morning after Singapore Airlines reported earnings with a narrower loss and an upbeat outlook. Hong Kong and mainland China equity markets gapped down but losses narrowed at mid-day.  Following overnight US equity market’s worst sell-off since June 2020, Hang Seng Index (HSI.I) slumped as much as 3.5% in the morning. Tencent’s (00700) over 8% plunge in share price after reporting Q1 results below market expectations dampened sentiment further. Tencent’s Q1 revenues and EPS coming at flat and -23% YoY respectively and both were 4% below consensus estimates. Online games revenues (PC + mobile) declined 2% YoY and online advertising revenue dropped 18% YoY. Investors were also troubled the management’s remarks saying support initiatives from the Chinese Government to the tech industry takes time and will not benefit the Company much in near-term.  By mid-day, Tencent is down 6.6% and Hang Seng Tech Index (HSTECH.I) is down 3%.  Hang Seng Index and CSI300 (00300.I) fell 2% and 0.3% respectively. Tesla (TSLA) shares slide 7%, more selling to come as S&P500 boots it out of ESG Index, at a time when market anticipates earnings growth to fall and costs to rise. S&P explained why it kicked Tesla out of its ESG index saying Tesla’s “lack of a low-carbon strategy” and “codes of business conduct,” along with racism and poor working conditions reported at Tesla’s factory in Fremont, California, affected the score. Separately, new research suggests battery cell prices will surge 22% from 2023 to 2026 amid the scarcity in raw materials needed to make EV batteries. This is why we continue to advocate that clients would be better served in commodity companies who are benefiting from price inflation, rather than commodity consumers (EV makers). Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Cisco (CSCO) – a proxy for business IT spending, guides for weaker earnings. Cisco is of the largest IT and networking businesses in the world (catering to a 1/3 the world’s market). It reported its Euro and Asian sales fell 6%. But the real story is its weak guidance. Cisco CEO guided for a drop in revenue ahead, expecting a 1-5% revenue decline for Q4, at a time when the market expected revenue growth of over 5%. This reflects that businesses are not willing to open up their pockets, at a time when inflation (wages, energy) is rising and interest rates are going higher. Consumer spending retail proxies hugely disappoint - as their profit outlooks dim. Target (TGT) shares fell 25% (biggest drop since Black Monday). Walmart (WMT) fell almost 8% as both retailers cut their forecasts for profit amid a slowdown in home-good sales at a time when they’re guiding for rising costs pressures (fuel, freight costs, rising wages). Target and Walmart make $600 billion in combined revenue, that’s double the size of the biggest company on the ASX. So given that both the retail giants are proxies for consumer spending, their demise could translate to other companies. What to consider? US retailer earnings signal shifting consumer spending patterns. We have seen a number of weak retailer/ecommerce earnings from the US now starting with Amazon (AMZN) to Walmart (WMT) to Target (TGT) reporting a 52% decline in profits overnight. While US retail sales show that the consumer is still resilient, there is certainly a shift in spending patterns away from home appliances that were the most sought after during the pandemic to reopening and travel related items such as luggage and services. But it is also important to note that inventory levels are building up, which may mean more write downs or a mark down in prices to sell off. Higher costs are also weighing and only likely to get worse in the second quarter. This means retailers will continue to face the brunt for now. Offshore investors were net seller in onshore RMB bonds for the 3rd consecutive month.  In April, foreign investors sold RMB88 billion (USD13.3bn equivalent) worth of onshore RMB bonds.  The amount of selling moderated somewhat from March’s RMB98 billion. Net inflow of foreign currency from China’s trade settlement declined. In April, net trade settlement was only 42% of China’s trade surplus of that month, below the 2021 average of 58%.  The key driver for the low net inflows seems coming from higher than usual demand from importers to buy foreign currencies, staying at escalated level of 65.1% in April versus 2021 average of 55.8%.  Exporters repatriated 60.8% of the total goods exports in April.  It was down from March’s 65.8% but still well above 2021 average of 54.6%.  Dollar trimmed gains in Asia. The USD moved higher as risk sentiment was eroded overnight, but trimmed gains in Asia. GBPUSD rose back towards 1.2400 while EURUSD was seen back above 1.0500. UK inflation shot up to 9% y/y in April from 7% previously, continuing to complicate the task for the BOE. Yen weakened in Asia, but the cap in 10-year yields as equities lose momentum is suggesting yen weakness has mostly run its course, at least on the crosses. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM AUDUSD rises 0.9%, off its low as Australian unemployment fell to a new historical monthly low (3.9%). This is the lowest reading for the survey. Unemployment was lower in 1974 when survey was quarterly. However, the AUD rose modestly off low, up 0.9% today to 0.7020, as the strong employment data gives the RBA more ammunition to raise rates - given Australia’s economy strengthened. China’s reopening theme also adds to upside for the AUD. However, longer term, as the Fed raises rates, this strengthens the USD, will likely cut the AUD’s grass. Japan imports swell on energy and weak yen. April trade deficit was seen at 839 billion yen as exports grew 12.5% y/y but imports rising 28% on higher energy prices and the drop in yen to two decade lows. Following a negative GDP print for Q1 reported yesterday, the impeding trade position is adding to Q2 risks and pent up demand remains the key to provide an offset in order to avoid a technical recession. Rising inflationary environment may however weigh on consumer spending and Japan’s April CPI will be on watch tomorrow. Consensus expects a rise to 2.5% y/y from 1.2% in March with core CPI also turning positive at 0.7% from -0.7% previously. Potential trading ideas to consider? Short CNHJPY trade that we put on last month may still have room to go. The larger foreign currency outflows due to offshore investors’ bond selling and smaller inflow of foreign currency from trade settlement tend to give add to the depreciating pressure the renminbi. At the same time, the Japanese Yen is benefiting from a safe haven bid in the midst of global equity sell-offs.  Both Japanese investors and overseas leveraged investors who fund their positions in Yen tend to repatriate and need to buy Yen in the time of turmoil.  In addition, the prospect of a pickup in inflation in Japan may trigger traders to cover their bearish positions in the Japanese Yen.  Asian retailers likely to see pressure from global counterparts. Consumer discretionary sector was leading the decline in the S&P overnight, and the rout is likely to spread to Asia. Watching key Asian retailer shares like Japan’s Fast Retailing (9983), Hong Kong’s Sun Art Retail (6808) and Australia’s Harvey Norman (HVN). With liquidity conditions only starting to tighten, there is likely room for the equity rout to run further, but cash is not a viable asset for long term investors. We remain overweight commodities and reopening.   Key economic releases this week: Friday: Japan nationwide CPI, China loan prime rates   Key earnings release this week: Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global   For a global look at markets – tune into our Podcast. 
Ebury Weekly Analysis: AUD, CAD, CNY | Ebury

Podcast: Equities nearing pivotal resistance. US housing rolling over | Saxo Bank

Saxo Bank Saxo Bank 18.05.2022 10:29
Summary:  Today we break down the strong market session yesterday, with crypto-related names the star performer on a day that Bitcoin is still struggling to find separation from 30k, and with the market higher despite a fresh hawkish broadside from the Fed as Powell claimed the Fed won't hesitate to take the Fed Funds rate above neutral. Key short-term resistance is coming into view in US stocks and is already here in Europe. Elsewhere, we look at a worst in 35-year drop in Walmart on its profit forecast, discuss a misguided forecast on the housing market from Home Depot CEO after that company got a boost from its earnings report, look at evidence the from leading indicators showing that the US housing market is rolling over, the latest on crude oil and natural gas, earnings and macro data up today and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Saxo Bank
An unusual drawdown is the perfect ending to an unusual bull market

(WMT) Walmart Price Dropped Down As The Earnings Turned Out To Be Quite Low. Jerome Powell (FED) Seems To Be Ready To Get His Foot Down Regarding Monetary Policy And Boost US Dollar (USD) Further | Saxo Bank

Saxo Bank Saxo Bank 18.05.2022 09:10
Summary:  Risk sentiment remained strong in the US yesterday, as the major indices closed strongly at a more than one-week high on a day that saw both a strong US Retail Sales report for April and largest US retailer Walmart’s stock punished by the most in a single day since 1987 on a weak profit forecast. Fed Chair Powell said that the Fed won't hesitate to raise rates above neutral if necessary, helping to lift the entire US yield curve and perhaps helping to cool sentiment overnight.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - S&P 500 futures pushed higher yesterday closing the recent short-term selloff cycle that started last Monday but are trading a bit softer this morning around the 4,075 level. US retail sales yesterday showed that the US consumer is still alive and comments from Home Depot’s CEO suggest that the US housing market is still strong despite recent higher mortgage rates with tight supply of homes to last several years. Overall, the dynamics are still the same with tighter financial conditions ahead and hawkish comments yesterday from several Fed members suggest our defensive stance on US equities is correct. Stoxx 50 (EU50.I) - Stoxx 50 futures closed above its 50-day moving average that we highlighted as the key focus point for the market in yesterday’s quick take. This is the first time since 20 April when technology stocks were staging a comeback with risk appetite before everything turned lower again. If Stoxx 50 futures can manage to stay above this moving average, there might be enough energy for a test of the 3,800. European car sales figures are out this morning and they are still weak which might add a bit of negative pressure among carmakers and car parts suppliers. EURUSD – strong risk sentiment and a weaker US dollar clearly go hand in hand, as yesterday’s market action demonstrated, but the euro got an extra boost from ECB governing council member Klaas Knot saying that the ECB shouldn’t exclude 50-basis point hikes from the menu of options. This drove a strong boost in ECB rate expectations, with end-2022 now priced for a +0.45% policy rate, 10 bps higher than the previous day. EURUSD traded up through 1.0500, a bullish reversal as that was a sticking point on the way down. Still, very heavy lifting would be needed to turn the bearish tide, with next resistance at the prior pivot higher near 1.0640, while more like 1.0800-1.0850+ would be needed to suggest a structural reversal. A new sell-off in risk sentiment will test the degree to which the latest hawkish tile from a growing number of ECB members weighs on the EURUSD exchange rate. USDJPY and JPY pairs – watching JPY crosses and USDJPY closely after US treasury yields jumped yesterday, especially at the long end of the curve, to which the JPY is traditionally most sensitive. Japan’s Q1 GDP estimate out overnight was better than anticipated as nominal GDP rose +0.1% and the economy (in real terms) contracted less than expected. In the JPY crosses, we have seen a wild ride on the recent swings in risk sentiment that now have pairs like EURJPY, AUDJPY and GBPJPY back near important retracement levels after steep sell-offs last week. These will likely tilt lower if bond yields stay calm and we see renewed risk aversion. Otherwise, the Bank of Japan will likely only come under fresh pressure to alter its policy if the USDJPY rate jumps to strong new highs and, for example, if global oil prices do likewise, increasing cost-of-living in Japan, etc. Gold (XAUUSD) trades lower after Fed chair Powell said the Fed will keep raising rates until inflation is brought under control. His comments helped lift inflation adjusted US Treasury yields with the 10-year real yield rising to 0.25%. The weaker dollar yesterday also helped boost risk appetite with stocks being the main recipients of these flows. For now, the bears remain in control, especially after the rejection yesterday at $1838, the 200-day moving average on XAUUSD. Silver (XAGUSD) meanwhile enjoyed some tailwind from recovering industrial metals with the XAUXAG falling to 83.90 after hitting a 22-month high of 88.5 last week. Crude oil (OILUKJUL22 & OILUSJUN22) tried but failed to break higher on Tuesday after the tailwind from a potential pickup in Chinese demand, as lockdowns begin to lift, was being offset by hawkish comments on interest rates from Fed chair Powell, and news that the US may ease some economic sanctions on Venezuela, a 2m b/d producer in 2017 reduced to just 0.7m b/d at present. The bid, however, returned late in the day when the API published a bullish inventory report that pointed to a continued and worsening tightness in the US crude and gasoline market after they saw stocks falling by 2.4m barrels and 5.1m barrels, respectively. The EIA will release its official report later Wednesday. Dutch TTF benchmark gas (TTFMM2) remains rangebound within a €85 to €110 range despite the fact Europe's gas inventories are rebuilding at the fastest rate on record as the region's buyers outbid competitors from Asia to acquire as much gas as possible at any price. According to Gas Infrastructure Europe total stocks have since the March low climbed by 202 TWh to 446 TWh, and at this rate will surpass the five-year average within the next few weeks. Asia’s LNG buyers have been less active than normal, driven by a combination of stocks being allowed to run down due to soaring prices and lower Chinese demand as its coronavirus outbreaks and lockdowns take its toll on demand for gas. US Treasuries (TLT, IEF) - sold off yesterday and took the 10-year Treasury benchmark yield sharply back higher toward 3.00% in the wake of strong US Retail Sales data and amidst positive risk sentiment. If the 10-year yield continues higher after yesterday’s 10 basis point jump, it is worth nothing that the recent top of 3.2% was within a few basis points of the 2018 high for the cycle at 3.26%. Meanwhile, the 30-year T-bond yield closed at 3.185, the second-highest daily close for the cycle, with an intraday cycle high of 3.31%. The US Treasury is set to auction 20-year T-notes later today. What is going on? Fed Chair Powell says “won’t hesitate at all” to take Fed Funds rate above neutral after saying that “what we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that.” Powell admitted that taking levels above neutral could bring some pain and a rise in the unemployment rate. End-2022 Fed expectations rose about 10 basis points yesterday and sit at 2.82”, just shy of the 2.88% cycle highs from before the May 4 FOMC meeting, at which Powell discouraged the idea of hiking more than 50 basis points at a time. UK Apr. CPI out this morning in line with expectations. The headline year-on-year reading was 9.0% vs. 9.1% expected and 7.0% in March, while the Core CPI was 6.2% as expected and vs.5.7% in Mar. The month-on-month headline CPI was 2.5% vs. 2.6% expected and 1.1% in March. Walmart, the world’s largest retailer, suffers worst single-day price drop since 1987 as it cut its profit forecast, citing margin pressure concerns due to inflation, and the CEO vowing that “price leadership is especially important right now.” Home Depot gains on strong Q1 and better than expected Q2 outlook. The US home improvement retailer gained yesterday on a surprise Q1 comp sales of +2.2% y/y vs est. -2.4% y/y and saying on the conference call that Q2 was off to a strong start; the company says it is not seeing the consumer holding back and sees tight housing inventory lasting for five years. Japan Q1 GDP contracted less than expected. Japan’s Q1 GDP showed a contraction of 1% q/q sa following a 3.8% expansion in Q4, but it was still better than expected. The omicron wave and supply drags created pressures, but the outlook for Q2 is appears to be improving as the economy reopens and pent-up demand boosts consumer spending. UK unemployment drops to a 50-year low of 3.7%. For the first time since records, job openings (1.3 million) outnumber those out of work. In addition, the number of payrolled employees grew by 121,000 between March and April, to 29.5 million. A lot of people have chosen salaried employment over self-employment due to fear of recession and higher cost of living. Wages continue to move upward. But this is not enough to cope with inflation. Pay, excluding bonuses, rose by 4.2 % between January and March while cost of living was at 7 % in March and is expected to jump to 9 % in April. The situation is becoming unbearable for many households. We believe that the Bank of England will have no other choice but to speed up the interest rate hike cycle before pausing perhaps after the summer. As expected, U.S. April retail sales show the U.S. domestic economy is very resilient. Retail sales were out at 0.9 % versus the expected 1 %. After adjusting for monthly inflation, it was at 0.6 %. This is still very solid. There is no sign of imminent recession in the United States when we look at the U.S. consumer. Peloton sees twice the demand for its $750 bond offering. The struggling health company has seen strong demand for its bonds in a sign that risk appetite is still intact in the high yield debt market in the US. Australian wage growth in Q1 slightly softer than expected. The report showed Australian wages rising only +0.7% QoQ and +2.4% YoY vs. +0.8%/+2.5% expected, respectively and vs. +2.3% YoY in Q4. What are we watching next? Earnings Watch. Today’s focus is Tencent given the latest support from the Chinese government including comments yesterday from the Vice Premier signaling support for platform companies. Consensus is looking for Q1 revenue of CNY 141.1bn up 4% y/y and EPS of CNY 2.77 down 5% y/y. SQM is also reporting today and is one of the world’s leading lithium miners earning 41% of its profits from lithium and 59% from fertilizers and plant nutrients including potassium, and as well as other agricultural sector products. Both lithium and fertilizers are seeing high prices due to tight supply-demand situation. Today: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com, SQM Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Economic calendar highlights for today (times GMT) 0800 – South Africa 1230 – US Apr. Housing Starts and Building Permits 1230 – Canada Apr. CPI 1230 – Canada Apr. Home Price Index 1430 – EIA's Weekly Crude and Fuel Stock Report 2000 – US Fed’ Harker (Non-voter) to speak 2350 – Japan Apr. Trade Balance 0130 – Australia Apr. Employment Data Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Markets are betting the Fed has it wrong again

