Saxo Bank

Summary:  The US debt ceiling showdown simply refuses to go away as a factor in the current market environment, with the latest talks collapsing on Friday as President Biden was at the G7 summit in Japan and overshadowed the notable developments there. Still, markets are taking the news in stride as US equities continue to trade near the top of the range and USDJPY merely suffered a significant wobble. Looking ahead, headlines from the US debt ceiling drama will dominate until a solution is found. What is our trading focus? US equities (US500.I and USNAS100.I): Can US equities sustain their gains this week? The US debt ceiling is lurking in the background as US equities retreated on Friday with S&P 500 futures declining but closing above the 4,200 level. Equity sentiment has started on a good note in Asia Monday morning with Japanese rallying again to a new high extending this year’s gains to 14.9%. This week’s key focus is on the US debt ceiling deal and earnings from Nvidia, Snowflake, and Costco. On Thursday, we will get another data point on the Chicago Fed National Activity Index which will provide insights into the broader US economy as of end of April. Technically, the focus this week is whether S&P 500 futures can close the week above the 4,200 level and solidify its momentum. Chinese equities (HK50.I & 02846:xhkg): China Internet and EV stocks rally  Hong Kong equities, ensnared within a confined trading range, exhibited resilience as they mounted a rally from the lower echelons of said range. Driving this resurgence were China Internet companies and EV stocks. Demonstrating their mettle, the Hang Seng Index surged by 1.6%, while the Hang Seng TECH Index experienced a commendable ascent of 2.6%. In anticipation of imminent earnings announcements, Kuaishou (01024:xhkg), a prominent social platform, witnessed an impressive surge of over 7%. Further uplifting the market, notable gains were observed in Alibaba Health (00241:xhkg), Baidu (09888:xhkg), Bilibili (09626:xhkg), and JS.COM (09618:xhkd), all of which recorded gains surpassing 3%. Within the EV sector, NIO (09866:xhkg) led the pack, experiencing a noteworthy surge of 5.7%. Meanwhile, the CSI300 Index relinquished some of its early advances and was nearly flat from previous Friday's closing level. FX: Debt ceiling risks and balanced Powell remarks bring the dollar lower Friday saw the debt ceiling risks back on the front burner as talks broke down (read below) while Fed Chair Powell’s remarks also re-confirmed a June rate pause after Fed speakers like Logan and Bullard last week raised the prospect of a hike. This saw JPY making a strong recovery, with USDJPY down from 138.60 to 137.40 before finding support. EURUSD has avoided a test of support at 1.0745 for now, and returned back above 1.08 while GBPUSD trades back near 1.2450 ahead of the UK CPI data this Wednesday. NZD was the strongest currency last week, and is now testing 0.63 handle ahead of the RBNZ meeting this Wednesday, while AUDNZD broke below the 1.0600 support area, trading to its lowest level since December after an RBNZ survey showed year-ahead inflation expectations rise to 7.4% from 7.0% in Q1. Crude oil: macro jitters bring increasing selling in the paper market Crude oil trades lower for a third day following choppy trading week with China’s lacklustre recovery the focus after economic data missed expectations. Also, in focus the US debt debacle along with still firm US economic data reducing the expectations of rate cuts this year despite Powell’s comments on Friday re-confirmed a June rate pause. Hedge fund selling in the paper (futures) market extended to a fourth week. In the week to May 16, the WTI and Brent long was cut by 17.6k to 267k and near the post-banking and pre-OPEC+ cut low at 241k lots. Overall, WTI and Brent both trades within four-dollar ranges, with current resistance at $73.50 and $77.50 respectively. Gold: recovery gains ground as Powell signals June pause Gold prices (XAUUSD) traded lower last week as the dollar and bond yields rose and the market reduced rate cut expectations for this year. The metal however manged to bounce from key support in the $1950 area on Friday after Powell re-confirmed a June rate pause. Continued focus this week on the dollar, debt ceiling discussions and economic data for signs of strength that may further reduce rate cut expectations, reduced to less than two (25bps cuts) by December from more than 3 at the beginning of the month. Hedge funds responded to gold’s drop below $2k in the week to May 16 by cutting their net long by 10% to a still elevated 131.8k lots while silver had its net long cut in half to 13.4k. To regain some positive momentum gold would need to break back above its 21-DMA currently at $2003. US Rates (2YYK3, 10YK3, 30YK3) US bond yields broke above key resistance levels across the yield curve as markets ended last week pricing 40% chance that the Fed will hike the fed fund rate in June. While bets on a June rate hike regressed to 10% this morning, this week’s numerous Fed’s member speakers, the Fed’s minutes on Wednesday and PCE Index on Friday might impact investors’ sentiment heavily, setting interest rate’s direction. Two-year yields (2YYK3) close above resistance at 4.22% and they might soar to test new resistance 4.30% if they break above this level, they will not find resistance until 4.50%. Ten-year yields broke above resistance at 3.64% and are not on their way to test 3.75%. If they break above this level, they might soar till 3.91%. Thirty-year yields broke above their resistance at 3.87% they are now rising to test resistance at 4%, if they break above this level, they might rise to 4.4%. What is going on? Debt ceiling fears back at the forefront, but talks resume for now Debt ceiling talks between Democrats and Republicans broke down on Friday while President Biden was in Japan for the G7 leaders' summit. US House Speaker Republican Kevin McCarthy said he is not seeing progress while the President is away, and the White House “moved backwards”. Statements from Democrats also hinted that “negotiations are going in the wrong direction” and “Republicans’ demands keep going further to the right." With risks of default back, Treasury Secretary Yellen warned once again that June 1 is the “hard deadline” when the US can pay its bills and that the chances of reaching June 15 (when further tax receipt income is due) are quite low before the government runs out of money. As both sides try to get the most out of this deal, there is a lingering risk that talks will extend until the last minute, and risks of a liquidity crunch following a deal (due to the huge new issuance needs for the US Treasury) are also massive suggesting the need for downside protection. China to ban some Micron chips after security review After a cyber-security review, China’s Cyberspace Administration of China ordered that Chinese companies dealing with critical information stop buying chips from US-based Micron Technology. The review said that Micron’s chips posed “relatively serious cybersecurity problems” that could “seriously danger the supply chain of China’s critical information infrastructure.” The move was widely viewed as a retaliation against recent US limitations on exporting high-end chips and chip-manufacturing equipment to China. A US Commerce Department spokesperson said the move has “no basis in fact”. Mainland China and Hong Kong revenue exposure is around 15% of total revenue for Micron Technology. Fed Chair Powell’s comments remained balanced After some comments from Fed officials last week saw June rate hike pricing climb higher to ~40%, Fed Chair Powell’s comments on Friday brought it back to close to 10%. Powell started the discussion saying inflation is far above its target, and the Fed is strongly committed to returning it to the 2% goal. However, he noted subsequently that policy rate may not have to rise as far as otherwise due to the tightened bank credit conditions. He noted we can afford to look at data and the ongoing outlook, adding the risks of doing too much vs doing too little are becoming more balanced. Minneapolis President Neel Kashkari was also heard late on Sunday, saying that he is open to a June FOMC rate hike pause, but not convinced that the Fed is done yet. Read next: Saxo Market Call Listeners' Edition - market wrap from yesterday, stocks' rally, listener questions and more| FXMAG.COM G7 meetings focused on Ukraine and China’s “economic coercion” The G7 has issued its strongest condemnation of China as the world’s most advanced economies stepped up their response to what they called rising military and economic security threats posed by Beijing. The G7 members said they were “seriously concerned” about events in the East and South China Seas, and also called for a “peaceful solution” to tensions across the Taiwan Strait. However, the unannounced in-person appearance by Zelenskiy stole the show as he attempted to garner support for his 10-point plan to end the war, as well as using the opportunity to lobby non-G7 attendees like India and Brazil. Zelenskiy said Ukraine will receive F-16 fighters from G-7 allies, but proposed a peace summit to begin in July marking 500 days of full-scale war. Chinese authorities urge market discipline amidst USDCNH surge As USDCNH hit as high as 7.0750 last Friday, a level not seen since early December last year, the China Foreign Exchange Committee (CFXC), an entity sponsored by the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) convened its first meeting in 2023 on Friday. In the readout of the meeting, CFXC emphasized the importance of market participants adhering to self-discipline in order to maintain stability in the foreign exchange market and curb excessive volatility in the renminbi's value against other currencies. Furthermore, it pledged that the PBOC and SAFE would reinforce their oversight and guidance of market expectations and intervene as deemed necessary. Subsequent to the release of the meeting's summary, USDCNH relinquished some gains, concluding the week at 7.0230, only to ascend once again and reach 7.0370 on Monday. Wheat and corn prices slump on Ukraine grain deal Chicago corn and wheat futures both dropped around 5% last week, with corn hitting an October 2021 low, while wheat touched an April 2021 low below $6 per bushel. Driven by expectations of ample global supplies after a deal to ship Ukraine grains was extended for another two months last week. Poor export demand amid fierce competition from South American exporters of corn and Black Sea exports of wheat both weighing on prices. Focus on the pace of US planting currently underway as well as potential poor harvest prospects in US Plains supporting the price of Kansas hard red winter wheat. Deere lifted its FY outlook again Deere reported Q2 fiscal quarter EPS of $9.65 up from $6.81 a year ago lifting its FY outlook on net income to $9.25-9.50bn from previously $8.75-9.25bn driven by robust demand for the rest of the year. What are we watching next? Debt ceiling headlines to dominate this week Republican House Speaker McCarthy is set to meet with President Biden today after talks between representatives of both sides ended in failure on Friday. McCarthy accused the other side of change in positions after left-leaning Bernie Sanders held a press conference and Biden accused McCarthy of being unreasonable and inflexible. If US Treasury Secretary Yellen is correct, crunch time comes as soon as June 1, and an added pressure is the upcoming Memorial Day weekend and its Monday holiday, with Congress back in session on Tuesday, May 30 after the Senate is out this week and the House in session only through this Thursday. The return of El Ninõ could take a $3 trillion bite out of the world economy El Niño is on its way, and when the warm weather pattern arrives, it could take a $3 trillion toll on the global economy, according to new research via The Verge. That estimate is based on damages inflicted by El Niño in previous years, plus forecasts pointing to a potentially supercharged event this year. El Niño influences weather across the world when it forms — potentially fueling more severe floods in places while worsening drought in others. Within the US, for example, it can trigger a wetter winter in the southern half of the country but more hot and dry weather farther north. Earlier this week, a warning came from the World Meteorological Organization that this year’s El Niño, combined with climate change, could “push global temperatures into uncharted territory.” A crippling heat wave continues across Asia, driving up prices of sugar, coffee and rice while raising demand for Russian produced coal, gas and fuel oil towards power generation according to a Bloomberg article. Today’s Technical Highlights Nasdaq 100 higher. Taken out all resistance levels. RSI divergence cancelled, now signals Nasdaq higher. Next resistance at 13,349 S&P 500 RSI bullish but divergence i.e., a struggle to reach next resistance at 4,308 DAX closed just below 16,290 – all-time high Gold bouncing from support at 1,950. Silver below support at 26.70. 100 MA support. US 10-year above resistance at 3.65 i.e., bullish trend EURUSD bouncing just above key support at 1.0745. Could re-test support Dollar Index above the cloud. RSI bullish paves the way to 103.84 – 104.75. GBPUSD heavy. Could test 0.382 retracement support at 1.2344 USDJPY took out key strong resistance at 137.85. Sellers trying to push back below but trend is up. 140? Earnings to watch The earnings calendar is getting thinner these days but looking ahead this week there are still some important earnings to watch such as earnings from Nvidia and Snowflake on Wednesday with the former obviously interesting because of the huge interest in AI technology. Snowflake is a good barometer of corporate spending patterns with revenue growth expected to decline to 44% y/y from 85% y/y a year ago. Finally, we are going to watch earnings from Costco on Thursday with analysts expecting 4% y/y revenue growth, but more importantly analysts are expecting it to climb to 8% y/y in the current fiscal quarter ending in August. Monday: Kuaishou Technology, Ryanair, Zoom Video Tuesday: Intuit, Lowe’s, Palo Alto Networks, AutoZone, Agilent Technologies Wednesday: Bank of Montreal, Bank of Nova Scotia, Xiaomi, Nvidia, Analog Devices, Snowflake, Splunk Thursday: Royal Bank of Canada, Toronto-Dominion Bank, Meituan, Generali, Costco, Medtronic, NetEase, Workday, Autodesk, Marvell Technology Friday: PDD, Booz Allen Hamilton Economic calendar highlights for today (times GMT) 1230 – US Fed’s Bullard (non-voter) to speak 0030 – Japan Flash May Manufacturing and Services PMI Source: Global Market Quick Take: Europe – May 22, 2023 | Saxo Group (home.saxo)

Summary:  Today is the second of our Saxo Market Call Listeners' Editions, prefaced with a brief market wrap from yesterday, which produced a strong rally extension in the US equity markets, supposedly on hopes that a debt ceiling deal is near, but also on benign economic data. With treasury yields also on the rise, it felt like the market expressing a belief in an improving economic outlook. On the debt ceiling issue, we caution that a solution could lead to a severe liquidity crunch as the US treasury rebuilds its reserves. The bulk of today's podcast is a look at listener questions from our survey last week. Stay tuned early next week for the next Saxo Market Call listener survey. Today's pod features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple Spotify PodBean Sticher Read next: S&P 500 gained near 1%, Nasdaq increased by 1.8%. Netflix rose 9.2%| FXMAG.COM 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: Debt ceiling soon solved? Careful what you wish for... | Saxo Group (home.saxo)

Summary:  Remarks by House Speaker McCarthy and Senate Majority Leader Schumer signaling readiness for a bipartisan debt ceiling vote next week lifted market sentiment, driving stocks higher. The S&P 500 gained 0.9% to 4,198, a 2023 high, while the Nasdaq 100 surged 1.8% to 13,834, its best close since April 2022. Netflix soared 9.2%, NVIDIA surged 5%, and tech giants like Alphabet, Microsoft, and Apple hit new 52-week highs. Wal-Mart rose 1% on positive sales and outlook. Treasuries sold off due to manufacturing index surges and declining jobless claims. Alibaba's ADR fell 5% on sales missing estimates. Rising Treasury yields pushed USDJPY to November 2022 levels. What’s happening in markets? US equities (US500.I and USNAS100.I): Nasdaq 100 closed at the highest level since April 2022 Remarks from House Speaker McCarthy and Senate Majority Leader Schumer signaling that they were ready for a bi-partisan vote on a debt-ceiling as soon as next week lifted market sentiment, seeing stocks moving higher. The S&P500 gained 0.9% at 4198, the highest in 2023 and the Nasdaq 100 surged 1.8% to 13,834, finishing the session at the highest close since April 2022. Netflix (NFLX:xnas) soared 9.2% and NVIDIA (NVDA:xnas) surged 5%. Netflix, Nvidia, Alphabet (GOOGL:xnas), Microsoft (MSFT:xnas), and Apple (APPL:xnas) all closed at new 52-week highs. Wal Mart (WAL:xnys) gained 1% after reporting an increase in sales and providing an upbeat outlook for 2023. Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): Sell off on a stronger Philly Fed manufacturing Index, decline in jobless claims and hawkish Fed remarks Treasuries experienced a sell-off in response to unexpected surges in the Philly Fed manufacturing index and a decline of 22,000 in initial jobless claims. The sell-off was further intensified, particularly in the short to medium-term Treasuries, following comments by Dallas Fed President Logan, indicating that the Federal Reserve was not yet ready to pause its rate hikes. Consequently, the 2-year yield closed the day 10bps higher at 4.25%, while the 10-year yield increased by 8bps to 3.65%. SOFR interest rate futures also saw a sell-off, resulting in higher rates, as the probability of a rate hike in June rose to approximately 40%. Reflecting this trend, the December 2023 SOFR contract (SR3Z3) declined by 12bps, indicating higher rates, while the red months (2024 contracts) experienced a decline of 18-19bps, suggesting higher rates as well. The USD15 billion 10-year Treasury Inflation-Protected Securities (TIPS) auction garnered strong demand. Looking ahead, the Treasury Department announced upcoming auctions of USD 120 billion in total for 2-year, 5-year, and 7-year notes next week. Chinese equities (HK50.I & 02846:xhkg): range bound as sectors show mixed performance The Hang Seng Index has remained directionless, trading within a 4% range since late April. Thursday's trading session witnessed a notable upswing of 0.9% from the lower end of this narrow range, as strong showings in Chinese banks, insurance companies, oil and gas, auto dealers, semiconductors, and China internet names outweighed declines in China properties, pharmaceuticals, and biotech names. The market's range trading can be attributed to a downward revision of macroeconomic expectations, which coincided with positive earnings surprises. Auto dealer Zhongsheng (00881:xhkg) emerged as the top performer within the Hang Seng Index, experiencing a 4.2% rise. This was closely followed by China Life (02628:xhkg), Sinopec (00386:xhkg), Lenovo (00992:xhkg), and PetroChina (00857:xhkg), all of which advanced by over 3%. On the other hand, Longfor witnessed a 4% decline, making it the worst performer within the index. Tencent (00700:xhkg) slid by 0.9% as the China Internet giant surpassed total revenue expectations but fell short in advertising revenue and earnings. Furthermore, Alphamab Oncology experienced a significant tumble of 18% following the biotech company's disclosure that its lung cancer trial failed to meet the regulatory submission requirements. After Hong Kong market close, Alibaba (09988:xhkg) reported earnings (see below). The e-commerce giant’s ADR retreated more than 5%. In A-shares, the CSI300 marginally declined by 0.1%, with gains in computing, media, commodities, communication, and banks partially offsetting losses in new energy stocks, properties, beauty care, electric vehicles, and farming stocks. FX: USDJPY heading to 140? The Dollar was firmer again and it hit two-month highs on the back of stronger than expected US data, hawkish Fed speak, easing regional bank woes, and potential optimism around the debt ceiling. The steep rise in Treasury yields saw the USDJPY climb above 138.50 to the highest levels since November, and the key 140 level will now be on the radar. EURUSD also in close sight of 1.0745 support while GBPUSD took a brief look below 1.24. AUDUSD may test 0.66 again after the weak employment data yesterday has eroded the case for a June rate hike from the RBA. While NZDUSD reversed higher after testing 0.62 handle. Crude oil: increased rate hike pricing weighs Crude oil prices dipped lower again on Thursday as firm economic data and hawkish Fed commentaries increased the probability of a June rate hike and reduced the case for big rate cuts in H2, bringing short-term demand concerns back on the radar. Asian demand outlook provided some offset, with reports that refiners in South Korea and Taiwan have been buying millions of barrels of US crude, while India is considering refilling its strategic reserves. WTI prices were back at $72 after a dip to $71,50 earlier while Brent was below $76. Powell stakes the stage today and G7 meetings remain on watch into the weekend but bigger focus on OPEC meeting on June 3-4 which will be an in-person meeting and could signal further intent to stabilize oil markets.   What to consider? Alibaba's Q4 FY23 revenue below estimates while earnings surpasses expectations Alibaba (09988:xhkg) reported Q4 FY23 revenue of RMB208.2 billion, showing a modest 2% year-on-year growth, below estimates. However, the company's group adjusted EBITA impressively rose by 60% to RMB25.3 billion, surpassing expectations. Non-GAAP EPS came at RMB10.71, 19% above consensus estimate. While China Commerce and Cloud revenue fell short of projections, other segments within Alibaba performed well. International Commerce outperformed, with revenues growing at 29% Y/Y. Notably, the company announced a full spin-off of the Cloud Group, as well as plans to raise external capital for Alibaba International Digital Commerce. Additionally, Alibaba intends to explore initial public offerings for both Cainiao and Freshippo. Taobao-Tmall Group will continue to be fully owned by Alibaba, while each business group will have independent financing options and an employee stock ownership program (ESOP). Looking ahead, Alibaba management aims to sustain their market position by investing in content, enhancing the merchant ecosystem, and driving technological innovations. US jobless claims come in below estimates indicating labor market tightness continues US initial jobless claims came in beneath expectations, falling to 242k after a rise to 18-month highs of 262k in the previous week. The data was for the week that coincides with the BLS survey period for nonfarms and the reversal from last week’s print suggests that the labor market is not loosening as fast as previously thought and continues to complicate the outlook for the Fed in the second half of the year. Meanwhile, the Philly Fed manufacturing index spiked to -10.4 in May from -31.3 in April, above the expected -19.8 and countering the plunge seen in the Empire State mfg. survey earlier in the week. Fed speakers bring up June rate hike possibility to 35% There isn’t a clear chorus in the Fed commentaries any more, but some continue to sound the hawkish alarms. Lorie Logan (voter) particularly opened up the door to more hikes, suggesting data so far does not support justifying a pause in June. Jefferson (voter) also said inflation is too high, but he was cognizant of the lagged effects of monetary policy. James Bullard also said that he will keep an open mind going into the June meeting but is currently leaning towards a hike, however he is not a voting member this year. The Fed Funds futures is now pricing in a June rate hike at over 35% probability from less than 20% at the start of the week. Powell will be on the wires on Friday Japan’s April CPI matches estimates, core-core above 4% April inflation data out of Japan this morning remained hawkish with headline CPI higher at 3.5% (in-line with expectations) from 3.2% in March. Core CPI rose to 3.4% YoY from 3.1% while the core-core measure rose above the 4%-mark to fresh 40-year highs at 4.1% YoY in April from 3.8% previously, but a notch softer than the 4.2% expected. While this data set will continue to build pressure on the BOJ to tweak monetary policy, the focus on wage inflation has been emphasized repeatedly and only modest changes can be expected at best if market pressures return. Micron expected to invest in Japan Micron (MU) intends to make a multi-billion dollar investment in Japan, although a Japanese official said no decision had yet been made. Micron said it will bring EUV technology to Japan, advancing its next-generation memory manufacturing, and expects to invest up to JPY 500bln in 1-Gamma process technology over the next few years. As chip wars accelerate, Japan is stepping up to be an alternate destination for semiconductor firms to set up plants, with reports that Samsung is also discussing to establish an R&D unit there. Read next: Saxo Market Call podcast Listeners' Edition - answers to listeners survey, Google AI, copper and more| FXMAG.COM G7 Summit: Potential for clear geopolitical implications The heads of the G7 will convene for a summit held from May 19-21 in Hiroshima, Japan. The leaders are expected to deliberate on a range of topics, including the health of the global economy, risks of a recession and persistent inflation. Global food security and geopolitics will also be a key focus as the war in Ukraine rages on, along with the escalating tensions between US and China. There is considerable anticipation that the meeting could produce major geopolitical signals related to the nature of the nations’ relationship with China. Bloomberg reported that G7 finance heads will propose a new partnership on supply chains that will only allow participation if certain minimum standards are met on human rights and environmental policies. The statement will be scrutinized by China in case it feels targeted, after China last month called a G7 statement "full of arrogance, prejudice against China," and lodged complaints with this year's G7 host, Japan.     For a detailed look at what to watch in markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – May 19, 2023 | Saxo Group (home.saxo)

Summary:  In this first edition of the Saxo Market Call podcast Listeners' Edition - we take a look at the many answers to our listener survey. Thanks very much to the Saxo Market Call community for the strong response. To address more of your questions, we have decided to make the survey a biweekly one, so we will follow up on more of your questions next week. We also have a brief market wrap at the end of today's pod, covering Google AI, copper breaking key support and sterling selling off on the Bank of England 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 available via the link. Read next: In today's Saxo Market Call - choppy market, Bank of England meeting, Disney and more| FXMAG.COM 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.

Summary:  Equity markets are steady after the US posted softer producer inflation than expected and the highest weekly jobless claims in over eighteen months yesterday. Treasuries yields dropped on the data and once more supported the megacap-heavy Nasdaq 100 index, while the broader market was mixed at best. The US dollar rallied across the board, particularly against sterling, which sold off broadly after a whipsaw-reaction to the guidance from the Bank of England meeting. Copper plunged through key support, suggesting concerns for the global growth outlook. What is our trading focus? US equities (US500.I and USNAS100.I): compressed trading ranges Negative jitter around the US debt ceiling negotiation and initial jobless claims weakened further providing a bit of weight to the forward curve in SOFR futures pricing rate cuts later this year, but the equity market remained relaxed with S&P 500 futures staying in the recent tight trading range. The VIX Index remains below 17 suggesting little implied short-term risks in the market. In Nasdaq 100 futures there were a bit more positive vibes yesterday due to the market liking yesterday’s AI announcements by Google. Today’s key macro event for the equity market is May preliminary University of Michigan consumer sentiment. Chinese equities (HK50.I & 02846:xhkg): head for weekly losses The Hang Seng Index and the CSI300 Index extended the decline, edging down 0.1% and 0.6% respectively by mid-day, both heading for over 1% losses for the week. In China, the amount of new RMB loans slumped to 719 billion in April from RMB3,890 billion in March. Loans to corporates collapsed by 75% and loans to households turned negative, stirring up investors’ worries further about the loss of momentum in the Chinese economy. The Hang Seng TECH Index, however, was lifted by rallies in e-commerce platforms following JD.COM (09618:xhkg) reported a better-than-feared 1% Y/Y revenue growth in Q1, a 33% EPS beat, and upbeat guidance for Q2. JD.COM surged 7% and peer e-commerce names gained between 2-4%. E-commerce A-shares stocks also advanced in mainland bourses. A-share textiles and traditional Chinese medicine names also bucked the decline. FX: Safe haven flows drive the USD higher Despite cooler economic data in the US knocking treasury yields back lower and refuelling of banking sector concerns, the US dollar rallied on Thursday across the G10 board. GBPUSD tried a weak rally immediately after the Bank of England’s rate hike but resumed its slide from recent highs subsequently to test 1.25 as the hawkish message was later discounted and yields actually fell at the front end of the UK gilt curve. EURUSD also dropped to test 1.09. AUDUSD and NZDUSD had more to give after recent gains, and were down toward key levels of 0.6700 and 0.6250 respectively. USDJPY bounced from lows well below 134.00 yesterday after a broad JPY surge, trading above 134.50 this morning in Europe. Crude oil: demand concerns still weighing Weak demand concerns continue to pile up for the crude oil market, with US economic data on cooling inflation and labor market conditions further igniting slowdown concerns and China’s inflation and credit data also pouring water on the China demand surge hopes. WTI prices dipped below $71/barrel while Brent was below $75. There were however some reports that underpinned oil prices later. US energy secretary, Jennifer Granholm, said the government aims to purchase oil to refill the Strategic Petroleum Reserve after a congressionally mandated drawdown ends in June. OPEC increased its outlook for China’s 2023 oil demand, thereby supporting expectations for a rise in global demand of 2.33mb/d, a prediction that contradicts the current downward trend in oil prices Copper and silver, two major casualties during Thursday’s risk off session Copper fell to its lowest level in seven months on rising concerns over the health of China’s economy. Copper futures broke below key support of $3.80/lb for the first time in four months, thereby supporting fresh selling by momentum-based funds and hedge funds already short. The next key level of support at $3.6680/lb, the 61.8% retracement of the October to January rally is now being tested. While short-term pressure is apparent, copper remains the king of green metals and lack of a resilient supply means prices will remain underpinned in the medium/long term. The copper weakness triggered a 5% sell off in silver, the biggest one-day loss since February 2, 2021, with selling accelerating after breaking support at $24.50. Having shown resilience following the 31% March to April rally, correction risks have been rising with focus now on support at $23.72, the 38.2% retracement of the mentioned rally. Gold, the next shoe to drop? The general market weakness on Thursday, especially across the metal sector, saw profit taking drive the gold price back towards a key area of support. Recently established longs after the softer CPI print lifted expectations for a Fed pause got caught offside and with silver tumbling 5% support evaporated. However, mounting fears of the US debt ceiling, de-dollarization flows, geopolitical tensions, expectations for rate cuts later this year remain key reasons why the yellow metal is currently holding up very well. The gold-silver ratio has jumped to near 84 and highest since March 29. Strong fundamentals aside, the short-term direction will be determined by flows and hedge funds are currently holding an elevated long, that could get squeezed. Support at $2007 followed the $1991 ahead of the big one at $1950 while resistance remains firm above $2050. US Treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) lower on US data The soft PPI headline data and spike in jobless claims (more below) saw US treasury yields pushing lower, though curiously a bit more at the long end than at the short end as the rally in 2-year treasuries reversed in late trading and the 2-year benchmark only closed a couple of basis points lower, while the 10-year Treasury yields closed some 6 basis points lower. The bottom of the range since the US bank turmoil began in March is now a bit closer in the 10-year benchmark – at 3.25% versus the 3.39% level this morning. What is going on? The slow cooling of the US economy – PPI softens, jobless claims rise US producer prices in April rose 0.2% M/M, less than the expected 0.3% rise, while the prior month was revised to a 0.4% decline from an initial 0.5% decline. The Y/Y figure fell to 2.3% from 2.7%, coming in softer than the 2.4% expected. Core PPI rose 0.2% M/M, as expected and reversing last month's 0.1% decline, with core services rising to 0.4% from 0.2% while core goods were more contained at 0.2%. Core PPI rose 3.2% Y/Y, beneath the expected 3.3% rise and down from the prior 3.4%. Meanwhile, weekly US initial jobless claims printed at 264k vs. 245k expected and 4-week average (as of last week) of 239k. It is the highest reading since October of 2021, and supports market expectations for eventual Fed cuts, though several more weeks of worsening claims data will be necessary to support the scale of cuts priced into the forward curve. Markets continue to price in about 100bps of rate cuts from the Fed through the January 2024 meeting. Richemont fiscal year results beat estimates The Swiss-based luxury goods maker reports this morning better than expected fiscal year revenue and operating profit of €5.03bn vs est. €4.82bn. The company is announcing a special dividend of CHF 1 per share. The company is also saying that its Chinese group travel business has not rebounded, inflation will be stickier than what people think, and finally that US demand has been in a slowdown since November. Alphabet shares rise 4% on AI announcements Google, the search engine business of Alphabet, reported yesterday several key updates on their AI efforts and technology including announcing a foldable smart phone to rival that of Samsung. The market came away impressed by the AI announcements sending Alphabet shares higher by 4%. JD.com rallies 7% on positive Q2 comments JD.com, one of China’s largest e-commerce retailers, reported better than expected Q1 revenue and earnings and said that Q2 gross merchandise volume growth is higher than in Q1 bolstering the hope for a growth rebound. Another round of regional bank fears Regional bank fears re-ignited on Thursday after PacWest Bancorp announced it saw deposit losses in early May of roughly 9.5% after noting it is exploring all strategic options. Western Alliance also sold off on the news pre-market, but recovered later after it announced total deposits are up $600mn since May 2 to ~$49.4bn as of Tuesday May 9. Banking sector confidence remains fragile and prone to further deterioration if deposit concerns continue. The KRX regional bank index fell more than 2% to its lowest daily close of the cycle. Elsewhere, FDIC proposed a special fee on larger banks to recoup losses incurred by SVB and Signature Bank failures. The fee would be based on the amount of uninsured deposits at each bank, and would set an annual special assessment rate of 12.5bps on a bank's uninsured deposits as of December 2022. Debt ceiling meeting postponed The White House said it has postponed a meeting on debt ceiling negotiations between Biden and GOP leaders that was scheduled for Friday to allow staff-level talks to continue. After Tuesday’s meeting brought no progress in talks, another postponement could bring additional bond volatility. While the White House reportedly viewed the delay as a positive development, adding that staff meetings were going well and it was not yet time for the principal leaders to come back together, Republicans disagreed, and Kevin McCarthy said that he does not think there is enough progress for leaders to get back together. Concerns are also starting to rise about the Treasury’s cash balance which is down by half since the start of the month, standing now at $155bn, and on pace to hit Janet Yellen’s critical date of June 1, although if the Treasury can piece together enough financing until mid-June, fresh tax revenues may delay the crunch time until July or August. What are we watching next? Election in Turkey on Sunday A smaller opposition candidate to President Erdogan who was polling at a few percentage points bowed out of the race yesterday in an election this Sunday that is chiefly a two-way affair between Erdogan and the main opposition candidate Kemal Kilicdaroglu, who has called the election a referendum on democracy and accused “Russian friends” of interfering in this Sunday’s election with deep fake videos and other content. Kilicdaroglu has slightly led Erdogan in the polls, but after a widening of the gap in the wake of the devastating earthquake in February, the gap has closed to only a few points. Yesterday, Erdogan announced a large hike in the minimum wage for civil servants set for July after announcing a previous 45% wage hike just two days prior. Read next: Saxo Bank Articles And Videos On FXMAG.COM G7 meeting needs to be on our radar The G7 nations are set to meet next Friday and into the weekend in Niigata, Japan, with considerable anticipation that the meeting could produce major geopolitical signals related to the nature of the nations’ relationship with China. This morning, Bloomberg reports that G7 finance heads will propose a new partnership on supply chains that will only allow participation if certain minimum standards are met on human rights and environmental policies. Today’s Technical Highlights: S&P 500 range bound 4,050-4,195 DAX range bound. Key support at 15.700 for a correction Gold key support at 1,980 and 1,950 Silver below key support at 24.64. Support at 23.72. Could spike down to 23.00 Copper closed below support at 372. Downside risk to 360-356 Brent Oil rejected at 0.382 could test previous lows at 71.28 WTI lower after rejected at 0.50 retracement. Could test previous lows at 64.12 EURUSD testing key support 1.0900. If closing below correction down to 1.0744 Dollar Index could bounce to 102.50-103 EURJPY Shoulder-Head-Shoulder reversal unfolding. Could drop to 144.80. GBPUSD testing rising trendline. A break likely leading to support at 1.2344 US 10-year Treasury yields close to be testing key support at 3,30-3,25 Earnings to watch Today’s US earnings calendar is non-existent, so the focus will be on the European earnings releases with Richemont being the most interesting because of the strong rally in luxury stocks this year. Next week’s earnings releases have been added with our focus next week being on Siemens Energy, Home Depot, Siemens, Tencent, Walmart, and Deere. Friday: Societe Generale, Allianz, Richemont Next week’s earnings releases: Monday: Constellation Software, Siemens Energy, Meituan, Bridgestone, NU Holdings, Trip.com Tuesday: KBC Group, Vodafone, Nibe Industrier, Sonova, Home Depot, Baidu Wednesday: Siemens, Munich Re, Commerzbank, Tencent, Experian, Cisco, TJX, Target, Sea Ltd Thursday: KE Holdings, National Grid, Walmart, Alibaba, Applied Materials Friday: Deere Economic calendar highlights for today (times GMT) 1115 – Bank of England Chief Economist Huw Pill to speak 1400 – US Preliminary University of Michigan Sentiment 1600 – USDA's World Agricultural Supply & Demand Estimates (WASDE) Source: Global Market Quick Take: Europe – May 12, 2023 | Saxo Group (home.saxo)

Summary:  In today's podcast, we note the market's choppy, but in the end positive embrace of the slightly softer US CPI data point yesterday as US treasury yields eased. On that note, we suggest that a crisis is almost needed to justify the market's forward expectations for the Fed, as pricing of significant easing starting later this year intensified yesterday. Could the debt ceiling issue drive that possible crisis scenario? Elsewhere, we preview today's Bank of England meeting and wonder whether the recent sterling surge means this will drive a "sell-the-fact" moment, as seemingly everything that tries to get moving ends up mean reverting (former EUR strength now erased, former JPY weakness now partially erased, etc..) We also talk Disney's woeful streaming results and much 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 available via the link. Read next: Tomorrow Societe Generale, Allianz and Richemont reveal their earnings. Iranium in an uptrend| FXMAG.COM 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: Mean reversion continues: sterling next? | Saxo Group (home.saxo)