Some reversal in risk sentiment seen in Asia, reaffirming that long term investors should look beyond finding a bottom in tech towards more promising sectors | Saxo Bank

Saxo Bank Saxo Bank 18.05.2022 08:21
Summary:  Fed’s hawkishness in the overnight session remained insufficient to erase China reopening gains, and markets continued to rally. Strong US overnight also boosted risk sentiment, but some reversal has been seen in Asia. Technology stocks may continue to suffer as financial conditions tighten, and Energy, Commodities and Reopening remain our key investment themes. What’s happening in markets? Technical triggers cause rally in markets: In the US, S&P500 rose 2%, Nasdaq gained 2.8% after quant traders and fund managers bought in automatically when a technical trigger was met (with the MACD and RSI indicating the key indices were in oversold territory). The most gains in the US were in Materials (Copper), Airlines and Semiconductors on hopes that China will reopen soon after three days of no covid infections. The gains also came in the face of the US Fed chair vowing further hikes will be made. Asian markets ex-China rally led by tech, semiconductors and materials. Japan’s Nikkei (NI225.I) was in gains of 0.7% led by gains in technology such as NTT Data Corp (9613) and Fujitsu (6702) as well as semiconductors like Tokyo Electron (8035) and Advantest (6857). Singapore’s STI index (ES3) gained close to 0.8% eying earnings from Singapore Airlines as passenger traffic starts to improve. Australia’s ASX200 rose for the fourth day, rising 1.1% before investors trimmed profits, leaving the ASX up 0.8% at noon; with Materials fuelling the charge with the minerals sector up 2.4%, and Industrials (led by airlines) are up 1.5%; on hopes that China’s impending slow recovery will see miners earnings and airlines benefit. Hong Kong and mainland China equity markets lost momentum after yesterday’s rally. Hang Seng Index (HSI.I) fell 1% and CSI300 (000300.I) dropped 0.6%.  Chinese internet stocks pared yesterday’s gains. Hang Seng TECH Index (HSTECH.I) was down 1.5%, mega-cap Alibaba (09988), Tencent (00700) and Meituan (03690) falling about 2%. JD.COM (09618) reported Q1 revenues (+18% YoY), -operating income (+33% YoY) and net income (-4% YoY) beating market expectations. Both gross margins and net margins improved and are better than expectations. The Company’s share price however was down over 2% as the management’s guidance in April and Q2 revenues as a whole weaker than market expectation.  In A shares, ChiNext (399006.I) outperformed other indices as digital economy stocks benefited from the Chinese authorities’ reiteration of promoting the development of digital economy. Nonetheless, the hype in mega-cap internet companies traded in Hong Kong receded as investors reassess the lack of new information in Vice Premier Liu He’s speech yesterday on the Chinese People’s Political Consultative Conference.  U.S. April retail sales show the U.S. domestic economy is very resilient. Retail sales were out at 0.9% versus expected 1%. After adjusting for monthly inflation, it was at 0.6%. This is still very solid. There is no sign of imminent recession in the United States when we look at the U.S. consumer. Japan Q1 GDP contracted less than expected. Japan’s Q1 GDP showed a contraction of 1% q/q sa following a 3.8% expansion in Q4, but it was still better than expected. The omicron wave and supply drags created pressures, but the outlook for Q2 is appearing to be better as the economy reopens and pent up demand boosts consumer spending.   What to consider? Fed speakers unable to surprise markets on the hawkish side. There were a number of Fed speakers on the wires yesterday, including Chair Powell himself. As hawkish as they could get, they still stuck with the market view of multiple 50bps rate hikes and did not surprise. Powell repeated his view that the Fed will raise rates until inflation retreats in a ‘clear and convincing’ way and this will likely mean some economic toll. Soft landing appears to be the base case for the Fed but we believe the US consumer is still strong and that will provide an offset. Vice Premier Liu He’s remarks in yesterday’s Chinese People’s Political Consultative Conference does not send a new signal different from the Chinese authorities’ initiatives to promote and at the same time regulate the digital and platform economy systematically and comprehensively. While supporting the “healthy” development of the platform economy and private enterprise economy, including capital raising, Liu also emphasizes the importance of streamlining the relationship between the Government and the market, as well as competition (anti-monopolistic behaviours?) and using competition to facilitate innovation (new technologies, new applications and new entrants rather than semi-monopolistic giants profiting from network effects due to scale?). After Fed and RBA, now ECB brings greater than 25bps rate hikes on the table. ECB governing council member Klaas Knot said that fifty basis point hikes should be on the table if conditions warrant. This took ECB rate tightening anticipation for this year over 10 basis points higher, with a positive 50 basis point policy rate almost fully priced now. This is the second day in a row of hawkish talk from the ECB after Bank of France head Villeroy warned on the weak euro yesterday. UK unemployment drops to a 50-year low of 3.7%. For the first time since records, job openings (1.3 million) outnumber those out of work. In addition, the number of payrolled employees grew by 121,000 between March and April, to 29.5 million. A lot of people have chosen salaried employment over self-employment due to fear of recession and higher cost of living. Wages continue to move upward. But this is not enough to cope with inflation. Pay, excluding bonuses, rose by 4.2 % between January and March while cost of living was at 7 % in March and is expected to jump to 9 % in April. The situation is becoming unbearable for many households. We believe that the Bank of England will have no other choice but to speed up the interest rate hike cycle before pausing perhaps after the summer. The bar for dollar bulls is higher. GBP was the biggest winner as the USD lost some ground despite a hawkish Fed, and GBPUSD is now facing resistance at 1.2500. UK inflation will be on watch today with the consensus at 9.1% against 7% previously. That might also mean jumbo rate hikes from the BOE. EURUSD retook the important 1.0500 area yesterday, a level that was a clear sticking point on the way down. Broad market short-rally not for the faint hearted, the outperforming themes - commodities and industrials - will continue, and likely leave tech for dust. Consider that the last time the S&P500 made a 2% gain in two and three days, coming off a 52-week low, it was March 2009 and March 2020. So, could the history repeat itself? We are not saying that, we reiterate, our long-term bearish view, as financial conditions are set to tighten with most central banks around the word, rising rates. But beware of the bear-market-bounce over the short term, caused by a technical rally (as markets were in oversold territory). The key to getting sustained, long-term gains is to have positions in Energy, Commodities and the Reopening theme (Industrials/Airlines), as we mentioned previously. Take a look at the ETF, iShares Global Energy (IXC) for example. It’s up 33% since tech fell like a led balloon since November last year. We remain bullish on sectors like energy that are likely to see long term earnings growth.   Potential trading ideas to consider? A tradable rally in China and Hong Kong equities but the market has not bottomed yet. The prospect of relaxation of Covid control measures, in particular the lockdown of Shanghai, will continue to give some support to the much beaten down Chinese equity market and gloomy view of the Chinese economy. A lot of pessimism has been in the price and recent improvements in the Covid situation is providing some relief. However, we doubt the near-term rally can sustain beyond a few sessions or a couple of weeks as Omicron being extremely contagious and the situation of outbreaks is fluid, plus a hawkish U.S. Fed on the path to tighten financial conditions to the extent that may exceed what the market has priced in. Traders can trade the counter-trend rally in the broad Chinese markets, including mega-cap internet companies, but investors probably should focus on the sectors that are benefiting from government spendings and policies such as traditional infrastructure and new infrastructure, which have policy tailwind in an otherwise turbulent investment environment. Some relevant ETFs are: Global X MSCI China Industrials CHII:arcx, Globax X MSCI China Materials CHIM:arcx, Global X China Cloud Computing 09826:xhkg, Global X China Robotics & AI 02807:xhkg, Global X China Semiconductor 09191:xhkg) Singapore airlines earnings on tap today. With the regional border reopening appearing firm, there is potential for a solid guidance from Singapore Airlines (C6L) today. Consensus estimates revenues of S$7.5 bn in FY2022 (year ending March 2022) from S$3.82 bn last year, and the loss is expected to narrow to S$895.1 million from S$4.27 bn last year. Cargo yields are expected to continue to climb higher due to the prolonged supply issues, but main focus will be on the recovery in passenger yields. Also on watch will be the details on fuel hedging and staff shortages. Singapore airlines trades at a P/BV of 0.74 currently, which is lower than most of its peers.   Key economic releases this week: Wednesday: U.S. Housing Starts & Building Permits; Japan GDP, UK April CPI Thursday: Australia employment Friday: Japan nationwide CPI   Key earnings release this week: Wednesday: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global   For a global look at markets – tune into our Podcast. 
Will Fuel Prices Shock Again? Crude Oil Price Almost Hit $120! Will EV Become More Popular Shortly?

FXO Market Update - USD long squeeze | Saxo Bank

Saxo Bank Saxo Bank 18.05.2022 08:17
Summary:  Risk sentiment improving as Shanghai lockdown easing. USD trades lower and EUR is bid after ECB hints a hike bigger than 25bps is possible. EURUSD trades back up above 1.0500 and we see potential of higher EURUSD if market gets squeezed out of their long dollar positions. Vols trades lower as spot is back up above 1.0500, 1 week is down 2 vol from the opening this week. Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these.FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week. Source: Bloomberg, Blue: EURUSD spot Risk sentiment stronger across the board with Shanghai lockdown easing and the last days negative price action tops out. Equities are higher and the dollar trades lower. EURUSD trades back up above 1.0500 as ECB hints that hikes bigger than 0.25 is possible. The break down below 1.0500 last week was the event that spurred the last spike in vol. Vols trades offered now when spot is up 200 pips from the low and back up above 1.0500. EURUSD 1 month vol is down 1.2 vol from the opening this week and trades at 9.0. 1 week is down around 2 vols at the same time and trades at 8.25. Market remains heavy long in USD and there is potential for a position squeeze in dollar if we can hold on to the last days momentum. A squeeze out of the long USD positions could take EURUSD up to 1.0750 quickly. We like to buy some short dated EURUSD calls and not spend too much premium as spot could also just get stuck between 1.05-1.06 if we don’t get enough momentum. Buy 1 week 1.0600 EURUSD callCost 26 pips Spot ref.: 1.0535 Source: Saxo Bank The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking. Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”. Change: The difference between current price/volatility and where it closed 1w ago. FX Options Trading: You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited. If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure. Learn more about FX Options: Forex Options – An introduction Forex Options – Exotic options Forex Options - Webinars
Stocks turn negative on Wall Street

Crypto Weekly: A week in crypto feels like months | Oanda

Saxo Bank Saxo Bank 17.05.2022 14:14
Summary:  The crypto market had an extremely turbulent week, as the third largest stablecoin was wiped out in a matter of days. Now, the reserve of the largest stablecoin Tether is in the spotlight. Norway does not ban the proof-of-work consensus mechanism used in Bitcoin and Ethereum. Regarding Ethereum, its transition away from proof-of-work is one step closer. Terra is history, USDT shrinks, and USDC thrives On Monday last week, we wrote that the largest decentralized stablecoin TerraUSD (UST) slightly unpegged from the dollar over the weekend. Fast forward one week, TerraUSD and its native token Terra (LUNA) are now put to sleep. On Monday afternoon, TerraUSD started to unpeg significantly from the dollar, leading to a true death spiral of Terra, further unpegging TerraUSD. TerraUSD presently trades at $0.078, far from its intended price of $1. Prior to these events, TerraUSD had a supply of around 18bn, whereas it is now around 11bn. To redeem some of this supply, its native token Terra went through hyperinflation. From trading at around $82, Terra now trades at $0.00019. As this event unfolded, we wrote an article explaining the death spiral of Terra. Let us face it, Terra is for sure put to sleep, but the consequences are greater than just the Terra ecosystem. First and foremost, the collapse of Terra attracts the attention of regulators around the globe. The crypto market has over the past 2 years grown substantially, arguably to a size, where it today might pose a systematic risk to other asset classes. Regulators cannot simply sit on their hands to let this risk unfold in front of their eyes, so at some point, they must react to restrain the potential risk of crypto. So, if regulators did not have enough rationale to heavily regulate the industry a week ago, they surely have now. If the governments see fit, they have the required latitude to bury the industry in a coffin through regulation. However, it is important to point out that regulation can likewise be beneficial for stablecoins. As reported by The Telegraph last week, the UK plans to legalize payments with stablecoins to support innovation, ultimately benefitting the whole crypto market. Knowing the common pace of regulators, the risk of harsh regulation is by default not a short-term risk. What is short-term, though, is the risk of other stablecoins, namely the largest stablecoin Tether (USDT). For years, Tether has not been truly transparent about its reserve backing its $75bn stablecoin. Immediately upon the Terra collapse, the crypto market once again started worrying about Tether’s reserve, which led to a sell-off of Tether, depegging it from $1 to as low as $0.95. It appears market makers and proprietary traders fairly quickly restored Tether at around $1 by buying Tether at a discount and redeeming them directly at Tether for one dollar apiece. Speaking of redeeming, Tether has since the end of last week redeemed Tether worth around $8bn, allegedly with no issues for the time being. As the saying goes, every cloud has a silver lining, since some of the USDT supply has flowed into the second largest stablecoin USDC, whose supply has increased by $2.5bn in the past 7 days. The issuer of USDC, Circle, is known for having a high degree of transparency with respect to its reserve. Heading into the new week, our focus is firmly pointed towards Tether. Even though Tether has allegedly fulfilled every request of redemption so far, if a single story breaks that Tether cannot fulfill a redemption, fear not seen since March 2020 will spread in the crypto market. Well, if last week felt like months’ worth of fear in a single market, if Tether is insolvent, we are talking years’ worth of fear, simply due to mutual distress that Tether has then artificially pumped the prices of crypto assets for years by issuing not fully backed Tether. Norway does not prohibit proof-of-work, as Bitcoin’s mining difficulty hits an all-time high Following in the footsteps of the European Union, the Norwegian Parliament voted no to prohibit proof-of-work on Tuesday. The consensus mechanism used by Bitcoin and Ethereum has for years been criticized for its enormous energy consumption, but for the majority of the Norwegian Parliament, the energy consumption was not enough for them to vote in favor of a ban. Since Norway accounts for roughly 1% of Bitcoin’s mining capacity, a potential ban would not have been a severe hit to Bitcoin, other than the signaling effect of such a ban. Interestingly, the network difficulty of Bitcoin hit an all-time high last week, meaning the network demands more computational power than ever from miners for them to confirm transactions. This is great for Bitcoin’s resistance to attacks, but as a result, the network also consumes more energy. The first public Ethereum merge test is scheduled for June 8th Speaking of proof-of-work, the second-largest cryptocurrency Ethereum is one step closer to abandoning proof-of-work to adopt proof-of-stake. On Friday, Ethereum core developers announced that the first public test of the merge is scheduled for June 8th. The merge is the name of the transition from proof-of-work to proof-of-stake. For the past months, there have been a total of five tests, but this is the first public test of an existing network called Ropsten, marking that we are one step closer to the merge. Following Ropsten, it is planned to merge two other test networks prior to the merge. If everything turns out well with Ropsten and the following two test networks, it is realistic to assume that the merge takes place in August. The merge will reduce Ethereum’s energy consumption by over 99.95%, reduce its inflation from 5.4mn to 0.5mn Ether yearly, and distribute staking rewards of up to 10% annually to stakers of Ethereum.Bitcoin/USD - Source: Saxo GroupEthereum/USD - Source: Saxo GroupUST/USD – Source: TradingViewLUNA/USD – Source: TradingViewUSDT/USD – Source: TradingView Source: Saxo Bank
FX: EUR/USD And GBP/USD - Powell And Lagarde May Affect These FX Pairs Today. How Is USD/JPY Doing?

Potential relaxation of Covid-related lockdown in China may help sustain a near-term equity market counter-trend rally. | Saxo Bank

Saxo Bank Saxo Bank 17.05.2022 12:44
Summary:  Equity markets’ slowdown fears were escalated on Monday by the weak China data and an unexpected contraction of the Empire State Manufacturing Index and stalled the rally from Friday. Nonetheless, the continuous improvement in the Covid situation in China is bringing some optimism to the market and has the potential to support a near-term rally despite the mid to long-term outlook for global equity market is still dim. What’s happening in markets? The U.S. equity market counter-trend short-covering rally waned as NASDAQ 100 reversed earlier gains in the last hour of trading during the day and ended 0.4% and 1.2% lower respectively.  The declines were led by techs and consumer discretionary.  Travel and casino stocks were among the largest loser.  Twitter (TWTR) plunged another 8% on continuous fear of Elon Musk walking away from the deal.  The Dow Jones Index managed to stay in the green and close little changed.  The slowdown/recession fear escalated somewhat during the day by the weak economic data from China and a surprising contraction of the Empire State (i.e. New York State) Manufacturing Index (-11.6 in May vs market expectation 15, and 24.6 in April).  Reports about reinstatement of mask weaking in the New York City also affected market sentiment.  Investors will monitor today’s U.S. Retail Sales closely to assess the state of U.S. household consumption. Bloomberg consensus survey is expecting headline retail sales to come at +1% MoM and ex-autos to come at +0.4% MoM. Hong Kong’s Hang Seng Index (HSI.I) rallied over 2% and Hang Seng TECH Index (HSTECH.I) gained 3.8% on improvement of the Covid situation in China.  JPMorgan’s 180-degree reversal to turn overweight in Chinese internet stocks and the fact that the Chinese People’s Political Consultative Conference (CPPCC) convened to promote “the sustainable and healthy development of the digital economy” also help the market sentiment.  Alibaba (09988), Tencent (00700), Meituan (03690) and JD.COM (09618) gained about 5%.  CSI300 (000300.I) gained 0.9%, with autos, auto-related semiconductors and EV batteries led the charge higher on hope of normalization of supply chain from lockdown.  Asia equities catching a bid on China reopening hopes. A sigh of relief in Asian equity markets as the shadow of China’s weak economic data out on Monday was erased by hopes of reopening. Japan’s Nikkei (NI225.I) and Australia’s ASX 200 was in gains of over 0.2% on Tuesday while Singapore’s STI index (ES3) gained over 0.5%. Food shares in Asia were mixed despite gains in wheat prices as India banned exports. Singapore’s Golden agri-resources was down over 3% even as Wilmar stayed neutral. RBA opening the door for bigger rate hikes. Minutes of the Reserve Bank of Australia's May monetary policy meeting showed that members considered three options, raising the cash rate by 15 basis points, 25 basis points or 40 basis points. The 40bps rate hike was avoided considering that the board meets monthly and would have the opportunity to review the data flowing in to decide on the size of future interest rate hikes. With inflation being seen as a key concern and Q1 inflation hitting 5.1% - the fastest pace in two decades – this likely suggests that there is room for 40bps (or more) of rate hikes in the upcoming meetings. Oil reversing gains in Asia, Agriculture prices stay supported. Oil prices made a recovery overnight as agriculture products looked set to resume their medium-term bullish trend. WTI crude oil was close to 8-week highs but reports on Iran lowering crude oil price in Asia to $4.25/bbl for June from $9.20/bbl brought it back below $114. Sentiment has improved on reports of China easing restrictions. Meanwhile, wheat prices gained further that may continue to lift soy and corn prices as well, suggesting food inflation pinch is likely to get harder especially for emerging markets. What to consider? Some light in the tunnel for lifting of lockdown in Chinese cities. China’s nationwide (excluding Hong Kong) new local cases fell to 1,049 (sharply lower from the April 13 high of 29,317 cases), of which 823 cases from Shanghai and 52 cases from Beijing.  Shanghai reported three consecutive days of zero community (i.e. outside of quarantine) transmission.   The municipality expects to gradually resume public transportation services from May 22.  Starting from today train services and air flights to and from other Chinese cities is gradually resuming services.  The Shanghai government expects that the lockdown will be completely lifted in June.  AUD leads the gains in Asia. AUDUSD made its way above 0.700 early in Asia amid China reopening hopes and RBA opening the doors for jumbo rate hikes to follow the Fed, but gains did not sustain. The Japanese yen stayed in a broad consolidation below 130 but is highly prone to swings in risk sentiment. The potential for gains in yen, especially on the crosses, remains in play amid a near peaking of bond yields for now. AUDJPY is above 90 but facing a strong resistance at 91. GBPJPY has barged above 159 and EURJPY is around 135. April U.S. retail sales are out today. Expect the positive momentum to remain in place. Several factors are pushing retail sales up: solid auto sales, significant cash savings buffers (built during the pandemic) and rising wages (though they are not keeping pace with the increases in the cost of living). In the short-term, we believe consumer spending will remain robust and the domestic economy will be in a good position. Potential trading ideas to consider? Industrial metals on watch as China reopens. Cyclical headwinds for industrial metals may be peaking as China hints at reopening and stimulus. Copper and aluminum still remain in a structural upcycle, with green transformation and focus on renewables suggesting demand uptrend but supply remaining tight due to lack of investment and declining ore quality. The potential of China’s relaxation of Covid restrictions and resumption of U.S. equity market counter-trend rally may help global equity markets’ momentum to bounce further from their recent lows in near-term, despite the woes of the equity markets are yet to be over in medium-term.  Chinese earnings on tap. While the US earnings mostly focused on cost pressures, the focus is now shifting to big China earnings. On tap today will be JD.com and Sea Ltd followed by Tencent, Trip.com, Xiaomi, and DiDi Global over the rest of the week. Key economic releases this week: Tuesday: U.S. Retail Sales, U.S. Industrial Production, EU Q1 GDP Wednesday: U.S. Housing Starts & Building Permits; Japan GDP, EU April CPI Thursday: Australia employment Friday: Japan nationwide CPI Key earnings release this week: Tuesday: Engie, Vodafone, Nibe Industrier, Sonova, Walmart, Home Depot, JD.com, Sea Ltd Wednesday: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Friday: NIO   For a global look at markets – tune into our Podcast.   Source: Saxo Bank
ECB's Marathon. Earnings Season Is Coming! What's Up Equities?

Will Petrol Prices Scare Drivers Again!? Crude Oil Price Reaches Really High Levels! US Dollar (USD) To Slowdown Its Skyrocketing? | Saxo Bank