Summary:  Equities churned back and forth yesterday after the release of a slightly softer than expected US headline CPI number, in the end perhaps celebrating the drop in Treasury yields as the Nasdaq 100 index posted a new high for the year, while the less megacap heavy S&P 500 remains rangebound. Focus today swings to the Bank of England and its policy guidance after a presumed further 25 basis points of tightening today. Sterling has posted new highs for the year against the US dollar and the euro. What is our trading focus? US equities (US500.I and USNAS100.I): equities liked the US April CPI report Equity traders were cheering yesterday over the US April CPI report that showed inflation came in line with estimates suggesting inflation continues to cool although one could argue that the trajectory for the core inflation is still slow. S&P 500 futures gained 0.4% and the index futures are extending their gains this morning to the 4,164 level. The Fed Funds forward curve dipped further suggesting the market is bolstering its bets that the Fed will be cutting 100 basis points by the January FOMC meeting. The VIX Index declined closing below the 17 level suggesting a very relaxed options market. Chinese equities (HK50.I & 02846:xhkg): market indices trade weak while EV extend gains Hang Sang Index shed around 0.5% and the CSI300 Index was nearly unchanged in the early Asian afternoon. Inflation in China softened further in April, with headline CPI growth slowed to 0.1% Y/Y (vs consensus 0.3%; March: 0.7%). Weakness was in both food prices and non-food items. Core CPI remained at 0.7% Y/Y in April, the same as in the previous month. PPI decelerated further to a year-on-year decline of 3.6% (Consensus: 3.3%; -2.5% in March). Investors have concerns about the sluggish performance in the inflation number as an indication of a lack of momentum in aggregate demand after the surge of pent-up demand for in-person services petered out. Bucking the decline today were EV names, led by a 15% surge in Li Auto (02015:xhkg) on an earning beat. FX: US yield drop post-CPI drives JPY gains As a softer US CPI print brought sharp decline in Treasury yields, that benefitted the Japanese yen with USDJPY sliding below 134 overnight before rebounding above that level. Elsewhere, the weaker USD reaction to the US inflation data was somewhat mixed, with no conclusion yet drawn by this market as both NZDUSD and AUDUSD initially rejected new cycle highs, although bouncing back overnight, particularly the kiwi, as AUDNZD eyes the lows for the year below 1.0600 (testing below 1.0630 overnight). GBPUSD is quiet ahead of the BOE meeting today and EURGBP trades near 0.8700 after hitting new lows for the year this week ahead of today’s Bank of England meeting (more below). Crude oil rangebound, with an upside move lurking Crude oil edged higher overnight following another bumpy day on Wednesday that saw resistance being challenged, supported by drop in supplies from Canada and Northern Iraq, and after an in-line CPI print supported the general level of risk sentiment, only to fall back after the EIA reported the first stock build in four weeks. However, the near 3-million-barrel build was being offset by a big 7.3m barrel drop in gasoline and distillates stocks. Also supporting prices were a big 25% jump in jet fuel implied demand, while gasoline implied demand also edged higher. Both Brent and WTI remains stuck in two-dollar ranges with resistance at around $77.50 and $73.80 respectively. Apart from US PPI the market will focus on OPEC’s Monthly Oil Market Report. Gold (XAUUSD) looks for the next catalyst Gold jumped to near resistance in the $2050 area after the US inflation report supported the market’s view of a Fed pause. However, the fact it fuelled further rate cut bets during the second half, currently around 80 bps, may end up being gold’s biggest short-term challenge. With core inflation unchanged at 5.5%, there is still a lot of work to be done before the FOMC can declare victory, unless a) they adjust higher their inflation target, currently at 2%, b) the US run into a recession that forces them to refocus their attention, or c) an economic shock of some kind hits the economy. Overall, we maintain our bullish outlook for gold, but just like the FOMC, traders will need to watch incoming data for the next catalyst. Support at $2007 followed the $1986 while resistance remains firm above $2050. US Treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) drop after US CPI The slightly softer year-on-year CPI figure saw US treasury yields consolidating back lower as treasuries found support. The 2-year benchmark fell back 10 basis points to 3.92% this morning and the 10-year benchmark trades near 3.43%. The SOFR interest rate futures jumped (rates down) by around 15bps in the 2024 contract months, pricing in more aggressive rate cuts next year. The SOFR Jun-Dec 2023 spread widened 8bps to -82.5, adding to rate cut expectations for the second half of 2023 as well.  An auction of 10-year US treasuries provided little drama, with a slight improvement on the prior month’s weak bidding metrics. A 30-year T-bond auction is up later today. What is going on? Trump calls for US debt default. House Republican Santos arrested The House GOP spending bill that recently passed and would lift the debt ceiling only by gutting many of President Biden’s recent initiatives only passed by a vote of 217-215 with the help of George Santos, a newly arrived Republican in the House who was widely accused of a string of lies about his background and of misappropriation of campaign funds. The Department of Justice yesterday arrested Santos on related charges, including money laundering. Santos posted bail after his arrest and refuses to resign. Elsewhere, former president Donald Trump urged Republican lawmakers allow a default on US debt unless Democrats were to agree on massive spending cuts. US earnings: Disney, Robinhood, Sonos Disney reported FY23 Q2 (ending 31 March) revenue and earnings in line with estimates, but the Disney+ subscriber figures were only 157.8mn vs est. 163.1mn. On the positive side Disney+ losses came in better than expected at $-659mn but would widen again in Q3 q/q, and management said on the conference call that the company is on track to deliver $5.5bn cost reductions. Disney is reducing its capital expenditures to $5.6bn from previously $6bn suggesting Disney is under pressure. Shares were down 5% in extended trading. Robinhood reported Q1 net revenue of $441mn vs est. $423mn and adjusted EBITDA at $115mn vs est. $94mn suggesting the retail trading business is stabilising after a tough period for cryptocurrencies. Robinhood shares were up 3% in extended trading. Sonos, the maker of wireless home sound systems, spooked the market guiding FY23 revenue of $1.63-1.68bn vs est. $1.7-1.8bn suggesting consumer electronics continue to be the weakest part of consumer markets. Sonos shares were down 24% in extended trading. Read next: Expect the ECB to keep increasing rates at the short-term, at least until the summer| FXMAG.COM China inflation slows more than expected China reported April inflation overnight, with the CPI reported at +0.1% YoY vs. +0.3% expected (yes, year-on-year) and +0.7% in March, while the April PPI dropped –3.6% YoY vs. -3.3% expected and –2.5% YoY in March. US CPI cools, reinforcing market’s view of a Fed pause The April CPI was broadly in line with the consensus. The headline was slightly below expectations at 4.9 % year-over-year. This is the first time it has been below 5 % in two years. But this is too early to declare victory over inflation. Indeed, the core CPI – which better shows underlying inflationary pressures – was at 0.41 % month-over-month and 5.5 % year-over-year. This is still too hot. However, this is unlikely to force the U.S. Federal Reserve to hike in June. Expect the monetary pause to last, perhaps even beyond the timeframe forecasted by the market. Obviously, today’s figures do not in any way corroborate the possibility of rate cuts this year. On a yearly basis, the main drivers of inflation are: transportation (+11 %), food away from home (+8.6 %) and electricity (+8.4 %). EU gas prices continue their month-long decline The Dutch TTF gas contract, the European benchmark, settled below €35 for the first time since July 2021 on Wednesday. Down more than 50% year-to-date, the price trades near the five-year average with the risk of further losses amid slowing demand and a record amount of LNG waiting at sea to offloaded. The volume of liquefied natural gas on the water for more than 20 days worldwide this week jumped to the highest seasonal level since at least 2017, data compiled by Bloomberg show. With the 2023/24 winter contract still stuck around €55 in anticipation of strong demand, the storage arbitrage is wide open, thereby supporting a speedy refilling of storage sites with relatively cheap gas that can be stored and sold at higher prices during winter. What are we watching next? Uranium in an uptrend Our Technical Analyst has confirmed that Uranium, both physical and Uranium producing companies are on the move after Physical Uranium has confirmed technical uptrend with U308 at a one-year high around $53/lb. Some nuclear companies could benefit too. Canada's Cameco trades up 12.2% during the past month while the URA ETF has gained 7.7% and the Sprott Physical Uranium Trust some 9.6%. Nuclear remains one of the key long-term solutions to the energy shortage issues. For inspiration, Saxo’s Nuclear Power equity theme basket is worth a consideration. Bank of England meeting on tap with guidance eyed Some of the sterling outperformance over the last week has been on reports from at least one private recruiting firm that wage inflation has reached 10%, although the official figures have flattened out below 7% YoY in recent months. Still, UK economic data has positively surprised on balance for months and UK yields at the front of the curve have outperformed EU counterparts by more than 20 basis points over the last several weeks and sterling over the last week has traded at new highs for the year versus both the US dollar and the euro  The Bank of England is expected to hike rates 25 basis points to bring the policy rate to 4.50% and another 40+ basis points of further tightening are priced through the November meeting, in contrast to the US Federal Reserve, which is fully priced for a rate cut by the September FOMC. Earnings to watch Today’s US key earnings to watch is JD.com reporting Q1 earnings before the US market open. JD.com, which is one of China’s largest e-commerce retailers, is expected to report Q1 revenue growth of 0.4% y/y and EBITDA of $7.8bn unchanged compared to a year ago. With the latest signs that the Chinese reopening is progressing much slower than anticipated JD.com earnings will be watched closely for clues about the outlook for the Chinese consumer. Thursday: Verbund, Coloplast, Engie, Deutsche Telekom, Merck, Bayer, Hapag-Lloyd, RWE, Takeda Pharmaceuticals, Honda Motor, 3i Group, ING Groep, JD.com Friday: Societe Generale, Allianz, Richemont Economic calendar highlights for today (times GMT) 1100 – UK Bank of England Bank Rate Announcement 1230 – US Weekly Initial Jobless Claims 1230 – US Apr. PPI 1245 – US Fed’s Kashkari (Voter 2023) speaking During the day: OPEC’s Monthly Oil Market Report 1415 – US Fed’s Waller (Voter) to discuss financial stability and climate. 1430 – EIA's Natural Gas Storage Change 1700 – US Treasury to auction 30-year T-bonds 0300 – New Zealand Q2 Inflation Expectations Source: Global Market Quick Take: Europe – May 11, 2023 | Saxo Group (home.saxo)

Summary:  The FOMC meeting produced a downshift in forward guidance, but avoided pre-committing to a pause in tightening, deferring to incoming data. Alas, the market decided that the backdrop supports the idea of the Fed pausing here cutting rates more than 75 basis points by year-end. Equity markets ended the day lower, perhaps spooked by the ongoing downdraft in bank stocks and concerns for the economic outlook, but rebounded partially in a choppy overnight session. ECB on tap today. What is our trading focus? US equities (US500.I and USNAS100.I): will the market twist Fed’s arm? US equity benchmarks rose on Friday with some stability in the banking sentiment as KRE regional banking ETF rose 6% and PacWest surged 82%. US nonfarm payroll report surprised to the upside for April and added to sentiment. The market’s interpretation of labor data has changed, where last several months of hot data meant Fed could hike further, and that spooked equity markets, but the latest data has been a relief that economic momentum will continue to hold. The market continues to be dovish pricing in 75-100bps of rate cuts by the December FOMC meeting. Nasdaq 100 was up over 2% with Apple (AAPL) surging just shy of 5% after a strong earnings report, particularly driven by iPhone sales, in addition to a fresh $90bn buyback programme. S&P500 was up 1.9% led by gains in led by gains in banks stocks. FX: JPY weakens as Japan returns from Golden Week Dollar’s spike following the hot NFP report on Friday was short-lived as Fed pricing continued to see no hike in June with cuts still priced through year-end amid the short-term banking uncertainty. USDJPY however rose back above 135 briefly in early Asian hours as Japan traders returned from a 5-day Golden Week holiday in which time JPY gained considerable strength on the back of banking sector risks. BOJ meeting minutes from the March meeting, which was Kuroda’s last meeting, continued to signal a dovish bent. NZDUSD supported at 0.63 after last week’s strength driven by the Q1 jobs data, while AUDUSD is also strong at 0.6750 following the surprise RBA rate hike last week and as AUD responded, together with CAD (more below on Macklem speech last Thursday) and the Scandie currencies, to the shift in sentiment and, to a degree, the rally in commodity prices, especially crude. Crude oil: firming up after heavy selling last week Oil has opened the week firmer, extending Friday’s gains after the strong US job report helped ease concerns of an imminent recession, furthermore an oversold market condition combined with Brent and WTI both managing to find support ahead of their March lows forced recently established short sellers to seek cover, potentially highlighting that the recent selloff was overdone. EIA’s Short-term Energy Outlook on Tuesday as well as OPEC’s monthly report on Thursday should shed some further light on the current demand and supply outlook. Earnings from Saudi Aramco will also be on watch. Speculators responded to the recent weakness by cutting their net long in Brent and WTI by one-quarter to 295k lots while the ICE gasoil (diesel) short hit a fresh +7 year high. Gold (XAUUSD) holds above key support with incoming data in focus After hitting a fresh record high last Thursday, gold dropped back to $2k after Friday’s strong jobs report pushed Treasury yields higher, before making a steady recovery towards the current level around $2020. In our latest update we highlighted that gold’s biggest short-term challenge remains elevated rate cut expectations, leaving the market exposed to a correction should incoming data not support these projections. Friday’s strong job report lowered the end of year rate cut expectation by a 25bps to around 75bps. The World Gold Council said bullion demand from central banks slowed purchases sharply in the first quarter. China stood out as an active buyer, adding to its gold reserves for a sixth straight month in April. ETF investors have maintained an unchanged position for the past two weeks around 93.5million ounces while hedge funds have increased length to a fresh one-year high at 14.80 million. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) sell off on strong US data US yields rebounded Friday, especially after the release of a strong April nonfarm payrolls growth (although this was partially spoiled by a significant negative revision of the March data) but also as regional banks recovered sharply Friday. The recovery in yields took the 2-year and 10-year benchmark yields comfortably back into the range, trading this morning at 3.93% and 3.43%, respectively. What is going on? Delayed reaction to Bank of Canada governor Macklem’s speech The Canadian dollar rallied sharply on Friday in what appears a delayed reaction to a speech last Thursday from Bank of Canada Governor Macklem, who admitted that the Bank of Canada may need to tighten policy further and generally indicating more uncertainty on the path to returning inflation to 2%. "If we start to see signs that inflation is likely to get stuck materially above our 2% target, we are prepared to raise rates further”. The same speech also fretted the risk of uncertain financial conditions, so the reaction was limited Thursday, but when financial conditions/risk sentiment cleared dramatically on Friday, CAD was the strongest among G10 currencies Friday, rallying more than 1% against the US dollar as USDCAD returned below its 200-day moving average and below 1.3400. The next level of note is the April pivot low of 1.3302. Warren Buffett cautious of US slowdown and US-China tensions In the annual shareholder meeting over the weekend, Warren Buffett’s Berkshire Hathaway disclosed that it has sold shares worth $13.3bn in the first quarter and bought stocks for a fraction of that figure. The company’s cash pile has risen by $2bn since the start of this year to $130.6bn, its highest level since the end of 2021. Buffet was somewhat cautious about the economic momentum in the US, and said he expected earnings to decline in most of its businesses this year. On Apple, he said it was one of the better businesses they own, and also disclosed that they won’t be making an offer for full control of Occidental Petroleum suggesting potential second thoughts on the oil industry. Meanwhile, Buffett continued to highlight opportunities in Japan, while being cautious of US-China tensions. Berkshire revealed last month it had increased its stakes in Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co and Sumitomo Corp to 7.4%, and Buffett said his company might buy more but the stakes won’t go above 9%. Read next: Expect the ECB to keep increasing rates at the short-term, at least until the summer| FXMAG.COM Hedge funds exodus from commodities gathers momentum For a second consecutive week, money managers were heavy sellers of commodities in the week to May 2. Overall, the net long across the 24 major commodity futures markets we track in our weekly update was cut by one-third to just 700k lots, the lowest since June 2020. The reduction being driven by heavy long liquidation of energy, as the crude oil roller coaster continued to wrongfoot momentum following traders, as well as the grains sector where speculators turned net short the sector for the first time since August 2020. The hardest hit last week was Brent and WTI crude oil and gasoil, as well as soybeans, corn and sugar. The major exceptions being gold and silver, both seeing continued demand. What are we watching next? US April CPI is up Wednesday The next macro calendar event risk of note is this Wednesday’s US April CPI release, with the consensus expectations looking for +0.4%/5.0% for the headline and +0.3%/+5.5% for the core, Ex Food and Energy, reading. The low core YoY reading for the cycle was the 5.4% registered back in February. Earnings to watch The conclusion on the Q1 earnings season continues to be that falling operating margins causing operating profit to slightly decline q/q and y/y with Nasdaq 100 earnings showing the best relative performance. This week the pace of earnings will slow down from the previous three weeks, but there are still plenty of interesting earnings releases to watch. Our focus this week is on earnings KKR (today), Airbnb (Tuesday), Vestas Wind Systems (Wednesday), Disney (Wednesday), Toyota (Wednesday), and Richemont (Friday). Monday: Westpac Banking, PayPal, KKR, Devon Energy, BioNTech, Palantir Technologies Tuesday: Suncor Energy, Daimler Truck, Nintendo, Amadeus IT, Endesa, Alcon, Airbnb, Duke Energy, Occidental Petroleum, Electronic Arts, Coupang, Rivian Automotive Wednesday: Nutrien, Vestas Wind Systems, Genmab, Credit Agricole, Siemens Healthineers, E.ON, Toyota, SoftBank, Panasonic, Compass, Disney, Trade Desk, Li Auto, Roblox Thursday: Verbund, Coloplast, Engie, Deutsche Telekom, Merck, Bayer, Hapag-Lloyd, RWE, Takeda Pharmaceuticals, Honda Motor, 3i Group, Ing Groep, JD.com Friday: Societe Generale, Allianz, Richemont Economic calendar highlights for today (times GMT) 1400 – ECB Chief Economist Philip Lane to speak 1800 – US Fed releases Senior Loan Officer Survey 2000 – US Fed releases May Financial Stability Report 2045 – US Fed’s Kashkari (Voter 2023) to speak 0030 – Australia May Westpac Consumer Confidence Source: Global Market Quick Take: Europe – May 8, 2023 | Saxo Group (home.saxo)

Summary:  The selloff in regional bank shares weight on the market sentiment, seeing U.S. equities lower driven by weaknesses in financials, communication services, and energy. Euro took a brief look below 1.10 before recovering to 1.1020 subsequently after ECB downshifted to a 25bps rate hike. Apple bucked the challenging economic and industry environment with a solid beat in FYQ2 top lines and earnings on strong iPhone performance. Today’s focus will be on the U.S. employment report.   What’s happening in markets? US equities (US500.I and USNAS100.I): regional bank woes weigh on market sentiment Shares of regional banks continued to sell off with SPDR S&P Regional Banking ETF (KRE:arcx) losing as much as 9.5% in the morning before clawing back some and finishing down 5.5%. PacWest Bancorp (PACW:xnas) plummeted 50.6% followed by Western Alliance (WAL:xnys) tumbling 38.4% and First Horizon (FHN:xnys) shedding 33.6%. Toronto-Dominion Bank (TD:xtse) called off its merger discussion with First Horizon due to doubts on getting regulatory approval. The selloff in regional banks weigh on the broader U.S. banking sector, seeing all 21 members of the KBW Bank Index, which includes the largest banks, in the red and the index declined by 3.8%. The S&P 500 shed 0.7%, driven by losses in financials, communication services, and energy. Nasdaq 100 slid 0.4%. Advanced Micro Devices (AMD:xnas) surged 6.1% on the headline that the chipmaker is working with Microsoft (MSFT:xnas) in its expansion into AI processors. Apple Inc (APPL:xnas) gained 2.5% on revenue and earnings beat. Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): the 2-10-year curve steepens to -41 The 2-year yield swung widely after rising to 3.89% on a smaller-than-expected increase in jobless claims and a much hotter-than-expected growth of 6.3% in Q1 unit labor costs, before falling to as low as 3.65%, the lowest level since September 2022 on the stress in regional bank stocks and then finally finished only 1bp lower at 3.79%. Buying was mostly on the front end and the 10-year yield rose 4bps to 3.38%, steepening the 2-10 curve by 5bps to -41.  SOFR 3-month interest rate contracts were well bid in the morning, with rates falling 30bps in the 2024 contracts before giving up some gains to finish 15bps lower in rate (higher in prices). The Dec 2024 SOFR (SR3Z4) last traded at 97.28 (i.e. 3-month interest rate at 2.72%). Chinese equities (HK50.I & 02846:xhkg): muted trading in A-shares and a moderate rally in Hang Sang Index Mainland China returned from the Labor Day holiday and had a muted response to a mixed bag of economic data. Similar to the official NBS manufacturing PMI released earlier, today’s Caixin China manufacturing PMI fell below the expansion-contraction threshold to 49.5. Trading in mainland A-shares was lacklustre and lacked directions, with CSI300 finishing the session nearly unchanged from last Friday before the long holiday. The Shanghai Composite Index advanced 0.8% while the Shenzhen Component Index declined -.57%. Read next: Expect the ECB to keep increasing rates at the short-term, at least until the summer| FXMAG.COM The travel and consumption data for the five days during the 5-day holiday period indicated a strong pick-up in consumption but tourism, lodging, and catering stocks retreated sharply in mainland bourses. A-share financial names gained, with Cofco Capital (002423:xsec) and China Minsheng (600016:xsec) hit 10% limit up. A number of central-government-owned names in the infrastructure construction, materials and media space surged. China financial names including insurance companies and banks listed in Hong Kong also outperformed notably, with Ping An Insurance (02318:xhkg) surging 7.7%, Citic (00267:xhkg) up 5.7%, China Life Insurance (02628:xhkg) up 5.2%, and ICBC (01398:xhkg) rising 5.1%. Hang Seng Index advanced 1.3%. Trading in technology names was relatively muted as Hang Seng Tech Index edged up 0.6%. FX: EUR underperforms despite Lagarde’s attempt to be hawkish EURUSD took a brief look below 1.10 on Thursday, although recovering to 1.1020 subsequently, after ECB downshifted to a 25bps rate hike. While the door for further tightening was kept open, market expectations turned dovish as ECB is likely to eventually follow the Fed and a peak is coming. GBPUSD, meanwhile, continued to make attempts at a break of 1.26. Regional banking concerns still remain top of mind and USDJPY plunged lower to 133.50 before a rebound to 134.20 subsequently. NZDUSD was the strongest, having broken above 100DMA at 0.6279 which opens the door to 0.64. Crude oil: steadier but closing another week down Crude oil steadied after a fierce three-day selloff sparked by concerns of dwindling demand as banking concerns continue to send shivers. Brent crude has shed over 10% this week as weak PMI data in China, combined with ongoing tightening of financial conditions weighed on sentiment. Meanwhile, Saudi Aramco also lowered its official selling prices to Asian customers. WTI prices stayed below $70/barrel while Brent stayed below $74. Supply side is less of a focus for now. Russia reaffirmed its commitment to cut crude oil production amid signs of robust exports. However, supply concerns were offset by additional 1 billion barrel crude oil discovery onshore Turkey   What to consider?   Apple's Q2 FY23 results beat in revenues and earnings Apple Inc. (AAPL:xnas) delivered Q2FY23 results beating analyst estimates, driven by stronger-than-expected performance in iPhone sales. Revenues came in at USD94.8 billion, above the consensus estimate USD92.6 billion. The EPS of USD1.52 beat the USD1.43 median forecast surveyed by Bloomberg. Apple repurchased USD22 billion worth of shares in Q2FY23 and announced a plan to add USD90 billion to the existing buyback program as the company generated stronger-than-expected USD25.6 billion free cash flow during the quarter. Apple raised the quarterly dividend to USD0.24 from USD0.23. Caixin China manufacturing PMI fell into the contraction territory Caixin China manufacturing PMI, which has a larger focus than the official NBS manufacturing PMI on export-oriented small and medium size enterprises in coastal China declined to 49.5 in April from 50.0 in March, back to the contraction territory. New orders, falling below 50, drove the deceleration in the headline PMI as demand weakened. Nonetheless, according to Caixin, the expectation about the future has improved from the level in March. ECB hikes by 25bps, keeps hawkish message As widely expected, the ECB stepped down to a 25bps rate hike pace from the 50bps unveiled in March, bringing the deposit rate to 3.25%. While recent data has confirmed that underlying inflationary pressures remain sticky, especially for core, weak credit growth and the latest results of the Bank Lending Survey have indicated that the rate hikes so far are clearly leaving some stress on the financial sector of the economy. The ECB also announced that the reinvestments of its Asset Purchase Programme (APP) will be stopped in July, which could equal to a €25bn reduction of the portfolio on average every month as per their own estimates. However, it was later revealed as a deal between the hawks and doves to go ahead with the 25bp hike instead of 50bps. Lagarde emphasised at the press conference that “the inflation outlook continues to be too high for too long”, keeping the door open for further rate hikes. US non-farm payrolls due today – will the cooling in labor market be enough While the job openings cooled and jobless claims in the US rose to 242k last week from 229k previously, the ADP survey on the other hand showed additions in jobs blowing past estimates. This suggests US labor market indicators have been mixed so far, and focus will be on the April nonfarm payroll which is scheduled for release today. Hiring pace is expected to slow, and Bloomberg consensus forecast is looking for it to come in at 185K in April from 236K in March, as layoffs extend from IT sector to banking and others, even as services sector continue to hire. Unemployment rate is also seen marginally higher at 3.6% from 3.5% previously, but wage pressures will likely still remain firm 4.2% YoY/0.3% MoM. The jobs report will be used to gauge the Fed's next move, whether that be a pause, or lead to some "additional policy firming", but it is worth stressing there is plenty of data between now and the June 14 FOMC, with what happens in the banking sector being more key at the moment.     For a detailed look at what to watch in markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – May 5, 2023 | Saxo Group (home.saxo)

Summary:  Today we look at a bit of deja vu all over again as we saw a negative session yesterday in the US followed by a megacap - this time Meta - reporting after hours. We note that regional bank stocks continue to struggle at cycle lows. Some of the weak sentiment yesterday was on the Republicans passing their spendign bill in the House, with no one having a clue on next steps as this bill is dead-on-arrival in the Senate, much less Biden's desk. Elsewhere, crude oil dropped sharply again, while gold is sticky near 2,000. Today brings perhaps the busiest earnings report calendar of the season, while the first BoJ meeting with Governor Ueda at the helm is up tomorrow. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting. Listen to today’s podcast - slides are available via the link. Read next: This evening Japan shares March Jobless Rate. Tomorrow Exxon Mobil, Chevron and Mercedes-Benz share their earnings| FXMAG.COM 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: Regional banks continue to suffer, but Meta! | Saxo Group (home.saxo)

Summary:  Equity markets suffered another weak session yesterday, although sentiment got a modest boost after hours from strong results from Meta, while Asian stocks were generally weaker overnight. Today brings another hefty load of earnings reports, including megacap Amazon in the US and German chemical giant BASF. The US is set to report its first estimate of Q1 GDP today, while FX traders await the first Bank of Japan meeting tomorrow under new governor Kazuo Ueda. In commodities oil erased all gains since the surprise OPEC+ cut on demand woes while gold held steady around the 2,000 level. What is our trading focus? US equities (US500.I and USNAS100.I): Can Meta’s Q1 results restart positive sentiment? US equities extended their decline yesterday with S&P 500 futures closing at 4,076, but this morning the index futures are attempting to rebound following stronger than expected Q1 results from Meta as advertising spending is recovering. With advertising spending being a leading indicator, the question is whether Meta’s Q1 results can restore the positive sentiment. First Republic Bank, which came back into focus on Tuesday when the stock responded to its Q1 earnings release declining 49%, extended its decline yesterday down another 30% as the bank is working on plans to survive. Judging from how other banking stocks are reacting it looks increasingly like the recent banking crisis is isolated into idiosyncratic cases. Chinese equities (HK50.I & 02846:xhkg): Insurance stocks led the advance Hong Kong and mainland Chinese benchmark indices advanced, driven by surging share prices of insurance companies, which were boosted by solid Q1 results from Ping An Insurance Group (02318:xhkg), up 7.5%. Hang Seng Index climbed 0.5% and CSI300 gained nearly 1% as of writing. In March, China’s industrial revenues grew 0.6% (vs a decline of 1.3% in Jan-Feb) and industrial profits fell 19.2% y/y (vs -22.9% y/y in Jan-Feb). FX: USD on its back foot, JPY eyes first BoJ with Ueda EURUSD surged and USJPY sold off yesterday on the announcement from House speaker McCarthy that he had the votes to pass the altered version of the GOP bill, which further pressurizes the debt ceiling risks (more below) and has market expectations wobblingly slightly for next week’s 25-basis point Fed rate hike. Alas, the new highs failed to sustain, although EURUSD remains near the former highs for the cycle above 1.1050 this morning. USDJPY rebounded as traders await the first Bank of Japan meeting tonight with new governor Kazuo Ueda at the helm. Short-dated implied options volatility suggests that this is the least anticipated meeting, in terms of volatility risks, in the last 12 months as Ueda is expected to maintain course for now. SEK received a jolt lower yesterday from dovish Riksbank guidance despite the 50-basis point hike and as two of six voters dissented dovish. EURSEK rallied within sight of the 11.45+ cycle post-pandemic highs. Read next: Dow and S&P 500 decreased yesterday. Nasdaq benefited from Microsoft earnings| FXMAG.COM Crude oil market sends a message to OPEC Never make any major production cut announcement on a weekend if it's driven by demand concerns. That is the message the market is sending to OPEC+ after prices on Wednesday slumped below levels that prevailed ahead of the April 2 surprise production cut announcement. The initial jump left a major gap that for weeks acted as a magnet for short sellers. In addition, having forced short covering and fresh longs to enter around $85 in Brent and $80 in WTI, the subsequent selloff has involved long liquidation from those ‘buying’ OPEC’s signal. The technical break below $80 in Brent may attract additional short selling from momentum focused traders, with weak risk sentiment spreading from the banking sector. On top of this the recovery in China remains underwhelming, while falling refinery margins may lead to runs being cut thereby reducing demand for crude oil further. WTI resistance at $76.50 and Brent at $80.50. Gold supported by fresh signs of banking sector stress Gold continues to bounce of trendline support, currently at $1980, thereby keeping it well above key support in the $1955-60 area. Current support is being provided by fresh banking sector concerns after First Republic Bank plunged about 64% in just two days. Bond yields trade softer while the dollar in broad terms remains unchanged in the week. Total holdings in ETFs backed by bullion have seen a two-day jump of 8.7 tons to 2911.7 tons, and highest since January 10. Ahead of the May FOMC meeting the market has priced in 75 bps cuts before yearend, and any signal from the Fed that goes against this assumption may act as a short-term drag on prices. Resistance in gold at $2012 and $2018 while silver maintains support in the $24.50 area, having so far retraced less than one-quarter of the recent strong gains. US Treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) rebound slightly US treasury yields rebounded slightly, even as the Republican controlled House passed its dead-on-arrival bill that won’t pass the Senate or Biden’s desk and ups the pressure on the debt ceiling situation (more on that below). The market maintains approximately 80% probability of a 25-basis point rate hike next Wednesday. 2-year yields have risen about 10 basis points from yesterday’s lows, trading near 3.97% this morning, similar to the performance of the 10-year benchmark, with trades 50 basis points lower. A 5-year Treasury auction saw strong demand, with a 7-year auction to follow today. What is going on? House passes GOP debt ceiling bill, ups pressure on Biden The House of Representatives, led by speaker Kevin McCarthy, narrowly passed a bill that would raise the debt ceiling, slash federal spending and repeal President Biden's programs to combat climate change and reduce student debt, defying Democratic objections. The Democrat-led Senate and President Biden signalled they remain unwilling to yield to GOP demands, with Biden saying that he refuses to negotiate on the debt ceiling, saying it needs to be lifted with no conditions. Elsewhere, stronger than expected tax revenues over the last week may push the debt ceiling crunch time out until July (as further tax revenues usually arrive in mid-June.) Meta shares jump 11.7% in aft-mkt trading on Q2 outlook As we highlighted in yesterday’s equity note, the results from Alphabet were boding well for Meta earnings and last night’s Q1 earnings release confirmed that online advertising growth is coming back. Q1 advertising revenue was $28.7bn vs est. $27.7bn and EPS hit $2.20 vs est. $2.01. In addition, the company guided Q2 total revenue of $29.5-32bn vs est. $29.5bn and lowered its cost expectations at the high end of the guided range by $2bn. One disappointing aspect of the Q1 earnings release was Meta’s insistence on investing in the Metaverse saying it expects operating losses from this division to keep growing. Meta also said that the current AI technology such as ChatGPT would be implemented across all its products. UK regulator blocks Microsoft’s Activision acquisition Microsoft’s $45 billion acquisition of Activision looks likely to fail as the UK’s Competition and Market Authority announced that it would block the deal on concerns that Microsoft would use the acquisition a part of a strategy to gain monopolistic control of cloud gaming. Specifically, the regulator says the incentives are too high for Microsoft to give Activision games exclusively access to Microsoft’s cloud service which would lock out competing distribution channels such as the PlayStation. Samsung missed Q1 earnings, expects H2 rebound Samsung Electronics reported its worst quarterly profit in 14 years, as global economic woes dented demand for consumer electronics and a chip glut battered its core business. Q1 operating profit was down 95% from a year ago with sales down 18%. Earlier this month, Samsung said it was cutting memory production "to a meaningful level," in a sharp departure from its previous position that it would not artificially reduce output as part of efforts to gain a bigger market share. However, it guided for a rebound in H2 pinning hopes on a China recovery and an expected uptick in order as prices are cut. These could be somewhat risky bets, but a greater reliance on the mobile business may help to offset some of the pressures. Lithium: small gains after heavy losses After falling to their lowest level in 18 months in April and shedding some 70% from peak prices in November last year, lithium prices in China gained for the first time this year on signs demand growth may be finally gathering pace as battery demand picks up. A report released Wednesday by the International Energy Agency (IEA) shows electric cars sales up 55% in 2022 compared to 2021. Lithium carbonate rose nearly 1.5% amid thinning inventories across the supply chain. Destocking was the main cause of the 70% fall in prices since mid-November. Xi calls Zelenskiy Chinese President Xi Jinping spoke to Ukraine's Volodymyr Zelenskiy on Wednesday for the first time since Russia's invasion of Ukraine, fulfilling a longstanding goal of Kyiv which had publicly sought such talks for months. Zelenskiy, describing the hour-long phone call as "long and meaningful", signalled the importance of the chance to open closer relations with Russia's most powerful friend, naming a former cabinet minister as Ukraine's new ambassador to Beijing. Xi told Zelenskiy that China would send special representatives to Ukraine and hold talks with all parties seeking peace, Chinese state media reported. Zelenskiy said in an evening video address that there was "an opportunity to use China's political power to reinforce the principles and rules that peace should be built upon." (Reuters) What are we watching next? US first Q1 GDP estimate, weekly jobless claims up today The US will report its latest weekly initial jobless claims numbers today. The recent range of the last seven weeks has been 228-247k, with 248k expected today. The US dollar may prove most sensitive to a surprisingly high number, given wobbling expectations for a Fed rate hike next week, as the debt ceiling issue could give them an excuse to pause for now if a few other data points are pointing to a less tight labour market and easing inflation risks (a claims number today well above 250k together with in-line or lower GDP and GDP price index data and perhaps a slight downside surprise in tomorrow’s PCE inflation data might be enough to do the trick). The first estimate of Q1 GDP today is expected to show that the US economy grew at an annualized 1.9% rate, although PErsonal Consumption is expected to show +4.0% annualized growth and the GDP Price Index is expected to drop to a nine-quarter low of 3.7% annualized versus 3.9% annualized in Q4. Note that these GDP numbers are often heavily revised in subsequent revisions. Earnings to watch Today’s key US earnings are Amazon, Eli Lilly, and Mastercard. Analysts expect Amazon to report Q1 revenue growth of 7% y/y and operating income of $19.4bn vs $14.8bn a year ago as cost cutting is working itself through to the bottom line. Logistics costs are coming down for Amazon which should be a meaningful driver of margin expansion. Eli Lilly is expected to report a weak Q1 result with operating income declining from a year ago and investors will focus a lot on any news related to its expectations of its upcoming competing drug to Novo Nordisk’s Wegovy on obesity treatment. Mastercard is expected to see revenue growth of 9% y/y in Q1 down from 24% y/y a year ago, but rising interest rates should provide a positive tailwind for the outlook. Thursday: DSV, TotalEnergies, Sanofi, STMicroelectronics, BASF, Deutsche Bank, China Life Insurance, Sinopec, BYD, Keyence, Hitachi, AstraZeneca, Barclays, DNB Bank, BBVA, Repsol, Atlas Copco, Nordea Bank, Amazon, Eli Lilly, Mastercard, Merck, AbbVie, Linde, Honeywell, Amgen, Intel, Caterpillar, Mondelez, Valero Energy, L3Harris Technologies, Newmont, Rockwell Automation, First Solar, Cloudflare, Pinterest, Snap Friday: Imperial Oil, Danske Bank, Neste, Mercedes-Benz, PetroChina, China Shenhua Energy, Eni, Sony, Norsk Hydro, Yara International, Hexagon, Exxon Mobil, Chevron, Colgate-Palmolive Economic calendar highlights for today (times GMT) 0900 – Eurozone Apr. Confidence Surveys 1230 – US Weekly Initial Jobless Claims 1230 – US Q1 GDP First Estimate 1430 – EIA's Weekly Natural Gas Storage Change 1500 – US Apr. Kansas City Fed Manufacturing Activity Survey 1700 – US Treasury to auction 7-year notes 2330 – Japan Mar. Jobless Rate Bank of Japan meeting Source: Global Market Quick Take: Europe – April 27, 2023 | Saxo Group (home.saxo)

Summary:  US equities closed mixed for the week with a lacklustre session on Friday as as traders look forward to the heart of earnings season this week and next. The EuroStoxx 50 index is eyeing its all-time highs after posting its highest daily close ever, just shy of a late 2021 intraday high-water mark. Elsewhere, higher yields after firm initial April PMI surveys in Europe and the US have gold wilting back below 2,000, while oil prices continue their recent slump despite the OPEC production cuts announced three weeks ago. What is our trading focus? US equities (US500.I and USNAS100.I): Headed lower inside April’s trading range US equities have headed lower since the Tesla earnings disappointed the market last week and this morning S&P 500 futures are trading around the 4,137 level, which is still well within the established trading range for April. The key event in equities this week is the Q1 earnings season with major earnings expected from US technology companies Alphabet, Microsoft, Meta, and Amazon. The first test this week on earnings is already today with Coca-Cola reporting Q1 earnings ahead of the market open. Chinese equities (HK50.I & 02846:xhkg): Hang Seng Index dropped below 20,000 Hang Seng Index traded weak across the board, falling over 1% and going below the 20000 level. Tencent (00700:xhkg) shed 2.4% and Alibaba (09988:xhkg) slid around 2%. Banking, property, and Macao casino operator names were among the laggards. Digital healthcare platform name and selective auto stocks gained. Sentiment has been under pressure since last Friday following a Bloomberg report that the U.S. is planning to impose wider than previously reported restrictions on American businesses to invest in semiconductors, AI, and quantum computing in China. CSI300 retreated 0.8% in early Asia afternoon as the weakness in semiconductors, tourism, lodging, and precious metal names more than offset the gains in media and online gaming. FX: Commodity FX in the dumps, JPY eyes first Ueda BoJ meeting The US dollar was mixed and didn’t cut much of a profile last week, where the biggest movers where commodity related currencies, including the Australian dollar, which limped lower to start the week as key commodity prices like copper continued their slide. AUDUSD traded below 0.6678 for the first time in over a week, with more range to work with down to the early March pivot low at 0.6565. Similarly, CAD and NOK traded softer in another drop in oil prices, with USDCAD firming up above 1.3550 Friday and testing a more than three-week high. The trades slightly weaker after a bump in global yields Friday and as the market awaits the first Bank of Japan meeting with new governor Kazuo Ueda at the helm on Friday. Crude oil trades lower on falling refinery margins Crude oil prices traded lower in Asia overnight on a combination of technical factors, such as ongoing attempts to close the gaps down to $80 in Brent and $75.70 in WTI as well as long-liquidation from funds that bought futures contracts following the April 3 OPEC+ production cut announcement. The short-term fundamental outlook also continues to deteriorate with recession worries more than offsetting supply cuts as refinery margins remain under pressure across all the major trading hubs sending a warning sign about demand ahead of the peak consumption season. The drop in refinery margins can partly be explained by record production from top refiners in China and India taking advantage of cheap Russian oil, as well as increased refinery activity in the Middle East. Over time, rising refinery capacity leading to lower margins will be good for consumers Read next: IG analyst to FXMAG.COM: In my opinion commodity prices already reflect higher oil prices| FXMAG.COM Gold and silver consolidating continues Precious metals remain in consolidation mode ahead of the latest US figures on growth, inflation and wages this week as the market fears they could support further rate hikes from the FOMC. In gold the risk remains of a a deeper correction towards $1957 - the 38.2% retracement of the banking-crisis-led runup in prices while silver will likely look for support around $24.50, an area that offered resistance when during silvers failed rally back in January and early February. Funds cut their gold length in COMEX futures for a second week but again by a relatively small 3.3k lots to 134k lots. The net selling was primarily driven by a 23% increase in the gross short following two failed attempts to extend the recent rally in gold beyond $2050. Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): yields rebound on firm US PMI’s US treasury yields rose all along the curve in the wake of the firmer than expected US S&P Global preliminary April PMI, with the 2-year yield closing over 5 basis points higher from the day’s lows and near 4.17% as the market leans for a rate hike at next Wednesday’s FOMC meeting. The action was echoed in the 10-year benchmark yields as well the intraday low of 3.50% provided resistance and the strong data saw the benchmark jumping back above 3.55%. What is going on? The Eurozone services economy is doing quite well The Eurozone April flash PMI were a positive surprise. The PMI Services showed an unexpected gain, coming out at 56.6 when a fall to 54.5 had been forecast. In France, it was out at a stunning 56.3 and in Germany at 55.7. This shows strong resilience of the services sector. This matters a lot from a macroeconomic viewpoint because the services account for 73 % of the eurozone economy. On the downside, the EZ manufacturing sector is still lagging with a print at 45.5. Overall, this indicates a quarterly GDP growth of about 0.5 % after 0.3 % in Q1. The EZ economy is clearly doing well. There is still no recession in sight. US asks South Korea not to boost memory chip sales to China if Micron banned According to the FT, the US asked major South Korean memory chip manufacturers Samsung and SK Hynix to hold back on boosting sales to China if Bejing were to ban US memory chip maker Micron from selling its products there. China has mobilized a national security review of Micron, with no announcement yet of its results. Bill Gross bets on US regional banks Bill Gross, the former CIO of PIMCO, says that he is bullish on some segments of the US regional banks after the banking crisis citing that many smaller banks have historically delivered 10% return on equity and are now trading at 60% of tangible book value. COT on HG Copper explains some of the current (weak) price action According to the latest Commitments of Traders report covering the week to April 18, the copper long jumped 230% to 19.8k lots in response to the failed, as it turned out, breakout that occurred during the reporting week. It highlights a market where traders are worried about missing the upside once it materializes, but also how failure turns to immediate long liquidation and with that fresh price weakness as seen last Thursday and especially Friday. For now, the metal remains rangebound having returned to the center of its current $3.8 to $4.2 trading range. However, with global visible exchange monitored stocks at the lowest seasonal level since 2008, the downside risks remain limited. S&P Global US PMI data stronger than expectations The S&P Global US Manufacturing PMI rose to 50.4, back to the expansion territory in April, from 49.2 in March and above the 49.0 expected. The S&P Global US Services PMI also came in stronger than the consensus estimate, bouncing to 53.7 in April, above 52.6 in March and beating the consensus 51.5. The composite measure was 53.5 in April, versus 52.3 in March and 51.2 expected. According to S&P Global Market Intelligence, new orders jumped to the highest rate in 11 months and output prices rose at the fastest rate in seven months. The Biden administration is taking a more expansive approach in curbing US investments in Chinese tech industries Bloomberg reports that US President Biden is going to issue an executive order in the coming weeks to curb American businesses from investing in China’s semiconductors, AI, and quantum computing industries. The ban, according to Bloomberg, will be bigger than what the other media previously reported. In February 2023, Politico reported that the Biden administration was scaling back the scope of the contemplated restrictions to new investment in China’s semiconductors industry only. Meanwhile, US Treasury Secretary Yellen took on a more hawkish tone saying that “even though these policies [against China] may have economic impacts, they’re driven by straightforward national security considerations, and we will not compromise on these concerns even when they make those tradeoffs with our economic interests”. BOJ Ueda reiterates the continuation of YCC ahead of his first policy meeting BOJ Governor Ueda reiterated on Monday his commitment to keep the loose monetary policy for now and hinted that there would be no change to the YCC policy this Friday when the central bank concludes two-day monetary policy meeting under his reign. Many investors, as suggested in various surveys, are expecting no change to policies, including the yield curve control (YCC) policy at this meeting. Investors are expecting some sort of changes to the YCC policy later this year but are divided in the forms of policy changes ranging from widening the current +/- 50bps band, shortening the tenor of the Japanese Government bond (JGB) yield that is targeted from currently 10-year to the 5-year or even the 2-year JGB, or even completely abolishing it. A change to the YCC policy is likely to make the Yen stronger. Chile announces plans to gain controlling stake in future lithium projects Chile’s president Boric in a television address last week said he would create a National Lithium Company that would participate in the whole production cycle. While the proposal fell short of a full nationalisation in the world’s second largest producer of the metal essential in electric batteries, to boost its economy and protect its environment, it nevertheless sent shares of major Chilean Lithium companies tumbling on Friday with Chilean Sociedad Quimica y Minera (SQM) falling 18.6% and Albemarle (ALB) down 10% both hitting fresh one-year lows. Chile holds the world’s largest Lithium and copper reserves, and the announcement is likely to make it more challenging and harder to invest in Chile at a time when demand for green transformation metals look set to accelerate in the coming years. What are we watching next? US debt ceiling concerns intensifying in the background Lower than expected incoming tax revenues are raising concerns that the debt ceiling issue could come to a head as early as early June rather than in late July or August as originally anticipated. The political dysfunction in US Congress, particularly House Republicans that are sending all of the wrong signals on the willingness to accept default if their demands aren’t met. Prices for Credit Default Swaps CDS to insure against US treasury default for the next 1-year rose to a record level of 130 basis points last week, with 24 basis points of that rise coming on Friday alone. Four-week T-bill yields, which mature before the timing of a feared US default scenario, have dropped to 3.25% even as the Fed’s policy rate band is 4-75-5.00% Earnings to watch The most important week during the earnings season is upon investors starting already today with Coca-Cola reporting Q1 earnings before the open. Analysts expect Coca-Cola to report Q1 revenue growth of 3% y/y and EPS of $0.65 up 1% y/y. First Republic Bank was in focus during the short-lived banking crisis and therefore there will be a lot of focus on its Q1 earnings today with analysts expressing gloomy estimates with net revenue and earnings severely down in the coming quarters. Later during the week, the key earnings are from the US technology majors such as Alphabet (Tue), Microsoft (Tue), Meta (Wed), and Amazon (Thu). Monday: Coca-Cola, Whirlpool, Cadence, First Republic Bank Tuesday: UPS, Danaher, PepsiCo, General Motors, Halliburton, Biogen, McDonald’s ADM, 3M, PulteGroup, GE, NextEra Energy, Chipotle Mexican Grill, Alphabet, Microsoft, Texas Instruments, Illumina Wednesday: Boeing, Meta, eBay, ServiceNow, Teradyne, Thursday: Linde, Caterpillar, Valero Energy, Honeywell, AbbVie, Merck, Newmont, Rockwell Automation, Mastercard, Eli Lilly, Mondelez, VeriSign, L3Harris Technologies, Intel, First Solar, Gilead Sciences, Amazon, Amgen Friday: Exxon Mobil, Colgate-Palmolive, Chevron Economic calendar highlights for today (times GMT) 0800 – Germany Apr. IFO Business Climate 1230 – US Mar. Chicago Fed National Activity Index 1430 – US Apr. Dallas Fed Manufacturing Activity Source: Global Market Quick Take: Europe – April 24, 2023 | Saxo Group (home.saxo)

Summary:  This week, focus will be on the Fed's preferred inflation read, the first BOJ policy meeting in the Ueda era, as well as Chinese Industrial Profits and Australia CPI. Five of the 10 biggest companies in the MSCI All World Index report this week, including Microsoft, Amazon, Alphabet, Meta and Exxon. Earnings misses, on already revised-down earnings estimates could threaten stock prices. We cover what you need to watch and why options for downside protection are rising. US GDP growth is expected to slow modestly to 2% The advance reading of the US real GDP growth, scheduled to release on Thursday, is expected, according to Bloomberg’s survey of economists, to slow to 2% Q/Q annualized in Q1, down from 2.6% in Q4 last year. Despite inventory drawdown is potentially dragging GDP growth, personal consumption is expected to come in strong at 4% Q/Q annualized and be the key driving force to sustain GDP growth in Q1. US core CPI deflator and employment cost index to gauge the Fed’s interest rate path This Friday, we will have the release of the Fed’s preferred measures of inflation and wage growth. The median forecast for core PCE from economists surveyed by Bloomberg is 0.3% M/M and 4.5% Y/Y in March (versus 0.3% M/M, 4.6% Y/Y in February). As rent-related components have a smaller weight in the core PCE measures than in the core CPI calculation, the core PCE may not benefit as much as the CPI counterpart from the recent weaknesses in rents. Investors will monitor closely the core service excluding housing sub-index in the PCE report to gauge the underlying consumer inflation trend in the U.S. Meanwhile, the headline PCE deflator growth is expected to slow to 0.1% M/M and 4.1% Y/Y in March from 0.3% M/M and 5.0% Y/Y in February. The Employment Cost Index (ECI) is the Fed’s preferred measure of wage growth. The Bloomberg surveyed consensus is expecting the ECI to tick up to 1.1% Q/Q in Q1, from 1.0% in Q4. The implied Y/Y change will be 5.0% in Q1, below the 5.1% in Q4. The first BOJ policy meeting in the Ueda era This Friday, the Bank of Japan (BOJ) is concluding its two-day monetary policy meeting, the first under the reign of Mr. Ueda. The majority of investors as suggested in various surveys are expecting no change to policies, including the yield curve control (YCC) policy at this meeting. At a press conference earlier this month, Ueda reiterated his stance that the YCC policy is appropriate in view of the current economic, price and financial situation. Investors are expecting some sort of changes to the YCC policy later this year but are divided in the forms of policy changes ranging from widening the current +/- 50bps band, shortening the tenor of the Japanese Government bond (JGB) yield that is targeted from currently 10-year to the 5-year or even the 2-year JGB, or even completely abolishing it. A change to the YCC policy is likely to make the Yen stronger. Chinese industrial profits are on watch: bringing iron ore and copper prices and stock in focus On Thursday traders will be watching Chinese Industrial Profits, looking for clues that China’s industrial sector has the propensity to increase commodity buying. Recent gains in factory output, as well as a seasonal increase in sales and exports, could reflect that industrial profits are improving in sorts; with profits expected to show a 11% YoY drop, which will mark an improvement from the prior 22% pull back in profitability YOY, according to Bloomberg. The data could also either validate or quash remarks that have been swirling, saying Chinese steel mills are experiencing a large profit squeeze, with some curbing output. As for trading implications; we will be watching iron ore and copper prices, as well as big miners shares and ETFs. Also consider the iron ore price pulled back 7% last week and trades almost down 3% on Monday, on concerns China will slow demand, at a time when iron ore producers such as Rio and Fortescue are exporting record amounts of iron ore, with traders concerns oversupply will continue to pressure iron ore prices lower. Read next: IG analyst to FXMAG.COM: In my opinion commodity prices already reflect higher oil prices| FXMAG.COM Australian CPI and potential implications for AUD On Wednesday Australia CPI will be in focus. Inflation is expected to cool with softening food prices to push down the figures, compared to last year’s weather-related price spikes. YoY inflation is expected to drop from 7.8% to 6.9%. QoQ inflation is expected to cool from 1.9% to 1.3%, that’s according to Bloomberg consensus. However, the RBA expects a 1.8% QoQ inflation read, and 7.4% annually. All in all, If hotter reads come through, it could validate the RBA hiking rates next week and see the AUD knee-jerk higher. However, near term downside is alive as commodity prices continue to retreat. Plus, AUD failed to close above the April 14 high of 0.6806 last week, so the April low could be reachable. And downside could pick up if a weaker CPI read come through, as it will likely keep the RBA in pause mode, next week. Also note leveraged funds increased their short positions in the AUUSD for a second week. Over the longer term though, Saxo’s house view is that China’s economy will outperform this year, and this should theoretically support the AUD. Plus commodity prices are widely expected to pick up later this year, supported to Chinese growth picking up. And if you add a potential Fed cut, we could see a downtrend in the overvalued USD. US earnings wrap: how is it going so far? So far this US quarterly earnings season 87 out of the S&P500 have reported results and 73% beat expectations. That said, overall aggregate earnings have declined 1.6% in the quarter. The Materials sector has seen the biggest drop in aggregate earnings, falling 43%. Tech earnings declined 36% on average. Meanwhile in positive news, Industrials reported the most average earnings growth of 47%, with Alaska Air reporting that demand has returned to pre-pandemic levels. US earnings this week; and why risk appetite for downside protection is rising This week, we will get a big reality check, with 170 members of the S&P500 reporting results and a lot of those being blue chips. Five of the 10 biggest companies in the MSCI all world Index report, including Microsoft, Amazon, Alphabet, Meta and Exxon. Earnings misses, on already revised-down earnings estimates could really threaten stock prices. Analysts are expecting tech profits earnings to see the biggest drop since 2009, as big tech’s customers are curbing spending on software, cloud and advertising services, given they’re pinched by inflation and higher borrowing costs.  So, focus will be on commentary about how cost-reduction measures, such as mass layoffs have helped ease margin pressures. Tech stocks in the S&P500 are trading at 25 times prospective earnings, and some traders think this is too expensive given earnings growth is going backwards (with average tech earnings growth down 37% far out). As such, some option traders have increased their bets of a pull back in the Nasdaq 100. The cost of contracts protecting against a 10% decline in the Invesco QQQ Trust, the largest ETF tracking the Nasdaq 100 Index, is now 1.7 times more than the cost of options that profit from a 10% rally. Big tech companies – what to watch, Microsoft, Alphabet, Meta, Amazon  Microsoft (MSFT) reports on Tuesday and expected to report a decline in PC sales and a slowdown in cloud services, which will likely continue to weigh on the top-line, with consensus forecasting the smallest constant-currency revenue growth since 2017. AI enhancements to its search engine, Bing are not likely to translate to sizable sales growth for the company in the near term, but, forward commentary will be watched like a hawk, given Bing is touted to potentially threaten Google’s search dominance. This could be a catalyst for higher forward revenue from advertisers. Alphabet’s (GOOGL) also reports on Tuesday, and growth is likely to remain dull, with a pullback in ad spending, particularly by the financial sector, adding to headwinds, while its core search-ads business si expected to remain pressured by macroeconomic uncertainty. Meta Platforms (META) could be the shining light for big tech, when they report on Tuesday. Operating margins is widely expected to expand sequentially by 18% and see Meta return to growth after four quarters of declines. Weak engagement on the Facebook app remains a real drag on Meta’s ad-impressions growth, but there has been increasing contribution from Instagram Reels, WhatsApp and messaging ads. So focus will be on that translating in the numbers. Amazon (AMZN) is widely expected to report its the weakest quarterly revenue growth on record on Thursday. Until we see cloud-services momentum re-accelerating, it’s possible operating margins will remain under pressure. This week’s key earnings releases   Monday 24 April Coca-Cola (KO) Whirlpool (WHR) First Republic Bank (FRC) Tuesday 25 April Alphabet’s (GOOGL) Microsoft (MSFT) General Motors (GM) Raytheon (RTX) United Parcel Service (UPS) Wednesday 26 April Meta (META) Boeing Thursday 27 April Amazon (AMZN) Caterpillar (CAT) Northrop Grumman (NOC) Merck (MRK) Capital One Financial (COF) Friday 28 April Exxon (XOM) Chevron (CVX) Colgate-Palmolive (CL)   This week’s economic key events Monday 24 April Germany IFO business climate (Apr) Tuesday 25 April US New home sales (Mar) US Conference Board consumer confidence (Apr) Wednesday 26 April Australia CPI (Q1) US Durable goods orders (Mar) Thursday 27 April US GDP (Q1) Eurozone Consumer confidence (Apr) Friday 28 April Bank of Japan policy meeting US PCE deflator (Mar) US Employment cost index (Q1) Germany, France, Eurozone GDP (Q1) Germany, France CPI (Apr) Sunday 30 AprilChina manufacturing and non-manufacturing PMI (Apr) Source: Saxo Spotlight: What’s on investors & traders radars this week? | Saxo Group (home.saxo)

Summary:  Difficult terrain lies ahead for US dollar traders as the US debt ceiling issue nears crunch time, possibly as soon as early June. Elsewhere, a lower than expected Q1 CPI number knocks NZD lower, while the RBA is set for major structural changes that will bring its structure and meeting frequency in line with global peers. Today's Saxo Market Call podcastToday's Global Market Quick Take: Europe from the Saxo Strategy Team FX Trading focus: A difficult terrain ahead as debt ceiling crunch time approaches. RBA set for big structural changes. The House Republicans came up with a complete non-starter of a budget bill that Senate Democrats will never pass, much less the veto-holding Biden administration. The bill looks to raise the debt limit by $1.5 trillion and reduce some $130 billion in spending next year, including axing many of the Biden administration’s hallmark initiatives, like canceling student debt and some of the climate- related programs (although details can be hammered out later). House speaker McCarthy claimed that the bill could save the government $4.5 trillion over the next decade. The House Republicans would have to show extreme discipline to get it passed even in the house as it can’t pass if they lose more than four votes from 222 possible. What to do with the US dollar then? On the one hand, liquidity headwinds lie ahead and threaten risk sentiment headwinds and possibly USD upside. These come from the Fed continuing its QT while the US Treasury is set to drive a net liquidity drain from here. (Backgrounder: US treasury has been providing extensive liquidity as it drained hundreds of billions of USD from its account at the Fed. That account has now dwindled to about as low as it can go now, stopping that source of liquidity for now. And once the debt limit issue is cleared, the Treasury will set about rebuilding the account by hundreds of billions, driving even tighter liquidity.) But if the Biden administration and Congressional Republicans play a game of brinksmanship, it’s hard to imagine that process as a USD positive and will keep the Fed in a cautious stance. The situation could come to a head as soon as early June because of weaker than expected tax revenues, while otherwise late July has been considered the more likely pinch point at which time the US Treasury runs out of room with its special maneuvers. If sanity prevails and a handful of Republican House members cross the line, the issue can be avoided until possibly 2025, if the “Problem Solvers” caucus discussed in this article can get an alternative passed. Sterling failed to get much out of yesterday’s hot CPI print, even as 2-year UK swap rates jumped 15 basis points on the news. GBPUSD couldn’t convincingly challenge the 1.2500 resistance again despite the yield spread widening to new extremes for the cycle. At present, the market is pricing BoE rates to be 25 basis points above Fed rates by year end. This is already difficult to swallow, much less any significant extension of the difference. Driving GBPUSD more than a figure or so higher at this point in the cycle would likely require some major US debt-limit related incident requiring eventual Fed liquidity injection. Expecting sterling to ramp higher because the BoE is finally getting more inflation-fighting religion is far less likely. EURGBP is back in the middle of the range it has traded within all year – still a non-story, though upside is likely the side of least resistance. GBPNOK has my contrarian warning lights flashing… Chart: AUDNZDWhile we await for something to give in either direction in the major USD pairs, the relative merits of AUD and NZD are worth consideration here after the kiwi was knocked lower in the wake of a lower than expected inflation number for Q1 at 1.2% QoQ and 6.7% YoY vs. 1.5%/6.9% expected, respectively and vs. 7.2% the prior quarter. This capped NZ yields and lowers the odds of a May rate hike from the RBNZ. From here, if inflation reheats, the RBA will have more work to do than the RBNZ to fight inflation. Meanwhile, an economic slowdown scenario would leave. With China’s economic activity picking up is normally an added potential benefit for the Aussie, although the key commodity prices coincident to that story are not offering much support to that story. See below for more on the RBA, which is set for a changed structure and meeting frequency that brings it into line with global peers. Next steps for firmly shifting focus back to the upside would be clearing the 200-day moving average and 1.1000 area.   Source: Saxo Group Big changes ahead for the RBA: Following an independent review of the RBA ordered by the Australian government, sweeping recommendations for change were handed down today. Among these are that the RBA should create a new monetary policy board and meet less frequently (eight meetings per year, down from eleven), in better alignment with international counterparts. These were just some of the recommendations and were “welcomed” by the RBA. The report criticized the RBA’s board composition, which includes one economist and six independent directors who are mainly from business. The recommendations include a dilution of the Governor’s powers as more economist expertise would be brought onto the board. The changes could start from July 2024 and see the RBA governor speaking at a press conference after policy meetings. Current Governor Lowe’s term expires in September. The Fed Beige Book released late yesterday suggests the US economy is in a holding pattern, with Fed observers claiming that consumer spending was flat to down slightly, while wage growth showed som moderation, while increasing slack in the labor market (evident in the recent rise in jobless claims) was also noted. A moderation of price increases was noted, while “several districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity”. The banks reporting thus far show no general patterns of suffering deposit flight, though they may have compete more for retaining deposits than previously, and this will tighten the screws on overall credit growth. Read next: US stocks, VIX, megacap companies earnings, metals and more in today's Saxo Market Call| FXMAG.COM Today’s Philly Fed worth watching: after the stunning April Empire Manufacturing survey, which came in at a stunning +10.8 versus expectations for –18 and –24.6 in March, it is worth watching today’s Philly Fed. More positive surprises in the regional surveys leading up to tomorrow’s preliminary S&P Global Apr. US Manufacturing PMI and the BLM’s ISM Manufacturing survey the week after next might indicate something is afoot in the US manufacturing sector. If so, is it the beginning of a turnaround due to huge announced investments in manufacturing that have been encouraged by the most sweeping US industrial policy initiatives since the second World War, including the Inflation Reduction Act and the CHIPS and Science Act? The setup for today’s April Philadelphia Fed survey is similar to the Empire number, with expectations for a reading of –19.3 after –23.2 in March. If the number comes in as weak as expected, then there is no corroboration of the Empire survey number, but if it swings into positive territory after the deepening negative prints in the last several months, it may point to a major reversal in the outlook for US manufacturing. Table: FX Board of G10 and CNH trend evolution and strength.NZD and especially NOK weakness worth noting, but CAD has also lost a lot of altitude here over the last couple of sessions as oil prices corrected lower. On the plus side, the Swiss franc continues its serene strength.   Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Note that EURCHF is approaching a pivot low near 0.9800, the low area since the zany swings during the March banking turmoil. USDCAD is trying to cement the reversal of the attempt through the 1.3400 area and 200-day moving average. Elsewhere, my contrarian pick for the next three months has to be GBPNOK, which just look so absurdly extended. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – US Weekly Initial Jobless Claims 1230 – US Philadelphia Fed Survey 1400 – US Mar. Existing Home Sales 1400 – Eurozone Apr. Flash Consumer Confidence 1530 – Bank of Canada’s Macklem and Rogers to epsak  1600 – US Fed’s Waller (Voter) to speak 1620 – US Fed’s Mester (Non-voter) to speak 1900 – US Fed’s Bowman and Logan (both voters) in Fed Listens event 2015 – ECB's Schnabel to speak 2301 – UK Mar. GfK Consumer Confidence 2330 – Japan National CPI 2345 – US Fed’s Harker (Voter 2023) to speak on economic outlook Source: FX Update: Difficult terrain for USD ahead on US debt ceiling crunch time. | Saxo Group (home.saxo)

Summary:  Today we discuss the very quiet US equity market, highlighting that VIX has dropped to the lowest since late 2021 and with the gains this year driven by a very narrow slice of the largest megacap names, which have yet to report earnings for the cycle. Concerns looking forward include liquidity and the debt ceiling issue approaching crunch time. We also take a look at Tesla's results that saw that stock sharply lower after the close. Elsewhere, we discuss metals, climate change risks intensifying ironically due to cleaner air from new shipping fuel standards, and the big shift from La Nina to El Nino weather patterns underway and possible impacts. Incoming macro data and more also on today's pod, which features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.   Read next: Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?| 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.

Summary:  Market sentiment remains relatively steady, although Tesla’s earnings report after hours so that stock dropping 6% as revenue fell quarter-on-quarter despite rising deliveries due to steep price cuts. US banks reporting earnings thus far for Q1 have generally failed to ring any alarm bells as earnings season rolls on, with the megacap stocks that have driven the bulk of the major US indices’ gains this year up next week. Elsewhere, oil slumped to new lows since OPEC+ announced it production cut. What is our trading focus? US equities (US500.I and USNAS100.I) chop aimlessly US equity markets are firmly bottled up within the range and showing no momentum, as the Nasdaq 100 index posting another choppy, low volatility session and only dropped some 50 points into this morning despite the heavy drop in Tesla shares after hours. That index and the equally low volatility S&P 500 index, may be awaiting the next move in the treasury yields or the earnings reports in the coming two weeks from the handful of market cap giants like Apple, that have driven the bulk of returns for the large-cap indices this year. Chinese equities (HK50.I & 02846:xhkg) ticked modestly lower CSI300 shed 0.7% and Hang Seng Index slid 0.1% in the early Asia afternoon as China property developers, EV makers, and mining stocks weighed on the indices while semiconductors and telco equipment stocks gained. Macao casino operators were among the top gainers as investors positioned for a potential surge in the arrival of mainland patrons during the upcoming May 1 golden week holiday.  FX: USD firms slightly, NZD sharply lower after soft Q1 CPI The US dollar stabilized and edged back higher in the Asian session overnight, particularly against the JPY as USDJPY challenged 135.00 at on point overnight and against a very weak New Zealand dollar after NZ Q1 CPI came in softer than expected, putting the May rate hike from the RBNZ in doubt. NZDUSD slipped below range lows and to its lowest in a month, while AUDNZD popped higher to 1.0880, near 6-week highs. GBPUSD was choppy with gains on the back of a strong CPI print yesterday remaining less than convincing, as the pair traded near 1.2425 in early European hours after a high of 1.2474 yesterday. EURUSD also still not able to make another move towards 1.10. USDCAD rallied hard yesterday on the slump in oil prices and confirming the rejection of the attempt below the 1.3400-10 area support and 200-day moving average. Crude oil continues lower as long-liquidation weighs Crude oil prices trade lower for a third day driving by demand concerns and a technical downside break in both WTI and Brent raising the prospect of deeper short-term losses. The recent weakness in diesel margins across all major trading hubs, a resumption of oil exports from Northern Iraq and recent hawkish Fed comments reducing rate cut expectations while supporting the dollar, are all developments that are now squeezing positions that we bought following the April 2 OPEC+ production cuts – the bulk around $84.50 in Brent and $80 in WTI - in the belief it would drive prices higher. EIA’s weekly stock report was broadly bullish but not strong enough to reverse the current negative sentiment, which is partly driven by a fresh attempt to close the gaps, in Brent to $80 and $75.70 in WTI. Read next: Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?| FXMAG.COM Gold and silver drops as rate cut expectations fade Precious metals traded lower on Tuesday before recovering the bulk of their losses later in the day. The current correlation between Gold and the December SOFR futures contract tracking end of year rates was an elevated 0.7 highlighting where traders currently seek short-term directional guidance. Apart from the need to consolidate following the recent strong gains, gold and silver have been weighed down by the outlook for smaller than previously priced rate cuts this year, currently down from 75bps and potentially pushing towards 25 bps only. The short-term risk of a deeper correction towards $1957 - the 38.2% retracement of the banking-crisis-led runup in prices – remains. Focus on short end rate developments and Friday’s US PMI. Platinum’s discount to gold drops 100 dollars in a matter of days The best performing metal during the latest correction has been platinum which has seen its discount to gold narrow by around 100 dollars from a recent peak above 1000 dollars and it is currently challenging resistance in the $1100 area, the January high. The white metal demand is driven by catalytic converters, green hydrogen technologies, jewellery and investment demand via ETF’s. The bulk of the supply is limited to South Africa currently facing frequent power disruptions, and Russia. The metal is under-owned according to the World Platinum Investment Council, and if ETF demand as recent data shows is starting to pick up, it may help push the market into supply deficit. Since March the net long held by funds rose 9k lots to a small 5.6k net long while gold length in the same period surged higher by 114k lots to 138k. The wide gap explaining part of platinum's resilience during the current correction phase.  Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): short yields slightly higher on UK CPI Selling of treasuries emerged in London hours yesterday, prompted by a 10bp selloff in U.K. Gilts after a hotter-than-expected U.K. CPI report. Traders repriced the Fed rate path higher by adding to the probability of a June rate hike and shedding the odds for rate cuts in the second half of 2023. The SOFR Jun-Dec 2023 spread narrowed by 5bps to -54bps. The 2-year yield rose 5bps to 4.25%. The long end of the curve, however, managed to pare losses following a solid 20-year auction. The 10-year yield edged up 2bps to 3.59% and the 30-year yield finished the day unchanged. What is going on? Tesla Q1 in line but company sees risks driven by economic uncertainty Tesla Q1 revenue and EPS were in line with estimates but the average selling price (ASP), due to recent price cuts, lowered revenue q/q despite deliveries increasing q/q. The operating margin was down 7.8 %-points y/y due to higher costs and a lower ASP. The underutilization of its factories is also leading to higher costs but should improve over time. The demand outlook was kept unchanged but economic uncertainty and higher interest rates were mentioned as key risks. Gross margins may suffer considerably in the short-term because lower ASP filters through more quickly through to the margin than lower costs on batteries from falling lithium carbonate prices. Tesla shares were down 6% in extended trading. Fed speakers increase May rate hike chorus, Beige Book hints at stable economic activity New York Fed President Williams, a permanent voter at the FOMC, reiterated that inflation is still to high and Fed will act to lower prices. He did see some tighter credit conditions, but said that banking conditions have stabilized, while inflation is likely to take two years to get back to 2% levels. He continued to see imbalances in the labor market and expects unemployment rate to rise to 4-4.5% over the next year from 3.5% currently. Chicago Fed President Austin Goolsbee was still neutral and continued to watch the credit side. Meanwhile, April Beige book hinted at some tightening of lending standards but overall little change in economic conditions, suggesting the impact of banking stress could remain limited to weaker parts of the market. NZ Q1 CPI slows more than expected despite the cyclone effect New Zealand CPI came in softer than expected at 6.7% YoY for Q1 from 7.2% YoY previously and weaker than expectations of a drop to 6.9% YoY with the QoQ figure also cooler at 1.2% vs. 1.4% last month and 1.5%V expected. The Q1 print was also weaker than the RBNZ’s own forecast of 7.3% in its Feb monetary policy statement. Inflation remains supported due to high food and utility prices, but softer crude oil prices cooled transportation costs. Today’s print adds to the case of RBNZ pause at the May 24 meeting, despite current market pricing suggesting 71% chance of another rate hike. This makes NZD vulnerable to potentially more downside as even hawkish rhetoric would make the markets expect a RBNZ policy error. RBA shake up; RBA to likely create a new board, and meet less frequently Following an independent review of the RBA, which was ordered by the Australian government, 51 sweeping recommendations were handed down today. Among these are that the RBA should create a new monetary policy board and meet less frequently (eight meetings per year, down from eleven), in better alignment with international counterparts. These were just some of the recommendations and were welcomed by the RBA. Australia’s Treasurer, Jim Chalmers ordered the review in July 2022 after the RBA’s inflation forecasts failed to detect a surge in price pressures. The report criticised the RBA’s board composition, which includes one economist and six independent directors who are mainly from business. The powers of the Governor would be diluted as more economist expertise would be brought onto the board. The changes could start from July 2024 and see the RBA governor speaking at a press conference after policy meetings. Current Governor Lowe’s term expires in September. Ugly inflation figures in the UK The United Kingdom perfectly epitomizes the challenges of the current cycle. While lower growth is desirable to fight inflation, this is politically sensitive. It results in policymakers restraining themselves from tightening enough. At the end of the day, this can cause much more damage to the economy than expected with inflation remaining uncomfortably high for a prolonged period of time. This is currently happening in the United Kingdom. The Bank of England has been very hesitant in the past months to tighten monetary policy given growth and financial fragility concerns. The result of that test has been pretty clear and largely expected: inflation is now entrenched with the headline at double digits and core inflation around 6% for a full year. Inflation is especially driven by profit (as it is the case in the eurozone as well) but also by Brexit consequences and a strong labor market. After yesterday’s inflation figures, it is now clear the Bank of England will have to send a clear signal to the market about its determination to fight inflation. A new rate hike is on the table for the May meeting. What are we watching next? Watching Philly Fed today after Monday’s strong Empire Manufacturing Monday saw the first of the regional US manufacturing surveys for April, the NY Fed’s Empire Manufacturing survey, which came in at a stunning +10.8 versus expectations for –18 and –24.6 in March. It is only one regional survey, but the scale of the surprise should have us on watch for more surprises that might indicate something is afoot in the US manufacturing sector and whether that something is the beginning of a turnaround due to huge announced investments in manufacturing that have been encouraged by the most sweeping US industrial policy initiatives since the second World War, including the Inflation Reduction Act and the CHIPS and Science Act. The setup for today’s April Philadelphia Fed survey is similar, with expectations for a reading of –19.3 after –23.2 in March. If the number comes in as weak as expected, then there is no corroboration of the Empire survey number, but if it swings into positive territory after the deepening negative prints in the last several months, it may point to a major reversal in the outlook for US manufacturing. Earnings to watch A wide variety of companies reporting today, including credit card company American Express, which should have its finger on the pulse of andy changes it is seeing in consumer behaviour in its earnings report. CATL, the largest EV battery market is meant to report today and traded down around 3% overnight as of this writing, even as it unveiled a new battery overnight that claims far higher power density than anything currently on the market and potentially making battery-powered flight possible. Also reporting are rail freight transportation giant Union Pacific, which rose sharply yesterday, perhaps on announcing that it will raise prices to offset higher costs from weather disruptions and higher wages. It reports before the US open. Thursday: CATL, Tryg, Nokia, Sartorius, Volvo, Philip Morris, AT&T, Union Pacific, American Express, Blackstone, CSX, DR Horton Friday: Jinko Solar, SAP, Sandvik, Investor, Procter & Gamble, Schlumberger, Freeport-McMoRan For an extended overview of all earnings releases check out the earnings calendar in our trading platform. Economic calendar highlights for today (times GMT) 0900 – Eurozone Feb. Trade Balance1230 – US Weekly Initial Jobless Claims1400 – US Mar. Existing Home Sales1400 – Eurozone Apr. Flash Consumer Confidence1430 – EIA's Weekly Natural Gas Storage Change1530 – Bank of Canada’s Macklem and Rogers to epsak1600 – US Fed’s Waller (Voter) to speak1620 – US Fed’s Mester (Non-voter) to speak1900 – US Fed’s Bowman and Logan (both voters) in Fed Listens event2015 – ECB's Schnabel to speak2301 – UK Mar. GfK Consumer Confidence2330 – Japan National CPI2345 – US Fed’s Harker (Voter 2023) to speak on economic outlook Source: Global Market Quick Take: Europe – April 20, 2023 | Saxo Group (home.saxo)