Saxo Bank Saxo Bank 17.05.2022 11:09
Summary:  Market sentiment is mostly stable after a rare, uneventful day for global markets. Crude oil has pulled to a new local high as petrol prices in many countries have risen to record highs. The US dollar is on its back foot, helping to spark a sharp gold rally from capitulation lows after the precious metal had broken down through all major support levels. The mood in Asia brightened overnight on hopes China is set to ease its clampdown on the tech companies.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - S&P 500 futures closed just above the 4,000 level yesterday as US equities failed to extend their gains from Friday’s session. Tesla shares fell 6% as bubble stocks and crypto related companies fell almost 5% suggesting weakness in technology stocks continues. While the Empire State manufacturing PMI figures yesterday were from a little region of the US, they surprised significantly to the downside hitting levels typically consistent with low economic activity or even a mild contraction. S&P 500 futures are pushing higher trading around the 4,024 level with yesterday’s high at 4,043. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) rallied 2% and 1% respectively on prospect of relaxation of Covid restrictions in China.  JPMorgan’s 180-degree reversal to turn overweight in Chinese internet stocks also help the market sentiment. Alibaba (09988), Tencent (00700), Meituan (03690) and JD.COM (09618) gained about 5% to 6%. Auto makers, batteries and semiconductors surged on the prospect of normalization of supply chain from lockdown. Great Wall Motor (02333) rose over 10%. Ganfeng (01772) rose 6.7%. Hua Hong Semiconductor (01347) gained 6%.  Stoxx 50 (EU50.I) - European equities continue to trade at levels lower than a year ago as weakness is still widespread due to the war in Ukraine with BOE chief Bailey warning yesterday of the extreme risks related to galloping food prices and security of supply. Stoxx 50 futures are trading just below the 3,700 level this morning with the 50-day moving average at 3,732 being the key resistance level to watch on the upside. USD pairs – the US dollar weakened rather sharply yesterday as risk sentiment continued to stabilize. Traders should be on the lookout for whether the sell-off could extend sufficiently to trigger a tactical reversal in the USD bull trend. Levels worth watching include the 1.0500 resistance area in EURUSD, 0.7050-0.7100 resistance zone in AUDUSD, and 1.2400 resistance in GBPUSD. The Apr. Retail Sales report up later today could trigger market volatility. JPY pairs – JPY crosses have bounced hard from the steep sell-off late last week as risk sentiment has stabilized since Friday and, to a lesser degree, as bond yields pulled back higher. The volatility looks excessive relative to coincident developments. USDJPY will watch US treasury yields over the US data today with resistance around 130.00, while a break down through the important 128.00-127.50 area and consolidation back toward 125.00 likely needing a significant consolidation lower in US treasury yields. AUDJPY and GBPJPY have been particularly volatile JPY pairs since a one-off meltdown last Thursday that has now largely been erased. Gold (XAUUSD) trades higher supported by a softer dollar, higher oil prices and tailwind from silver (XAGUSD), as the industrial metal sector receives a boost from the prospect of easing lockdowns in China. The recent loss of momentum which helped attract fresh tactical short sellers was driven by the relentless rise of the dollar and the markets belief in the FOMC’s ability to bring down inflation without hurting growth. With the latter increasingly seeing downgrades, the risk of recession has not gone away, and it raises the question of whether real yields may pause following its March to May near 1.5% jump. Further weakness below 0.09% may signal a period of consolidation in US ten-year yields. Gold needs to break above its 200-day moving average at $1838 to force a further improvement in sentiment. Crude oil (OILUKJUL22 & OILUSJUN22) returned to an eight-week high overnight after China signaled it would start unwinding lockdowns in the Shanghai. Also underpinning prices is the continued strength in the price of fuel products, driven by strong demand and restrained refining capacity. Recently led by a record high price of RBOB gasoline future. Global demand has yet to show signs of demand destruction and with Chinese demand starting to recover the risk of higher prices remains, not least considering Europe’s continued efforts to reduce its dependency on Russian oil and gas. HG Copper (COPPERUSJUL22) has bounced back after hitting a seven-month low last week, and as we highlighted in a recent update, the market has been under pressure due to China lockdowns, and with those now starting to ease a bid has returned. If the change in sentiment towards a more favorable outlook takes hold, hedge funds may soon be forced to cover a short position which according to the latest COT report doubled to a two-year high in the week to May 10. The industrial metal sector slumped 25% during since early March as China closed, but with lockdowns now easing, stimulus policies focusing on the property sector and infrastructure will likely support a recovery. What is going on? High yield credit spreads continue to widen, signaling rising stress in corporate debt markets.  One measure of credit spreads, the Bloomberg US Corporate High Yield Average option-adjusted-spread, has widened to above 450 basis to US treasuries, the highest levels since late 2020. Back in late 2018, the spread peaked at 537 basis points just before the Powell Fed pivoted to easing policy. Lockdowns start to ease in Chinese cities. China’s nationwide (excluding Hong Kong) new local cases fell to 1,049 (sharply lower from the April 13 high of 29,317 cases), of which 823 cases from Shanghai and 52 cases from Beijing.  Shanghai reported three consecutive days of zero community (i.e. outside of quarantine) transmission.   The municipality expects to gradually resume public transportation services from May 22.  Starting from today train services and air flights to and from other Chinese cities is gradually resuming services.  The Shanghai government expects that the lockdown will be completely lifted in June.  Chinese tech stocks trade higher on hopes for easing stance from regulators. A symposium hosted by a prominent advisory body today in China has sparked hopes for a revival of tech stocks as executives of prominent companies like Baidu Inc were invited. JP Morgan Chase & Co. analysts yesterday announced upgrades to ratings on major Chinese tech names like Alibaba and Tencent Holdings. Bank of England Governor Bailey fears “apocalyptic” risk from rising food prices. Governor Bailey testified before a parliamentary committee yesterday and said the rise in prices is “a major worry not just for this country but for the developing world.” Bailey bemoaned the series of supply shocks that are driving a cost-of-living crisis for the many UK citizens as the price of food and energy, in particularly have risen sharply, the latter a direct result of the Russian invasion of Ukraine. Bailey also noted a 1.3% fall in the size of the labor market, which also limits economic growth potential. Deputy Governor Ramsden added that “we hear companies telling us that even people on median incomes are overextended.” RBA opening the door for bigger rate hikes. Minutes of the Reserve Bank of Australia's May monetary policy meeting showed that members considered three options, raising the cash rate by 15 basis points, 25 basis points or 40 basis points. The 40bps rate hike was avoided considering that the board meets monthly and would have the opportunity to review the data flowing in to decide on the size of future interest rate hikes. With inflation being seen as a key concern and Q1 inflation hitting 5.1% - the fastest pace in two decades – this likely suggests that there is room for 40bps (or more) of rate hikes in the upcoming meetings. What are we watching next? The European Commission downgraded GDP forecasts for 2022 and 2023. The EU Q1 GDP estimate is out later this morning. Official real GDP growth in both the European Union and the euro area is now forecast at 2.7 % in 2022 and 2.3 % in 2023, down from 4.0 % and 2.8 % (2.7 % in the euro area) in the last forecast released in February 2022. The forecast for 2022 is likely too optimistic. Several countries are facing a very challenging economic environment (stagflation risk in Germany and risk of technical recession in France, for instance). France’s wage negotiations are kicking off. According to a blog article published by the Bank of France last week, wages are likely to increase by 3% this year, on average. From 2014 to 2020, wages barely moved (+1 %). This is still not enough to cope with higher inflation (4.8 % YoY in April). April U.S. retail sales are out today. Expect the positive momentum to remain in place. Several factors are pushing retail sales up: solid auto sales, significant cash savings buffers (built during the pandemic) and rising wages (though they are not keeping pace with the increases in the cost of living). In the short-term, we believe consumer spending will remain robust and the domestic economy will be in a good position. Earnings Watch. As with many earnings release dates for Chinese companies they are postponed and that happened to Meituan yesterday. The Q1 earnings release has been postponed to 23 May. Today’s focus in Europe is Vodafone which could show its qualities as a defensive company during the current declines and then Nibe Industrier which is big on air-to-heat water pumps which are a declared preferred technology by the EU in its quest to become independent of Russian natural gas. In the US session, the focus will be on Walmart, Home Depot, JD.com and Sea Ltd. The two big retailers Walmart and Home Depot will provide great insights into consumer behaviour in their outlook. Today: Engie, Vodafone, Nibe Industrier, Sonova, Walmart, Home Depot, JD.com, Sea Ltd Wednesday: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Economic calendar highlights for today (times GMT) 0900 – Euro zone Q1 GDP forecast 1005 – UK Bank of England’s Cunliffe to speak 1230 – US Apr. Retail Sales 1315 – US Fed’s Harker (non-voter) to speak 1315 – US Apr. Industrial Production and Capacity Utilization 1400 – US May NAHB Housing Market Index 1700 – ECB President Lagarde to speak 1800 – US Fed Chair Powell Interview at event 1830 – US Fed’s Mester (voter) to speak 2030 – API Weekly Report on U.S. oil and fuel inventories 2350 – Japan Q1 GDP estimate 0130 – Australia Q1 Wage Price Index Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Asian equities move higher | Oanda

China Update: a swamp of weak economic data for April; light in the tunnel for the Shanghai lockdown; stern warning against private capital. | Saxo Bank

Saxo Bank Saxo Bank 17.05.2022 07:29
Summary:  China released a series of very weak credit and economic data which pointed to contraction in economic activities in April. On the positive side, there is finally light in the tunnel for Shanghai to emerge from lockdown in June. The April data was history and the determining factor for the pace of growth of the Chinese economy to a large extent lies on the development of the Covid outbreaks and lockdown. Qiushi Journal’s publication of new excerpts from an old speech of President Xi highlighted the priority of regulating private capital in the Chinese authorities’ agenda. Growth of Aggregate financing failed to gain traction.  New aggregated financing fell sharply to RMB910 billion in April (Bloomberg consensus: RMB2,200bn; March: RMB4,653 bn).  The rate of growth of outstanding aggregate financing dropped to +10.2% YoY in April from +10.6% in March and back to the level as in February (Figure 1).  After hitting the growth rate trough in September last year, aggregate financing hovering between 10% and 10.5% and failed to gain traction to break to the upside despite numerous government rhetoric as well as effort to kick-start faster credit creation. New RMB loans slumped to RMB645 billion (Bloomberg consensus RMB1,530 bn; March RMB3,130bn).  New loans to corporate slumped to RMB578 billion from RMB2,480 billion in March.  Mortgage lending was weak with outstanding mortgage loans contracted RMB61bn from the level in March. Reportedly, the People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) have been calling on banks to lend to corporate and households but loan demand have been weak and at the same time banks are reluctant to lend as they are afraid of holding the bag when loans turning sour.  Yesterday, in their latest effort to boost mortgage lending, the PBoC and the CBIRC jointly announced a cut of 20bps of the floor mortgage rates for first-time home buyers to 20bps below the 5-year long-term prime rate (LPR which is currently 4.6%).  In other words, the mortgage floor is effectively reduced from 4.6% to 4.4%.  However, most banks are currently charging a premium to the LPR and the average mortgage rate for first-home buyers is about 5.2%.  In other words, the mortgage rate floor currently is not a binding lower limit on banks mortgage lending anyway.  How much banks will pass on the decline in the mortgage rate floor to first-time home buyers is questionable. Demand for mortgage loans is weak.  New home sales for the top 100 developers plunged to -61.2% and -58.6% YoY in April as more than 40 cities were under various degrees of lockdown or mobility restriction.  Net government bond issuance fell to RMB391 billion in April from RMB707 billion in March.  The Ministry of Finance has demanded local governments to use up most of the RMB3,65 trillion annual local government special bond (LGSB) quota by the end of June this year.  So far, about RMB1.3 trillion has been issued and the remaining RMB2.35 trillion is required to issued in May and June.  For the LGSB issued in Q1 2022, more than 60% of the proceeds was designated for infrastructure investment.  When setting its policy 1-year Medium-term Lending Rate today, the PBoC kept it unchanged at 2.85% despite some analysts had called for a cut after the weak April credit data.  It is our view that the room for the PBoC to cut rates is limited and the central bank will continue to rely on targeted relending programmes and other quantitative measures to support specific industries or segments of the economy.  China’s April industrial production, retail sales and fixed asset investment all came at very weak levels.  April industrial production fell 2.9% YoY (consensus +0.5%, March: +5%).  The weakness was led by the manufacturing sector which declined 4.6% YoY in April.  Passenger car production plunged 43.9% YoY as Shanghai and Jilin, two of the auto production hubs in China, were under lockdown. The mining sector’s growth also slowed to +9.5% YoY in April from 12.2% in March.  Processed materials such as cement and steel products slumped 18.9% and 5.8% YoY respectively.   Fixed asset investment came at +2.3% YoY in April, down from March’s 7.1% YoY.  Although the Chinese authorities are pushing for infrastructure construction, the April data in infrastructure investment growth slowed to +4.3% YoY from March’s +11.8% YoY.  April retail plunged 11.1% YoY (consensus -6.6%; March: -3.5%).  After adjusting for the retail price inflation of 3.4% YoY, retail sales in real term fell 14.5% YoY in April.  Merchandise retail sales fell 31.6 YoY; auto retail sales dropped 31.6% YoY; catering services fell 22.7% YoY.  Shanghai is expected to lift the lockdown in June.  Shanghai’s Covid situations have improved further with 938 new cases for Sunday, the first time falling below 1,000 since March 23.  It was also the second day that the municipality reporting no new cases outside quarantine.  Shanghai is gradually allowing some stores to open for business and passenger cars to travel in certain areas.  The municipality expects to gradually resume public transportation services from May 22.  Starting from today train services and air flights to and from other Chinese cities is gradually resuming services.  The Shanghai government expects that the lockdown will be completely lifted in June.  Qiushi Journal published President Xi’s stern warnings against predatory behaviors of private capital in a speech he made in December last year.  Quishi Journal, a longstanding mouthpiece of the Chinese Communist Party (CCP) publishes today in its portal excerpts of a speech which President Xi made in the CCP’s Central Economic Working Conference in December 2021.  The excerpts selected to publish today extended substantially the coverage on the importance of three-tier income redistribution and regulating private capital which had occupied much less space and with less details in the original press release of that December meeting.    Today’s piece has 674 words in stern language to warn against the negative impact of private capital while the original press release in December had only 186 words in more moderate tone in mentioning private capital.  As discussed in our previous note, the CCP is dealing private capital with a red light-green light game kind of regulatory approach for the latter to move forward on green light but to stand still on red light.  It is one of the CCP’s tenets that private capital is in contradiction with the communist ideal but a necessary convenience in the socialist economy.  In today’s piece, “President Xi warns against “lax regulations’ in recent years over private capital, and the emergence of “disorderly expansion, wanton manipulation and excessive profiteering” of private capital.  He further emphasizes the importance of “not letting capital barons to do whatever they want” and demands for “stopping private capital’s savage growth, monopolistic behaviors, excessive profits, price rigging and improper competition.”   In the way of working of the CCP, articles like these in mouth pieces such as Quishi Journal and the People’s Daily are often selected carefully to serve specific political purposes.  Today’s piece should caution analysts and investors who have recently developed, in our opinion, too much optimism on a fundamental reversal of China’s clampdown on internet companies.  Relaxation may be, a reversal of the trend of tightening regulation is unlikely. Tomorrow, some leading technology executives including the founder of internet security company Qihoo 300’s will attend a consultative session of the Chinese People’s Political Consultative Conference (CPPCC) to discuss digital security.  Some analysts are speculating if there will be positive signals from senior officials who attend the CPPCC session on relaxing the clampdown on internet platform companies.  We suspect that the CPPCC, which is purely consultative, will not be the platform for conveying important policy messages.Figure 1: China Aggregate Financing Growth (% YoY); Source: Saxo & Bloomberg LP Source: Saxo Bank
Markets are betting the Fed has it wrong again

Podcast: Catching knives a dangerous pastime | Saxo Bank

Saxo Bank Saxo Bank 16.05.2022 11:21
Summary:  Equity markets surged on Friday in what looks so far like a short squeeze as the market ran dry of fresh sellers, with the most speculative sectors backing up in spectacular fashion after Bitcoin and the Tether "stable coin" survived existential threats late last week. Today we look at fresh concerns on the outlook for global food prices as India has moved to ban wheat exports on weather related developments there, sending wheat limit up in Chicago. We also discuss the latest on Elon Musk's Twitter acquisition intentions, the weak ahead in earnings and macro event risks and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Saxo Bank
Rates Spark: The hawks are circling | ING Economics