Summary:  Today we discuss the US market continuing to hold its breath ahead of key cycle resistance as European equities are also near all-time highs, at least in the EuroStoxx50. It's important to note that the US market rally has been driven by a short list of megacap names. Elsewhere, we round up Netflix and ASML and preview Tesla's earnings report after the close, and many US regional banks will be reporting in coming days, particularly tomorrow, so we should have a broad picture of the state of play for US bank stress by Friday. In commodities, we look at crude oil and natural gas, noting ETF flows that suggest investors are reducing exposure to oil upside. 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 available 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. Read next: Technical analysis of Gold price and silver price - Kim Cramer Larsson| 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: Podcast: It’s been a narrow US equity market rally. Tesla is on tap | Saxo Group (home.saxo)

Summary:  Gold and Silver have formed top and reversal patterns. A correction seems likely to unfold over next few days Gold ripe for a correction. Gold has formed a Bearish Engulfing top and reversal candle. Gold future shows identical pattern.With the divergence on RSI (RSI is declining when asset price has been rising) the precious metal is ripe for a correction.A correction should take Gold down to the 0.382 retracement at 19,55 but could drop to the 0.618 retracement at 1,897. However, 55 and 100 daily Moving Averages are coming up around that level providing some support. Minor support at around 1,981. If taken out a short-term down trend has been confirmed.If Gold can stay above the bottom of the Cloud bull trend is likely to resume after a correction.For Gold to reverse this bearish correction scenario a close above the 2,050 is needed.   Source all charts and data: Saxo Group Gold has run out of steam short of all-time high and with divergence on Weekly RSI a correction should be expected. Silver has also formed Bearish Engulfing candle indicating a top and reversal. Contrary to Gold there is no divergence on RSI suggesting Silver is likely to resume uptrend after a minor correction.Nevertheless, a correction can take Silver down to the 0.382 retracement at around 23.70. If closing below Silver could dip to test 23.00 where the 100 and 55 daily Moving Averages are coming up providing support. However, a dip down to strong support at around 22.25 should not be ruled out.To demolish and reverse this bearish correction scenario a close above 23.10 is needed. Weekly chart Silver was rejected at the strong resistance area 25.85-26.46. Medium-term trend is still up but a correction is likely.  Strong support at around 22.25 which is both the 0.618 retracement and the top of the Cloud.    Gold/Silver ratio is bouncing from support at around 79.00 after dipping down to the 0.786 retracement at 78.36 forming a bottom and reversal pattern.A rebound should have energy to take Gold/Silver to the 0.382 retracement at 83.50 but a move up to 85 level where the 200 and 55 Moving Averages are providing resistance. Read next: Crude oil prices stabilised after Fed's Bullard's comments. Tomorrow Nokia, Volvo and American Express report their earnings| FXMAG.COM For the Ratio to resume down trend and extend it to 74.50 a close below 77.94 is needed.     Source: Technical analysis Gold Silver ripe for correction | Saxo Group (home.saxo)

Summary:  Markets are in a holding pattern as earnings season unfolds and the S&P 500 price action remains bottled up near the 4,200 resistance, with a small cluster of large cap names having driven most of the gains this year. A host of regional US banks, both large and small, will report their earnings in the coming two days and should help the market gauge the status of the ongoing stress on banks as depositors seek higher yields. What is our trading focus? US equities (US500.I and USNAS100.I) are treading water US equity markets are losing a bit of momentum with the S&P 500 futures treading water in yesterday’s session and headed lower in early trading hours today. Netflix earnings after the close was not a positive catalyst as the guidance was on the weak side. US bond yields are steadily climbing here, and the Fed rate cuts priced in for later this year are slowly being reduced as the market is adjusting its inflation and rates outlook higher as more recent data points are suggesting the economy is still humming along. The big focus in US equities is later tonight with Tesla reporting Q1 earnings after the close. Chinese equities (HK50.I & 02846:xhkg) edge down, driven by property developers Hang Seng Index shed more than half a percent, driven by weaknesses in property developers, EV, and sportswear names. After another round of intervention by the Hong Kong Monetary Authority to sell the US dollar in support of the Hong Kong dollar to prevent it from weakening beyond 7.85, the interbank liquidity measure, aggregate balance, fell to HKD49.23 billion, its lowest level in 15 years. The draining of liquidity stirred up fears of Hong Kong dollar interest rising to narrow the gap with the USD interest rates and weighed on interest rate-sensitive local property developers. Macao casino operators bucked the decline following a leading investment bank calling for sustained revenue recovery of the sector. In A-shares, CSI300 slid 0.4%, with property names leading the decline. On the other hand, semiconductors, co-packaged optics (CPO), and media stocks gained. FX: USD sideways, GBP and NZD eye CPI The US dollar rally from Friday reversed course yesterday as treasury yields went sideways and risk sentiment remained steady as US equities threaten the highs for the year. Upside for the greenback likely needs support from a combination of higher yields toppling risk sentiment, or risk sentiment stumbling badly because of fears of an economic slowdown. Most of the US data this week is second-tier stuff, although we are on watch for other regional manufacturing surveys (April Philly Fed up tomorrow and expected at fairly dire –19.2 after –23.2 in March) after the huge Empire Manufacturing number on Monday, and especially if confirmed by the preliminary April S&P Global US Manufacturing PMI on Friday. The market may be sensitive to big surprises in the weekly claims tomorrow as well. Meanwhile, NZD has stabilized a bit ahead of its Q1 CPI print tonight, and the UK’s CPI data is out this morning (see quick report tomorrow, as it is breaking just before we publish). Read next: Suprisingly, Nikkei 225 is still more than 30% below its ATH (printed in 1989)| FXMAG.COM Crude oil awaits the next catalyst Crude oil prices steadied after hawkish comments from Fed’s Bullard and demand concerns, especially for diesel fuel which powers heavy machinery such as truck and construction equipment, were offset by China’s strong Q1 GDP data. Oil exports from Iraq’s Kurdistan region will resume this week according to the Iraqi PM. Ahead of today’s US stock report the API reported an across-the-board and price supportive drop in crude and fuel stocks. Apart from stock levels the market will also be focusing on export, production and fuel demand in today’s report. Having failed to build on the OPEC+ production news a couple of weeks of ago, the market could now be exposed to some long liquidation from recently established longs. Brent is currently trading below $85, and a break below $83.50 could prompt a fresh attempt to close the gap down to $80 (for WTI, between $79 and $75.70). Gold and silver drops as rate cuts are being priced away Precious metals trade lower as the SOFR market continues to price away rate cuts this year with Gold (XAUUSD) getting close to challenging the 21-DMA at $1989 while silver Silver (XAGUSD) trades below $25. Both metals have lost some of their recent shine on a combination of overbought markets in need of consolidation and hawkish Fed comments forcing bond yields and the dollar higher. In our latest update we highlight the short-term risks to precious metals while also highlighting the reasons why we believe prices could go higher still. Below $1989 gold will be looking for support at $1957, the 38.2% retracement of the banking-crisis-led runup in prices. Silver meanwhile is now looking to $24.50 for support being an area that provided several tops back in January and February. Arabica coffee trades up 19% this month on Brazil weather concerns and momentum buying Global coffee prices continue to get more expensive with Arabica coffee, the high-quality bean primarily produced in South America, trading up 19.6% this month to $2.0525/lb, a seven-month high, after the pace of buying accelerated last week when the price broke above the 200-DMA, now support at $1.90/lb. Robusta coffee, primarily produced in Asia, has enjoyed the tailwind to trade up 10% this month so far. The market is worried about weather developments in Brazil with heavy rainfall in some areas and low temperatures in others raising some concerns. In addition, the May contract (KCK3) has been exposed to short covering ahead of the futures first notice day tomorrow. Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): curve flattens in muted trading The lack of negative surprises from banks’ Q1 results so far (although note the number of regional banks reporting below) and the rejection of recession risks in 2023 from St Louis Fed president Bullard weighed on the front end, seeing the 2-year yield rising 3bps to 4.20%. Yields from the 5-year to 30-year edged down 2bps, with the 10-year yield finishing the muted session at 3.58%. The 2-10-year curved flattened to -62. As yields were being range-bound lately, traders were seen shorting volatility in rates by selling strangles. What is going on? ASML sees mixed demand signals The world’s largest manufacturer of advanced semiconductor equipment is reporting Q1 results this morning with Q1 gross margin at 50.6% vs est. 49.8% and revenue of €6.75bn vs est. €6.3bn. The Q2 revenue guidance of €6.5-7bn is also exceeding estimates of €6.4bn suggesting the demand picture looks strong although ASML says in its statement that they see mixed signals on demand. ASML indicates +25% revenue growth in 2023 and that demand will exceed production capacity this year. China is roughly 8% of system sales and 20% of backlog with the CFO saying that the company is still awaiting the Dutch government’s final decision on China chip curbs. Netflix recovers from initially bad read of Q1 earnings Netflix reported last night after the US market close Q1 revenue of $8.2bn in line with estimates and Q1 paid memberships of 232.5mn in line with estimates. The streaming giant also raised its FY23 free cash flow guidance to at least $3.5b from previously at least $3bn as a function of Netflix reducing its spending on original content. Investors were initially spooked sending the shares down 12% because of its Q2 revenue guidance of $8.2bn vs est. $8.5bn, but comments on the conference call about plans to roll out paid sharing models which will increase monetization eased investor concerns. Japan’s Sumitomo Mitsui bank sold $1 billion in AT1 notes This was the first issuance of AT1 debt since Credit Suisse’s AT1 debt was wiped out in its sale to UBS last month and was one of the large corporate bond deals in Japan this year. The bank plans to issue further AT1 debt in May. The bonds sold at a 171 basis point spread to JGB’s. Fed Speak: hawkish, but from non-voters Fed’s most hawkish member Bullard was on the wires overnight, still vouching for terminal rate at 5.50-5.75% against current market pricing of 5.1%. He also stated that US recession predictions ignore the strength of the labour market and pandemic savings still to be used, and the risk of bank stress causing broad problems seems to have diminished. Raphael Bostic also reiterated that he expects one more rate hike, noting the economy still has lots of momentum and inflation is too high and it will take a while to move back to target. On the banking stress, he said that more caution in bank lending will allow the Fed to hike rates less. UK data: uncomfortably high March CPI a challenge for BoE complacency The UK March CPI this morning came in at +0.8% MoM and 10.1% YoY vs. 0.5%/9.8% expected and the core was steady at 6.2% YoY versus expectations of a fall to 6.0%. These hot data points are a challenge to the Bank of England’s aggressively disinflationary CPI forecasts. The Retail Price Index only fell slightly to 13.5% vs. 13.3% expected and 13.8% in Feb. What are we watching next? Blitz of regional US banks reporting earnings next two days Regional US banks are not normally in focus in any given earnings season, but they are suddenly in the spotlight for this earnings cycle since the sudden March collapse of Silicon Valley Bank and ensuing signs that some depositors are moving their funds to larger banks, or even into US treasuries or money market funds, given the unprecedented pace of declines in US commercial bank deposits in the weeks since the Silicon Valley Bank collapse kicked off the recent bank turmoil. Some of the larger US regional banks reporting this week include US Bancorp (US’ fifth largest bank), Zions Bancorp, Western Alliance Bancorp, and Citizens Financial Group Inc. Report today.  Tomorrow Bank OZK, Comerica, Fifth Third, KeyCorp and Truist report, with at least eight additional smaller banks in the KBW Regional Bank Index reporting as well. One regional bank reporting Q1 earnings yesterday, Hancock Whitney ($35B total assets), saw an 11% drop in total deposits and a doubling of its short term borrowing. Earnings to watch Today’s key US earnings to watch are Tesla (aft-mkt) and US Bancorp (bef-mkt) with investors focusing on the gross margin developments of Tesla which has aggressively cut prices across its models in Q1 as lithium carbonate prices have declined more than 60% since the peak in November. Tesla’s expectations for orders and growth will also be closely watched by investors. Analysts expect Tesla to report 25% revenue growth y/y in Q1 and then Q2 revenue growth estimates are currently at 47% y/y. US Bancorp has not seen the same impact on deposits as other US banks so given the figures we have seen from US bank we expect a strong report from US Bancorp. Wednesday: Metro, ASML, Heineken, Tesla, Abbott Laboratories, Morgan Stanley, IBM, Lam Research, US Bancorp Thursday: CATL, Tryg, Nokia, Sartorius, Volvo, Philip Morris, AT&T, Union Pacific, American Express, Blackstone, CSX, DR Horton Friday: Jinko Solar, SAP, Sandvik, Investor, Procter & Gamble, Schlumberger, Freeport-McMoRan For an extended overview of all earnings releases check out the earnings calendar in our trading platform. Economic calendar highlights for today (times GMT) 0900 – Eurozone Mar. Final CPI*1035 – ECB Chief Economic Lane to speak1215 – Canada Mar. Housing Starts1430 – US DoE Weekly Crude Oil and Product Inventories1600 – ECB's Schnabel to speak1700 – US Treasury to sell 20-year T-bonds1800 – US Fed Beige Book2130 – UK Bank of England’s Catherine Mann to speak2130 – US Fed’s Goolsbee (Voter 2023) to speak2245 – New Zealand Q1 CPI Source: Global Market Quick Take: Europe – April 19, 2023 | Saxo Group (home.saxo)

Summary:  Indecisive market action here despite a fresh surge in US treasury yields on a strong regional manufacturing survey and bounce in a key US housing survey. The US dollar shrugged off those developments while gold attempts to hang on to the $2,000 per ounce handle. As we consider the earnings season kicking into high gear today with companies like Netflix and Bank of America reporting, a major speech from ECB President Lagarde on “Central Banks in a fragmenting world” is worth pondering for the longer term. What is our trading focus? US equities (US500.I and USNAS100.I) getting closer to new highs for the year US equity markets continued their rally yesterday with S&P 500 futures making their second highest close for the year with the closing high back from early February now in sight. Stronger than expected April Empire Manufacturing is a preliminary suggestion that economic growth continues to hum along despite the higher interest rates. Earnings from Charles Schwab were also good enough to calm the market about any potential new fallout in banking stocks improving sentiment in financials. Today’s key earnings focus is earnings from J&J (bef-mkt), Bank of America (bef-mkt), and Netflix (aft-mkt). Chinese equities (HK50.I & 02846:xhkg) were mixed after strong GDP and retail sales Hang Seng Index shed 0.5% while CSI300 Index added 0.4% after the release of a mixed bag of data. China’s real GDP rose 4.5% y/y in Q1, beating expectations and accelerating from the 2.9% in Q4 last year, driven by stronger-than-expected growth in the tertiary sector (mainly services). Retail sales also came in strong at a growth rate of 10.6% y/y. The growth in industrial production, however, was below expectation at 3.9% y/y, dragged by a deceleration in the mining industry. Fixed assets investment decelerated to 4.8% y/y in March from 5.5% in the first two months of the year, driven by a larger -5.9% y/y decline in property investment. FX: USD fails to extend recovery despite new treasury yield surge The bounce in the EURUSD failed to spread its wings, even as US treasury yields surged anew yesterday, in part on firmer US economic data, including a whiplash turnaround in the first of the regional US Manufacturing surveys (the Empire survey – more below) and a firmer NAHB Housing Market survey. A speech from ECB President Lagarde (more below) is worth considering as a game-changer for suppressing currency volatility long term if we see confirmation that other countries in the US/EU-aligned security sphere share her thinking. Crude oil: stabilizing near key support on China growth outlook On Monday, crude oil prices retreated by about 2% due to concerns over demand, as more bets on Fed tightening emerged amidst a strong showing of economic indicators. However, prices rebounded slightly overnight as China's Q1 GDP exceeded expectations, indicating faster growth. Nonetheless, there are concerns over a drop in demand in Asia, with reports suggesting that refiners in the region are considering cutting output due to a significant decline in profit margins. Refinery margins in Europe and the US have also weakened, particularly for diesel fuel, which powers heavy machinery such as trucks and construction equipment. Last week, Russian crude exports exceeded 3 million barrels per day. Brent is currently trading near $85, and a break below $83.50 could prompt a fresh attempt to close the gap down to $80 (for WTI, between $79 and $75.70). Read next: Judging from integrated technical analysis US dollar may face further downside pressure if...| FXMAG.COM Gold and silver: correction risks remain as Fed tightening bets pick up Precious metals were pressured lower on Monday as US yields surged further with the 2-yr reaching 4.19%, up from 3.55% during last month's banking scare, while the 10-year touched 3.6% as the NY Fed’s manufacturing survey indicated further economic strength and room for Fed to keep rates higher-for-longer. The June23-Dec23 SOFR spread has narrowed to 59 bps from around 70 bps as the prospect for rate cuts are being scaled back. Gold has so far managed to hold above its 21-day moving average, currently at $1989 while silver is holding above $25 ahead of $24.50. Correction risks remain while the market focus on the risk of higher rates and a slow pace of cuts thereafter. Friday’s US PMI data as key along with a host of Fed speakers. Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): yields rise anew on firm US data US Treasury yields climbed sharply again yesterday and all along the curve, with the 2-year benchmark rising nearly 10 basis points to a new multi-week high just shy of 4.20%, while the 10-year yield advanced only slightly less to near 3.60%, which is close to the highest level since the treasury market stabilized after the storm of buying on the SV Bank collapse in early March. Strong US data (more below) seemed to drive much of the move. What is going on? ECB President Lagarde calls for coordinated CB action, united EU capital markets In a sweeping speech delivered before the Council on Foreign Relations thinktank in the US, President Lagarde described a fragmenting world that could lead to the world dividing into as few as two blocs led by the two superpowers if the current scrambling to disentangle supply chains from unfriendly hands deepens. She noted attempts to set up alternatives to the SWIFT system so that powers considered a pariah in the US-aligned national security sphere can conduct trade. She also called for central bank interdependence to support weak spots, noting that the Fed and ECB had been “proactive in providing offshore liquidity when recent crises have hit” - a veiled reference to the bailout of the UK during its crisis last fall. She also called for a deeper integration of EU capital markets: “To put it bluntly, we need to complete the European capital markets union. This will be pivotal in determining whether the euro remains among the leading global currencies or others take its place.” Important to consider full text of President Lagarde’s speech. Bank earnings: Mixed report from Charles Schwab but a disappointing one from State Street Focus remains on regional banks reporting earnings this week, after we got an early insight last week on Friday with strong results from JP Morgan, Citigroup and Wells Fargo. But the regional bank earnings have started on a more mixed footing amid deposit outflows. Charles Schwab, which was under pressure during the recent banking crisis, has reported today Q1 net revenue in line with estimates and EPS of $0.93 vs est. $0.90. But the US broker also reported Q1 deposits that declined to $325.7bn down from $366.7bn in Q4 2022 and down from $465.9bn a year ago highlighting that it has been hit hard on the funding side. Meanwhile, State Street reported lower net interest income, deposits and fee revenue in Q1, and customers withdrew a net $26 billion from State Street’s investment products in the quarter, compared to expectations of $8bn in inflows. Its deposits fell to $39 billion from $44 billion, and they expect another drop of $4-5 billion in Q2. Strong US Empire Manufacturing, NAHB Housing Market Index The April US Empire Manufacturing survey shocked the consensus with a reading of +10.8 versus –18.0 expected and –24.6 in March, a whiplash turnaround that makes one wonder if the surge in new manufacturing buildout plans (FT notes that some $200B in expansion plans have already been announced) encouraged by the Inflation Reduction Act and CHIPS and Science Act are already showing up in the data. It is only one “soft” survey data point so far, but we should be on watch for whether the other regional US surveys show a similar pickup. Elsewhere, the US Apr. NAHB Housing Market Index continued to recovery, posting a reading of 45 as expected and 44 in March. Apple introduces new “High Yield Savings Account” to US users with 4.15% yield As we talked a lot about during the banking crisis, there is a stark difference between the US deposit rate and the money market rates. Apple is extending its financial services to take advantage of this yield difference by offering a savings account in partnership with Goldman Sachs to make the iPhone a digital wallet. There are some low-level constraints on the offering such as customers cannot spend money directly from the savings account, which leaves it an open question of how popular the account will become. Wheat prices rise on renewed supply threats from Ukraine Paris Milling wheat rose 2.4% to €256/t on Monday, potentially confirming a double bottom in the €245/t area, on worries that Ukraine grain exports could be disrupted after Ukraine said that Russia for the second time in a week had blocked inspections of vessels. That’s happening as Poland, Hungary and Slovakia have banned imports of Ukrainian gran over concerns supplies were hurting their domestic markets. Chicago and Kansas wheat meanwhile trades up more than 2% since Friday as well supported by poor winter crop conditions with only 27% of the winter wheat crop being rated in good to excellent condition versus 30% a year ago. What are we watching next? UK labor data to be the next key test for GBP May hike from the Bank of England still remains in play with about a 80% probability, but commentary from officials has remained mixed. While economic momentum continues to pick up compared to recession calls being made late last year, this week’s data will be a key test for how much room there might be for further tightening. Labor data out on Tuesday and traders will be looking for signs on whether wage growth has peaked. Bloomberg consensus expects March employment change to come in at 48k from 98k in February, with the 3-month unemployment rate remaining steady at 3.7%. Weekly earnings is expected to grow 5.1% YoY in the three months to March from 5.7% previously. GBPUSD has plunged below 1.24 amid recent USD strength but supports are still far at with 100DMA and 50% retracement of the recent rally sitting just below 1.22. Regional US banks reporting earnings will be in focus this week. Regional US banks are not normally in focus in any given earnings season, but they are suddenly in the spotlight for this earnings cycle since the sudden March collapse of Silicon Valley Bank and ensuing signs that some depositors are moving their funds to larger banks, or even into US treasuries, given the unprecedented pace of declines in US commercial bank deposits in recent weeks. Some of the larger US regional banks reporting this week include Zions Bancorp and US Bancorp reporting Wednesday, and Bank OZK, Comerica, Fifth Third, KeyCorp and Truist reporting on Thursday. Earnings to watch Today’s key US earnings to watch are Johnson & Johnson (bef-mkt), Bank of America (bef-mkt), and Netflix (aft-mkt). Analysts expect Johnson & Johnson to report low revenue growth of 1% y/y in Q1 and no growth in operating profit. Bank of America Q1 earnings will likely be positive following the earnings we got on Friday from Citigroup, JPMorgan Chas and Wells Fargo. Netflix is expected to report revenue growth of 4% y/y in Q1, and EBITDA is expected to be slightly up compared to a year ago. Tuesday: Ericsson, Johnson & Johnson, Bank of America, Netflix, Lockheed Martin, Goldman Sachs, Intuitive Surgical Wednesday: Metro, ASML, Heineken, Tesla, Abbott Laboratories, Morgan Stanley, IBM, Lam Research, US Bancorp Thursday: CATL, Tryg, Nokia, Sartorius, Volvo, Philip Morris, AT&T, Union Pacific, American Express, Blackstone, CSX, DR Horton Friday: Jinko Solar, SAP, Sandvik, Investor, Procter & Gamble, Schlumberger, Freeport-McMoRan For an extended overview of all earnings releases check out the earnings calendar in our trading platform. Economic calendar highlights for today (times GMT) 0900 – Eurozone Feb. Trade Balance 1230 – US Mar. Housing Starts & Building Permits 1230 – Canada Mar. CPI 1500 – Canada Bank of Canada Governor Macklem & Deputy Governor Rogers before Lawmakers 1700 – US Fed’s Bowman (Voter) to speak on Central Bank Digital Currencies 2030 – API's Weekly Crude and Fuel Stocks Report Source: Global Market Quick Take: Europe – April 18, 2023 | Saxo Group (home.saxo)

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, April 11. A week that saw renewed dollar weakness and rising bond yields as the impact of last month’s banking crisis continued to fade. In commodities the total net long reached a seven-week high, with buying being concentrated in WTI crude oil, RBOB gasoline, natural gas, coffee, and cattle. On the sell side some profit taking emerged in gold, platinum, soybeans while the CBOT wheat short reached a fresh five-year high Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial. Link to latest report What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Global Market Quick Take EuropeSaxo Market Call Daily Podcast This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to last Tuesday, April 11. A week that saw renewed dollar weakness and rising bond yields as the impact of last month’s banking crisis continued to fade, thereby triggering some profit taking across interest rate sensitive stocks. Ahead of key US economic data the commodity sector traded mixed with gains in energy and softs being offset by profit taking across the metal sectors. Commodity sector:   The Bloomberg Commodity Index added 0.6% to trade higher for a third week as continued gains in energy, led by gasoline and natural gas, and broad gains in softs led by sugar and coffee more than offset consolidating among precious and industrial metals as well as grains. Overall, the net long across 24 major commodity futures rose by just 2% to 1.2 million lots, a seven-week high, with buying being concentrated in WTI crude oil, RBOB gasoline, natural gas, coffee, and cattle. On the sell side some profit taking emerged in gold, platinum, soybeans while the CBOT wheat short reached a fresh five-year high.        Crude oil: Buying of crude oil moderated following a massive buying spree in the previous week that followed the surprise OPEC+ production cut announcement. Having bought the biggest number of contracts or lots (136k or 136 million barrels) in a single week since December 2016, speculators turned more cautious. The WTI net long increased 22k lots on an equal combination of fresh longs and short covering. Brent meanwhile saw a small amount of net selling with long and short positions being adjusted lower.  Fuel Products: The ICE gas oil net long was reduced to a 30-month low at 17.3k lots while the RBOB Gasoline position received a 25% boost, driven by fresh longs as the price jumped 4.7%. Gold: Following the strongest four-week buying spree since mid-2019 the yellow metal was exposed to a small amount of profit taking during the week as the price showed signs of consolidating around $2000. Having jumped by 121k lots (12.1 million ounces) in the previous four weeks, the net long was reduced by 7.4k lots to 137.6k lots, some 38k lots below last year’s peak around the time gold hit a $2070 record high.  Silver & Platinum: Profit taking reduced the net longs in both, but while the 262 lots reduction in silver was driven by interest both on the long and short side, platinum’s 36% reduction was driven by a combination of long liquidation and fresh short selling. This was before both metals surge higher in the days that followed, not least platinum where the discount to gold slumped to $955 on Friday from a recent peak at $1015. Despite a 6% year-to-date gain and an almost non-stop 25% rally during the past month, silver is not seeing the same interest from investors with the managed money long down 1/3 on the year as opposed to gold which has more than doubled during the same time.  HG Copper: The copper long increased by 45% to 6k lots and despite trading up close to 8% on the year, the net long remains around 9k lots below the level seen at the start of the year. The lack of interest despite seeing the price attempting an upside break highlights a speculative community still torn between the risk of a global economic downturn versus a recovering China and a drop in exchange monitored stocks to a 15-year seasonal low at 221,000 tons.       Wheat: The widening to a record of the spread between in tight supply Kansas RHW and a falling Chicago SRW (Soft Red Winter) wheat contract helped drive the net short in the Chicago contract to fresh five-year high at 104k lots. The Kansas contract meanwhile registered a 21% increase in the net long to 9.2k lots. Across the other grains contract activity with except for a 21k reduction in the soybean long was muted leaving the total net long across the six major contracts down 33k lots on the week to 140k lots. Read next: DAX and EuroStoxx 50 - technical analysis by Kim Cramer Larsson| FXMAG.COM Softs buying extends to a third week: All four softs contracts of sugar, coffee, cotton and cocoa continued to attract buying during a week that saw raw (+4.6kj to 220k lots) and white sugar prices hitting fresh decade highs on continued supply concerns amid the prospect for limited exports out of India and concerns about production in other key suppliers like Thailand. Supply concerns from key South American exporters led by Brazil helped lift Arabica coffee (+12.1k to 21.8k) by more than 8% as it prepared to mount what turned out to be a successful attack on the 200-day moving average, now support at $1.90/lb, for the first time since last September. Forex In forex, speculators bought a considerable amount of euros ahead of the fresh upside push seen later in the week. It lifted the net long to 163k, near the highest since January 2021, and together with a trimming of short positions in sterling to a 13-month low at -2.4k lots and fresh short covering in Swiss franc being only partly offset by selling of AUD, these changes helped boost the overall dollar short against nine IMM forex futures and the Dollar index by 57% to $9.4 billion, a seven-week high. Source: COT: Gold sees profit taking; Crude oil buying slows | Saxo Group (home.saxo)

Summary:  Friday saw a solid jump in US treasury yields, one that the incoming data didn't really justify, suggesting that market players have an agenda here. Could that agenda be the sense that there was an overreaction to the immediate implications for Fed policy from the Silicon Valley Bank crisis? The results and outlook from regional US banks this week should help answer that question. We also look at the bump in US yields helping the USD to reverse sharply from recent weakness and offer extensive commodity market coverage, especially on positioning, crude oil and copper. Today's pod features Ole Hansen on commodities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.   Read next: What have Fed speakers said recently? This week Netflix, SAP, Nokia, Volvo and other big names report their earnings| 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.

Summary:  US equities ended last week largely flat as three of the largest banks reported earnings and kicked off the Q1 quarterly earning cycle. Developments elsewhere deserved a bit more attention as hawkish Fed comments drove a sharpy rise in treasury yields and inspired a sharp reversal in the US dollar’s fortunes, with gold also selling off on the development just after having probed new cycle highs. What is our trading focus? US equities (US500.I and USNAS100.I) chop to end day and week flat US equity market saw a choppy session Friday but ended the day and week largely unchanged as earnings season gets into full swing this week (see long list of important companies set to report earnings this week below). Technically, the S&P 500 action has been bottled up ahead of the 4,200+ resistance and the Nasdaq 100 has been unable to capitalize and extend its momentum higher after break back above 13,000 more than two weeks ago, with the bounceback in US Treasury yields on Friday offering some headwinds for bulls if that move extends. Chinese equities (HK50.I & 02846:xhkg): rally ahead of key data tomorrow Hang Seng Index and CSI300 Index both advanced, rising 0.6 to 1%. Resources names surged. Base metal miner MMG (01208:xhkg) jumped more than 12% and Petrol China (00857:xhkg) added 4.3%. EV maker XPeng (09868:xhkg) soared 10% on plans to cut costs. China is releasing Q1 GDP and fixed asset investment, as well as March retail sales and industrial production tomorrow. The data is expected to show an acceleration in growth, partly attributable to the base effect following strict lockdowns that began in major cities in March last year. Economists surveyed by Bloomberg anticipate China's Q1 real GDP growth to recover to 3.9% Y/Y, up from 2.9% Y/Y in Q4. FX: EUR and GBP back below key levels After a tough week, the USD recovered sharply on Friday into the close, bouncing higher as Treasury yields rose on the back of retail sales data and a University of Michigan survey signalling Fed could keep rates higher for longer on the jump in short term inflation expectations (more below). The Fed’s Waller comments also brought back fear of more rate hikes, seeing EURUSD drop back below 1.10 and GBPUSD below 1.25 and testing 1.24 in today’s session – both just after testing cycle highs. USDJPY also rose back higher to test the 134 handle from lows of 132 during the week. NZDUSD is testing range lows just above the 200-day moving average, while AUDNZD surged back above 1.08 for the first time since early February ahead of Q1 NZ CPI data due on Wednesday. Crude oil: IEA warns about higher prices while diesel sends the opposite message Crude oil continues to trade in a relatively tight range following the early April mayhem when prices surged higher after OPEC+ announced their surprise production cuts. Since then, both WTI and Brent have traded rangebound with a brief upside attempt quickly running out of steam last week. In their monthly oil market report last Friday, the IEA warned that the OPEC+ cut will tighten the market more than previously expected and lead to further price increases. On the other hand, the risk of continued US rate hikes and weakening refinery margins signaling weaker demand, especially for diesel fuel, the heavy machinery fuel that powers everything from trucks to construction equipment, is a concern that could keep Brent below $90 in the coming weeks until the demand outlook becomes clearer. Gold drops back towards $2000, silver below $25.50 on Fed warning Higher yields and a stronger dollar into the close on Friday saw gold trade lower following a week that saw the yellow metal move within 1% of the 2022 record high. A combination of a Mich. survey pointing to higher inflation for longer and warnings from Waller (see below) that the Fed has not made much progress on its inflation goal, and rates need to rise further, saw gold slump from $2040 to sub-2000 before stabilizing. Silver also plummeted from $26 to lows of $25.15 with support at the 25-handle still holding. Having gone through a mini correction after reaching overbought territory the metals will be focusing on this week’s PMI data as key along with a host of Fed speakers. Gold will need to stay above the 21-day moving average, currently at $1989, to maintain its upward trajectory, and avoid a bigger setback towards $1955. Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): yields rose on hawkish Fed comments. US Treasury yields climbed higher on Friday, driven by hawkish remarks from Federal Reserve official Christopher Waller, who is a voting member on the Board of Governors and said that inflation is too high and that his job is not done. The market is now pricing higher odds of a May 3 FOMC meeting rate hike and a full 25 basis point hike through the June meeting is now fully priced. Later in the day on Friday, the University of Michigan consumer survey, 12-month inflation expectations surged to 4.6% in March from 3.6% in February. This uptick raised concerns over inflation and weighed on the shorter-term end of the Treasury curve, with the 2-year yield surging 13bps to 4.10%. The 10-year yield increased by 7bps to 3.51%. What is going on? Merck to buy Prometheus Biosciences at 75% premium to Friday’s close. The US-based pharmaceutical company Merck is attempting to acquire Prometheus in a deal worth $10.8bn and expects the deal to close in Q3 this year. Prometheus is a biotechnology company treating different types of immune-mediated diseases with a focus on inflammatory bowel disease. In other news, Merck announced a very successful set of data points related to its skin cancer vaccine treatment which it is developing in a partnership with Moderna. Flash April University of Michigan survey sees jump in inflation expectations Preliminary print UoM for April saw the headline rise to 63.5 (exp. 62.0, prev. 62.0) reflected by current conditions and forward-looking expectations both lifting more-than-anticipated to 68.6 (exp. 67.3, prev. 66.3) and 60.3 (exp. 60.0, prev. 59.2), respectively. Meanwhile, inflation expectations jumped sharply higher, with 1yr expectations coming in at 4.6% from 3.6% previously while long-term 5yr expectations remained at 2.9%. This is probably a signal of higher gasoline prices at the pump, and continues to signal that it may be too soon to take inflation concerns off the table. Fed speakers further send USD higher A host of Fed speakers were on the wires on Friday. Specifically, Waller’s (voter) comments were particularly hawkish, as he noted the recent data shows Fed has not made much progress on its inflation goal, and rates need to rise further. He also said that policy needs to remain tight for a substantial period and longer than what markets are expecting. Bostic (non-voter) also supported the case for a May rate hike, saying that the recent inflation data is encouraging, though prices are still rising too fast and the Fed needs to do more. Dovish member Goolsbee (voter) repeated his comments from earlier in the week, noting he does not want to comment on what he will be voting for in May as he still wants to see the data, but repeated the need to be mindful as Fed has already hiked a lot and there is some lag possibly coming through and possibly evident in the weak March retail sales. With data flow remaining thin this week, focus will be on a host of Fed speakers to assess the path of interest rates from here. US retail sales mixed, but garners a strong reaction from bonds and USD Headline retail sales fell 1.0% in March, deeper than the expected decline of 0.4% and the prior -0.2% (revised up from -0.4%). Core Retail sales were also weak, falling 0.8% vs the -0.3% consensus and against a prior -0.1%. However, the retail control group, an input into the consumer spending section of GDP, declined by 0.3%, coming in better than the Bloomberg consensus expectation of -0.5%. The March industrial production also came in better-than-expected at 0.4% MoM vs. +0.2% expected, further boosting short-end yields. In the wake of the data and Fed speakers, US treasury yields and the US dollar surged. Read next: easyJet, Tesla, Netflix, GS - some big names report earnings this week| FXMAG.COM COT on commodities in the week to April 11 In the reporting week, the Bloomberg Commodity Index added 0.6% to trade higher for a third week as continued gains in energy, led by gasoline and natural gas, and broad gains in softs led by sugar and coffee more than offset consolidating among precious and industrial metals as well as grains. Responding to these developments, and according to the weekly Commitments of Traders report, money managers increased their net long across 24 major commodity futures contracts by just 2% to 1.2 million lots, a seven-week high, with buying being concentrated in WTI crude oil, RBOB gasoline, natural gas, coffee and cattle. On the sell side some profit taking emerged in gold, platinum, soybeans while the CBOT wheat short reached a fresh five-year high. What are we watching next? Regional US banks reporting earnings will be in focus this week. Regional US banks are not normally in focus in any given earnings season, but they are suddenly in the spotlight for this earnings cycle since the sudden March collapse of Silicon Valley Bank and ensuing signs that some depositors are moving their funds to larger banks, or even into US treasuries, given the unprecedented pace of declines in US commercial bank deposits in recent weeks. Some of the larger US regional banks reporting this week include M&T Bank reporting today, Zions Bancorp and US Bancorp reporting Wednesday, and Bank OZK, Comerica, Fifth Third, KeyCorp and Truist reporting on Thursday. Earnings to watch The Q1 earnings season is taken to a new level this week with very important earnings releases from Netflix on Tuesday and ASML and Tesla on Wednesday. In relation to the banking crisis earnings from Charles Schwab today and later this week on Wednesday from US Bancorp are key to watch – but note as well some of the regional bank names set to report this week above as well as the list below. Monday: Eve Energy, Exor, Charles Schwab Tuesday: Ericsson, Johnson & Johnson, Bank of America, Netflix, Lockheed Martin, Goldman Sachs, Intuitive Surgical Wednesday: Metro, ASML, Heineken, Tesla, Abbott Laboratories, Morgan Stanley, IBM, Lam Research, US Bancorp Thursday: CATL, Tryg, Nokia, Sartorius, Volvo, Philip Morris, AT&T, Union Pacific, American Express, Blackstone, CSX, DR Horton Friday: Jinko Solar, SAP, Sandvik, Investor, Procter & Gamble, Schlumberger, Freeport-McMoRan For an extended overview of all earnings releases check out the earnings calendar in our trading platform. Economic calendar highlights for today (times GMT) 1200 – Poland Mar. CPI Core1230 – US Apr. Empire Manufacturing1300 – UK Bank of England’s Cunliffe to speak1400 – US Apr. NAHB Housing Market Index1500 – ECB President Lagarde to speak0200 – China Q1 GDP0200 – China Mar. Industrial Production0200 – China Mar. Retail Sales Source: Global Market Quick Take: Europe – April 17, 2023 | Saxo Group (home.saxo)

Summary:  Today we look at the market posting a strong session as US data was benign and as the US dollar rolled over to new cycle lows. Hard to read too much into local price action, however, as we await the Q1 earnings season kick-off today with the large US banks reporting and a heavy earnings calendar next week. We also delve into metals and commodity performance generally here, the end of the EuroDollar futures market as SOFR futures take over, the macro calendar for the week ahead and much more. Today's podcast features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.   Read next: Raw sugar traded in NY and White sugar in London both trade near a decade high on persistent worries about tight global supplies | 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: Podcast: Market in goldilocks mode, with massive earnings week ahead. | Saxo Group (home.saxo)

Summary:  Weak US producer price inflation and signs of slightly more slack in the US labour market in the jobless claims saw the US dollar sharply lower and kept market sentiment yesterday, with the S&P 500 bouncing back from the previous day’s weakness and then some. The EURUSD posted a new 1-year high and USDCHF tumbled to a new 2-year low as gold eyes its all time high in USD terms. Today sees the US reporting March Retail Sales. What is our trading focus? US equities (US500.I and USNAS100.I) PPI print extends momentum in equities A negative producer price index m/m kickstarted a rally in equities despite the inflation print did little to move the Fed Funds forward pricing with S&P 500 futures rallying 1.3% to the highest close since early February. Unless macro figures are weakening considerably in the near-term the momentum in equities will likely continue. Today’s big event in US equities is earnings from major US banks such as JPMorgan Chase, Wells Fargo, and Citigroup given the recent banking crisis and indications that lending standards are tightening. Chinese equities (HK50.I & 02846:xhkg): rallies modestly on lackluster trading Hang Seng Index and CSI300 Index both opened higher but the rallies lost momentum somewhat in lackluster trading as China internet stocks met selling on upticks. The Hang Seng Index was nearly unchanged and the Hang Seng Tech Index shed 0.5% with Baidu, down around 4%, driving the decline. Semiconductor names, on the other hand, bounced. SMIC (00981:xhkg) gained 4% and Hua Hong Semiconductor added 5%. In A-shares, semiconductor, auto, and gold mining stocks advanced. CSI300 climbed 0.5%. FX: USD tumbles, AUD and NZD suddenly resurgent The US tumbled to new lows overnight after weakening sharply in the wake of jobless claims and PPI data yesterday. Initially, the JPY jumped the most across the board on the impact of the weak data on US treasury yields, but as the yield reaction faded, the JPY rolled back over and AUD and NZD led the pack in posting new highs against the US dollar, perhaps on strong credit growth data from China yesterday. AUDUSD rallied more than a figure from its lows, though it has yet to stick above the pivot high from earlier this month just south of 0.6800. EURUSD pulled to its highest level in a year overnight above the pivot highs of 1.1054 from early February. Read next: Powell's preferred supercore measure still hovers around 4-6% range| FXMAG.COM Crude oil: pared some recent gains on demand concerns Crude oil traded softer on Thursday despite tailwinds from a weaker dollar after US economic data pointed to a softening economic outlook, and after both Brent and WTI ran into local resistance. Still the market is heading for its fourth weekly gain supported by tightening market conditions following last month surprise OPEC+ production cuts, robust demand from China and the mentioned dollar weakness. Both prompt spreads in WTI and Brent trade in backwardation, thereby supporting the tightening outlook focus. Ahead of today’s monthly oil market report from the IEA, OPEC in its latest monthly report said that “commercial inventories have been building in recent months, and product balances are less tight than seen at the same time a year ago”. Still, the group kept the 2023 world oil demand growth forecast unchanged at 2.3mn barrels/day. Gold and silver reach fresh cycle highs on broad dollar weakness Gold prices surged further on Thursday to trade near $2050 with around 1% to go before reaching the March 2022 record high at $2070. Silver meanwhile extended its gain to trade near $26 as the relentless rally that started with the banking crisis last month continues to attract fresh demand. The trigger for the latest move higher was ongoing weakness of the dollar which tumbled to new lows overnight after weakening in the wake of softer jobless claims and PPI reports yesterday. Data that strengthened market expectations for a Fed pause followed by a succession of rate cuts. The dollar weakness helped support strong performances among other metals, platinum's discount to gold narrowed to $985 from above $1000 earlier in the week, while HG Copper’s move above trendline and the recent high at $4.15 may trigger some additional momentum buying amid an outlook pointing towards tighter market conditions amid rising demand for green transformation metals. Coffee on the move as supply worries resurface Arabica coffee hit a fresh 6-month high at $2 a pound on Thursday with accelerated buying interest seen after the price broke above its 200-DMA, now support at $1.90. The fundamental driver behind the latest move higher has been the outlook for lower production in Colombia and after shipments from Brazil was reported to have fallen 19% last month. A further extension above $2.04, the 61.8% retracement of the August to January retracement, could see the market target $2.19 next. US Treasury yields little changed after latest US data (TLT:xnas, IEF:xnas, SHY:xnas) The market put on a show of bidding up treasuries after a softer than expected US PPI data point yesterday and as weekly jobless claims rolled in again within the recent range, but yields at the front end of the curve quickly reverted back to unchanged and even rose slightly at the longer end of the yield curve after a US 30-year t-bond auction saw few take-aways, alth What is going on? US PPI soft, weekly jobless claims higher than expected The March PPI data came in cooler than expected on the headline M/M and Y/Y, with M/M seeing a 0.5% decline. Core M/M was also cooler than expected, falling 0.1%, vs. expectations of +0.3%. While data suggested disinflation trends maybe more pronounced than what was evident from the CPI report earlier in the week, February prints were revised higher for both the headline and core, suggesting it may be too early to dismiss inflation fears. Meanwhile, the initial jobless claims increased 11k last week to 239k, coming in above expectations and signalling more slack in the labour market. Fed expectations failed to shift meaningfully, although the USD was quite reactive to the data. Japan’s Fast Retailing opens up  8% on improved outlook Uniqlo owner Fast Retailing reported H1 (September-February) earnings yesterday, with revenues falling short of estimates but a profit beat and improved outlook helped stock open strongly on Friday. Revenue for the period increased 20% y/y to 1.47trn yen while net income rose 4% to 153 billion yen. The outlook was especially strong as easing of restrictions in Japan and also China’s reopening is likely to underpin. It now expects full-year revenue of 2.68trn yen ($20bn), up 16% from the previous year’s result and compared to 2.65trn yen forecasted in January. Japanese equities are gaining a lot of interest as a diversification opportunity for investors especially after recent interest from Berkshire Hathaway. Mixed Q1 results from Delta Air Lines but Q2 looks strong Delta Air Lines shares rose yesterday as the airliners’ Q2 EPS guidance of $2-2.25 beat estimates of $1.61 as demand is looking strong ahead of the crucial summer travel season. Jet fuel costs are coming down and the consumer remains bullish despite inflationary concerns. Danske Bank lifts its 2023 guidance Danske Bank is out this morning lifted its net profit outlook for 2023 to DKK 16.5-18.5 vs est. DKK 16.1bn despite loan impairments are expected to rise to DKK 2.5bn. The main driver of the positive outlook is rising interest income. Novo Nordisk lifts guidance weight loss drug Wegovy The Danish-based pharmaceutical company raised its FY revenue growth outlook to 24-30% in constant currency and operating income growth in constant currency to 28-34%. Novo Nordisk also says that a second contract manufacturer is now ready to start production increasingly available supply of its new weight loss drug which is the important new growth driver of the company. ECB hike expectations firm: and huge year-forward contrast with Fed Three ECB Governing Council speakers yesterday argued in favour of further policy tightening, including Edward Scicluna, Robert Holzmann and Martins Kazaks. Lithuania’s Kazaks clearly favours another 50 basis-point move at the ECB’s May 4 meeting: “I don’t see any reason to slow down any time soon in terms of interest rate increases, because inflation does remain very high”. Austria’s Holzmann said in an interview with CNBC that a 50 basis point hike is “in the ballpark”. It is worth noting that the forward expectations for the Fed prices less than 25 basis points of further hiking, with a policy rate that drops over 85 basis points to 4.14% by the Jan 2024 FOMC meeting, while the ECB is priced to continue hiking into Q4 of this year before possibly in December. Commodity sector reversing all of March losses The commodities sector has started April and the second quarter on a much firmer footing than recent months, especially last month when the banking crisis temporarily hurt the growth and demand outlook. The Bloomberg Commodity index which tracks a basket of 23 major commodities trades up 2.3% so far this month with the softer dollar, OPEC+ production cuts and the prospect for falling interest rates in the coming months and not least robust demand from China all adding support. Gains are led by coffee (+15%), sugar (+8%), crude oil (+8%) and silver (+7%) while US natural gas (-12%) and Chicago wheat (-4%) remains the two major laggards. Sweden CPI comes in this morning softer than expected Sweden reported March CPI this morning, with the headline coming in at 0.6% M/M and 10.6% Y/Y  vs. 0.9/11.0 expected and “underlying” inflation at +0.4%/8.0% vs. 0.7%/8.3% expected, respectively, and vs. 9.4% in February. What are we watching next? France’s Constitutional Court to rule on Macron pension reforms Macron recently moved to raise the retirement age in France to 64, doing so without a vote from the legislature, a controversial moved that sparked widespread protests. Today, France’s Constitutional Court will rule on the constitutionality of the pension reform, with a variety of potential outcomes, from overturning it entirely to approving it wholesale to criticizing elements of the new rules and even setting in motion a referendum that could take months to play out. Earnings to watch The Q1 earnings season kicks into gear today with major US banking earnings. Analysts expect JPMorgan Chase to report Q1 net revenue of $39.7bn up 18% y/y and EPS of $3.39 up 21% y/y, but with the recent banking crisis the outlook is obviously more important and especially JPMorgan’s comments about funding costs and loan growth outlook. Well Fargo is even more interesting because of its large exposure to the US west coast which has been hit the hardest by the slowdown in the technology sector. This week’s earnings releases: Friday: JPMorgan Chase, UnitedHealth, Wells Fargo, BlackRock, Citigroup, Progressive, PNC Financial Services For an extended overview of all earnings releases check out the earnings calendar in our trading platform. Economic calendar highlights for today (times GMT) 1230 – Canada Feb. Manufacturing Sales 1230 – US Fed’s Goolsbee (Voter 2023) to speak 1230 – US Mar. Retail Sales 1245 – US Fed’s Waller (Voter) to speak 1315 – US Mar. Industrial Production/Capacity Utilization 1400 – US Apr. Preliminary University of Michigan Sentiment Source: Global Market Quick Take: Europe – April 14, 2023 | Saxo Group (home.saxo)

Summary:  Roughly one and a half years after Ethereum holders started staking Ether, they may now unstake to make their Ether accessible following the Shanghai hard fork. The day has been feared by the market, as it would allow 19.2mn Ether to be unlocked in the foreseeable future. However, at first sight, it appears that fewer than expected want to unstake, leading Ethereum to a nearly 5% gain in 24 hours, so Ethereum trades above $2,000 for the first time since August 2022. In September 2022, Ethereum transitioned from proof-of-work to proof-of-stake in an event known as the merge. The proof-of-stake framework allows Ether holders to verify transactions in the role of being a staker. Nearly two years before the merge, on the 1st of December 2020, the staking contract launched, allowing holders to stake Ether by that time. Until this day, staking has been a one-way street, so stakers have not been able to withdraw from staking to make their Ether accessible again, not even following the merge. From a total supply of nearly 120.5mn, almost 19.2mn Ether is in the staking contract, of which some have been staked since the 1st of December 2020, effectively locked for about 2.5 years. Shanghai makes stakers non-stakers However, the one-way street turned into a two-way street this evening, as the highly anticipated Ethereum hard fork called Shanghai – or Shapella – was successfully implemented. Among other minor advances, the most noted addition was the technological possibility to unstake Ether, slowly opening the floodgates to the 19.2mn staked Ether worth over $38bn. The 19.2mn Ether is not instantly withdrawable from staking, though. About 1,800 validators of 32 Ether each may exit staking daily. This totals 57,600 Ether of the nearly 18.2mn originally staked Ether. To ensure a maximum of 1,800 validators exit per day, there is a queue called the exit queue in which validators wait on a first-come, first-served basis. When a validator successfully exits this queue, it has to wait at least a couple of days in another queue known as the withdrawal queue before the Ether is accessible. On the contrary, the slightly more than 1mn total staking reward of the past nearly 2.5 years can be completely withdrawn in the coming few days. Read next: Stephen Dover and Seth Cotrun from Franklin Templeton present highlights of the historic United Nations Water Conference| FXMAG.COM Although the Ether is only slowly withdrawable from staking, the day of the Shanghai hard fork has long been feared by the market worrying that many stakers would liquidate Ether as soon as they were able to due to the multiple-year lockup. Few are unstaking In January, we published our view on this matter. We argued that the Ethereum market would mostly be negatively driven by the sentiment leading up to the hard fork, rather than by heavy selling pressure from unstaked Ether following the hard fork, considering that most stakers are long-term holders fully aware of the multiple-year lockup, whereas stakers willing to sell would likely already have hedged their portfolio by shorting futures. Likewise, the modest daily limit to withdraw staked Ether causes potential selling pressure to be evenly distributed over a long period to better be aligned with buyers. The past slightly more than 12 hours since the Shanghai hard fork has so far confirmed this view. Although the exit queue has been open prior to the hard fork, it currently only has 18,000 validators and the withdrawal queue has 5,100 validators compared to about 560,000 active validators. The first of these validators is expected to be fully accessible sometime tomorrow, so it is too early to conclude whether these are about to hit the market. It is, though, clear that not every unstaked Ether will hit the market, as some validators have more or less been forced to unstake. This includes the crypto exchange Kraken. The latter is undisputed the largest entity to unstake, which is largely done due to a settlement with the Securities and Exchange Commission (SEC) in the US earlier this year, forcing the exchange to end staking services to US clients. Nonetheless, it appears that the market expected a much greater unstaking queue, as Ethereum is up by nearly 5% in the last 24 hours while being up by 3% relative to Bitcoin. Ethereum crossed $2,000 for the first time since August 2022 earlier today.   Source: Saxo Group Source: Ether may now be unstaked: Was that it? | Saxo Group (home.saxo)

Summary:  Today we look at the choppy reception of the US March CPI figures and evidence that inflation remains a problem, with the risk that energy prices re-aggravate the inflation story in coming months as oil breaks higher. The US dollar is on its knees and breaking lower - a situation that could extend here. We also look at key stocks to watch, including the great news from luxury giant LVMH and preview the coming attractions for this earnings season set to kick off on Friday. Today's podcast features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.   Read next: Tesco cuts milk price and locking in the price of 1,000 other everyday products. Total company's revenue rose 7.2% hitting £65.76bn| 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: Podcast: Inflation is not going away. Earnings season incoming. | Saxo Group (home.saxo)

Summary:  US equities turned back lower and closed down on the session after trying to rally in the wake of the March US CPI report as treasury yields chopped aimlessly. The US dollar slumped, with EURUSD testing above 1.1000 for the first time since February and GBPUSD eyeing the 1.2500 level. Oil prices rose sharply and cleared local resistance after the recent OPEC+ production cut. What is our trading focus? US equities (US500.I and USNAS100.I) lower after choppy reaction to CPI US equities jumped higher on the slightly softer-than-expected March CPI headline, but then chopped back lower as a dip in Treasury yields failed to sustain. The Nasdaq 100 index underperformed the broader market, dipping over 100 points to close at a two-week low near the 21-day moving average just below 13,000. The S&P 500 closed less than a half-percent lower and within the recent range, although the reversal from the intraday jump looks ugly (with intraday volatility likely aggravated by zero-day-to-expiry option trading over the US CPI release. FX: USD tilts lower after US CPI data. AUD firms on jobs data. The US dollar chopped around in the wake of the March US CPI release, which failed to provide any surprise in the core data (more below), but ended the day lower as EURUSD tested above 1.1000 for only the second time in the last year, and GBPUSD approached important cycle resistance near 1.2500. Fed hike expectations/probabilities for the coming two meetings edged ever so slightly lower. Overnight, the Aussie got a lift from stronger than expected March employment data, with a second month in a row of strong full time payrolls growth as the unemployment rate remained pinned near the cycle low at 3.5%. Crude oil surges clear of recent resistance on supply concerns Brent Crude oil prices surged above $87/barrel for the first time since January, breaking free of the local resistance after the prior surge on OPEC+ announcing a production cut the weekend before last. Lower exports from Russian ports last week have been in focus in recent days, and a disruption of a pipeline supplies in Iraqi Kurdistan may also have weighed. The WTI crude oil contract cleared $83/barrel overnight for the first time since December. OPEC will issue it monthly report today. Gold (XAUUSD) and silver choppy on March CPI release The US CPI report (see below) didn’t generate a sufficiently large surprise to serve as a major catalyst for gold prices, which tried to surge on the initial dip in US treasury yields and the US dollar before chopping back lower and then ending the day only slightly higher and still below the recent 2,032 high, with the 2,000 level maintaining as the USD remains on its back foot. Silver managed to hold its new gains slightly better, staying well above $25/oz after the choppy reception of the US CPI data. US Treasury yields choppy on CPI data (TLT:xnas, IEF:xnas, SHY:xnas) US treasury market reaction to the March CPI data (see below) was mixed, with a sharp rally yielding to a choppy retracement and the 2-year this morning only coming in a few basis points lower at 3.98% after a dip to 3.87% after the CPI data yesterday. The longer-end of the US yield curve underperformed and the results from the 10-year auction were poor with notes being awarded at 2bps cheaper than the when-issue trading level as of the deadline of the auction. The yield on the 10-year notes closed 4bps lower at 3.39%. The 2-10-year yield curve steepened by 4bps to -57. What is going on? US March CPI: core inflation in-line with expectations The market noted that US March headline CPI came in slightly cooler-than-expected while the core numbers were in-line with expectations. Headline CPI M/M cooled to 0.1% (exp. 0.2%, prev. 0.4%), while the annual pace slowed to 5.0% (prev. 6.0%, exp. 5.1%); core M/M rose 0.4% (prev. 0.5%, exp. 0.4%) and Y/Y 5.6% (prev. 5.5%, exp. 5.6%). The initial reaction was dovish as equity market futures rallied and Fed pricing for a May rate hike tumbled but the reaction was later mostly reversed. Fed futures are still pricing in a 70% probability of a 25bps rate hike in May with about 65bps rate cuts (from an assumed hike) then priced in for the rest of the year. The drag on inflation has chiefly come from a slight deceleration in the rise in shelter prices and sharply lower energy and used car prices. FOMC minutes raise credit concerns, still lean for hike. The FOMC minutes showed that members are divided on the outlook, with some emphasizing the need to be flexible as growth risks have increased while others still worried about upside risks to inflation. Still, the committee leaned towards another rate hike after the March meeting, even though concerns of a credit crunch did weigh on the outlook and Fed staff advisers forecasting a “mild recession” later this year. The banking sector concerns have cooled further since the meeting, and CPI and jobs data have remained firm, sustaining expectations that the Fed may not yet have peaked rates for the cycle, although the 18-month forward assumption is that the Fed will cut some 150 basis points from the current level. Bank of Canada stands pat at 4.50% as expected The Bank of Canada left rates unchanged at 4.5% as expected whilst maintaining language it is prepared to do more on rates if needed to bring inflation back to target. The average GDP forecasts were revised higher for 2023, but down for 2024, while the 2025 growth is seen picking up to 2.5%. On inflation, the 2023 average CPI forecast was revised lower to 3.5% from 3.6%, while 2024 was left unchanged at 2.3% with 2025 inflation seen at 2.1%. Commentary included some pushback on the pricing of rate cuts for this year, but it wasn’t enough to change the market pricing. USDCAD trades just above the 200-day moving average and the near the local pivot low of 1.3407. China’s exports saw surprise surge in March China reported a 14.8% YoY gain in exports in USD terms, the first time exports rose in six months, in part on the clearing of disruptions from the country’s former zero-tolerance policy on Covid. The strong surge was a surprise to consensus expectations of a –7% fall. With imports falling slightly YoY, the Trade Balance hit a huge surplus of $88.2 billion. LVMH shares set to surge today on Q1 sales surge The European luxury retailer reported a strong surge in Q1 sales, led by fashion and leather goods rising 18%, nearly twice the pace of growth expected from analysts. The company reported strong growth in sales in Asia after China lifted Covid restrictions. The American depository receipts surged 3.4% on the news yesterday. German chemical giant BASF reports much higher profit than expected. The company reported Q1 profits of EUR 1.93 billion, handily beating expectations of EUR 1.78 billion, although still a drop of 32% versus a year ago. Sales also beat expectations despite cutbacks of production for some of its more energy-intensive products What are we watching next? Last US data points ahead of May 3 FOMC meeting The US March CPI data yesterday offered little to shift expectations for the May 3 FOMC meeting as the market still leans for perhaps one more Fed rate hike there, followed by rate cuts to begin as soon as September. Ahead of the May 3 FOMC meeting, we will get three more weekly initial jobless claims prints, starting with today’s, the March PPI also out today, and the Retail Sales report Friday. The Fed’s favoured inflation gauge, the PCE inflation data, will be out on April 28 (looking sticky at 4.6% in February after the two prior readings were within 0.1% of that number. The March Fed forecasts see PCE core dropping to 3.6% by the end of this year). We will have a look at both the ISM Manufacturing (May 1) and ISM Services survey (May 3) ahead of the Fed’s decision. Earnings to watch The Q1 earnings season kick-off on Friday is dead ahead, as three of the largest US banks are set to report. S&P 500 12-month forward EPS estimates have risen 1.2% since late February, suggesting analysts are less worried about credit conditions, the recent banking crisis, and the slowing economy. Analysts expect JPMorgan Chase to report Q1 net revenue of $39.7bn up 18% y/y and EPS of $3.39 up 21% y/y, but with the recent banking crisis the outlook is more important and especially JPMorgan’s comments about funding costs and loan growth outlook. Delta Air Lines earnings today are also worth watching for insights into business traveling, the airlines’ most profitable segment. Analysts expect Q1 revenue growth of 28% y/y and EBITDA of $1.17bn up from a loss of $282mn a year ago. This week’s earnings releases: Thursday: Fast Retailing, Tesco, Fastenal, Delta Air Lines Friday: JPMorgan Chase, UnitedHealth, Wells Fargo, BlackRock, Citigroup, Progressive, PNC Financial Services Economic calendar highlights for today (times GMT) 1230 – US Mar. PPI 1300 – UK Bank of England Chief Economist Huw Pill to speak 1430 – US Weekly Natural Gas Storage Change 1700 – US Treasury to auction 30-year T-Bonds Source: Global Market Quick Take: Europe – April 13, 2023 | Saxo Group (home.saxo)

Summary:  Today we look at the market continuing to hold its breath, likely in anticipation of today's US March CPI release, where a strong directional surprise could unleash the latest round of zany intraday volatility on 0DTE (zero-day-to-expiry) S&P 500 options. We also discuss the compelling Japanese equity market, crude oil breakout potential, softs on the move and precious metals on fire and much more. Today's podcast features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.   Read next: This Friday Wells Fargo, BlackRock and Citigroup report their earnings| 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: Podcast: Another 0DTE frenzy in wait on US CPI? | Saxo Group (home.saxo)