Very weak China data heightens slowdown fears. | Saxo Bank

Saxo Bank Saxo Bank 16.05.2022 10:48
Summary:  The breather provided by tech and growth led rallies in the U.S. is dampened by weakness in China’s credit, industrial production, fixed asset investment and retail sales data. This Friday’s Japan nationwide CPI is likely to inform if the recent strength in the Japanese Yen against dollar and other crosses has more to go. What’s happening in markets? U.S. equity market rebound improves the tone for the start of this week. Having finished a six weeks in a row of falling, S&P500 and NASDAQ 100 managed to finish last Friday with 2.4% and 3.7% gains respectively.  Tech and growth outperformed value stocks.  The Philadelphia Semiconductor Index gained 5%. The market is taking a breather in the midst of a bunch of negative factors including a hawkish Fed, persistent inflation and global growth slowdown or even recession fears.  Australian dollar fell below 0.69 after weak China data.  Following the rally from last Friday, AUD initially rallied to 0.696 but reversed after China released declines in April industrial production and retail sales, triggering fear of further retracement of industrial metal prices.  Mainland China and Hong Kong stocks pared early gains on weak China data.  Hang Seng Index (HSI.I), Hang Seng TECH (HSTECH.I) and CSI300 (000300.I) opened higher on news that China having cut the mortgage interest rate floor for first-home buyer and optimism about a gradual lift of lockdown in Shanghai.  The markets lost momentum as China released that industrial production fell 2.9% and retail sales fell 11.1% YoY in April, both being worse than market expectations.  India bans export of wheat that sent wheat futures up more than 5% in price. What to consider? China’s credit data was much weaker than expectation in April.  New aggregated financing fell sharply to RMB910 billion in April (consensus: RMB2,200bn; March: RMB4,653 bn).  The growth of outstanding aggregate financing dropped to 10.2% YoY in April from 10.6% in March. New RMB loans slumped to RMB 645 billion (consensus RMB1,530 bn; March RMB3,130bn).  Mortgage was weak with outstanding mortgage loans contracted RMB61bn. China cut the floor of mortgage rates.  The People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly announced a cut of 20bps of the floor mortgage rates for first-home byers to 20bps below the 5-year long-term prime rate (LPR which is currently 4.6%).  In other words, the mortgage floor is reduced from 4.6% to 4.4%.  However, most banks are currently charging a premium to the LPR and the average mortgage rate for first-home buyers is about 5.2%.  The impact of the cut of the floor will depend on if banks are willing to reduce the premiums that they charge the home buyers. The PBoC keeps its policy rate unchanged.  In setting its policy 1-year Medium-term Lending Rate today, the PBoC keeps it unchanged at 2.85% despite some analysts have called for a cut after the weak April credit data.  It is our view that the room for the PBoC to cut rates is limited.  China’s April industrial production, retail sales and fixed asset investment were weaker than market expectations.  April industrial production fell 2.9% YoY (consensus +0.5%, March: +5%).  The weakness was led by the manufacturing sector which declined 4.6% YoY in April.  Passenger car production plunged 43.9% YoY.  The mining sector’s growth also slowed to +9.5% YoY in April from 12.2% in March.  Processed materials such as cement and steel products slumped 18.9% and 5.8% YoY respectively.   Fixed asset investment came at +2.3% YoY in April, down from March’s 7.1% YoY.  Although the Chinese authorities are pushing for infrastructure construction, the April data in infrastructure investment growth slowed to +4.3% YoY from March’s +11.8% YoY.  It the above is not bad enough, April retail plunged 11.1% YoY (consensus -6.6%; March: -3.5%).  All in all, the bunch of economic data from China for April was very weak. Japan’s PPI rose faster in April at the rate of 10.% YoY (consensus +9.4%; March revised to +9.7% from +9.5%).  Core PPI came at +1.2% YoY (consensus +0.9% from +0.8%).  Japan is releasing nationwide CPI data on Friday.  Bloomberg survey has 2.5% for headline CPI and 2.0% for CPI ex fresh food.  The CPI data is the focus of the market and may shape the expectations about BoJ’s stance on monetary policy.  Shanghai’s Covid situations have improved with 938 new cases for Sunday, the first time falling below 1,000 since March 23.  It was also the second day that the municipality reporting no new cases outside quarantine.  Shanghai is gradually allowing some stores to open for business and expects to gradually resume public transportation from May 22. A leading Chinese Communist Party ideology publication, QSTheory publishes in its portal a speech from President Xi which calls for common prosperity, redistribution of income, regulating capital’s predatory behaviours and monopolistic activities.  Potential trading ideas to consider? USDJPY may have more to the downside (127) in near-term. Key economic releases this week: Tuesday: U.S. Retail Sales, U.S. Industrial Production Wednesday: U.S. Housing Starts & Building Permits; Japan GDP Friday: Japan nationwide CPI Key earnings release this week: Monday: Meituan (03690) Tuesday: JD Logistics (02618); JD.COM (09618) Wednesday: Tencent (00700); Singapore Airlines (SIA) Thursday: Xiaomi (01810) Friday: NIO (9866)   For a global look at markets – tune into our Podcast. Source: Saxo Bank
UK retail sales dip as confidence falls to another all-time low

Soaring Food Prices!? Indian Crops Limited! Chinese GDP Disappoints, Power Of US Dollar Humiliates Gold Price Attempt To Gain | Saxo Bank

Saxo Bank Saxo Bank 16.05.2022 09:53
Summary:  The strong close on Wall Street Friday has not brightened the mood for the start of this week, as China reported far worse than expected GDP data that soured sentiment overnight. In other news, the global food supply concerns have ratcheted higher as the second largest wheat grower, India, has shut off exports of the food after a recent heat wave has damaged its crop. And in precious metals, the gold rally has fully broken down through all major supports as the strong USD tightens liquidity on virtually everything.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities rose into the close on Friday with the S&P 500 futures closing above the big 4,000 level, but they are already retreating this morning trading below 4,000 again with the news of a major wheat export ban from India due to a failed harvest putting more pressure on inflation and food costs. Our view has not changed much on equities. We remain defensive and believe investors should fade every short-term rally. Inflation will continue to put pressure on central banks to tighten financial conditions even more from current already tight levels. Commodities are still by far the most critical asset class to get exposure to in your asset allocation portfolio. Mainland China and Hong Kong stocks pared early gains on weak China data. Hang Seng Index (HSI.I), Hang Seng TECH (HSTECH.I) and CSI300 (000300.I) opened higher on news that China has cut the mortgage interest rate floor for first-home buyers and on optimism that a gradual lift of lockdowns in Shanghai will brighten the outlook.  But markets lost momentum on weak Chinese data releases (more below). Stoxx 50 (EU50.I) - European equities continued higher on Friday driven by a big sentiment shift in US equities, but Stoxx 50 futures are pushing lower today with the 3,600 level being the big support level to watch. Higher wheat prices (limit up today) could add more pressure on European households and negatively impact consumer confidence. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM USD pairs – the US dollar was pushed lower on Friday as the currency seems to be the great liquidity indicator of the moment and correlates with swings in risk sentiment. Interesting to note to start this week that it has jumped aggressively back higher versus riskier currencies, like AUD (especially due to weak Chinese economic data) but that the Japanese yen is outperforming (more below) as safe haven US treasuries caught a bid to start this week after a modest sell-off. For EURUSD, watching the 1.0341 low from 2017 for whether the path to parity and lower opens up from here. JPY pairs – at times in recent sessions, the JPY has served as an even higher beta currency to risk sentiment than the US dollar, likely because safe haven sovereign bonds have shown fitful signs of reverting to their old behavior as safe havens when the market is suffering a general deleveraging event. Watching whether the sell-off in JPY pairs since the outbreak of the war in Ukraine comes fully undone in coming sessions if yields at the long end of the US Treasury yield curve continue to push lower. GBPJPY has already broken back below its mid-February high, while EURJPY has teased a similar move (the 132.50-133.00). Gold (XAUUSD) trades back to unchanged on the year after suffering the biggest weekly fall in almost a year. The relentless rise of the dollar and the markets belief in the FOMC’s ability to bring down inflation has reduced gold’s appeal and it culminated last week with a drop to a three-month low at $1800. The recent weakness was led by silver (XAGUSD) partly being dragged down by weakness across industrial metals. The loss of momentum and price weakness during the past few weeks had by last Tuesday reduced the hedge fund long to a three-month low and down 58% from the March peak. Gold remains technically challenged with a break above its 200-day moving average at $1838 needed for that to change. Crude oil (OILUKJUL22 & OILUSJUN22) trades lower after dismal economic data out of China highlighted the price the country is paying for the government’s Covid Zero policy, with industrial output and consumer spending falling to the worst levels since the pandemic began in 2020. Brent crude oil remains rangebound within a $100 to $114 range with tight supply and sanctions against Russia being offset by global growth worries, led by China where crude oil processing last month slumped to the lowest level in two years. While US gasoline futures hit a record last week, Iran teasingly has been out saying it can double oil exports if the market needs it. US Treasuries (TLT, IEF) – US treasury yields rose Friday on the sudden improvement in risk sentiment but have faded back lower as Asia has stumbled out of the blocks to start this week on ugly Chinese economic data. Every quarter-percent marker on the 10-year yield benchmark graph has seen sticky price action – so 3.00% is support and the next resistance levels are 2.75% and then 2.50% (the benchmark trading this morning near 2.90%). What is going on? Weaker than expected Chinese economic data out overnight. China’s latest economic data spooked sentiment overnight, as April Industrial Production was recorded down –2.9% year-on-year vs. +0.5% expected, and April Retail Sales were down –11.1% YoY vs. -6.6% expected. The Surveyed Jobless Rate rose to 6.1% in April vs. 6.0% expected and 5.8% in March. Residential property sales were down 32.2% YoY. The impact of Covid lockdowns amidst China’s zero Covid policy is clear, although an easing of the Shanghai lockdowns is currently ongoing. Wheat (ZWN2) jumped by the exchange limit of $12.475 overnight after India over the weekend moved to restrict exports, thereby adding further risks to an already tight global market. Just a few weeks ago the market had expected exports this year would almost double from last year’s record 8 million tons, but a record-breaking heatwave during the past month has parched the crop during a crucial period, driving expectations for a slump in yields. Last week the USDA lowered its forecast for US wheat production by more than expected while war-hit Ukraine could see its production and exports slump to the lowest since 2012/13. In addition, European growers have already been struggling with warm and dry weather this early in the season, raising concerns about the output from the world’s top exporter. Adding to all this the dollar, which has risen by close to 10% this year, and the pain for key emerging market buyers of wheat is clear for all to see. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Is Musk looking for an escape route? As we alluded to a couple of times last week on our daily Saxo Market Call podcast the relentless decline in technology stocks was putting pressure on Musk’s acquisition of Twitter as his premium looked more and more outrageous. Over the weekend, Elon Musk said the deal is on hold until verification of the size of bots on the social media platform, and Twitter followed up saying that Musk violated his NDA revealing the bot sample size. In any case, the deal looks fragile at this point. Downbeat US consumer sentiment. The preliminary US May University of Michigan sentiment survey showed the Current Conditions reading drop to a new cycle low of 63.6, a bad miss relative to the 69.6 expected. The reading was only worse for three months during the financial crisis of 2008-09. Expectations fared poorly as well, with a reading of 56.3 vs. 61.5 expected. The longer term inflation expectations component was stable at 3.0%. German Social Democrats suffer historic defeat in regional election in North Rhine-Westphalia, the most populous German state. The SPD polled at 27.1% according to exit polls, down over 4% from 2017, while the CDU won almost 36%, up about 3%, and the Greens advanced from 6 to 18%. What are we watching next? Status of crypto market as a sign of weak liquidity conditions: The cryptocurrency market survived last week’s volatility event after “stable” coin TerraUSD was blown up and the largest stable coin Tether suffered its worst challenge with parity since late 2020. Bitcoin broke down well through 30k, but the subsequent rally has failed to carry the price action away from that level, and the crypto space shows a near one-to-one correlation with US equities, which suggests that crypto assets offer no diversification. Stable coins stability and renewed break-down risk remain concerns until that asset class shows a life of its own. Official NATO application from Sweden and Finland. The is a major political event as it ends 200 years of Swedish neutrality and Russia has already reacted by cutting electricity to Finland (around 10% of the country’s consumption but can easily be filled by Sweden and the Baltics) and generally threated NATO with consequences. It seems all NATO countries are favouring to include Sweden and Finland the defense alliance except for Turkey with Erdogan commenting over the weekend that the two countries are housing Kurdish terror organisation. Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM Earnings Watch. The worst earnings season since the bottom during the early phase of the pandemic is coming to an end. Data confirms that revenue growth is slowing down and earnings lower due to margin pressure from commodities. This week will be dominated by large Chinese earnings from Meituan, JD.com, Tencent, Trip.com, Xiaomi, and DiDi Global. Monday: Meituan, Ryanair, Recruit Holdings, Take-Two Interactive Tuesday: Engie, Vodafone, Nibe Industrier, Sonova, Walmart, Home Depot, JD.com, Sea Ltd Wednesday: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Economic calendar highlights for today (times GMT) 0840 – ECB's Lane and Panetta to speak 1200 – Poland Apr. CPI 1215 – Canada Apr. Housing Starts 1230 – US May Empire Manufacturing 1255 – US Fed’s Williams (voter) speaking 1300 – Canada Apr. Existing Home Sales 1415 – UK Bank of England Governor Bailey and other MPC members to speak 0130 – Australia RBA meeting minutes Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Friendly Friday | Oanda

Bumpy ride in the markets will continue, watch for higher VIX levels. JPY appeals as a safe haven again and Gold at key support levels | Oanda