Summary:  US equities treaded water yesterday ahead of a pivotal March CPI report today that will provide one of the last few US data points ahead of the Fed’s May 3 FOMC meeting. The market is leaning in favour of one more hike from the Fed in either May or June, to then yield to rate cuts beginning as soon as September. The FOMC minutes from the March 22 meeting will be released later today. Elsewhere, crude oil is poking at the top of the range again, threatening assumptions about the future course of inflation if it breaks higher. What is our trading focus? US equities (US500.I and USNAS100.I): welcome to inflation day S&P 500 futures had a narrow trading range yesterday with the market waiting for today’s US March CPI report expected to show that headline inflation is coming down, but the real focus should be on the core and services sector inflation. As we have talked about before today’s trading range could be significant if inflation deviates a lot from consensus due to the sizeable zero-days-to-expire options market. FX: USD and JPY leaning on weak side again ahead of important data The US dollar is limping into the March CPI release later today, with the EURUSD recovering sharply from its weakness on Monday and now taking aim at the top of the local range at 1.0973, with the psychological 1.1000 objective clearly in mind (highest daily close this year was 1.0990 back in early Feb, with a brief intraday high above the big round figure). Clearly, the market will key off the direction of the CPI surprise, but also any policy hints from the FOMC minutes up several hours later, which should offer a sense of the level of concern that the recent banking turmoil has engendered. Crude oil avoids the drop as focus return to tightening supply Crude oil prices bounced on Tuesday with Brent trading back above $85, thereby preventing recently established longs from getting under water, a development that could have triggered additional selling towards support in the $80-area. Instead, the market was supported by the weaker dollar and signs that Russian shipments are slowing and a continued halt to pipeline flows to Turkey from the Iraq’s semi-autonomous Kurdistan region. Both prompt spreads in WTI ($0.06/b) and Brent ($0.44/b) have moved into backwardation highlighting a tightening market. The API reported a 0.4-million-barrel increase in US crude stocks while the EIA in its monthly STEO said supply, despite OPEC cuts, would outstrip demand this year and next.  Gold (XAUUSD) trades higher for a second day led by fresh silver charge Gold trades higher for a second day and near $2020, supported by renewed dollar weakness on expectations US CPI will show a y-o-y decline to 5.1% from 6% last month. An outcome that will strengthen calls for just one more – if any - rate hike before a succession of cuts begins later this year. The June-December SOFR (Secured overnight financing rate) spread points to a +50-bps rate cut before yearend while the recovery in EURUSD back above 1.09 could see it gunning for the psychological important 1.1000 level. The latest charged was once led by silver, which found additional support from recovering industrial metals. The white metal trades at a one-year high at 25.40 with the XAUXAG ratio declining to 79.50.  Gold support at $1970, the 21-DMA, and $1950 while a renewed push above $2032 would signal a return to the March 2022 record high of $2070. US Treasury yields edge higher ahead of US March CPI (TLT:xnas, IEF:xnas, SHY:xnas) The US 2-year treasury yield held above 4.00% ahead of pivotal US CPI data today as the market continues to lean for one last rate hike in May or June before Fed cuts are priced to begin as soon as September (or arguably December if the Fed fails to make another tightening move first).  At the longer end of the curve, the 10-year treasury benchmark edged higher to 3.45% before pulling back after having jumped off margin new lows at 3.25% last Thursday ahead of the US employment report, which was released on a bank holiday Friday. What is going on? Mixed signals from Fed officials on need for further tightening The NY Fed president and board of governors member John Williams said yesterday that the Fed still has work to do in its fight against inflation and said that the median forecasts in the Fed’s March policy forecasts of one more hike followed by holding rates steady is a “reasonable starting place”, though further action would depend on incoming data. This contrasts with Chicago Fed president Goolsbee (a vote this year) who sounded notes of caution. “Given how uncertainty abounds about where these financial headwinds are going, I think we need to be cautious.” and “We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation.” China’s credit data came in stronger than expected The credit data came in stronger than expected, with new aggregate financing at RMB5,380 billion and new RMB loans at RMB3,890 billion in China. It brings the growth in outstanding aggregate financing to 10.0% Y/Y in March from 9.9% Y/Y in February and outstanding RMB loans to 11.8% Y/Y in March from 11.6% Y/Y in February. One of the bright spots in the March credit data is the RMB 1,245 billion in new loans to the household in March versus the RMB 208 billion in February and the RMB758 billion in March last year. Looking at the breakdown, new medium-to-long-term loans to the household (mainly mortgage) were RMB645 billion in March, much better than RMB86 billion in February and RMB374 billion in March 2022. Volvo Q1 beats estimates The Sweden-based truck maker reports SEK 131.4bn vs est. SEK 118.4bn and the Q1 operating profit was SEK 18.4bn vs est. SEK 12.8bn driven by increasing prices and improving supply chains. The result also underscores the still strong dynamics in global and Europe’s logistic markets. Agriculture commodities on the move The Bloomberg Commodity Softs index which includes sugar, cocoa, cotton and coffee jumped 3.2% on Tuesday with gains being led by Arabica’s (KCc1) 4.3% gain to 188.45 cents/lb supported by technical buying after reaching its 200-DMA for the first time since last September. The Raw Sugar contract traded in New York (SBc1) reached a 2016 high while the White Sugar contract in London touched the highest since 2011. Both sweetener contracts being supported by production downgrades in major producing countries, raising the prospects for limited export from key shippers like India as well as Pakistan and Thailand. Also concerns about a short squese ahead of Friday’s expiry of the May White sugar contract (WK2). Cocoa meanwhille rose 2% to $2985 per tons, the highest close since 2016 Read next: Forex Update by John J. Hardy from Saxo Bank - April 12th, 2023| FXMAG.COM What are we watching next? Volatility warning: significant US CPI surprise could trigger large move in markets The US equity market and other assets are showing signs of pent-up volatility ahead of the March CPI report today, one of the final US macro data points that can tilt the odds of the Fed moving ahead with another rate hike at the May 3 meeting or deciding to stand pat, together with the March PCE inflation release on April 28. A significant upside inflation surprise could trigger an S&P 500 move of as much as 100 points in short order, particularly with hedging of popular so-called “0DTE” (zero-day-to-expiry) options driving volatility risks intraday. A large downside inflation surprise could spark a significant knee-jerk move to the upside. Ahead of the release, traders should note that the Bloomberg consensus forecast is looking for the core inflation to rise 0.4% MoM and 5.6% YoY after 5.5% YoY in February. The less important headline is expected at +0.2%/5.1% vs. 6.0% YoY in Feb. Bank of Canada expected to hold policy rate steady again at today’s meeting After a rapid rate tightening cycle last year that took the policy rate from 0.25% to 4.50% in the space of just over nine months through the final hike at the meeting this January, the Bank of Canada paused at the March meeting and is expected to hold steady at today’s meeting as well. The forward expectations curve is pricing no further tightening and even marginal odds that the bank cuts rates at some point in the second half of this year, with greater than 50/50 odds of the first cut coming at the October meeting. In the March policy statement, the Bank declared it “will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2% target.” The next Canadian CPI number is up on April 18 after February showed core inflation rising at a 4.8% clip (versus peak of 5.6% in July of last year.) Gold giant Newcrest Mining is in focus after Newmont improves its takeover offer Australia’s biggest gold company, Newcrest Mining, received a new sweeter takeover offer from US rival Newmont Corp. The new offer values Newcrest Mining at A$29.4 billion ($19.5 billion). Two months ago, Newcrest rejected Newmont’s $17 billion all-stock takeover offer as the firm said it undervalued the Aussie gold company. If the deal goes again, it will mark the largest gold mining takeover ever, and extend Newmont’s lead over other bullion mining rivals such as Barrick Gold Corp. Moreover, this not only highlights that the world’s appetite for Gold is increasing but shows that Newmont wants to beef up its copper exposure via the takeover. Newcrest is aiming for copper to make up 50% of its revenue by the end of the decade, up from about a quarter now. Earnings to watch The Q1 earnings season starts this week with US banking earnings as the highlight on Friday. S&P 500 12-month forward EPS estimates have been rising since late February by 1.2% suggesting analysts are less worried about credit conditions, the recent banking crisis, and the slowing economy. Analysts expect JPMorgan Chase to report Q1 net revenue of $39.7bn up 18% y/y and EPS of $3.39 up 21% y/y, but with the recent banking crisis the outlook is more important and especially JPMorgan’s comments about funding costs and loan growth outlook. Delta Air Lines earnings on Thursday are also worth watching for insights into business traveling. Analysts expect Q1 revenue growth of 28% y/y and EBITDA of $1.17bn up from a loss of $282mn a year ago. This week’s earnings releases: Wednesday: Aeon Thursday: Fast Retailing, Tesco, Fastenal, Delta Air Lines Friday: JPMorgan Chase, UnitedHealth, Wells Fargo, BlackRock, Citigroup, Progressive, PNC Financial Services Economic calendar highlights for today (times GMT) 1230 – US Mar. CPI 1300 – UK Bank of England Governor Bailey to speak 1300 – US Fed’s Barkin (Non-voter this year) to speak 1400 – Canada Bank of Canada Rate Decision 1430 – DoE Weekly Crude Oil and Product Inventories 1700 – US Treasury auctions 10-year T-notes 1800 – US FOMC Minutes 2301 – UK Mar. RICS House Price Balance 0130 – Australia Mar. Employment Change/Unemployment Rate Source: Global Market Quick Take: Europe – April 12, 2023 | Saxo Group (home.saxo)

Summary:  The US equity market is making a break for it as the Nasdaq 100 Index closed at its highest level since last August. The broader market is somewhat more mixed and smaller bank stocks closed lower on the day. Today we get a look at the Eurozone flash March CPI data after yesterday’s German CPI data for the month was once again hotter than expected. Later, the US reports February US PCE inflation after a surprisingly hot January number last month. What is our trading focus? US equities (US500.I and USNAS100.I): Equities end the month higher S&P 500 futures increased 0.6% yesterday and extending this morning trading around the 4,085 level pushing equities to a positive gain for the month of March despite a banking crisis and increased risks of a recession this year. The month is ending with banks, diversified financials, insurance, and real estate industry groups declining and being the worst performer. At the other spectrum industry groups such as semiconductors, media & entertainment, technology hardware, and software have been the best performing driven of course by lower interest rates and the optimism around the GPT 4 AI system. Today’s key event for US equities is the US February PCE inflation which if it shows to remain sticky then forward interest rates pricing might rally again suppressing risk sentiment in equities. Hang Seng Index and CSI300 gained as China’s PMIs better than expected Hang Seng Index advanced 0.7% and CSI 300 climbed 0.3% in the early Asian afternoon. China’s March Manufacturing PMI came in at 51.9, moderating from the prior month but better than expectations. The biggest positive surprise came at the Non-manufacturing PMI print, which surged to 58.2 in March from 56.3 in February while economists estimated a decline. The Services sub-index increased, by 1.3 points to 56.9, signaling strong momentum in demand for in-person services. Meanwhile, JD.COM (09618:xhkg) jumped 6% as the e-commerce giant filed for listings of subsidiaries Jingdong Property and Jingdong Industrial at the Stock Exchange of Hong Kong. Alibaba (09988:xhkg) gained 3.6% as the group is reportedly preparing to get its logistic unit, Cainiao Network Technology listed in Hong Kong. FX: yen lower still into Japan’s financial year-end Very low volatility across much of FX, with the USD edging lower in places, but with yen weakness into Japan’s financial year-end today the most notable development this week. EURJPY even poked at the highest levels of the year overnight above 145.00 before easing back lower into this morning’s session, perhaps in part on hotter than expected Tokyo CPI in March AUD and especially NZD firmed overnight on strong Chinese official PMI data for March and ahead of an RBNZ meeting that is expected to see the central bank take rates 25 basis points higher to 5.00%, the highest among G-10 currencies. It could be a key meeting for a shift to more neutral guidance after the recent turmoil. Only one more 25 basis point hike beyond next week’s meeting is priced into the forward NZ rates curve. Crude oil near two-week high on supply disruptions and short covering Crude oil trades firm ahead of month-end with a 7% rally this past week being driven by continued supply disruptions from Northern Iraq, a weaker dollar, the biggest drop in US crude stocks since November, China’s recovery showing continued strength, and not least an improve risk sentiment forcing short covering, not least ahead of today’s expiry of the May Brent contract which has seen prompt spread rise above 70 cents. In a monthly survey published by the Dallas Fed, shale oil basin executives said the “uncertainty of the depth and duration of bank crisis is causing us to be nervous about capital spending plans in 2023”. In addition to access to credit, record costs from a shortage of labor and supply chain issues have led to a slowdown in production growth. Support in Brent at $77.90 while a break above $80.40 is needed to fully cancel out the March sell-off. Will US PCE inflation dampen gold’s biggest monthly gain since 2020? Following a month of turmoil across the banking industry, gold and silver is heading for monthly gains of around 8% and 14% respectively, and despite easing tensions this week both metals have managed to hold onto most of their gains in anticipation of a near-term peak in US rates being followed by a succession of rate cuts. This outlook, however, could be challenged today by the US PCE inflation print, the Fed’s preferred measure of underlying price pressures. As the banking crisis ease inflation above target may trigger fresh rate hike expectations. On the upside, $2000 remains the key level to watch, while support is seen at $1933, the 38.2% retracement of the recent runup to $2000. In silver, watch a weekly close above $23.90 as it may signal a breakout of a two-year downtrend. Treasuries ended mixed in a muted session The 2-year yield edged up 2bps to 4.12% while the 10-year yield 2bps to 3.55% in a muted session. Fed’s Kashkari and Collins both reiterated that the Fed has “more work to do” to bring inflation down to the 2% target while Fed Barkin said he is undecided. Flight to quality bids for the front end of the Treasury curve fades and the PCE data today is in focus. What is going on? Donald Trump indicted for hush money payments during campaign A grand jury in New York indicted former president Donald Trump late yesterday for his role in paying hush money paid to a woman to suppress her story of their affair, which had occurred a decade prior to her interest in selling the story during his presidential campaign in 2016. The specific charges mostly revolve around the use of campaign funds to pay the hush money. Mr. Trump is expected to turn himself in to authorities in Manhattan and has issued blistering statements against what he calls “political persecution and election interference at the highest level in history”. Mr. Trump’s standing in presidential polls and particularly in Republican primary polls has surged in recent weeks. Fed’s Kashkari says not clear if SVB demise will lead to credit crunch The President of the Minneapolis Fed Neel Kashkari said it is too early to determine whether the “banking stresses of the past few weeks” will lead to a sustained credit crunch that slows down the US economy, saying it would “take us a while until we fully understand, are there more losses out there”. He also noted that inflation remains too high. Tesla looks to build a battery plant in the US with China’s battery leader CATL Tesla is looking to build a battery plant in the US with China-based CATL, the world’s largest battery manufacturer. Ford announced a similar move last month. Given EV batteries are the most expensive component of an EV, CATL's technology is sought after, as it makes lithium iron phosphate batteries, that are cheaper than the nickel-based batteries predominantly used in EVs. Tesla has been in talks with the White House in recent days, to clarify the rules and potential funding support as part of the Inflation Reduction Act. Tesla is deep in expansion mode, deploying $22 billion in cash to crank up production, while scoping ways to lower costs, and contend with increasing EV competition. What are we watching next? The grain market awaits key reports on stocks and planting intentions. Later today, the USDA will release its 2023 Prospective Planting and Q1 stock reports. The planting report is the government's first attempt to gauge which crops farmers will be planting in the coming season. If trade estimates are met farmers will plant the most wheat in 7 years while Q1 stocks will be the lowest in 15 years and corn in 9 years. The cotton acreage is expected to be cut by +19% and together with reductions in other small crops such as barley and oats it has made room for more planting of the bigger crops. Read next: South Korea: Industrial production contracts more than expected in February| FXMAG.COM The RBA likely to pause rate hikes next week Australian’s households are under pressure from the RBA’s policy tightening. The RBA has warned that the ‘full effect’ of its 10 interest rate rises have yet to be seen. Already over 1 million mortgages have been deemed ‘at risk’ and another 880,000 Australians roll off fixed mortgages to variable, which will sharply raise mortgage-related expenses and strain household budgets. Seven Australian banks have cut mortgages rates slightly to reflect the recent drop in interest rates and the RBA is seen likely to pause its hiking cycle and then cutting later this year. With Australia’s households the second most indebted in the world behind, Sweden, we explore what a rate hike pause could mean for investors and traders in our article. Heavy anticipation around Bank of Japan policy as Kazuo Ueda set to take charge in a week We are rolling into a new Japanese financial year next week and the week after, Bank of Japan Governor Haruhiko Kuroda is set to retire, to be replaced by the Kazuo Ueda, an economist and former Bank of Japan policy board member. He has signaled a cautious approach to adjusting Bank of Japan policy, but looking forward, some level of convergence between the BoJ’s ultra-easy policy of the last ten years under Kuroda and the rest of the world’s dramatic tightening and exit from negative- and zero- interest rate policies is likely. Earnings to watch The earnings calendar next week is light, so the equity market will focus on inflation, credit, and the economy next week, while waiting for Q1 earnings season starting up in two weeks. Next week’s earnings releases: Monday: BOE Technology Wednesday: Industrivärden, Conagra Brands, Sodexo Thursday: Seven & I, RPM International Friday: Aoen, Yaskawa Electric Economic calendar highlights for today (times GMT) 0755 – Germany Mar. Unemployment Change/Rate 0900 – Italy Mar. Preliminary CPI 0900 – Eurozone Mar. Preliminary CPI 1230 – US Feb. PCE Inflation 1230 – Canada Jan. CPI 1400 – US Mar. Final University of Michigan Sentiment 1500 – ECB President Lagarde to speak 1905 – US Fed’s Williams (Voter) to speak 2145 – US Fed’s Cook (Voter) to speak Source: Global Market Quick Take: Europe – March 31, 2023 | Saxo Group (home.saxo)

Summary:  In today's podcast we talk about the improved momentum in equities driven by technology stocks and especially with yesterday's best performing theme being semiconductors driven by AI focus, strong EV demand, and improving demand for memory chips in data centers. We also talk Sweden as a showcase of the impact from tighter credit conditions and the new financial year in Japan. On commodities we cover oil with a focus on recent changes to the Brent crude contract and the slowing production in the US due to cost pressures, lastly on commodities we highlight recent developments in the grain markets. Finally, we cover better than expected earnings from H&M and talk about US non-financial corporate profit margins reached the highest levels in 2022 since the end of WWII. Today's podcast features Peter Garnry on equities, Ole S. Hansen on commodities, and John J. Hardy on FX. Listen to today’s podcast - slides are available via the link. Read next: AEX25, BEL20 and CAC40 - technical analysis by Kim Cramer Larsson| FXMAG.COM 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.

Summary:  Market sentiment was broadly strong yesterday as US equities charged higher and the Nasdaq 100 index challenged the sub-13,000 resistance area yet again. Bank stocks remain on the recovery path with another positive session, while in Europe, the ECB’s Schnabel says there are no signs of general deposit flight in Europe, though more depositors are looking at money market funds. US-China tensions are in focus as Taiwan’s president visits US. What is our trading focus? US equities (US500.I and USNAS100.I): Banking erased in prices S&P 500 futures extended their momentum above the 50-day moving average as highlighted in yesterday’s QuickTake rallying 1.4% to hit the highest closing price 17 February erasing the losses caused by the banking crisis. This is extraordinary and highlight the strong sentiment there is still present in equity markets, but also the market’s reluctance to price in a recession. The index futures have continued to extend momentum this morning pushing towards the 4,100 level. There are no major US earnings today, so the driver today is technical flows and potentially a bit of impact from initial jobless claims later today expected to show a continued strong US labour market. Chinese equities (HK50.I) and (02846:xhkg): Retreating with tech names leading the decline Hang Seng Index slipped 0.5% and Hang Seng Tech Index lost 0.8% in the early Hong Kong afternoon session. Digital health platform names led the slide with Alibaba Health (00241:xhkg), JD Health (06618:xhkg), and Ping An Healthcare (01833:xhkg) plunging 3%-8%. EV names bucked the decline and were among the top gainers. PetroChina (00857:xhkg), surging over 6%, on an earnings beat and share buyback plan. The sentiment towards Alibaba (09988:xhkg) remains buoyant and shares of the e-commerce giant continue to advance for the second day following the reorganization plan. In A-shares, CSI300 edged up 0.2%. Semiconductors, lodging, and tourism outperformed. FX: Yen retreats ahead of year-end as the safe-haven bid fades As the fear of a US banking crisis subsided, the safe-haven bid for the Japanese Yen faded. Japanese corporate forex flows increased, as it is approaching the Japanese fiscal year-end on Friday. USDJPY jumped over 1% to 132.50 and EURYEN surged to 143.65. AUDJPY climbed to as high as 88.83 overnight before paring some of the gains to trade at around 88.65. Elsewhere in FX, action is very muted, although the Swedish krona jolted lower on the largest every drop in year-on-year Retail Sales volumes, with a –9.4% drop recorded in February as inflation bites. Brent Crude oil finds resistance at $80 Crude oil continued higher on Wednesday with Brent reaching $79.70 and WTI $74.35 before profit taking emerged, especially following the weekly US stock report which despite showing the biggest reduction in crude stocks this year nevertheless helped attract some selling as momentum stalled. Gasoline stocks was at their seasonal lowest level since 2014 while distillate demand was at the weakest seasonal level since 2016, pointing to weakness in trucking and manufacturing. In a monthly survey published by the Dallas Fed, shale oil basin executives said the “uncertainty of the depth and duration of bank crisis is causing us to be nervous about capital spending plans in 2023”. In addition to access to credit, record costs from a shortage of labor and supply chain issues have led to a slowdown in production growth. Support in Brent at $77.45 and $76. Gold tied in a range awaiting Fridays US inflation update Gold traded withing a 16-dollar range on Wednesday, the tightest in almost three weeks as traders and investors await further directional input with the next major event being Friday’s US PCE print, the Fed’s preferred measure of underlying price pressures. An easing of banking sector fears this week has allowed some profit taking to emerge as risk-on boosted equities and reduced safe haven demand while also increasing the focus on the large disconnect between market and Fed expectations of the direction of rates. As the banking crisis ease inflation above target may trigger fresh rate hike expectations. On the upside, $2000 remains to be the key level to watch, while support is seen at $1933, the 38.2% retracement of the recent runup to $2000. Treasuries oscillate in a mixed session Treasuries had a mixed session with the 2-year yield rising 2bps to 4.10% and the 10-year yield dropping by 1bp to 3.56% on Wednesday. Volume was low. The strong rally in equities and a poorly received 7-year auction weighed on the front end to the belly of the yield curve. US PCE Inflation for February is up tomorrow. What is going on? Technology leaders call for six-month pause on the training of more powerful AI systems More than 1,100 people have now signed an open letter calling for a six-month pause on the training of AI systems more powerful than OpenAI’s GPT-4. The signatories, which include tech leaders Elon Musk and Steve Wozniak, and AI experts Stuart Russell and Yoshua Bengio, warn that the technology could “pose profound risks to society and humanity.” The warning call from the tech and AI communities comes amid growing concerns from Europol regarding the criminal applications of ChatGPT. Earlier this month, the OpenAI team debuted its most advanced language model system to-date, GPT-4, whose training data remains a mystery. Notably, nobody from the OpenAI team signed the open letter, according to a report from TechCrunch, nor has anyone from Anthropic, an AI safety and research firm. (Source: Quartz) ECB’s Schnabel: no signs of EU depositor flight, but pick up in money market interest ECB governing council member Isabel Schnabel said she sees no evidence of a general depositor flight from EU banks but has seen a pickup in flows into time deposits. She said that the recent bank turmoil could have a disinflationary impact, but that EU banks are resilient and there would likely be less impact into the Euro Zone from the situation than in the US. H&M earnings: Significant Q1 operating income beat The Swedish fast fashion retailer reports Q1 operating income of SEK 725mn vs est. loss of SEK 1bn as gross margin improves to 47.2% for the quarter against 45.8% expected. March revenue in local currencies is expected at around 4% y/y as the fashion industry is hit by a decline in volumes like so many other industries as household budgets are squeezed due to inflation. H&M expects to reduce the store network by net 100 stores in the current fiscal year. Read next: Never waste a good crisis – a profit-price spiral in Germany| FXMAG.COM The grain market awaits key reports on stocks and planting intentions. On April 1 the USDA will release its 2023 Prospective Planting and Q1 stock reports. The planting report is the government's first attempt to gauge which crops farmers will be planting in the coming season. If trade estimates are met farmers will plant the most wheat in 7 years while Q1 stocks will be the lowest in 15 years and corn in 9 years. The cotton acreage is expected to be cut by +19% and together with reductions in other small crops such as barley and oats it has made room for more planting of the bigger crops. Wheat traded in Chicago reached a one-month high on Wednesday at $7.24, before running into profit taking, after Cargill said it would take a further step back from the Russian market. In addition, speculation about a temporary halt in Russian wheat and sunflower exports continues to create nervous market conditions. US considers tightening regulations over mid-size banks During his 2-day appearance before the US Congress, Fed Vice Chairman for Supervision, Michael Barr expressed support for tighter capital and liquidity requirements on midsize banks with assets between USD 100 billion and 250 billion. Meanwhile, the Wall Street Journal reports that the White House is planning to call for stricter regulations from the Fed and other government agencies, including tighter capital and liquidity rules and stress tests. US FDIC considers making large banks pay more for deposit insurance. A Bloomberg article notes that the US lawmakers want to shield smaller banks from the costs of a draw on the FDIC’s deposit insurance fund, so the regulatory agency is considering charging the large US banks the $23 billion needed to shore up the deposit insurance fund after the recent turmoil. Taiwan’s president Tsae Ing-wen in US Taiwan’s president Tsae Ing-wen spoke late yesterday in New York, saying that Taiwan is at the “front-lines of democracy” and as a Bloomberg article paraphrased here speech, that the “security of the world hinges on the self-ruled island’s fate.” She will wrap up her visit today before traveling elsewhere in Latin America before swinging back through the US on her way back home in two weeks, with a meeting reportedly scheduled with US House speaker McCarthy. Recall the dramatic Chines response to then House speaker Pelosi’s visit to Taiwan last year, which triggered extensive military drills off Taiwan. The Biden administration is trying to play down the significant of Tsae Ing-wen's visit. What are we watching next? Initial Claims expected to stay below 200K, PCE inflation up tomorrow. The next key data point to watch is the initial jobless claims today before the PCE tomorrow. The market consensus as per the Bloomberg survey is expecting it to tick up to 195K but still below 200K. The GDP report today is the third revision and is not expected to surprise. The PCE core inflation readings will be in focus tomorrow after the January data showed core inflation higher than expected at +0.6% MoM and +4.7% YoY. Consensus expectations on tomorrow’s core PCE inflation prints is +0.4%/4.7%. Earnings to watch H&M is our European earnings focus today (see earnings review above). Thursday: Kweichow Moutai, Great Wall Motor, H&M Economic calendar highlights for today (times GMT) 0700 – Spain March CPI 1200 – Germany March CPI 1230 – US Initial Jobless Claims 1430 – EIA's Weekly Natural Gas Storage Change 1900 – Mexico Rate Decision 1240 - Sweden Rikbank's Bunge to speak on financial stability 1700 - US Fed's Kashkari (Voter 2023) to speak 2330 - Japan Tokyo Mar. CPI 0130 - China Mar. Manufacturing/Non-manufacturing CPI   Source: Global Market Quick Take: Europe – March 30, 2023 | Saxo Group (home.saxo)

Summary:  US equities are stuck in neutral, with the more yield-sensitive Nasdaq 100 index shying away from the 13,000 level once again, while the S&P 500 seems unable to move away from the 4,000 area. Most bank stocks, especially for larger banks, rallied yesterday and US treasury yields revived ahead of the March US Consumer Confidence survey today. JPY was sharply stronger overnight on a large life insurer indicating a domestic investment focus for bond holdings. What is our trading focus? US equities (US500.I and USNAS100.I): Crisis fears ease with energy and banks gaining S&P 500 futures held steady yesterday with positive sentiment coming from energy, transportation, and banking stocks indicating that the market is still relaxed about a potential incoming recession driven by tighter credit conditions. The index futures are trading around the 4,019 level this morning with the 50-day moving average at 4,029 and the 4,050 being the next big level to watch on the upside should momentum continue. We expect another quiet session with focus on the Conference Board Consumer Survey for March out at 14:00 GMT as the potential market moving event. Chinese equities (HK50.I) and (02846:xhkg): gains led by Tencent and financials Hang Seng IndexHong Kong’s Hang Seng Index climbed 0.7% as of writing, led by Tencent (00700:xhkg) up nearly 4% and a rally in financials. HSBC (00005:xhkg) and Standard Chartered (02888:xhkg) climbed more than 1.5%. Leading instant noodle maker Tingyi (0322:xhg) reported a 31% Y/Y decline in net income, seeing its share price plummeting over 11% and added to investors’ concern about the much-anticipated consumption recovery.  CSI300 remains range-bounded and nearly flat. Petrochemicals were the top gainers while semiconductors and ecommerce stocks lagged. FX: JPY jumps as life insurer signals domestic investment focus, USD softens USDJPY dipped sharply overnight, perhaps in part on a large Japanese life insurer Dai-ichi Life Holdings incoming president indicating a domestic investment focus in very long Japanese Government Bonds for the company’s $260 billion in funds, saying that buying US treasuries was still too expensive due to the costs of hedging FX (as higher US rates transmit directly into the cost of the hedge, offsetting the yield gain). After USDJPY traded above 131.50 yesterday, the price action was taken as low as 130.50 overnight, dragging the USD down broadly, even as US treasury yields revived yesterday (often a JPY-negative). AUD traders will focus on the February CPI release tonight (although it is a single headline data point and not the full quarterly release that has the various core measures, etc.) Crude oil recovers half the March loss supported by supply risks and easing banking fears Crude oil retraced half the March losses on Monday with Brent finding resistance at $78.45 ahead of $79.35, the 21-DMA. WTI meanwhile popped above $72.70 with its 21-DMA offering some resistance at $73.50. Supported by optimism that the recent banking crisis is fading together with a legal dispute between Iraq, its semi-autonomous region of Kurdistan and Turkey halting around 400,000 barrels a day of seaborne exports from the Turkish port of Ceyhan. In a two-week period to March 21, speculators increased gross short positions in WTI and Brent by 106 million while cutting longs by 127 million barrels, and those decisions are now being challenged as prices recover. Gold continues to consolidate after failing above $2000 with focus on inflation Gold prices trades flat following a two-day correction after Treasury yields rose as banking sector concerns eased, however sustained dollar weakness provided an offset. The recent recovery in equities also trimmed safe-haven buying, and gold reversed lower to $1944/oz after making three failed attempts at $2000 last week. Support at $1933, the 38.2% retracement of the recent rally, may be tested if inflation data this week from US PCE to flash March CPI in Eurozone may bring the focus back on price pressure, but overall, the outlook for gold and silver remains supportive, buoyed by falling yields and safe-haven demand. Treasury yields rebounded yesterday on easing pressure on bank stocks. Fears of contagion across U.S. regional banks eased after First Citizen Bank acquired large parts of the failed Silicon Valley Bank in an auction. The odds priced in for a 25bp hike for the May FOMC increased to 50% and the implied terminal rate increased to 4.95%. The USD42 billion 2-year auction went relatively poorly, stopping at 2.8bps cheaper than the market level at the time of auction and a below-average bid-to-cover ratio of 2.44. The 2-year yield surged 23bps to 4% and the 10-year yield climbed 15bps to 3.53%. The 2-10 year curve bear flattened 7bps to -47bps. A 5-year Treasury auction is up later today. What is going on? ECB still worried about inflation; flash March CPI due this week ECB’s Schnabel noted that it is not easy to say how restrictive rates are, noting that there is no sign of weakening in the labour market, whilst also saying there are no real concerns about financial stability risks although the situation remains fragile. He had pushed to include guidance for a further rate hike at the last ECB meeting. Meanwhile, ECB's Nagel said QT should be accelerated from the summer and inflation is still too high. Focus will be on regional and Euro-wide inflation prints in Europe this week to see if inflation cools beyond the impact of energy on the headline. US regulators sue Binance and its CEO for illegally selling crypto derivatives to US retail investors The price of Bitcoin fell sharply on Monday after the US Commodity Futures Trading Commission (CTFC) sued Binance and its CEO Changpeng Zhao, alleging that the major crypto exchange illegally sold crypto derivatives, a leveraged bet on whether the price will rise or fall—for currencies including bitcoin, ethereum, litecoin, tether, and binance USD— to retail investors. The lawsuit accuses Binance employees of explicitly encouraging certain customers to use illegal VPNs for trades, while directing customers designated as important to set up shell companies in places like the British Virgin Islands and the Netherlands to avoid US trading restrictions. Carnival Q1 earnings top estimates Cruise operator Carnival reported first-quarter fiscal 2023 results, with earnings and revenues beating estimates. The company reported adjusted loss per share of $0.55, narrower than -$1.66 in the same period last year. Revenue jumped 173%, improving to 95% of 2019 levels due to strong bookings in the quarter for the North America and Australia and Europe segments. However, the outlook was conservative, and that saw the stock turn lower after over 18% gains YTD. The strong earnings performance of Carnival is reflective of a pickup in travel demand and bodes well for Saxo’s Travel and APAC Tourism equity theme baskets. Three EV companies report this week, including China’s giant BYD The EV sector has generated a lot of noise of late; from intensifying price wars among EV makers who are cutting prices, likely in part on a large drop in lithium prices, to EV purchase subsidies expiring in China last year, and new EV entrants in the market. As mentioned in our Week Ahead, this week’s earnings from China’s BYD’s, China’s Great Wall and America’s Canoo, as well as China’s lithium giant Genfeng, will set the scene for what investors can expect from the EV sector in 2023. Given BYD is the leading Chinese EV company, its Q4 results and outlook are the most heavily anticipated. Investors will get a gauge on how increased competition has affected sales, and if price drops have spurred increased sales. We will also get a gauge on how falling commodity prices (with lithium prices down 11%-47%), have potentially helped EV makers balance sheets. China’s BYD is expected to report annual net income of 17 billion yuan ($2.5 billion), a 450% jump from the prior year. What are we watching next? US March Consumer Confidence ahead – watching expectations/present situation spread The March Conference Board Consumer Confidence survey is out today, after the February headline of the survey dipped a few points to 102.90. That level is not remarkable relative to the high of 109.00 and low of 95.3 over the last 12 months, with the low posted in the context of wild spikes in gas prices last summer. However the expectations-present situation spread is very remarkable, as the February spread of –83.1 was the lowest since a brief episode back in early 2001 of a few months, as the Expectations component of the survey has deteriorated badly in recent months while the Present Situation component has held up well. A further deterioration in expectations would suggest the risk that consumers may tighten their belts Earnings to watch The memory and data storage chipmaker, Micron Technology, has outperformed the Nasdaq 100, and is up 21% this year, ahead of its quarterly results today scheduled for after the market close. Its outlook will be watched closely following the memory chipmaker’s cost-cutting efforts, from headcount reductions to executive compensation cuts, which take hold this quarter. That said, consensus expects further y/y declines in both EPS and revenue. Drug store giant, Walgreens Boots, reports before the open and could see restructuring and capital plans scrutinized, while investors could also react to the drugstore halting the sale of abortion-pills in several US states. Walgreens shares are down 14% this year. Lululemon is another key consumer stock reporting today after the close with analysts expecting revenue growth of 27% y/y and EBITDA of $836mn up from $654mn a year ago as the company continues to take market share and expanding into new categories such as shoes. Tuesday: BYD, Nongfu Spring, Micron Technology, Lululemon Athletica, Walgreens Boots Alliance Wednesday: Constellation Software, Cintas, Paychex Thursday: Kweichow Moutai, Great Wall Motor, H&M Economic calendar highlights for today (times GMT) 0845 – UK Bank of England’s Bailey to testify on Silicon Valley Bank 1230 – US Feb. Advance Goods Trade Balance 1300 – US S&P CoreLogic Home Price Index 1300 – Norway Norges Bank’s Governor Bache to speak 1400 – US Fed’s Barr (Voter) to testify before Senate panel 1400 – US Mar. Consumer Confidence 1700 – US Treasury to auction 5-year notes 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Feb. CPI Source: Global Market Quick Take: Europe – March 28, 2023 | Saxo Group (home.saxo)

Summary:  The Fed delivered a rate hike as most expected and largely failed to adjust forward projections for policy, but did note that credit conditions are likely to weigh on the economy. The market thoroughly ignored the Fed’s rhetoric and forecasts and continues to look for rate cuts later this year. While Fed Chair Powell spoke at the post-meeting press conference, US Treasury Secretary Yellen unsettled markets by indicating no comprehensive depositor insurance. What is our trading focus? US equities (US500.I and USNAS100.I): it is all about deposits, recession, and credit S&P 500 futures are rallying from yesterday’s lows post the FOMC rate hike despite the Fed’s action will increase the pressure on smaller banks and increase the likelihood of a recession. Today’s focus is how banking stocks will react to the FOMC decision and especially how deposits will develop from here. The rate hike will increase the incentive for depositors to move money from deposits to money market funds adding potentially further funding stress. We remain cautious on equities as the economy will likely move closer to a recession due to yesterday’s rate decision. European equities (EU50.I): focus is back on banks post FOMC rate hike STOXX 50 futures have turned around in early trading after being lower on the open as equities initially responded negatively to the FOMC rate decision of hiking the policy rate by 25 bps. The consensus is that higher policy rates at a high speed coupled with many bonds in the held-to-maturity were causing the problems for smaller banks so the reaction in equities today seems odd. We remain cautious on the banking sector and the real estate sector in the coming weeks. Read next: Yesterday's UK inflation prints have undermined previous MPC narrative| FXMAG.COM Hong Kong equities advance as Tencent’s solid results and upbeat outlook Hang Seng Index rallied for the third day in a row, led by Tencent (00700:xhkg) and pear internet names. Tencent surged nearly 7% after reporting stronger-than-expected online adverting revenues. The tech giant’s upbeat outlook of 2023, citing a broad-based recovery in consumer activities in China added to the market optimism. Orient Overseas (00316:xhkg) soared 16% after the container shipping liner beat earnings estimates. Lenovo (00992:xhkg) jumped 11% on its plan to develop new products based on the Nvidia Drive Thor chip. In A-shares, CSI300 advanced nearly 1%, led by semiconductors and financials. FX: Dollar weakens with EUR and JPY as winners on Powell/Yellen shocks The Fed hiked rates by 25 bps and inserted new language into the policy statement noting forward concern (more below) and the market thoroughly ignored the “dot plot” that largely maintained the December policy forecasts. The dollar fell, but it was Treasury Secretary Yellen’s statements deny a blanket backstopping of all bank deposits that spooked markets and changed the tone far more than the Fed, with US banks and rates under huge pressure and the USD lower again overnight after a mixed close yesterday, with EURUSD well above 1.0900 this morning and USDJPY slumping below 131.00. Focus shifts to BOE today after re-acceleration in inflation yesterday, although sterling has weakened again sharply, possibly in recognition that the BoE may stick to its forecasts on inflation as Governor Bailey seems a reluctant inflation fighter. Crude oil dips on Powell/Yellen double blow to sentiment Crude oil prices trade lower following a three-day bounce that saw both WTI and Brent retrace more than 38.2% of their recent drop. Earlier on Wednesday the market received a boost from a mixed EIA stock report with rising production and rising crude stocks being offset by big draws in fuel products as US total oil and fuel exports reached a record 12.3m b/d. However, risk sentiment received a fresh setback after an expected 25 bps rate hike was followed up by comments from Yellen that the government was not considering “blanket” deposit insurance to stabilize the banking system. Macro-economic developments remain firmly in the driving seat and will continue to dictate the short-term direction, but the combination of a weaker dollar and most of the selling/long liquidation already done the downside risk may be limited. Gold rallies with bonds on hike less, cut later focus The Fed’s 25bps rate hike came in-line with market expectations, but the push back on market expectations of about 100bps of rate cuts for this year failed to materialize, and together with a softer dollar and Yellen’s message that the government is unlikely to unilaterally expand deposit insurance, they added fresh upside momentum to gold, climbing to $1983. The fact gold earlier in the week managed to find support already at $1933, the 38.2% retracement of the recent surge, suggests gold remains in a strong uptrend. However, until the FOMC’s and the markets year-end rate expectations get in line - currently apart by almost one percent - golds upside potential towards a fresh record high may take longer to achieve. ETF buying continues with total holdings up another 12 tons this week on top of the 21 tons that was bought last week. Treasury yields plummeted and may have much more to go The treasury market ignored Fed forecasts and focused on the Fed’s shift in forward concern on credit conditions, but especially Yellen’s statement on bank deposit guarantees (more below). Yields on the 2-year tumbled more than 25 bps to below 3.9% in early trading and the 10-year yield fell 18 bps to 3.43%. What is going on? US risks widespread bank runs from vulnerable banks starting today With US Treasury Secretary Yellen’s commenting "I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits”, the risk of a stampede-like bank run from smaller regional lenders and even some mid-tier and larger banks has risen sharply, one that the Silicon Valley Bank situation shows can happen with alarming speed, given the ease of digital transfers. JP Morgan analyst estimates that some $1 trillion of deposits have already left the most vulnerable banks, about half of that since the SVB collapse of two weeks ago. Certainly, a situation of sufficient severity will trigger the inevitable official response to ensure that no systemic crisis is allowed to balloon and drive dramatic market dysfunction, but the follow-on impact into the economy could be severe on the disruption of credit flows (as alluded to in the Fed’s monetary policy statement last night, even as it touted the solidity of the system). Fed raised rates by 25bps but considered a pause The FOMC lifted the Federal Funds Rate target by 25bps to 4.75-5.00% and the updated economic projections left the terminal rate forecast unchanged at 5.1% while the 2024 rate view was adjusted higher to 4.25% from 4.125% earlier. Chair Powell in his comments later also said that they considered a pause but the consensus was for a rate hike, and that no participants had rate cuts in their base line scenario for this year. The market completely ignored this and redoubled its anticipation of rate cuts during the evening, particulary after US Secretary Treasury Yellen spoke (see below). The new FOMC statement removed reference to ‘ongoing increases in the target range will be appropriate’, though added that ‘some additional policy firming may be appropriate’. The Fed expressed confidence in the banking system, stating that it was ‘sound’ and ‘resilient’, but added that the “recent developments” were likely to result in tighter credit conditions and will weigh on economic activity, hiring and inflation. Janet Yellen says Treasury unlikely to unilaterally expand deposit insurance Treasury Secretary’s comments hit the wires during Fed Chair Powell’s press conference. She said that regulators are unlikely to provide “blanket” deposit insurance to stabilize the US banking system. This brought back concerns on the US banking sector, especially the smaller banks, and risks of more bank runs arise as the US opens on Thursday. The KBW regional bank index slumped 5.7% while the broader KBW bank index was down 4.7%. Economic risks also escalated amid tighter bank lending standards. Tencent’s small growth improvement excites investors Tencent shares rally 7% in Hong Kong trading after the company announced Q4 earnings yesterday after the close reporting Q4 revenue of CNY 145bn vs est. CNY 144.5bn driven by stronger than expected gains in online advertising revenue suggesting underlying improvement in the economy. On the conference call management says that advertisers in China are getting optimistic about the economy recovery and this was the piece investors were looking for. Coinbase gets Wells notice from the SEC Coinbase, the biggest publicly traded cryptocurrency exchange, says it has got a Wells notice from the SEC which means that the SEC will bring an enforcement action against the exchange. Coinbase says it could relate to its spot market or Coinbase Prime (its institutional offering). Coinbase shares are down 10% in extended trading on this news. What are we watching next? Bank of England – hike and guidance expectations justified The very hot February CPI numbers yesterday relative to consensus expectations have the market pricing very high odds for a 25-bp rate hike from the Bank of England today despite the most guidance suggested the Bank is hoping that it can shift to a pausing its rate hike cycle, and Governor Bailey out in recent weeks suggesting there is no guarantee further rate hikes are needed. Observant economists note that at least one measure of the inflation level of most concern – core Services CPI – is still actually slightly below the BoE’s own forecasts even if it rose sharply in YoY terms in February. Interestingly, sterling is heading into this meeting on its back foot and traders should tread carefully here as the Bailey BoE has been difficult to pin down in terms of likely policy moves. Last night was likely the last rate hike of the cycle We suspect that the credit contraction unfolding in the banking system will force the hands of the Fed and we may have seen the last rate hike in this cycle yesterday. U.S. banks, according to the latest survey done by the Fed in January, have already been tightening lending standards sharply before the recent turmoil. Given what has been happening over these two weeks, banks will refrain further from making loans and may cause credit growth to slow or even to contract, especially if deposits are flighty. U.S. Treasury yields, especially in the 2-year to the 5-year segment may fall further. Historically, when the Fed pauses, the short end of the curve performs better than the longer end and the yield curve will steepen. Earnings to watch Today’s key earnings reports are Accenture and Darden Restaurant, both are reporting before the market open, with the latter being a good barometer for US discretionary spending. Darden has a strong same-store network of restaurants and has so far lifted menu prices less than inflation, which has kept customers coming. Analysts expect FY23 Q3 (ending 28 Feb) revenue growth at 11% y/y and EBITDA of $435mn, up from $392mn a year ago. Accenture is expected to report FY23 Q2 (ending 28 Feb) revenue growth of 3% y/y, which is a significant slowdown from 25% y/y from a year ago, as corporate consultancy and technology spending slows on cost cutting. This week’s earnings releases: Thursday: China Mobile, Accenture, General Mills, Darden Restaurants Friday: China Merchants Bank, Meituan, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 0830 – Swiss National Bank Rate Decision 0900 – Norway Norges Bank Rate Decision 1100 – Turkey Central Bank Rate Decision 1200 – UK Bank of England Rate Decision 1230 – US Weekly Initial Jobless Claims 1400 – US Feb. New Home Sales 1400 – Sweden Riksbank Governor Thedeen to speak 1430 – EIA's Weekly Natural Gas Storage Change 1500 – Eurozone Mar. Consumer Confidence 2330 – Japan Feb. National CPI 0001 – UK Mar. GfK Consumer Confidence Source: Global Market Quick Take: Europe – March 23, 2023 | Saxo Group (home.saxo)

Summary:  Today we look at the eerie calm across markets after the two consecutive weekend interventions to deal with systemic risks from failing banks. We also discuss whether the FOMC will be willing to market its forecasts anywhere near where market expectations have shifted in its forward guidance at tomorrow's meeting, look at copper, natural gas and platinum, stocks to watch, including Amazon, where we wonder if activist investors could soon make an appearance 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 available 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.   Read next: JP Morgan, GS and Morgan Stanley ended the day above the line. On Monday, S&P 500 increased by almost 1%, Nasdaq gained 0.34%| 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: Podcast: Are markets too calm? Will FOMC play ball with market expectations? | Saxo Group (home.saxo)

Summary:  Market are putting on a show of increasing calm, but we can hardly expect that the implications of what has unfolded are set to quickly fade after two dramatic weekend interventions to avoid banks triggering a systemic crisis. First up is the FOMC meeting tomorrow and how the Fed positions what is going on and how it guides from here now that the market has already priced in significant rate cuts by year-end. But the Bank of England and Swiss National Bank are also up tomorrow. What is our trading focus? US equities (US500.I and USNAS100.I): awaiting the FOMC rate decision S&P 500 futures rallied 2.2% from the lows after initial nervousness over the AT1 capital market in Europe as Swiss regulators wiped out Credit Suisse AT1 capital holders while leaving money on the table for shareholders. The best performing sector was energy while technology stocks did the worst due to bond yields rising. S&P 500 futures are extending their gain in early trading hours with the 4,000 level being the big gravitational point and colliding with the 200-day moving average. Across markets investors are now awaiting tomorrow’s FOMC rate decision in which the Fed is leaned in markets to hike 25 basis points. Tonight, after the market close Nike will report earnings and provide an outlook on the global consumer. European equities (EU50.I): confidence is coming back for now The rescue of Credit Suisse and subsequent reassuring comments from UK and EU regulators that AT1 capital holders are still above shareholders in the capital structure, despite the Swisse regulators broke that order in their Credit Suisse takeover design, lifted sentiment yesterday with STOXX 50 futures rallying 3.7% from intraday lows. The index futures are extending the gains trading above the 4,100 level with the 50-day moving average at around 4,144 is the next potential upside level if momentum continues. Focus is still on banks and real estate related companies. Hang Seng Index and CSI300 bounced modestly Selling in the Hong Kong equity market took a pause as battered financial names rallied and the Hang Seng Index gained nearly 1%. HSBC (00005:xhkg) and Standard Chartered (02888:xhkg) gapped higher following rallying overnight in the London session but then traded sideways, up 2% and 1.5% respectively as of writing. Pharmaceuticals and consumer names were top gainers with the benchmark Hang Seng Index. The three leading China telcos consolidated for the second day after a strong performance in March, falling over 1%. In A-shares, CSI300 advanced by around 1%, led by the defense, and tourism stocks. ChatGPT concept stocks were well bid. FX: USD stabilizes on rebound in yields and ahead of FOMC The US dollar stabilized after choppy trading and a bout of weakness yesterday as the market mulls the odds for a Fed pause at tomorrow’s FOMC Meeting (preview below), with a rebound in yields and odds for the Fed to go ahead with another rate hike supporting, while at the same time spoiling the Japanese yen’s rally attempt, which can only thrive on lower yields. An important seasonal consideration for JPY traders, by the way is the end of the Japanese financial year at the end of this month and as we await signals from the incoming Bank of Japan Governor Kazuo Ueda as he is set to take the helm in a few weeks. The kiwi was particularly weak overnight as RBNZ expectations have deflated since this latest bout of turmoil started, although less rapidly than RBA forward expectations have. Tonight, NZ reports its Q1 Consumer Confidence survey after the Q4 survey came in at 75.6, the worst ever in the 34-year history of the survey. Crude oil bouncing but not by enough to force a turnaround in sentiment Crude oil, down around 12% this month, remains the biggest casualty among key commodities as the banking crisis and risks to the global economic outlook has led to short-term price and demand downgrades. In addition, the technical breakout of long-established ranges has forced major position changes from traders and investors. Hedge funds sold 65k lots of Brent in the week to March 14, and continued selling since then has helped flattening the curve as the market price in lower demand in the months ahead. So far, technical selling and the need to reduce exposure have drowned out signs of robust Chinese demand with Trafigura seeing record demand for some grades. While the attention now turns to the FOMC meeting, Brent and WTI as a minimum would need to close above $75 and $70 respectively before a change in direction can be contemplated. Gold eased back from the $2000 level with eyes on Fed and AT1 bonds Gold prices briefly rose above $2,000 on Monday to fresh one-year high of $2010 as the bank lending sector was sent into a tailspin before stabilizing later in the day as regulators rushed to shore up optimism. Before then, gold had reached a record high against the Australian dollar and a near record against the euro, highlighting gold's current ability to attract bids despite pockets of dollar strength. The focus now turns to the FOMC meeting, the most unpredictable in years, with market having gone from hike to cut and back to a hike within the last week. What’s important from a gold perspective is whether a hike will be followed by a signal to pause, if so, it would support market expectations that rate cuts may follow in the coming months. Short-term gold seems overbought, and a correction if gathering pace could see it target $1931, the 0.382 Fibo retracement of the latest run up since March 8. Overall, gold is in an uptrend short- and medium-term and could test all-time highs around $2,074  Flight to quality bids for Treasuries faded as bank stocks rallied In Asian hours and the early London session on Monday, investors flocked to the front end of the Treasury curve, seeing the 2-year yield falling to as low as 3.64% as fear arose toward the Additional Tier-1 debts (AT1) issued by banks following the wiping out of over USD17 billion such debts in the takeover deal of Credit Suisse by UBS. The gains in Treasuries faded as stocks, including bank stocks, rallied when New York came in and the Bank of England said that AT1 debts rank ahead of common equity in case of insolvency. The market is pricing in around 18bps, in other words, around a 70% chance for a 25bp hike at the FOMC tomorrow. The 2-year yield finished the Monday session 14bps cheaper at 3.98% while the 10-year yield was up 6bps to 3.48% What is going on? US FDIC studies was to insure all deposits in a crisis Bloomberg reports that US officials are studying ways to temporarily cover all deposits in an emergency, prompted to do such by a coalition of banks. The US Treasury Department will have to determine whether it has the authority to insure all deposits greater than the current cap of $250,000 without Congressional approval, with the latter a likely hefty challenge given the deep partisan divisions. First Republic Bank, widely seen as the most troubled bank of size in the US, saw its shares drop by almost half yesterday despite peers putting together a $30 billion rescue plan for the bank. EU regulators assure markets of capital structure norms after Credit Suisse After the AT1 bonds of Credit Suisse were written off in the deal with UBS, EU and UK regulators reassured markets that junior creditors should bear losses only after equity holders have been fully wiped out. But the statement could not provide enough support to Europe’s $275 billion AT1 market. The EU and UK authorities also said they welcomed the comprehensive set of actions taken by the Swiss authorities to ensure stability and that the European banking sector remains resilient, with robust levels of capital and liquidity. Meanwhile, ECB President Lagarde was also on the wires and she continued to reaffirm that the central bank’s inflation fighting mission is separate from the financial sector threats. Read next: JP Morgan, GS and Morgan Stanley ended the day above the line. On Monday, S&P 500 increased by almost 1%, Nasdaq gained 0.34%| FXMAG.COM Amazon lays off another 9,000 employees Amazon announced that it is laying off another 9,000 employees, adding to the 18,000 jobs cuts it has announced since the end of last year. The latest job cuts would primarily affect Amazon Web Services, human resources, advertising and the Twitch livestreaming service groups, and comes after a massive hiring spree during the pandemic which left Amazon and other tech companies over-staffed. Amazon is up 16% YTD. Russia says it will listen to China’s peace proposal. US Secretary of State Blinken responds. With Chinese leader Xi in Moscow, Russian leader Putin said is open to discussing China’s proposals for “the acute crisis in Ukraine”, but it is a non-starter with Ukraine and its supporters if the proposal simply freezes the current Russian territorial claims. US Secretary of State Blinken positioned China’s overtures as such and said that Xi’s visit is offering Putin “diplomatic cover” as it comes just days after the International Criminal Court issued an arrest warrant for Putin for war crimes. After Xi’s visit in Moscow this week, a video conference between Xi and Ukraine’s president Zelensky is also planned. Mining titans and traders see copper prices hitting a new record within a year. Copper has only lost around 3.5% this month which is around 1/3 of the losses seen in crude oil, and it highlights the market focus on a recovering China, low visible stock levels and the continued rise in demand towards electrification.  Trafigura co-head of metals Kostas Bintas joined other senior trading executives at the Financial Times Commodities Global Summit who were uniformly bullish on the outlook for copper, citing constrained supplies and the outlook for rising demand for electrification as part of the green-energy transition.  Mercuria chipped in by saying that the current prices do not reflect the reality of a looming shortage. What are we watching next? FOMC meeting tomorrow – to hike or not to hike? The focus for the upcoming Fed will clearly have to address the current financial stability concerns while pretending to stay on message on inflation considerations. The US Feb. CPI data remained hot, with services inflation still sticky, and Powell's preferred "supercore" metric (which excludes shelter and rent) rose 0.5% month-on-month from 0.36%, the highest since September, so there is plenty of cause for the Fed to continue its hiking regime from the “incoming data” side of the equation. BUt the Fed’s messaging on inflation will be pushed to the side as investors watch for two things: first, simply whether the Fed hikes 25 basis points or stands pat, but second and more importantly, how it positions its level of concern around recent events and the risk of a funding crisis in the banking system and therefore how it guides for the path of rates and QT from here. The market has already marked the Fed to cut more than 75 basis points by year-end after possibly hiking another 25 basis points over the next two meetings (tomorrow’s meeting has a +18 bps probability, i.e., a lean for a hike, but a significant minority is looking for the Fed to blink and not hike rates tomorrow.) Earnings to watch Nike reports earnings tonight after the US market close with analysts expecting revenue growth of 6% y/y for the FY23 Q3 (ending 28 Feb) and EBITDA of $1.19bn down from $1.81bn a year ago. Nike continues to be the leader in the sports retailing industry and with a strong result and outlook from Chinese-based Anta Sports (shares were up 7% in Hong Kong trading) we expect Nike to deliver good results. This week’s earnings releases: Tuesday: RWE, Anta Sports, Partners Group, Nike Wednesday: Tencent, China Telecom Thursday: China Mobile, Accenture, General Mills, Darden Restaurants Friday: China Merchants Bank, Meituan, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 1000 – Germany Mar. ZEW Survey 1230 – US Philly Fed Business Activity Survey 1230 – ECB's Lagarde, Villeroy to speak 1230 – Canada Feb. CPI 1400 – US Feb. Existing Home Sales 1700 – US 20-year Treasury Auction 2000 – New Zealand Q1 Westpac Consumer Confidence 2030 – API's Weekly Crude and Fuel Stock Report Source: Global Market Quick Take: Europe – March 20, 2023 | Saxo Group (home.saxo)

Summary:  Today we continue to highlight the tremendous volatility in asset markets, particularly bonds, on the bank-centered turmoil and wonder whether the extension of a lifeline by the Swiss National Bank to Credit Suisse will provide any calm beyond the immediate relief that the latest weakest link isn't set to break. We also look at the ECB's impossible task at its meeting today as it juggles concerns with financial stability and its formerly most-hawkish guidance, we note the turmoil slipping into the commodity markets and much more. Today's pod features Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple Spotify PodBean Sticher Read next: Is the end of NFT flipping and speculation near? LiveArt announces an NFT membership card| FXMAG.COM 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.

Summary:  Following the collapse of SVB bank in the US, European banks have come under renewed selling pressure as contagion fears grow and the EuroStoxx banks index falls by more than 8%. This article will look in more detail at what has led us to this point alongside what to look for in the price action and why Saxo as a financial institution provides both safety and security. What is happening in markets now? As the collapse of US bank SVB took place last week, authorities stepped in to contain the fallout and prevent a broader impact on the financial sector. New liquidity measures from the Federal Reserve and the announcement that both SVB and Signature Bank's depositors will be made whole were meant to shield the banking industry from contagion risks. What we are witnessing now though is further turmoil as markets wrestle with deteriorating financial conditions and fears of contagion outside of the US banks. This is all set against the backdrop of excessively high inflation that central banks globally still need to tackle. There’s still a lot of leverage in the system and interbank markets are seeing liquidity drying up. Volatility feeds further volatility in a similar feedback loop as we saw during the covid market turmoil and clients should ready themselves accordingly. From a cross-asset perspective, equities and credit have held up way better than they should have during the whole hiking cycle.  Financial sector valuations have especially been booming, which has left the sector vulnerable to a re-pricing. The Stoxx 600 banks have fallen 15% since the SVB story hit last week but the index is still up +23% from the end of September 2022 (as illustrated in the chart). In a way, one could even say that this was long overdue and hence needed, even though the way it is unfolding is far from optimal. Source: Bloomberg What opportunities do you have in the current market situation? For the simplest, low risk method to earn a return on your money, you may just wish to hold it as cash with Saxo. Saxo offer highly competitive rates of interest across multiple currency pairs. For those equity investors that simply want to reduce overall risk, short-term bonds or holding cash on their Saxo account should be considered. Clients interested in learning what bonds are and what they can offer a portfolio in terms of income (especially on idle cash) and portfolio diversification can find a lot of useful information in our published Starter Guide.  Another consideration to add fixed income diversification is via a bond ETF; the iShares 20+ Year Treasury Bond Fund and iShares USD Treasury 7-10 Year UCITS ETF track the performance of a basket of bonds. Read next: Adobe earnings: company's FY23 Q1 revenue and EPS beat expectations| FXMAG.COM Saxo’s analyst Peter Garnry wrote in a note that small caps are always a bigger risk when financial conditions are tightening, so investors should consider reducing exposure to small caps. Quality companies with low debt levels, high return on invested capital and market leading positions should be preferred. Examples of ETFs providing exposure to different variations of quality are FCF US Quality ETF, VanEck Morningstar Wide Moat, and iShares Edge MSCI World Quality Factor UCITS ETF. Thinking more about ‘Safe Havens’, John Hardy, Saxo’s Head of FX Strategy pointed toward the Japanese Yen and gold as the two most notable safe stores of value which roared higher as the focus on weak banks weighed on markets. Those that see the situation worsening before getting better can look to adopt hedging strategies by adding short exposure. There are various instruments available for this on the Saxo platform including Inverse index tracker funds, which provide short exposure to a particular sector or index, buying of put options on individual stocks or a stock index which is like buying insurance, or lastly use of a simple Index CFD. Adding these instruments to a long equity portfolio will provide profits to off-set losses during a market down turn, a few of the inverse trackers include; Lyxor S&P500 Daily Inverse UCITS ETF (DSP5:xpar), Lyxor CAC40 Daily 2x Inverse UCITS ETF (BX4:xpar), Xtrackers S&P500 2x Inverse Daily Swap UCITS ETF (DBPK:xetr), Lyxor EuroStoxx 50 Daily 2x Inverse UCITS ETF (LSK8:xetr). If the current situation doesn’t spiral out of control, the leading indicator is to look at correlations between bank share price moves. As long as all moves are extremely correlated, the market is macro/fear/risk unwind driven. As soon as correlations start to decrease, that’s the first sign that smart money and fundamentals are behind the wheel again­. Why clients can trust Saxo with their money Saxo offers very competitive rates of interest on client deposits and has taken strategic decisions that allow us to be in a strong financial position with a sound balance sheet and very low exposure to movements in long term interest rates. Saxo does not have a mortgage or commercial loan book and therefore is not exposed to the inherent risks of credit losses from those activities. Clients and partners can and should continue to trust Saxo to be a safe-haven to place their deposits during this crisis. Source: Turmoil in European banks - what's happening and what are the opportunities | Saxo Group (home.saxo)

Summary:  Troubled Swiss lender Credit Suisse has been extended a lifeline by the Swiss National Government this morning, but will that move sufficiently calm the banking sector and global markets after the collapse of the US’ SVB touched off a firestorm of negative focus on banks? Elsewhere, the ECB faces a tough task today after pre-committing to a 50 basis point hike, with the market doubting they will deliver and forward expectations marked lower. What is our trading focus? US equities (US500.I and USNAS100.I): Another day of volatility ahead S&P 500 futures are bouncing higher this morning trading around the 3,935 level responding to measurements taken by the Swiss National Bank to shore up confidence in Credit Suisse. The US 2-year yield is also jumping 12 basis points this morning on this attempt to muster a broader risk-on rally. The VIX Index remains high around the ~26 level with the VIX forward curve flat suggesting less stress in the US equity options market. US mega caps remain a safe-haven trade in the market holding up US equities a bit more than what you would expect given the tighter financial conditions. European equities (EU50.I): Credit Suisse taps central bank funding The Swiss National Bank (SNB) has offered a funding lifeline worth $54bn to Credit Suisse and the Swiss investment bank has offered to repurchase debt in a move to restore confidence. Credit Suisse’s 5-year senior CDS price hit 970 yesterday, a new all-time high, reflecting the nervousness in market. The measures from SNB are helping on sentiment with Credit Suisse indicated up 18% in pre-market trading. STOXX 50 futures are also attempting to rally on this news trading 1.6% above yesterday’s close with the key level to watch on the downside being the 4,025 level and 4,125 on the upside. We expect another nervous trading session today with high volatility and focus on banks. Chinese equities (HK50.I and 02846:xhkg): Retreat on a risk-off session HSBC (00005:xhkg), AIA (01299:xhkg), and energy stocks weighed on the benchmark Hang Seng Index, seeing the benchmark index down 1.7%. While the saga in the U.S. regional banks and Credit Suisse has stabilized somewhat, market sentiment remains fragile and investors opt for risk-off, towards financial and cyclical names. In A-shares, however, banks are well bid and are among the top gainers on Thursday. In February, 55 out of the top 70 Chinese cities surveyed registered new home price increases from January. CSI300 shed 1%, as coal, petrochemical, non-ferrous metal, and electric equipment leading the decline. FX: Dollar recovery takes hold, but JPY’s safe-haven status at play The US dollar charged higher as the Swiss Franc and Euro slumped amid rising concerns on European banks (read below). US data failed to take the limelight away but softer February PPI and downward revisions in the previous print again lowered the probability of a Fed rate hike next week (currently at slightly better than 50/50 odds for a 25 basis point hike). USDCHF surged back above 0.93 overnight after touching lows of 0.91 earlier this week on CHF’s safe-haven demand which has come under question due to concerns on Credit Suisse and the Swiss banking sector (more below). EURUSD plunged over 200bps to 1.0550 ahead of the ECB decision today where a 50bps rate hike may look too bold now and guidance will be critical (more below). The Yen’s perceived safe-haven status getting plenty of focus yesterday amid the banking crisis and collapse in global short yields, as USDJPY slumped below 133 from 135. AUDUSD surged to 0.6637 from sub-0.66 levels overnight as the AU jobs report came in better than expectations with unemployment rate down to 3.5% (vs. 3.6% expected and 3.7% prev.) Read next: S&P 500 shrank 0.7% yesterday, Nasdaq gained 0.42%. European Central Bank decides on the interest rate today| FXMAG.COM Crude oil climbs from 15-month low Crude oil prices slumped to a December 2021 low on Wednesday as the banking crisis continued to roil risk appetite and the general economic outlook. The Interntional Energy Agency in its monthly oil market report warned that higher-than-expected Russia exports will keep the market in surplus for the first half of the year. With the short-term demand outlook increasingly being challenged by the current banking crisis the three-day rout accelerated yesterday as hedge funds scrambled to reduce what up until last week had been an elevated long position. The direction in the coming days will apart from the liquidity crisis depend how much more selling, if any, they need to carry out. Following the latest slump, the market will now be looking out for OPEC+ production comments and whether the US government will start refilling its SPR. Brent as a minimum needs a close above $75 to signal some emerging stability. Copper trades below $3.95 despite positive China signals Copper extended losses as the risk-off tone across market triggered further selling. The banking crisis appeared to be spreading to Europe sparking global growth concerns. This was despite positive signs in China in the Jan-Feb activity data. Growth in fixed asset investment picked up as projects commenced in the New Year following policy support. Property investment also rose more than expected in the first two months of the year. Copper prices broke below the key $3.95 mark thereby bringing the 200DMA at $375.75 into focus. Precious metals clear winners following a week of extreme uncertainty One week on from the SVB news and we have seen precious metals respond positively with silver up around 8% and gold around 5%. Yesterday's turbulence triggered by turmoil at Credit Suisse triggered another rush of safe haven buying which briefly saw gold trade $1937 before profit taking emerged as the Swiss National Bank stepped in to provide a lifeline (see below). Gold and silver have been supported by fresh buying from hedge funds which during the February correction had cut their gold long by 64% to 40k lots while the silver position was flipped to a net short. Key focus remains the outlook for US Fed funds and whether we have seen a peak already, bond yields and today’s ECB meeting given its potential impact on the dollar. Support at $1890 followed by 1877. Treasuries surge again with yields on the 2-year plummeting to 3.89% US treasury yields plunged yesterday on the negative focus on banks in Europe, centering on Credit Suisse. The 2-year yield plummeted to as low as 3.71%, before bouncing to finish the session at 3.89% and then trading as high as 4.0% this morning after the announcement of an SNB lifeline to Credit Suisse. Markets were extremely volatile. The September SOFR contracts once soared 100bps and triggered a 2-minute trading halt. At the close of trading, markets are pricing in a terminal Fed Fund rate of around 4.8% at the FOMC next week before falling to around 3.9% by the end of this year. Yields on the 10-year dropped 23bps to 3.46%. The 2-10-year curve bull steepened 12bps to -43bps. What is going on? Credit Suisse receives a lifeline from the Swiss National Bank The Swiss National Bank will lend troubled Swiss bank Credit Suisse up to CHF 50 billion to extend a lifeline and prevent liquidity concerns from resulting in a possible collapse of the lender as counterparties flee. Credit Suisse will use a portion of the funds to buy back some $3 billion of senior debt that has collapsed in price recently. The move came after the recent turmoil in global banks saw Credit Suisse’s share price nosediving steeply after a long period of struggling. Shares traded as low as CHF 1.55 yesterday versus 2.67 last week just before the Silicon Valley Bank collapse touched off a negative focus on global banks. The ECB was out polling banks yesterday on their exposure to Credit Suisse. As market fears linger, Saxo provides a range of options on how to protect your portfolios and reduce overall risk exposure, which could mean including short-term bonds or holding cash as well as including some exposure to safe-havens. Several such ways are discussed here in this piece. Adobe earnings: Figma transaction on track for 2023 closure The US software maker reported earnings last night after the close with FY23 Q1 (ending 3 Mar) revenue at $4.66bn beating est. of $4.63bn and EPS of $3.80 vs est. $3.67. The outlook for revenue and EPS in the current quarter is slightly above estimates. In addition, Adobe said that the Figma acquisition is on track to close by the end of 2023. Shares were up 5% in extended trading. UK budget: projects no recession and inflation halved in 2023 Chancellor of the Exchequer Jeremy Hunt set out major changes to the UK tax and benefit system to encourage businesses to invest, entice people back into work and to pull the economy out of stagnation. Overall, a significant fiscal easing was delivered alongside improved borrowing, and Hunt said the economy would only contract by 0.2% in 2023, compared to the OBR’s previous forecast of shrinking by 1.4%. The OBR also sees inflation falling to 2.9% by end-2023 from current over 10% levels. US PPI and retail sales comes in cooler than expected February PPI and retail sales came in softer-than-expected after the in-line CPI report a day before, and a marked revision lower in the January PPI print added to the relief. Headline PPI fell 0.1% MoM (vs. +0.3% exp) while the January figure was revised lower from +0.7% to +0.3%. The YoY print also fell to 4.6% from the downwardly revised 5.7% for January (initially 6.0%), well beneath the expected 5.4%. Core PPI was flat (vs. exp. +0.4%; prev. revised to +0.1% from +0.5%), with the YoY falling to 4.4% (exp. +5.2%; prev. revised to +5.0% from +5.4%). February retail sales data was dovish as well, declining 0.4% MoM, worse than the expected -0.3% MoM. But the January print was revised higher to 3.2% MoM from 3.0% previously. Still, the control group measure, which is a signal on consumer spending, rose 0.5%, a big surprise against the -0.3% forecast, while the January reading was also revised up to 2.3% from 1.7%. The report may signal that the consumer and growth are holding up well, but the story has turned since the banking crisis unfolded and little conclusions can be drawn from any backward-looking data. China to cut steel output, sending jitters to iron ore prices, and major miners shares China, the worlds’ biggest steel producer is cutting its steel production output for the third year, in a bid to hit its green goals by 2030. Steel production emission account for 15% of China’s emissions, behind electricity generation. China is also said to be banning new steelmaking capacity, but that report was an allegation. The news reverberated through metal prices, sending the price of the key steel ingredient, iron ore (SCOA) down 2.2%, to $129.25. China’s production hit a record in 2020, of 1.053 billion tons. Since, production declined each year, remaining just above 1 billion tons. Shares in some of the world’s biggest miners fell sharply with BHP, Rio and Fortescue Metals shares down 3-4%, while Vale shares in Brazil fell 3% What are we watching next? ECB faces a tough communication task today after bank turmoil and recent hawkishness ECB expectations have suffered a profound mark-down now that the turmoil in banks has spread across The Pond to Europe, particularly jarring given the popularity among investors of buying European bank stocks on the hope that a widening interest rate margin was set to improve profitability. The ECB pre-committed to a 50 basis point hike today at its prior meeting and more hawkish members had been talking up multiple 50-basis points moves before the turmoil of this week, while a couple of former prominent ECB governing council members have weighed in against further tightening. Market expectations are priced at +28 basis points, suggesting many see a smaller hike or no hike from President Lagarde and company today due to market conditions.  Focus will be on the guidance for the path of interest rates from here, as well as on the comments around the risks of a financial contagion spreading from the SVB collapse and turmoil in banks. Recent data such as an upside surprise in core inflation had prompted the market to price the ECB to shift to a terminal rate of 4% by July, but this has been marked down to hardly more than 3.0%. The latest inflation forecasts will also be key, with core inflation expectations likely to be revised higher for 2023 after strong reads in January and February. Read our full preview here. Fed expectations for next week in the spotlight post-ECB Expectations of a Fed rate hike next week have dropped back to 25bps with the concerns now seen in European banks after the recent turmoil in US banks on the SVB collapse, but the Fed may need to preserve its inflation-fighting credibility and can still go for a 25bps rate hike if no further market disorders are seen. Earnings to watch Rheinmetall earnings are key to watch today in Europe with analysts expecting Q4 revenue growth of 29% y/y and EBITDA of $494mn reflecting the highest growth rate in more than two decades and a strong improvement in profitability as orders are surging for the German weapons manufacturer. Today’s US earnings focus is FedEx with analysts expecting -4% y/y revenue growth in FY23 Q3 (ending 28 Feb) and EBITDA of $2.03bn down from $2.45bn a year ago. The global logistics market is seeing pricing pressure as volumes relative to available capacity is now more in balance than during the pandemic. The key outlook driver to watch in FedEx earnings is whether the Chinese reopening is lifting demand. Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) 0900 – Norway Feb. Regions Survey 1230 – US Weekly Initial Jobless Claims 1230 – US Feb. Housing Starts and Building Permits 1230 – US Mar. Philly Fed Survey 1315 – ECB Rate Announcement 1330 – ECB Press Conference 1430 – DOE's Weekly Natural Gas Storage Change Source: Global Market Quick Take: Europe – March 16, 2023 | Saxo Group (home.saxo)

Summary:  Still very early days, as we ponder the ongoing fallout from the turmoil in the US banking system, which has triggered a massive collapse in yields as the market brings forward the end of the Fed's tightening cycle. One significant danger is that we risk a credit crunch as banks are forced to scramble for funding and deposits. We highlight areas and indicators that are flashing red, the impact of the situation into currencies, precious metals, and equity sectors. Today's pod features Garnry on equities, Ole Hansen on commodities, and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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: Careening toward a credit crunch? | Saxo Group (home.saxo)