Saxo Bank Saxo Bank 13.05.2022 10:00
Summary:  A sense of relief in the Asian markets today but peak capitulation in global markets is still some way off, and continue to watch for further higher VIX levels. Yen starts to appeal as a safe haven again, although it remains hard to push back the USD bulls which makes yen crosses relatively more interesting. Inflation continues to run hot in the US, but also in India and EM bond pressures will likely pick up further. What’s happening in markets? Markets poised for further pull back, but remember, markets rise over the long term. Long term downtrends have gripped most markets. In US; the S&P500 and Nasdaq are in Bear markets (down ~20%+). In Australia, ASX is not in a bear market, but the Tech Index is, after losing 44%, while the ASX’s Discretionary sector is in a bear markets (down ~20%). As mentioned last week and earlier this week, we could see a small term rally, but long term pressure remains. Markets could capitulate, given the US Fed has only risen rates twice. In Australia, the RBA, has only risen rates once, with both to make another 6+ potential hikes. Plus, both banks continue to get inflation forecasts wrong; which is spooking the market (causing further pull backs). Asia markets taking a sigh of relief. With the US markets ending somewhat in the green and crypto panic abating for now, Asian markets were in the recovery mode on Friday. Japan’s Nikkei (NI225.I) was in gains of over 2% on Friday after BOJ governor Kuroda came out saying monetary easing must stay as economic pressures mount. Record losses were reported by SoftBank (9984) Vision Fund unit but the stock was up over 10% today as the bank has pledged to scale back investing activity and preserve cash as the market downturn hammered the tech portfolio, boosting buyback hopes. Chipmaker Tokyo Electron (8035) resumed gains as well after a beat on its earnings. Singapore’s STI Index (ES3) also took a breather with Singtel (Z74) being the most active stock but down 1%. Casino operator Genting Singapore (G13) reported earnings beat for Q1 but was only cautiously optimistic of the recovery trajectory due to the rising costs. Hong Kong equity markets rallied with coal miners, EV autos, techs and property management services leading the charge higher. Hang Seng Index (HSI.I) and CSI300 (000300.I) were up 2% and 3.9% respectively. Coal mining stocks were up around 5% and EV autos rallied 6-7%. Semiconductor manufacturer, Hua Hong (01347) reported strong revenues growth (+12.6% QoQ, +95% YoY) but margin compression in 1Q22 (-5.6ppts QoQ). Net profits were down 23% QoQ  and +211% YoY. The Company is guiding double-digit ASP increases in 2H22. Hua Hong says that it has applied for dual listing in Shanghai. Fed speakers continue to favor a series of 50bps rate hikes rather than 75bps. As the Senate confirmed Fed Chair Powell's second term, he reiterated his objective to get inflation under control but also highlighted some concerns regarding ensuring a soft landing. Notably, both Powell and Daly support 50bps increases at the next two meetings. While that means markets are close to pricing in peak Fed hawkishness, a bumpy ride is set to continue as we are just at the beginning of pricing in recession concerns by the markets. Yen’s appeal as a safe haven returns. With recession concerns mounting, the yen is back as a safe haven although it remains hard to push back the USD bulls. Japanese investors are also selling overseas bonds and that means flows back into the yen. USDJPY slipped to mid-127 as sole standout performer among G10 peers. Yen crosses look more appealing especially GBPJPY which broke support at 158. GBPUSD is also under pressure not just because of USD strength but also with concerns around UK macro drivers. Q1 GDP growth was up 0.8% q/q March at -0.1% and BOE warning doesn’t bode well for Q2. EURUSD fell to lows of 1.035 despite multiple ECB speakers adding support for July rate hike. EURGBP has upside potential given the yield spread. AUDUSD still under pressure due to iron ore concerns.   What to consider? US producer prices continue to run hot. US April PPI printed 11% y/y and 0.5% m/m driven mostly by goods. While this is moderate compared to the March print of 11.2% y/y, but still signals persistent supply-driven inflation pressures which signals continued elevated CPI going forward. USDCNH rose to 6.838 before retracing slightly to 6.814. On the back of a strong U.S. dollar, the renminbi continued to weaken.  Reportedly, there was substantial amount of RMB bond selling from foreign investors this week. Chinese importers’ buying and USD bond issuers’ hedging activities also were said to contribute to the weakness of the renminbi. We are expecting the uptrend of USDCNH to continue but expecting profit taking from traders to emerge between 6.90 and 7.00.India inflation not showing any signs of peaking. India’s April CPI surged to an 8-year high of 7.79% y/y driven by broad-based increases in good and services prices. The Reserve Bank of India, having raised rates by 40bps in an out-of-cycle meeting, is still in for more tightening pressures and 50bps rate hike is in the cards for the June meeting. That could mean more pain for Indian assets, especially bonds.   Potential trading ideas to consider? Volatility is set to rise. The oil price (biggest inflation contributor) is likely to head higher, so too are food and wage prices. So consider, that right now, the VIX index is just at 32. In March 2020, the VIX index was over 80. In October 2008 the VIX was almost 90. So expect volatility to rise, and watch if the VIX gets over 40, which it will likely to. This supports the US dollar rising. The takeaways? You can consider looking at oil, or investing in the US dollar ETFs to cushion your portfolio. Also consider looking at food stocks and energy stocks that are setting higher levels. Gold (XAUUSD) on the verge of testing 1800. A hotter-than-expected US CPI print highlighted the FOMC’s struggle in bringing inflation down to levels the market has priced in. Overall, however, the yellow metal remains challenged by the strong dollar and the general level of risk adversity forcing investors to cut exposure across-the-board. Selling in ETFs has also contributed, while China demand has also been slower. But a real test is coming at $1800/oz support level.   Key economic releases this week: Friday: US Univ of Michigan sentiment, US import price index Key earnings release this week: Friday: Deutsche Telekom, KDDI, Honda Motor, Alibaba   For a global look at markets – tune into our Podcast. 
Powell to hit bullish sentiment at semiannual testimony | MarketTalk: What’s up today? | Swissquote

Fast rising U.S. CPI data adds to equity market woes | Saxo Bank

Saxo Bank Saxo Bank 12.05.2022 16:22
Summary:  The larger than expected April U.S. CPI and core CPI reversed the attempt of the equity market to rebound and brought major U.S. equity indices firmly back onto their down trends. The surprising strength in services is particularly worrying and the money market is pricing in 143 bp hikes (i.e. almost three 50 bp hikes) in the next three FOMC meetings. What’s happening in markets? What spooked markets overnight was US inflation rose more than expected, which gives the Fed more ammunition to rise rates (more than they mapped out). Rising rates will cause further carnage, as when rates rise, bond yields tend to rise, which may trigger the US 10-year bond yield, to rise back over 3%,  (which is a better yield than the Nasdaq and S&P500 combined – just think about that for a second). As such the Nasdaq (with an average dividend yield of 0.9%) continued to fall and lost 3.2%. The Tech heavy index is down 28% from its high, and the technical indicators suggest it will likely continue to fall on a weekly and monthly basis, which supports our bearish fundamental view. The S&P500 lost 1.7% on Wednesday, (it has an average dividend yield of 1.66%). The U.S. treasury yield curve flattened 13 bps since yesterday’s CPI release.  The 10-year yield fell 10 bps to 2.89% while the 2-year yield rose 3 bps to 2.64%. It is worthwhile to note that the 10-year yield has fallen 30 bps in just three days from its May 9 high of 3.20%.  The treasury market is sending signals of investors being worried about a sharper slow-down in the U.S. economy.  In Australia, the Aussie share market fell 1% and hit a support level 6,991 points, but energy companies hit new highs. If the ASX200 falls further bellow this level, it could fall 2.2% to the next support (at 6,837 points). The technical indicators, suggest this could occur, with the MACD and RSI suggesting a weekly and monthly could pull back. We ideally need to see better than expected news to break the cycle. All in all though, it’s worthwhile continuing to back those stocks that are outperforming and are likely to outperform this trajectory, with rising cashflow and earnings growth. Just take a look at today’s best performing stocks as an example. In Energy there is Ampol (ALD) up 3.5% with its shares hitting a 2-year high, and Viva Energy (VEA) up 3% to its highest level since 2019. China and Hong Kong equity markets rebounded from their lows. After a weak opening, stocks traded in Hong Kong, Shanghai and Shenzhen rebounded from their lows.  Hang Seng Index (HSI.I) was down  1% and CSI300 (000300.I) recouped all its early loss to close the morning session flat.  Infrastructure related A share, in particular county seat modernization names rallied.  Sunac China, China’s 4th largest property developer, failed to make a coupon payment of a dollar bond.  The news pushed down the shares of other Chinese developers traded in Hong Kong. Asia stocks follow Wall Street down. Japan’s Nikkei (NI225.I) was down 1% in the Asian morning following US CPI release overnight and the slide in US indices overnight. Steel makers like Japan Steel (5631) and Kobe Steel (5406) surged in a big way after earnings results and profit outlook was better than expected. Singapore’s STI Index (ES3) was also in the red. Singtel (Z74) was up over 1% leading on the index as it broadened its 5G network to underground metro line. Chinese electric car maker Nio (NIO) is going to start trading on the Singapore stock exchange form May 20. FX range trading continues. The USD had a hard time reacting to the US inflation print, suggesting range trading patterns may continue for now. While USDJPY slipped below 130 on lower real yields, EUR was still unable to overcome inflation and growth worries even with Lagarde hinting at a rate hike for July on stickier inflation, it dipped slightly to remain above 1.05 support. AUDUSD’s move above 0.7000 was not sustained and NZDUSD returned to sub-0.6300. GBPUSD is making a steadier move below 1.2300 ahead of UK GDP release. What to consider? US inflation may have peaked but the descent will be slow and painful. April U.S. CPI came at 8.3% YoY.  Core CPI, which excludes food & energy,  was 6.2% higher from a year ago.  Reiterating what we said in this piece, while headline inflation may be showing signs of peaking as base effects turn, it is likely to stay at these elevated levels. It was important to note that the 0.6% monthly increase of Core CPI  has brought inflation back to the uncomfortably high 0.5%-0.6% range from October 2021 to February 2022, after a temporary moderation in March.  Another worrying sign was the +0.7% core service price, which was the highest since 1990. Regular rents and owner-equivalent rents rose faster than expected and prices of reopening related spending, such as airfares and hotel lodging rose sharply. The US consumer remains very strong, which gives pricing power to companies. Services inflation will also broaden further, suggesting we are in for a higher-for-longer mode. Take into the mix, a prolonged war, sustained disruptions from China and still-tight labor market. This means Fed’s hawkish rhetoric is set to stay. The money market has moved towards pricing in a 50bp hike in the Sept FOMC on top of the two 50bp moves anticipated for June and July. Oil bulls pin their ears back: Both the Saudi oil Chief and UAE have warned that all energy sectors are running out of capacity, which supports our view that the oil price will hit higher levels over the longer term and also once China is out of lockdown. That being said, Saudi Aramco (ARAMCO) has strengthened regardless, along with many other oil companies, as their cashflows are rising at record paces. ARAMCO has now overtaken Apple as the world’s most valuable company. As we have been saying for some time now, it’s wise to consider revisiting oil stocks and oil ETFs. For instance, the ETF OOO that tracks the oil price, looks like it could break above a key trigger level and re-enter another uptrend, so that’s worth consideration. Also have a look at your favorite large oil stocks with rising earnings growth. Malaysia’s rate hike will be a signal for the region. Bank Negara Malaysia started the rate hike cycle yesterday as we had expected, turning away from its patient stance in April. This comes on the back of a similar rate increase decision from the Reserve Bank of India last week in an out-of-cycle meeting. Ringgit interest rate swaps are now pricing in over 75-basis points of rate hikes over the next 6 months. This similar surge in hawkish pricing is being seen across emerging Asia, suggesting more pain for EM bonds. Potential trading ides that could be worth your consideration? US dollar and US dollar ETFs move higher. As mentioned last week the USD dollar is supported higher along with US dollar ETFS. The Invesco USD Index Bullish Fund ETF closed at a brand new record high overnight. BetaShares USD ETF is also hitting higher levels and looks like. As previously mentioned, also as our head of FX Strategy also said, we are bullish on the USD, as higher volatility and bond yield are expected. This supports the USD and USD ETFs. BTC s in a bearish long term downtrend pressured by long term yield rising. For investors it could be worth considering shorting Bitcoin given rates are likely to continue to rise for now. Buy USDHKD 12-month forward. HKD interest rates are set to rise towards or even go above those of the USD as the Hong Kong Monetary Authority (HKMA) withdraw HKD liquidity in its move to buy HKD against USD.  As the USDHKD spot rate touches 7.85, which is the weak-side convertibility undertaking of the HKMA, the HKMA intervened by buying HKD versus the dollar this morning.  Given the strength of the US dollar and the weak economic sentiment in Hong Kong and the mainland, it is likely that the HKMA will have to continue to intervene and withdraw HKD liquidity further.  Given the ample ammunition that the HKMA has in defending HKD’s Linked-exchange Rate Regime, investors who are interested in betting on persistent weakness in the HKD would be better off to take a long position of USDHKD 12-month forward (currently at around 7.83) which can go up as HKD interest rate rise even when the spot being capped at 7.85.  Key economic releases this week: Thursday: India April CPI, US April PPI Friday: US Univ of Michigan sentiment, US import price index   Key earnings release this week: Thursday: Verbund, KBC Group, Brookfield, Fortum, Siemens, Allianz, Merck, Hapag-Lloyd, RWE, Atlantia, Snam, NTT, SoftBank Group, Aegon, Naturgy Energy, Motorola Solutions Friday: Deutsche Telekom, KDDI, Honda Motor, Alibaba   For a global look at markets – tune into our Podcast.  Source: Saxo Bank
Stablecoins losing stability – is Tether losing its peg too? | Saxo Bank

Stablecoins losing stability – is Tether losing its peg too? | Saxo Bank

Saxo Bank Saxo Bank 12.05.2022 16:15
Summary:  Over the past couple of days, UST, one of the major crypto stablecoins, completely lost its peg with the US dollar, and today the biggest stablecoin, Tether, has shown signs of a similar trend. In this article, we zoom in on the difference between three of the biggest stablecoins and discuss the potential impact that de-pegging may have on the general crypto market. - co-written by Mads Eberhardt, Cryptocurrency Analyst Stablecoins are crypto tokens that have their value pegged to another currency or asset. The most popular stablecoins are USDT (Tether), USDC, and UST (Terra), which all are created to have the value of $1. Apart from providing crypto traders with a store-of-value within the crypto space linked to fiat currencies, stablecoins play important roles in many of the decentralized applications build on blockchain technology and cryptocurrencies. Read next: Saxo Bank: Markets are assessing the global growth outlook and the pace of Fed tightening| FXMAG.COM The crash of the Terra stablecoin in the beginning of the week has shaken the crypto markets, and UST is currently trading at $0.60 - way below $1.00. This morning the contagion spread to the rest of the stablecoin space with USDT dropping as low as $0.96, however bouncing back to $0.99 this afternoon. It should be noted that other stablecoins are trading above $1.00 as they seem to be receiving value from some of the unpopular stablecoins. Source: Coinmarketcap.com Stablecoin collateral To understand why the stablecoins are suddenly not stable anymore, it is crucial to understand the collateral type for the different stablecoins. We focus on the three mentioned above. Terra (UST) relies on a swap function to maintain its peg through an associated crypto token, LUNA, as 1 UST can always be swapped for $1 worth of LUNA. We elaborate more in the appendix below. But in short, UST is not collateralized by anything other than the market’s belief that LUNA will always have value to some and thus always have interested buyers, and this belief is anyway closely related to the value they see in UST. This belief from the market in LUNA is exactly what is missing right now, disabling the pegging mechanism. During Terra’s recent rally, many also criticized Terra for basically being non-collateralized due to this structure, as it does not have any backing in physical assets. Read next: Philip Morris Buys Match, Fed Members Spills The Tea And Gold Price Nears Quite Low Values | Saxo Bank| FXMAG.COM The second-largest stablecoin USDC is, however, backed 100 % by reserves in cash and cash equivalents such as short-term highly liquid investments. This is fundamentally different from the collateral in UST, and USDC is thus seen as a much more stable peg to the US dollar. The largest stablecoin, Tether, does reportedly have around 85% of its reserves in cash and cash equivalents and the rest in other assets such as corporate bonds and other digital tokens. However, Tether has earlier faced controversies when it comes to transparency around its dollar reserves, so the market has for years questioned what assets its reserve consists of and whether Tether in reality keeps full reserve to back its stablecoin. These controversies are likely what is driving stablecoin investors away from USDT, as the event of UST has refreshed the market’s memory of Tether’s lack of transparency with respect to its reserve. The sell-off in USDT this morning occurred even after the CTO of Tether posted on Twitter that they were continuing to honor USDT redemptions at $1 and that the redemption of more than $300mn has been carried out over the past 24 hours. And as it looks for now, Tether is making a comeback towards the $1.00 level. Regulators may become more harsh The whole narrative of Bitcoin and especially stablecoins is now heavily under pressure, although it is important to emphasize that not all stablecoins are currently under pressure – only those where investors doubt the collateral mechanism. But it is not only investors, who are worried. Regulators and policymakers are still working on national and international regulations for the cryptocurrency space, and fear is now that the regulatory framework will be even more strict, and it could limit some of the existing use-cases for cryptocurrencies. In case potential applications for cryptocurrencies are constrained, the sentiment will likely go down as well. Appendix - Additional reading for those interested in the Terra: Terra had over $18bn worth of stablecoin issued prior to the bank run of its stablecoin. For Terra, there are two tokens. Its stablecoin called TerraUSD (UST) and LUNA. LUNA has no value other than the fact that you can always create and redeem 1 TerraUSD (intended to be worth $1) for $1 worth of LUNA and vice versa. When you create TerraUSD, the LUNA is burnt and TerraUSD is created. When you redeem TerraUSD, it is burnt and LUNA is created. Since you are paying or receiving $1 worth of LUNA for every TerraUSD you create or redeem, people are intended to arbitrage, so TerraUSD is as close to $1 at all times. For instance, let us say TerraUSD falls to $0.95. By buying TerraUSD at $0.95, you can technically redeem it for $1 worth of LUNA, selling it for fiat and earning 5 cents. As mentioned above, TerraUSD is not collateralized by anything other than the market’s belief that LUNA will always have somewhat of a value, which belief is anyway closely related to TerraUSD. Since Terra started gaining momentum last year, people have criticized this structure, as it is basically non-collateralized. The Terra foundation responded by buying $1.5bn worth of Bitcoins at the beginning of this year to show some collateralization. This means that Terra was suddenly solely around 10% collateralized in another highly volatile asset and due to the fact that the foundation controlled the small collateralization there was, Terra was suddenly not that decentralized. Over the weekend, some traders started selling a lot of TerraUSD to un-peg it from the dollar, among some other things. When the un-peg occurred, people started to redeem TerraUSD for $1 worth of LUNA and sell LUNA to fiat to cover their position. This LUNA is created by new and when dumped on the market, the price of LUNA plunges. When the next redeems TerraUSD for LUNA, they need to get credited by even more LUNA. Suddenly not only TerraUSD holders are pushing the LUNA price down, but other traders see it and go short LUNA, pushing the price further down. Now, you have the death spiral. LUNA plunges even more, while more and more LUNA is needed to be issued to redeem one additional TerraUSD. At the same time, there is a cap on how many can redeem TerraUSD to $1 worth of LUNA per hour. People that cannot redeem it start to get nervous and dumps TerraUSD directly to USD or other assets on exchanges, de-pegging it further from $1. As this happens, few want to do arbitrage, because they cannot instantly redeem it for LUNA and sell it for fiat since there is a maximum the protocol can redeem per hour. LUNA's supply has increased 20-fold in the past few days from around 346mn to 7.1bn LUNA to redeem some of its TerraUSD supply. At the same time, its market capitalization has plunged by over 99%. LUNA currently has a market capitalization of $138mn, but technically it still needs to redeem 12bn TerraUSD for $1 each. This means that LUNA is going through hyperinflation, if it will be possible to redeem every UST at all since there is close to no demand for LUNA. Source: Saxo Bank
(USDT) Tether's Not That Stable? JPY Goes Higher, How Will It Perform Against US Dollar? | Saxo Bank

(USDT) Tether's Not That Stable? JPY Goes Higher, How Will It Perform Against US Dollar? | Saxo Bank

Saxo Bank Saxo Bank 12.05.2022 15:42
Summary:  Fires are springing up everywhere and it feels like markets are under siege, but the volatility curve doesn’t even look particularly alarming yet. We focus on the areas that could continue to keep markets on tilt, including the breaking of the largest "stable" coin Tether already in evidence today after Bitcoin melted through a huge chart level yesterday, the Hong Kong dollar peg under pressure, the Tesla-Bitcoin-Ark triangle, etc. In FX, the focus is on the jolt higher in the JPY even more so than the ongoing USD strength, while commodity traders have it relatively easy on the volatility front. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: Saxo Bank: Markets are assessing the global growth outlook and the pace of Fed tightening| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Read next: Philip Morris Buys Match, Fed Members Spills The Tea And Gold Price Nears Quite Low Values | Saxo Bank| FXMAG.COM   Source: Saxo Bank
Financial Markets Today: Quick Take – May 12, 2022 | Saxo Bank

Financial Markets Today: Quick Take – May 12, 2022 | Saxo Bank

Saxo Bank Saxo Bank 12.05.2022 12:30
Summary:  Markets are in a deep funk after an attempt to rally in the wake of a hotter than expected US CPI data point yesterday was quickly wiped away and then some, taking the major US averages to new cycle lows. Adding to negative sentiment was an ugly downdraft in the crypto currency space as Bitcoin broke down through major support. In FX, the US dollar firmed to new highs broadly, but the JPY was stronger still as US Treasuries picked up a safe haven bid.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - equity sentiment was improving yesterday until the shocking 0.6% m/m print in core US CPI hit the market like a hammer. Everything reversed and Nasdaq 100 futures tumbled 3.1% closing below 12,000; in early European trading hours Nasdaq 100 futures are extending their decline trading around the 11,915 level. The risk cluster Tesla, Ark Invest, and crypto was severely due to overlapping positions, and as we have highlighted Tesla is the key for this part of the market, and with the Shanghai lockdown weighing on Tesla’s production in China sentiment could weaken further. We view Bitcoin as the ultimate indicator of marginal liquidity and risk appetite and with Bitcoin breaking below 27,000 this morning, we expect a tough trading session ahead for US technology stocks. Initial jobless claims later today are more important than normal as the time series has recently turned around and the question is whether the job market is weakening further. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) - After a weak opening, stocks in Hong Kong, Shanghai and Shenzhen rebounded from their lows. The Hang Seng Index (HSI.I) was down 1.2% and CSI300 (000300.I) recouped most its early loss.  Infrastructure related A share, in particular county seat modernization names rallied. Sunac China, China’s 4th largest property developer, failed to make a coupon payment of a dollar bond.  The news pushed down the shares of other Chinese developers traded in Hong Kong.  As the USDHKD spot rate touches 7.85, which is the weak-side convertibility undertaking of the Hong Kong Monetary Authority, it intervened by buying HKD versus the dollar this morning, first time since 2019. Stoxx 50 (EU50.I) - European equities were out of sync with the selloff in US equities yesterday, but is reacting a bit this morning with Stoxx 50 futures trading down to the 3,540 level. The 3,490 level is the key support level to watch today should risk-off continue and the major support level is of course down at the 3,400 level being the bottom during the selloff in March as reaction to the war in Ukraine. Bitcoin and Ethereum suffered further aggravated weakness yesterday as Bitcoin broke down through a major support zone from the psychological low of 30,000 down through the mid 2021 low near 28.8k. Ethereum punched down through the 2022 lows and well below 2000. Market focus in recent days has been on the woes of one of the “stable coins” TerraUSD, which broke its parity with the US dollar and traded as low as 30 cents yesterday. The largest stable coin, Tether, closed yesterday at 0.9963, its farthest daily close from parity with the USD since March of last year, and has traded below 0.99 at times this morning. AUDUSD and USDCAD – weak risk sentiment continues to see the Australian dollar suffering against nearly all of the other DM currencies, as global growth outlook fears, particularly centered on China, persist and due to the pressure on the Aussie from a liquidity angle. The break of 0.7000 in AUDUSD was in doubt yesterday after the strong US CPI release as the pair somehow traded back up to 0.7050, but the subsequent downdraft taking the price action below 0.6900 overnight suggests that the downside risks remain and with plenty of empty space on the chart below, only round levels like 0.6500 might be the focus for support. USDCAD has tried to hang on to the 1.3000 area after poking above range resistance near 1.2950, but CAD looks vulnerable to extending its weakness, particularly if crude oil prices correct lower. USDJPY and JPY pairs – the USD was strong again yesterday, but the JPY managed to firm even more as sovereign bonds have begun to play their traditional role as a safe haven asset – at least when risk deleveraging in equities and elsewhere is at its worst. This offers the JPY a boost as well, due to the focus on the Bank of Japan’s yield-curve-control policy. One of the first major JPY pairs to suffer a technical breakdown has been GBPJPY, which has traded down through the important 160.00 area and is having a look at the major 158.00 level support as sterling is beset by weakness as a less liquid currency and where the BoE is forecasting a recession, suppressing its potential to hike rates as rapidly as elsewhere to fight inflation. USDJPY still trades clear of the first pivotal area around 128.50, but further drops in especially long US treasury yields could see it test down through that area. Gold (XAUUSD) bounced on Wednesday after finding support at $1833, the trendline from last August’s low, as well as the 200-day moving average at $1837. A hotter-than-expected US CPI print highlighted the FOMC’ struggle in bringing inflation down to levels the market has priced in. Overall, however, the yellow metal remains challenged by the strong dollar and the general level of risk adversity forcing investors to cut exposure across-the-board. Silver (XAGUSD) trades below $21.50 driven by renewed weakness across the industrial metal sector, thereby potentially providing a downside pull to gold.  Crude oil (OILUKJUL22 & OILUSJUN22) jumped around 6% on Wednesday after tumbling 9% during the previous two sessions. Today some weakness has re-emerged, and it highlights how traders are struggling to price correctly the world’s most important energy contracts as the focus continues to alternate between China lockdowns hurting demand and high inflation killing economic growth while EU sanctions on Russian crude oil has yet to be agreed while Saudi Arabia and UAE have warned that all energy sectors are running out of capacity. Underlying this market looks supported as inventories of fuel such as diesel and gasoline continue to decline. Monthly Oil Market Reports today from IEA and OPEC. Arabica Coffee (COFFEENYJUL22) surged the most on Wednesday in nine months. The high-quality bean hit a multi-year high $2.6045/lb in February as the outlook for a lower production in Brazil following last year’s frost damage, before slumping in response to a stronger dollar and a weaker demand outlook due to high inflation and the war in Ukraine. The 8% jump to $2.19 per pound was triggered by forecasts that freezing temperatures may hit key coffee regions next week. The jump comes just the day after the high-quality bean hit six months low at $2.02/lb, and in order to break the downtrend from the February high, the front-month contract now needs to break above $2.2750/lb. US Treasuries (TLT, IEF) – US treasury yields at the shorter end of the curve ended the day relatively flat despite the hotter than expected April CPI print yesterday (more below), while the longer end of the curve saw support from safe haven seeking amidst general risk deleveraging, thus flattening the yield curve. The 2-10 measure has flattened from a high at the start of the week above 44 basis points to 25 basis points this morning. A 10-year T-note auction yesterday generally failed to generate headlines as demand was average. Today sees the auction of 30-year T-bonds. What is going on? Coinbase, the largest US crypto exchange, saw its shares plunge more than 25% yesterday. As of March 31, the company was the custodian of $256 billion in customer “funds”, a level which is much lower now with the steep loss of value in many crypto assets, as some of the smaller coins are down 50% or more in just a week. In a regulatory filing, the company said that in the case of bankruptcy, Coinbase’s customer assets might be treated as collateral. The Coinbase CEO said the company is in no danger of going bankrupt. U.S. April Consumer Price Index (CPI) is still uncomfortably high. The headline number was +0.3 % MoM vs. +0.2% expected, but the ex-Food-and-Energy reading of +0.6% MoM number vs. +0.4% expected had more impact. Many are hoping that inflation has peaked in the United States, but there are two reasons why this may not be the case. First, most of the deceleration in the CPI number is due to a drop in gasoline prices. But since April, gasoline prices have risen again and were about $4.161 per gallon early this week after dipping below $4 in April (data from the Energy Information Administration). Second, we can observe a worrying shift from goods to service inflation inside the U.S. economy (airline fares are now up 33 % over the past year, for instance). This is a clear danger for the economy since services matter five times more in the computation of the CPI.  Expect more volatility and a sustained increase in services inflation (including core services). The inflation headache remains for the U.S. Federal Reserve. Sweden Apr. CPI out at +0.6% MoM and +6.4% YoY vs. +0.5% / +6.2% expected, respectively. UK GDP and Trade Data. UK Q1 GDP reported at +0.8% QoQ and +8.7% YoY vs. +1.0/+8.9% expected, respectively, but the Bank of England is predicting that growth will turn negative as soon as Q4 of this year followed by a modestly negative GDP growth for the year 2023 as a whole. March GDP was out at –0.1% MoM. The March UK Trade data was out at –£23.9B vs. -£18.5B expected, showing a yawning trade gap and a risk to the currency. US earnings recap. Disney reported FY22 Q2 revenue and EPS below estimates while Disney+ subscribers grew to 137.7mn vs est. 134.3mn. The initial reaction was positive, but the outlook was murky on the earnings call, sending the shares lower. Beyond Meat shares were down 20% in extended trading on a wider than expected operating loss in Q1 despite reiterating its FY22 revenue guidance of $560-620mn vs est. $586mn. Rivian shares rose 5% in extended trading despite worse than expected Q1 revenue of $95mn vs est. $131mn as the EV truck maker reiterated its production target for 2022 of 25,000 vehicles despite ongoing supply issues. What are we watching next? “Stable” coins in the crypto market as the crypto currency space suffers its worst market cap meltdown in absolute terms ever after the space narrowly missed $3 trillion in market cap in late 2021 and now threatens to fall below $1 trillion. A failure of one or more of the largest stable coins, which often serve as a kind of gateway in and out of crypto, to hold parity with the US dollar could trigger a further avalanche of negative sentiment and a liquidity crisis in the space, potentially large enough to add some contagion into risk assets more broadly.  Earnings Watch. In Europe this morning, the key earnings watch is Siemens, being one of the largest industrial companies in Europe with a footprint in many important cyclical industries. The German industrial company has reported better than expected FY22 Q2 (ending 31 March) revenue but delivering 4%-points lower operating margin as inflation is hurting costs. In addition, the company is winding down its Russia business booking a charge of €0.6bn in Q2. Today: Verbund, KBC Group, Brookfield, Fortum, Siemens, Allianz, Merck, Hapag-Lloyd, RWE, Atlantia, Snam, NTT, SoftBank Group, Aegon, Naturgy Energy, Motorola Solutions Friday: Deutsche Telekom, KDDI, Honda Motor, Alibaba Economic calendar highlights for today (times GMT) 0800 – IEA's Oil Market Report 0805 – ECB's De Cos to speak 1000 – Sweden Riksbank’s Ingves to speak 1030 – ECB's Makhlouf to speak 1230 – US Apr. PPI 1230 – US Weekly Initial Jobless Claims 1430 – US Weekly Natural Gas Storage change 1800 – US 30-year T-Bond auction 1800 – Mexico Overnight Rate Announcement During the day: OPEC’s Monthly Oil Market Report  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Rates Spark: The hawks are circling | ING Economics

China Update: In time of trouble, go with the flow of government money | Saxo Bank

Saxo Bank Saxo Bank 12.05.2022 12:11
Summary:  A new round of COVID outbreaks and a stringent pandemic control policy have dampened the growth outlook in China. In anticipation of the rolling out of massive infrastructure construction by the Chinese government to boost the economy, we look at the investment opportunities in the traditional an new infrastructure space. We also consider the medium-term cases for growth in hydrogen energy and cybersecurity. China is to increase spending on infrastructureAs U.S. bond yields have moved higher than those of China and the Chinese renminbi has weakened substantially versus the U.S. dollar within a short period of time, China’s central bank’s room to manoeuvre in monetary easing is quite limited without jeopardising its goal of maintaining the relative stability of the renminbi versus the U.S. dollar, in which, energy and commodities are priced internationally.The property sector is still in dire situation and will not be making the kind of contribution to the overall economy as in the past decade.  Exports, the key growth driver last year, will very likely to be unable to do the heavy-lifting to support the economy this year.  In April, China’s export growth decelerated to 3.9% YoY in USD terms.  Adjusting it for the rise in export prices, the real rate of growth in exports was negative in April. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COMThe Chinese Government is set to increasingly rely on additional infrastructure spending to boost the economy.  At the Central Financial and Economic Affairs Commission meeting on April 26, President Xi Jinping called for stepping up infrastructure construction.  It is particularly noteworthy that he emphasized the need to look beyond economic returns of infrastructure projects and to consider the projects’ benefits to national security and social returns as well.  In other words, projects that have been rejected on internal rate of return and cash flow considerations may be reconsidered and launched.  He also pledged supports to local governments in getting financing for infrastructure projects.  Moreover, Xi’s call for rolling out more infrastructure construction can provide a cover for local government officials from balancing the risks between carrying out infrastructure construction and devoting time, effort and resources to pandemic control.  Without that, the assessment of political risks and rewards might tend to incentivize local government officials to focus on pandemic control at the expense of executing infrastructure projects.  Read next: Tech Stocks Plunging!? Trade Desk Earnings Announcement Pushes Tech Giant Stock Down, Russian Ruble Strengthening and Ford Motor Co. Although local governments’ budgets have been constrained substantially by the sharp fall in land sales revenues, they can tap on funding raised from the  RMB1.2 trillion special bonds issued last year and the RMB 1.4 trillion special bonds issued thus far this year to finance infrastructure projects, in addition to other supports to come their ways from the central government. The Central Financial and Economic Affairs Commission’s meeting on April 26, 2022 emphasized transportation, energy, and water conservancy among the traditional infrastructure projects.On May 6, 2022, the General Offices of the Chinese Communist Party’s Central Committee and China’s State Council released a joint guideline to boost the development and urbanization of county seats throughout China’s rural areas.  The guideline calls for building industrial bases and constructing public infrastructure and services in county seats and making medical care, education, and elderly care more accessible in rural areas surrounding county seats. New InfrastructureIn addition to traditional infrastructure, China is taking to high gear of its spending on new infrastructure.  The term “New Infrastructure” was coined in December 2018 and has been more frequently mentioned in the Chinese Government policy initiatives since the beginning of 2020 and the scope has been expanded to include industries in seven key areas: (1) 5G base stations and networks, (2) data centers, (3) Ultra High Voltage (UHV), (4) electric vehicle charging piles, (5) artificial intelligence, (6) Industrial Internet of Things, and (7) intercity rail and urban transit network.  One of the key characteristics of new infrastructure is its potential in enhancing technological innovation and improvement in productivity.  Hydrogen EnergyWhen China launched its 13th Five Year Plan in 2016, fuel cell electric vehicles was first mentioned.  In November 2020, in its New Energy Vehicle Industry Development Plan 2021-2035, the State Council set out initiatives to develop a wider hydrogen energy infrastructure, in addition to fuel cell applications. Since 2020, the Ministry of Finance (the MoF) has been providing financial incentives for cities that launch pilot programmes to build up hydrogen energy and fuel cell vehicle industries and its supply chain. The MoF focuses on promoting the use of hydrogen energy medium to long-range and medium to heavy commercial vehicles and their related hydrogen infrastructure networks.  About 20 cities in China, including Beijing and Shanghai have launched such pilot programmes in using hydrogen energy vehicles.China 14th Five Year Plan in 2021 reiterated the development initiatives for hydrogen energy and fuel cell vehicles.  Accordingly, in March 2022, the National Development and Reform Commission (NDRC) and the National Energy Administration jointly released a Hydrogen Energy Medium to Long-term Plan 2021-2035 (the Plan), which affirms the strategic position of hydrogen energy in China’s green transformation and set out the development goals for the hydrogen energy and fuel cell vehicle industries. Read next: (BTC) Bitcoin’s Price Tanks Along With Equities. U.S. Stock Market Awaits CPI Report, Poor Performance From The FTSE 100. The Plan aims at establish a system and environment for the development of technologies and processes for the production, storage and transportation of hydrogen energy as well as working towards clean energy hydrogen production.  It targets to reach annual deployment of 50,000 fuel cell vehicles and build comprehensive networks of hydrogen refuel stations by 2025. There are three major types of technology to manufacture hydrogen.  1) grey hydrogen: using coal, petroleum or natural gas as feedstock; 2) blue hydrogen: using conventional natural gas-based process coupled with carbon capture; 3) green hydrogen: using renewable energy to produce hydrogen from water electrolysis.  The plan targets to construct a clean energy (blue and green) hydrogen production and supply system by 2030 and envision to establish a diversified hydrogen ecosystem of manufacturing, transportation and storage of renewable energy hydrogen production by 2035.  CybersecurityChina released the Critical Data Infrastructure Security Protection Regulation in 2021.  The regulation seeks to protect critical data from hacking and malwares that could result in damage to national security, social order or public interest.  It defines the required responsibilities of the entities that hold the critical data and penalties for those fail to comply.  In particular, it requires local governments and enterprises to be responsible for monitoring, defending, and managing cybersecurity risks in their network and information systems.  The regulation also requires local governments and enterprises to set up early warning mechanism against cybersecurity threats and vulnerabilities, to carry out defence exercises and to conduct regular checks of their information systems. In addition to the regulation mentioned above, China enacted the China Data Security Law in September 2021. The new law regulates data collection, processing, and transition, beyond the traditional measures of database audits and encryption. When China rolled out its 14th Five Year Plan, it increased its cybersecurity budget by three times from the 13th Five Year Plan.  The Ministry of Industry and Information Technology (MIIT) guided government departments and state-own enterprises with critical data to raise their cybersecurity spending to 10% of information technology spending from 3% previously. The new regulation, law, the enlarged national budget allocation, and the MIIT’s guidance help induce growth in demand for cybersecurity.  Going with the flow of government moneyIn a turbulent global investment environment and slowing Chinese economy, we consider that it may be rewarding to go at the direction in which the Chinese government’s money is going. We expect that the Chinese authorities are on high gear to roll out infrastructure construction projects in transportation, energy and water conservancy and the new infrastructure areas in 5G, data centers, ultra-high voltage, EV charging piles, AI, industrial internet of things and inter-city rail and urban transit network.  It may be more fruitful to look for investment opportunities in these areas than the others that have less tailwinds behind them.For the medium-term, we see interesting multi-year growth potentials in the areas of hydrogen energy and cybersecurity.  Monitoring companies in these industries and relevant value chains may prove to be fruitful. Source: Saxo Bank
Here's your first look at Cyberpunk: Edgerunners! Coming to Netflix this September!

Philip Morris Buys Match, Fed Members Spills The Tea And Gold Price Nears Quite Low Values | Saxo Bank

Saxo Bank Saxo Bank 11.05.2022 17:29
Summary:  Global equity markets have bounced after the US briefly hit new cycle lows yesterday. One development at the margin that has helped is the sharp decline in longer bond yields, even as a couple of Fed members were out with hawkish comments. A strong 3-year US treasury auction showed strong demand. Elsewhere, gold remains under pressure and is on life support. The data focus today swings to the US and the release of April CPI data.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - the rebound in US equities succeeded closing above the prior session’s close but met resistance above the 12,500 level in Nasdaq 100 futures. However, this morning Nasdaq 100 futures continue to rally trading around the 12,450-level attempting to break above the 12,500 level again which is needed to close Monday’s selloff range. Sentiment is still weak but a pause in the momentum in US 10-year interest rates is providing some support to US equities in the short-term. Q1 earnings results yesterday confirmed the slowdown in gaming and cryptocurrency trading activity. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I). China’s A shares surged with ChiNext rising 4.3% and CSI300 up 2%. Electric equipment, semiconductors, EV battery, consumer electronics, wind and solar names led the charge higher. EV battery maker, CATL (300750) rose 7.7%. Hong Kong’s Hang Seng Index rose 1.7% and Hang Seng TECH Index gained 4.6% by mid-day.  After reporting better than market expected earnings and margin expansion, Li Auto (2015) surged 11%. The COVID related disruption to logistics and production, plus food and daily necessities stockpiling by households seems to make their impact felt on general price levels. China’s April PPI came at +8.0% YoY and CPI at +2.1% YoY, both higher than market expectations.   AUDUSD and USDCAD – the two key commodity currencies broke through key support against the US dollar this week, but so far the reaction to the development has been restrained and would likely take a further slide in risk sentiment, including in the commodity space for a notable extension lower. As the break levels remain nearby, the pairs deserve watching for the trend status and a possible reversal as well – resistance in AUDUSD is 0.7000-0.7050 and support in USDCAD comes in at 1.2900-50. Read next: Don't Worry Coffee Lovers! The Price Of Coffee Futures Falling Amidst Current Market Conditions, Crude Oil (WTI) Recovers Slightly, Palladium Prices Show Steady Downward Price Trend | FXMAG.COM USDJPY and JPY pairs – global sovereign bond yields have tumbled