Summary:  An historic move in interest rates accelerated yesterday as investors rushed to price an end to the current Fed hiking cycle and even an eventual easing starting as early as Q3 after US officials moved to prevent contagion in the US banking sector. The US 2-year treasury yield, which traded above 5.0% mid-last week, traded below 4.0% late yesterday. The US dollar is down sharply, gold and bitcoin are soaring, and equities can’t decide whether to sell off on the uncertainty or celebrate the sharp drop in yields. What is our trading focus? US equities (US500.I and USNAS100.I): has the dust settled post SVB Financial bailout? Yesterday’s session saw big moves across US government bonds with especially the US 2-year yield declining 60 basis points as many corporates likely converted deposits into short-term bonds to reduce deposit risk. In equities mega caps were seen as safe havens with Apple shares gaining 1.5% while the broader S&P 500 Index was flat, and the Russell 2000 Index was down 1.5%. US financial conditions tightened to the tightest levels since late September and thus under those circumstances the S&P 500 Index should be trading closer to 3,600 than the close of 3,855 yesterday. Moves in times of crisis are always exaggerated and often not consistent so investors should continue to be cautious and not celebrate too early despite equities help up yesterday. The key indicators to monitor remain US bond yields, USD, FRA-OIS spreads (interbank stress), VIX, credit default swaps, and banking stocks. FX: USD weakens as market prices imminent end of Fed hiking cycle The USD continued to slide on Monday as US yields at the front end of the curve suffered an historic collapse, with Fed expectations revised lower (read below), although a floor in US rates was found in early Asian trading near 4.00% for the US 2-year yield. AUDUSD touched highs of 0.6717 late yesterday before reversing to 0.6650. GBPUSD found resistance ahead of 1.22 and focus turns to labor market data in the UK today before the budget announcement tomorrow, although incoming data feels suddenly less urgent than just a week ago, given the uncertainty the turmoil in the financial sector has generated since late last week. EURUSD touched 1.0750 with a 50bps rate hike still on the table this week from the ECB, although the probability for a hike of that size has dropped significantly, and ECB tightening expectations have seen a sharp downgrade since late last week. JPY and CHF continued to outperform, with USDJPY staying below 134 and USDCHF testing support at 0.91. Crude oil tests strength of support near bottom of current range Crude oil prices closed lower by 2.5% on Monday as banking sector concerns continued to challenge growth and demand dependent commodities from cotton and copper to crude oil. However, expectations of a less aggressive Fed monetary policy helped crude oil find support with WTI and Brent both finding support in the bottom 20% of their current ranges. In Brent, the prompt month backwardation remains elevated around 50 cents while the contango in WTI has not widened despite the current weakness, both signalling a discrepancy between current robust fundamentals and the overall weak sentiment. Ahead of today’s US CPI print, OPEC is scheduled to issue its monthly market report, while the International Energy Agency will follow on Wednesday. Gold and silver benefitting from the yield collapse Gold broke above $1900 barrier on Monday as flight to safety continued despite the efforts of US regulators to reduce the risk of contagion from the SVB collapse. The massive drop in 2-year Treasury yields of the order of 60bps as well as market now pricing in as many as four rate cuts this year (from four hikes less than a week ago) have seen the dollar come off considerably from its highs and brought the precious metals back in focus. Since the SVB news broke late Thursday, gold has gained 4.2% while silver has added a massive 8.5%, and with several rate cuts now priced in, and short end yields unlikely to continue their decline, the risk of a profit taking ahead of the CPI print has risen. Support levels that may get challenged in gold are 1900 followed by 1890 and 1872. Copper looks to China for support Copper trades back above $4 after managing to find support around $3.94, the December high. With the arrival of the peak season and the drop in copper prices, consumption in China is expected to continue to recover, potentially offsetting growth concerns elsewhere Massive bull steepening in US Treasuries as investors flocked to 2-year Treasuries On the back of U.S. regional bank turmoil, investors quickly repriced the front end of the Treasury curve and removed additional future rate hikes in this tightening cycle. Investors flocked to 2-year Treasuries in safe-haven bids and traders closed out curve-flattening positions. Yields on the 2-year plunged 61bps to 3.98% while the 10-year yields fell “only” 13bps to close at 3.57%. The 2-10-year curve steepened to -46bps, after hitting as inverted as -110bps last week. What is going on? Fed launches SVB probe as bank stocks tumble the most since the Covid-19 crash The Federal Reserve will launch an internal probe to the supervision of Silicon Valley Bank after its collapse sparked criticism by the central bank oversight. The KBW Bank Index declined 12% yesterday extending last week’s rout that saw the index slide 16%. In biggest declines were among banks such as First Republic Bank (-62%), Western Alliance Bancorp (-47%), and California-based PacWest Bancorp (-21%) as depositors and investors were nervous about smaller financial institutions. Larger financial institutions were not immune to the risk-off with Charles Schwab shares declining 12%. Credit Suisse has found material weakness in financial reporting The Swiss-based investment bank was forced to postpone the release of its annual report last week due to US regulators and the morning the bank says that it has identified material weaknesses in its financial procedures for 2021 and 2022. The bank is working on remediating those errors. Credit Suisse 5-year CDS prices hit a new all-time high yesterday at 485. Bank worries bring a significant shift in Fed expectations Bonds continued to soar as markets digested the measures of the US regulators to stem contagion from the collapse of SVB. But that continued to complicate the path of monetary policy with the Fed having broken something. As markets continued to re-assess the path of monetary policy from here, 2-year Treasury yields plunged 61bps to below 4%, the biggest one-day slump in four decades, while 10-years dropped 16bps. The CME FedWatch tool now shows a 35% chance of no move from the Fed next week, and 65% probability of a 25bps rate hike. Fed Funds futures are now pricing in a terminal rate of 4.8% as early as May (down from 5.7% in July earlier) and as much as 100bps of rate cuts this year (compared to one 25bps rate cut expected last week). What are we watching next? US CPI will still get some attention, even if incoming data’s importance has fallen sharply US inflation has been the talk of town for several months now, although the focus has lately turned chiefly to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. In fact, several banks are now calling for a pause next week, with one also expecting a rate cut and an end to quantitative tightening. Still, the US February CPI – due to be released today – will be a big test after last month’s print reversed the disinflation narrative in goods inflation and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% m/m in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% m/m in February, matching the January pace, though the annual rate is expected to fall to 5.5% y/y from 5.6% in January. Despite the SVB’s failure, we still believe the February CPI release will be particularly relevant for the FOMC’s March policy decision as the Fed may try to pretend that it can focus on business as usual. Evidence of economic resilience and persistent price pressures would prolong the Fed’s tightening cycle. However, by year-end, we expect the U.S. economy will start to experience more significant disinflationary pressures. NFIB survey for February Given that small businesses are particularly sensitive to domestic economic dynamics, sentiment among small business owners will provide an update on inflationary conditions and the labor market situation. Earnings to watch Volkswagen earnings are the big focus today at 9:00 CET but VW’s investment plans have already been surfaced increasing to €180bn in investments during 2023-2027 which is 13% higher than previously announced and with 70% going to EV. Next key US earnings are Adobe and Lennar tomorrow with analysts expecting Adobe’s revenue growth at 9% y/y which is unchanged from a year ago suggesting the growth rate is stabilising. Analysts are also expecting Adobe to show meaningful improvement in operating income as the software maker has reduced costs. Lennar is expected to report -3% y/y and –41 q/q revenue growth for FY23 Q1 (ended 28 Feb) and a significant hit to EBITDA at $725mn down from $1,527mn. Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) During the day: OPEC’s Monthly Oil Market Report 1230 – US Feb. CPI 1230 – Canada Jan Manufacturing Sales MoM 2030 – API's Weekly Crude and Fuel Stock Report 2120 – US Fed’s Bowman (Voter) to speak   Source: Global Market Quick Take: Europe – March 14, 2023 | Saxo Group (home.saxo)

Summary:  Banking sector concerns continued to roil markets as the SVB fallout still remains a big unknown despite measures from US authorities to stem contagion. Flight to safety accelerated further with 2-year Treasury yields slumping by a massive 60bps, and Fed rate expectations continued to shift lower with terminal rate expectations now down to 4.8% from 5.7% last week. Dollar was broadly sold and gold and silver were in favor on yield drop. US CPI still a key focus ahead but a softer print can prompt a further shift lower in the expectations of the Fed tightening path.   What’s happening in markets? US equities assess the probability of Fed rate cuts, while both the recession and volatility indexes spike After the sweeping failure of regional lenders, including Silicon Valley Bank, and ahead of the all-important US inflation read, tech stocks edged cautiously ahead, while bond yields fell - as SVB’s collapse severely complicated the Fed's rate path. Meanwhile, the NY Fed probability of a recession index, climbed to its highest level since the GFC, while the Volatility index hit its highest level since October last year. As such we remain cautious. The swaps market is now showing a less than 1-in-2 chance probability the FOMC can continue to hike rates, while also showing a probability of several rate cuts this year. So, the two-year treasury (bond) yield plunged 61 bps to below 4%, the biggest one-day slump in decades, while the 10-year yield dropped 16 bps. While the US dollar plummeted, sending the kiwi, yen and Aussie all up by 1.2% or more. Fed launches probe into the supervision of SVB. Bank stocks continue to tumble, notching biggest decline since the COVID19 crash The Federal Reserve will launch an internal probe to the supervision of Silicon Valley Bank after its collapse sparked criticism by the central bank oversight, with Michael Barr leading the review, which is said to be publicly released by May 1. Not only the Fed is concerned, but so too is Washington and investors alike. The KBW Bank Index shed 12% on Monday, continuing last week’s rout that saw the index slide 16%- with the index collectively notcing its biggest monthly pull back since COVID19. First Republic Bank shares tanked 62% on Monday, with other regional banks such as Western Alliance Bancorp falling 47%, and California-based PacWest Bancorp down 21% - as investors fret about the strength of liquidity in the lending market. Larger companies also are not immune to the sell off- Charles Schwab shares slid 12% with traders also de-risking and even perhaps shorting some financial institutions. As mentioned on Monday’s Podcast - we think the rout of several lenders in Silicon Valley could have a profound ripple effect on the innovation eco system – and future lending meaning access to liquidity in the VC and cryptocurrency market could be limited – and this could also impact the private equity market. All this reinforces Saxo long held belief that the physical world will continue to outperform the intangibles (the technology sector). This view was reinforced in our Quarterly Outlook. Massive bull steepening as investors flocked to 2-year Treasuries On the back of U.S. regional bank turmoil, investors quickly repriced the front end of the Treasury curve and removed additional future rate hikes in this tightening cycle. Investors flocked to 2-year Treasuries in safe-haven bids and traders closed out curve-flattening positions. Yields on the 2-year plunged 61bps to 3.98% while the 10-year yields fell “only” 13bps to close at 3.57%. The 2-10-year curve steepened to -46bps, after hitting as inverted as -110bps last week. Hang Seng Index and China’s CSI 300 rallied on U.S. regulators’ decision to backstop depositors Hong Kong and Chinese stocks rallied as U.S. regulators rolled out plans to prevent the woes in Silicon Valley Bank and Signature Bank to turn into systemic risks. Hang Seng Index advanced 2% and CSI300 climbed 1%. China’s Two Sessions concluded this morning. President Xi secured a third term and his ally Li Qiang took the position of Premier, both being widely expected. Premier Li Qiang’s remarks at the press conference had a pro-growth and market-friendly tone. Energy, telco, China consumption, and China internet stocks drove the advance of the Hang Seng Index. Hang Seng TECH Index gained 2.9%. Bilibili (09626:xhkg) jumped 10.7% following the video-sharing platform being included in the Stock Connect. In A-shares, SOE telcos outperformed. Belt-and-Road-Initiative-related stocks were well bid. Australian equities (ASXSP200.I) trade lower for the sixth week. Swaps show RBA’s hiking cycle is over After not only the dovish commentary from the RBA but the recent demise of several large VC and cryptocurrency lending banks in the US, now we are seeing that the RBA’s interest rate hiking cycle could be over. That’s according to the swaps market, which reflects that there is just a 50% chance for an increase in the RBA’s cash rate for the rest of this year. FX: Expectations of a less aggressive Fed weighing on the dollar The USD continued to slide on Monday as Fed expectations were revised further lower (read below) but some floor was being found in early Asian trading. AUDUSD touched highs of 0.6717 before reversing to 0.6650, while NZDUSD surged to 0.6250+ before heading back towards the 0.62 handle. GBPUSD could not move above 1.22 and focus turns to labor market data in the UK today before the budget announcement tomorrow. EURUSD touched 1.0750 with a 50bps rate hike still on the table this week. Safe haven JPY and CHF continued to outperform as bank risks reign, with USDJPY staying below 134 and USDCHF testing support at 0.91. Crude oil prices slump amid risk off Oil prices closed lower by 2.5% on Monday as banking sector concerns continued to spell caution on risk assets. However, expectations of a less aggressive Fed monetary policy helped crude oil to recover from its lows, and focus now turns ahead to the US CPI data due today. WTI futures still trading below $75/barrel while Brent is at $80. OPEC is scheduled to issue its monthly market report later Tuesday, while the International Energy Agency follows with its release on Wednesday, providing on snapshot on the outlook for supply and demand, but focus is unlikely to be back on fundamentals until market concerns ease. Gold and Silver benefitting from the drop in yields Gold broke above the $1900 barrier as flight to safety continued despite the efforts of US regulators to reduce the risk of contagion from the SVB collapse. The massive drop in 2-year Treasury yields of the order of 60bps as well as market pricing in as many as 4 rate cuts this year have seen the dollar come off considerably from its highs and brought the precious metals back in focus. Additional demand for Gold from momentum traders looking for a fresh upside attempt, could bring Gold towards the January high around $1950. Silver was up over 6% on Monday as well breaking the $21.70 resistance which will be followed by $22 and $22.27. What to consider? Bank worries bring a significant shift in Fed expectations Bonds continued to soar as markets digested the measures of the US regulators to stem contagion from the collapse of SVB. But that continued to complicate the path of monetary policy with the Fed having broken something. As markets continued to re-assess the path of monetary policy from here, 2-year Treasury yields plunged 61bps to below 4%, the biggest one-day slump in decades, while 10-years dropped 16bps. The CME FedWatch tool now shows a 35% chance of no move from the Fed next week, and 65% probability of a 25bps rate hike. Fed Funds futures are now pricing in a terminal rate of 4.8% as early as May (down from 5.7% in July earlier) and as much as 100bps of rate cuts this year (compared to one 25bps rate cut expected last week). Upside in US CPI is also unlikely to make Fed go for 50bps in March US inflation has been the talk of town for several months now, although the focus has lately turned to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. In fact, several banks are now calling for a pause next week, with one also expecting a rate cut and an end to quantitative tightening. Still, February CPI – due to be released on Tuesday – will be a big test after last month’s print reversed the disinflation narrative in goods inflation, and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% MoM in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% MoM in February, matching the January pace, though the annual rate is likely to fall to 5.5% YoY from 5.6% in January. Overall message is likely to remain that inflation remains stubbornly high, especially after tough weather conditions in California, but the risk of a 50bps rate hike from the Fed in March remains low as the central bank becomes wary of “something breaking”. Submarine deal moves ahead  - the market is still awaiting further detail The US, Australia and the UK unveiled further plans for a new fleet of nuclear-powered submarines when the country heads met in the US on Monday. There will be an initial budget of about A$9 billion through to June 2027, with the tri nations deepening their Aukus Defense partnership that formed 18 months ago, to counter China in the Pacific. The market awaits further detail with much of the discussion remaining confidential. To read more on what to expect, click our article here. Chinese peak construction season ramps up. Iron ore makes green shoots. Iron ore stocks follow higher The iron ore (SCOA) price has extended its rebound - with the steel ingredient's price is up 2.7% so far this week, after rising 2.7% last week. All in all, the iron ore is now trading 8% higher year to date, and above the $132 for the first time since April last year. We’ve been speaking a lot about how iron ore buying usually picks up around this time of year, with Chinese steel mills getting ready for peak construction season - which runs from March through to June. Fresh data released on Friday showed by both steel stockpiles and iron ore inventories fell last week, which implies there is a need to top of up stockpiles. We think buying of iron ore will likely continue in 2023, as the re-opening of China’s economy pick up, all while iron ore supply remains short. And this is underpinning price strength, despite some in Beijing accusing iron ore market participant's of price manipulation. Australian pulse checks: business and consumer confidence and jobs numbers   Australian business and consumer confidence, numbers released today – show consumer confidence is somewhat improving, while businesses remain cautious - feeling the aftereffects of the RBA’s 10th rate hike. Despite the RBA’s comments previously alluding to a potential pause on rate hikes soon - business confidence fell by 4 points in February. The next gauge we will get on Australia’s economy is due on Thursday - with all-important unemployment rate released for February. Bloomberg’s consensus is suggesting the jobless rate will fall from 3.7% to 3.6%, with 50,000 jobs expected to be added last month. If the data shows employment is rising, contrary to what the RBA expects, then the Australian dollar would likely gain pace, as the RBA would gain power to keep rising rates by 0.25%. UK labor data on watch today for the path of BOE The UK labor market data will be released on Tuesday and investors will be scrambling to gauge how much room does the BOE have to tighten further. Bloomberg consensus expects the unemployment rate to rise to 3.8% in the three months to January from 3.7% previously, with headline jobs growth likely to ease to 60k from 102k in January. However, even with a slightly softer jobs report, the BOE is expected to continue its hiking cycle in March as activity data has been stronger than expected, but the trend in labor market from here will be key to see where BOE could pause its tightening cycle. Focus also turns to UK’s budget announcement tomorrow. For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.

Summary:  AEX25 and CAC40 still hanging on to key supports. BEL20 is downtrend testing supports potential Today's Market Quick Take from the Saxo Strategy Team AEX25 In the broader picture AEX is still range bound between 772 and 735 with the latter as a key support. A close below 735 the RSI will also close below 40 i.e., confirm a downtrend with down side potential short-term to around 700. Some support at around 712-707 Source all data and chats : Saxo Group BEL20 took out key support at 3,819 with a bang. And is fast approaching strong support at around 3,700. 200 Moving Average will add to the support meaning a minor rebound could be seen. However, trend is down and a move down to support at around 3,913 seems likely. To reverse this bearish picture a close above 3,900 is needed. First indication of this to play out would be a close a of the gap from Thursday CAC40 is testing key support at around 7,187 and the rising trendline. A close below both could fuel a sell-off down to next support at around 6,946If this bearish scenario play out a close above 7,401 is needed to reverse it.     Source: Technical analysis AEX25 BEL20 CAC40 | Saxo Group (home.saxo)

Summary:  US equity futures are rallying, the dollar is lower, and Treasury yields have extended their declines following a busy weekend which resulted in regulators backstopping uninsured bank deposits at SVB Financial and Signature Bank. Traders have dialed back Fed rate-hike bets to just one while the yield curve has flattened as bank deposits are being converted to short maturity bonds. Gold jumped in response to these developments but whether the overall improved risk appetite can be maintained remains to be seen, and for this we need to watch credit spreads and default swaps. What is our trading focus? US equities (US500.I and USNAS100.I): be wary of the short-term celebration A busy weekend in the US for regulators have ended with a backstop of all insured and uninsured deposits of SVB Financial and Signature Bank including a new “Bank Term Funding Program” that will offer 1-year loans to banks on easier terms than normal. The Fed is also relaxing terms for lending through its discount window. US equity futures are rallying this morning with S&P 500 futures up 1.4% trading around the 3,955 level (just above the 200-day moving average), but our stance is that investors should be extremely cautious of celebrating too early. The lessons from the Great Financial Crisis and the Euro Crisis are that the early cracks and the first rescue attempt by regulators are often not enough as these events to not happen in vacuum. At this point we simply do not have enough information to guess the secondary effects from this event so investors should remain cautious. Investors should monitor money market spreads, yield curve shape, flows in USD etc., instead of equities this week for information what is happening in the system. Chinese equities (HK50.I and 02846:xhkg): Rally as US backstops depositors Hong Kong and Chinese stocks rallied as U.S. regulators rolled out plans to prevent the woes in Silicon Valley Bank and Signature Bank to turn into systemic risks. Hang Seng Index jumped 1.8% and CSI300 rallied 0.6%. China’s Two Sessions concluded this morning. President Xi secured a third term and his ally Li Qiang took the position of Premier, both being widely expected. The People’s Bank of China’s Yi Qang unexpectedly remains as the central bank’s governor. Nonetheless, his appointment is likely to be transitory pending the establishment of the National Financial Supervision Bureau. Energy, consumer, and internet stocks led the advance of the Hang Seng Index. In A-shares, SOE telcos outperformed. Belt-and-Road-Initiative-related stocks were well bid. FX: Dollar on the backfoot as Fed rate hike expectations recede on financial risks The dollar trades sharply lower following the Sunday announcement from the US authorities that it will backstop bank deposits to avert a deepening crisis after the SVB collapse. With short-end US yields collapsing and the market pricing just one rate hike before a December cut, the dollar index has dropped to a near a one-month low while the euro after finding firm support around €1.035 last week has rallied back above €1.07. AUDUSD pushed back above 0.66 to highs of 0.6672 in Asian session amid a recovery in sentiment. NZDUSD also pierced above the 200DMA to reach 0.62. GBPUSD rose above the 1.21 handle again with this week’s focus being the Spring budget and the labor market data. ECB’s hike remains in focus, and EURUSD taking another look above 1.07 as risk sentiment improved this morning in Asia.  Crude oil prices bounce as risk sentiment improves but economic outlook still weighing Crude oil prices continue to ebb and flow with the general level of risk sentiment and prices are higher overnight after US authorities stepped in over the weekend to restrain the SVB contagion. The result being a commodity supportive drop in the dollar as interest rates collapse and rate hikes are being priced out of the market. However, the risk of a US recession has strengthened on the back of these developments and with that in mind the short-term outlook points to continued range bound trading. Meanwhile, the spread between Brent and Dubai narrowed to USD2.70/bbl, as Dubai crude gained against the global benchmark, suggesting robust Asian demand. Both Brent and WTI will be facing resistance at their 21- and 50-DMA levels, both currently meeting at 83.75 and 77.70 respectively. Also, in focus this week are monthly oil market reports from OPEC and IEA Gold making a fresh stride higher despite easing banking sector crisis concerns Gold together with US government bonds have seen strong safe-haven demand since Friday as the SVB fallout has led to concerns about contagion in the banking sector. Two of gold’s main engines, the dollar and treasury yields have both seen a sharp drop since Friday and together with technical levels being broken and hedge funds holding a much-reduced long position, the market briefly managed to touch $1890 overnight. Despite the Sunday announcement from the US authorities, gold will likely benefit from continued worries about the financial system, increased recession worries and a swap market now pricing in just one rate hike ahead of a December cut. Support at $1871 and $1858 while a break above $1900 is needed to signal a reversal of the February correction. Treasury yields plunged on safe-haven bids amid banking woes and Fed speculation The Silicon Valley Bank Incident has since Friday driven continued safe-haven demand for bonds while the swap market is now pricing in just one more 25 bps rate hike, down from four since Thursday, with the first cut now priced in for December as recession worries and financial stability takes centre stage.  Prices of Treasuries climbed, and yields fell sharply, with the 2-year yield falling to 4.4% after briefly trading above 5% last week. Traders are now speculating whether the contagion of the crisis to other banks, and the widening of credit spreads will sway the Fed in favour of keeping the next hike at a modest 25bps, or even pausing earlier than expected. These speculations are supported by the slight 0.2% month-over-month or 4.6% year-over-year increase in average hourly earnings, and an increase in the labor force participation rate to 62.5% in February. Given the package rolled out by the regulators will backstop depositors but not unsecured creditors and the Fed may downshift, the front end of the Treasury curve is likely to remain in high demand. What is going on? US authorities step in to restrain the SVB contagion – what to watch from here? The US authorities have stepped in with a liquidity backstop of uninsured deposits and announced a new lending program for banks to prevent the risks of contagion from the collapse of Silicon Valley Bank (SVB) on Friday. Fed pause bets for March are increasing, but the authorities’ response on containing the financial risks suggests that the room to fight against inflation has been maintained. Risks to inflation also tilt further to the upside with the added liquidity measures, and the long-run impact on US tech sector innovation will remain key to consider in portfolios. Read more here. HSBC acquires SVB’s UK unit HSBC has announced to acquire SVB’s UK unit after meetings over the weekend highlighted the importance of SVB UK in relation to the UK’s VC and startup ecosystem risking wider economic implications if a plan to safeguard deposits was not found. Signature Bank closed by US regulators Yesterday, US regulators closed Signature Bank which was another smaller US bank that came under pressure Thursday and Friday last week. The bank is less connected to the startup ecosystem but has connections to the cryptocurrency industry which was rattled with the liquidation of Silvergate Capital last week. Signature Bank’s insured and uninsured deposits will be accessible to customers on the same basis and under the emergency process as with SVB Financial. ECB monetary policy meeting on Thursday There is little doubt the ECB will hike interest rates by 50-basis point this week, to 3 %. The uncertainty about the magnitude of the monetary policy tightening beyond the March meeting is high, however. Our baseline is that the ECB will certainly signal another 50-basis point hike in May and give no real guidance after that. There is another possibility: the ECB could confirm it will continue hiking rates by 50-basis point in the coming meetings and could open the door to a faster reduction of holdings after June. This would be a hawkish scenario, in theory good for the euro. But we think the likelihood it will happen is small. Ahead of Thursday's meeting, the money market forecasts that the terminal rate in the eurozone will be slightly above 4 %. Nomura is currently the most hawkish bank. Its economists call for 50-basis point hikes in March, May, June followed by 25-basis points in July, leaving the terminal rate at 4.25 %. US nonfarm payrolls remained elevated in February Nonfarm payrolls in the US rose by 311k last month, less than the January's blowout print of 504k (revised down from an initially stated 517k) but remaining elevated and above consensus expectations of 215k. While the headline continued to reaffirm a tight labor market, other indicators from the report were weak. Average hourly earnings rose +0.2% MoM in February, lower than the expected and last month’s +0.3% MoM. The annual rate of average hourly earnings rose from +4.4% in January to +4.6% YoY, a touch short of the 4.7% that the market was expecting. The unemployment also picked up by 0.2% pts to 3.6% against market expectations of no change, as participation rose 0.1% pt to 62.5%. The data remained short of cementing a 50bps rate hike possibility for March, also given the recent concerns on the US banking sector from the SVB collapse. Focus now turns to CPI release on Tuesday to further shape Fed expectations. China's February aggregate financing surged beyond expectations with 9.9% y/y Growth China's aggregate financing growth in February was much better than expected, reaching RMB 3160 billion, far above the RMB2300 consensus estimate. The outstanding aggregate financing growth also accelerated to 9.9% year-on-year (Y/Y) in February, up from 9.4% Y/Y in January. Furthermore, M2 increased at a faster pace in February, growing 12.9% Y/Y, up from January's 12.6%. What are we watching next? US inflation figures Tomorrow, the first estimate of the US February CPI will be released followed on Wednesday by the February PPI. The CPI is certainly the most important data point to focus on this week. This is the latest major US data release before the FOMC March meeting of 21-22 March. The Cleveland Fed produces nowcasts of inflation based on recent publicly observable price moves. According to their latest forecast, the monthly inflation will come in at a similar level to January for February. If so, that is not encouraging. A 50-basis point interest rate hike is certainly not a done-deal in March. But this is a clear possibility. Credit and money markets Besides the focus on US inflation figures this week, we will be watching financial conditions in the financial markets with a key focus on credit and money market rates and spreads to gauge risks in the banking system. In addition, Bitcoin will be monitored for understanding risks in the wider cryptocurrency system as this part of the market is where the highest marginal risk-taking takes place. Finally , June and December Fed Funds Rate futures should be monitored for assessing the market’s pricing of monetary policy off this event. Earnings to watch This week’s key earnings are Volkswagen, BMW, Adobe, and FedEx with tomorrow’s focus on Volkswagen where everything is about the EV outlook as it is increasingly looking like VW is having difficulties to keep up with the production ramp up at Tesla and BYD. Analysts expect FY23 revenue growth of 2% y/y for Volkswagen which if realized will prove to low to satisfy investors when the leading EV-makers such as Tesla and BYD are growing much faster. Later this week we will focus on Adobe and FedEx. Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) No major releases today Source: Global Market Quick Take: Europe – March 13, 2023 | Saxo Group (home.saxo)

Summary:  The US authorities have stepped with liquidity measures and also announced a new lending program for banks to prevent the risks of a contagion from the collapse of Silicon Valley Bank (SVB) on Friday. Fed pause bets for March are increasing, but the authorities’ response on containing the financial risks suggests that the room to fight against inflation has been maintained. Risks to inflation also tilt further to the upside with the added liquidity measures, and the longer-run impact on US tech sector innovation will remain key to consider in portfolios. A comprehensive response from US authorities As risks of a contagion from the US bank SVB’s collapse rose last week, authorities have stepped in to contain the fallout and prevent a broader impact on the financial sector. New liquidity measures from the Federal Reserve and the announcement that both SVB and Signature's depositors will be made whole have shielded the banking industry from contagion risks. The Fed also announced a new lending program called the Bank Term Funding Program (BTFP) which allows any insured depository institution to borrow from the Fed for up to a year using banks' investment securities as collateral. The banks can borrow funds equal to the par value of the collateral pledged, even if the market value of the collateral has been eroded due to high interest rates. This will allow banks to meet withdrawal demands, without having to sell their bonds at a loss as was the case with SVB last week. So the authorities have not just responded to the idiosyncratic risks posed by SVB, but the breadth of measures from the US regulators suggest they were wary of some systemic risks. Whether those risks have been pre-empted will be key to watch, but near-term relief is likely. The announcement of BTFP will put the depositor concerns at ease about their exposure to smaller regional banks, and clearly puts a floor on any panic brewing in the system for now. Key things to keep on your radar Biden’s address US President Joe Biden will be speaking on Monday morning US time on the SVB situation, and his administration will be briefing Congress. Focus will be on any measure being announced to strengthen oversight and tighten regulation to avoid further banking sector stress as the Fed continues its inflation fight. Monetary policy response and the direction of yields The risks of a financial crisis have further complicated the monetary policy response function in the US. Markets went from pricing in a 25bps rate hike for the March meeting to 50bps after Powell’s testimony last week back to 25bps after risks of a contagion in financial sector arose. Terminal rate pricing has gone down from 5.7% last week to 5.0% now. Some banks are also calling for the Fed to pause in March to re-assess the impacts of their policy tightening. But the Fed has responded to the financial risks very strongly, further suggesting that the room to fight against inflation has been maintained. Further, steps to add liquidity to prevent a financial crisis could mean more risks of inflation. Some may also argue that with the backstop in place, the Fed can continue to raise interest rates without harming held-to-maturity assets, since they can still be traded in at par if banks need liquidity. This enables the Fed to go higher for longer. Could we start to see more tightening expectations being priced in again if the fallout from SVB is contained but US CPI comes in hot once again on Tuesday? Longer term, this may impact the US tech startup productivity The SVB crisis has highlighted the pains of the US tech sector, where demands for withdrawals possibly ramped up as liquidity pressures worsened. While the Fed has been nimble on addressing financial stability risks, fear waves are rippling through the entrepreneurial sector in the US especially in the tech space, and that may potentially leave some long-lasting scars on the productivity of the tech sector. VC funding could continue to weaken as interest rates remain high, impacting the innovation in the tech sector. Market implications US equity futures and Asian equities have responded positively to the news of a backstop funding, but Treasury yields continued to slide and the US dollar weakness also extended further as calls for Fed’s tightening path continued to ease. Risk rally could extend into the US session after a sharp drop in equities last week. Friday’s US jobs report was mixed but the headline continued to hint at labor market tightness. Tuesday’s CPI release will be the next big test of the Fed path from here, and if it is evident that inflation risks remain prominent, while the Fed can convince the markets that financial risks will be responded to, then yields could reverse back higher once again and USD could strengthen. Equities will likely continue to be under pressure, and the pressure on smaller businesses (best represented by RUSSELL 3000 index) or the tech innovation could mean these parts of the market could continue to shed their froth. This continues to emphasise that flight to quality will be key for portfolios as the Fed tightening cycle continues. However, even if the Fed goes ahead with a 25bps rate hike next week, there will be considerable uncertainty on the outlook if the market continues to believe that the Fed won’t hike rates higher and keep them there for longer. How the Fed addresses these market concerns will be key to watch from here.   Source: US authorities step in to restrain the SVB contagion – what to watch from here? | Saxo Group (home.saxo)

Summary:  U.S. regulators moved to calm markets by backstopping depositors in full. The Fed’s monetary policy has been complicated and market expectations swung from a faster pace back to downshifts and earlier pause as the crisis of Silicon Valley Bank and Signature Bank unfolded. Investors’ number one focus this week will be whether the U.S. regulators succeed in calming down the markets’ concern about the U.S. banking system and avoiding systemic risks. The US CPI, PPI, and retail sales data, while being important, may take a back seat in terms of market focus. China will monitor the retail sales data coming out from China this Wednesday to gauge the strength of the Chinese economic recovery. SVB contagion limited by authorities, but risks could remain As risks of a contagion from the US bank SVB’s collapse rose last week, authorities have stepped in to contain the risks and prevent a broader impact on the financial sector. Equity futures have responded positively to the news of a backstop funding, but Treasury yields continued to slide and the US dollar weakness also extended further. The headlines around this will continue to be key to watch this week as there may be lingering fears for depositors for not just the SVB but also more broadly in the US banking sector. President Biden’s address on Monday morning will be key to watch. The development has also complicated the Fed’s monetary policy outlook further, and March rate hike expectations have reversed back from 50bps to now 25bps again with calls for a pause also gaining traction and financial stability concerns arise. However, the Fed’s response to the situation asserts that financial risks remain under control, while the inflation risks may continue to be an issue, suggesting potential yield curve bull steepening.  Investors should remain on guard after the SVB fallout spread to Signature Bank. Market to search for concentration risk clues We all know the US’ 16th largest bank, SVB, on Friday was taken over by the FDIC. Then regulators took control of another bank, Signature Bank. We know the Fed offered an emergency bank term funding program, to SVB depositors, so they can access money from Monday, while authorities suggest Signature Bank depositors would also be supported. This is not only the biggest bank failure since the 2008 financial crisis, but also, risk still remains. Now investors and option holders may be forced to take risk off the table for those assets that are embroiled in the saga. Secondly - it’s really vital to consider the ripple effects of the banking fallout. With Continuous Disclosure obligations for listed companies, we expect companies involved with SVB or Signature bank to disclose their exposure and or relationship over the coming days. This has already started to occur in Australia- with companies on the ASX such as Xero (XRO) revealing they have a 1% of their cash and cash equivalents with SVB. Thirdly – consider the market will be searching for opportunity to de risk – perhaps selling out of firms that are prone to concentration risk or could potentially be under financial duress. That may include financial institutions that have concentrated (not diversified) client's books and revenue streams. Or those companies that have lent money to high-risk technology companies or starts ups. For the investor, it could be worth considering reviewing your portfolio, to ensure the company’s asset quality and clientele are not at risk. Upside in US CPI is also unlikely to make Fed go for 50bps in March US inflation has been the talk of town for several months now, although the focus has lately turned to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. Still, February CPI – due to be released on Tuesday – will be a big test after last month’s print reversed the disinflation narrative that the markets had started to accept, and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% MoM in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% MoM in February, matching the January pace, though the annual rate is likely to fall to 5.5% YoY from 5.6% in January. Overall message is likely to remain that inflation remains stubbornly high, especially after tough weather conditions in California, but the risk of a 50bps rate hike from the Fed in March remains low as the central bank becomes wary of “something breaking”. Other US data of note this week includes PPI and retail sales for February, both of which are expected to show a modest cooling but still remain high. Consensus expectations are for February producer prices to rise by +0.3% MoM (prev. +0.7%) or 5.4% YoY (prev. 6.0%). Retail sales are expected to cool from January jump of 3.0% MoM on warmer weather and expected to come in cooler at +0.2% MoM. If the January outperformance in US data is not repeated, and the contagion fears continue, we could see Fed expectations being pulled back significantly this week as the market is in panic mode. China retail sales are expected to bounce strongly China is scheduled to release retail sales, industrial production and fixed asset investment this Wednesday. Investors will focus on the retail sales data for a gauge of the strength of the recovery of consumption after the economy reopened. Consensus estimates expects retail sales to bounce strongly to a growth of year-on-year growth of 3.5% in the first two months of the year, after declining 0.2% in January. Industrial production is expected to come in at +2.5% Y/Y year-to-date. European Central Bank to go for another 50bps rate hike this week The ECB is still expected to hike the deposit rate by 50bps to 3.0% at the March 16 announcement, given what was said in the February meeting and recent commentaries. Focus will be on the guidance for the path of interest rates from here, as well as on the comments around the risks of a financial contagion spreading from the SVB collapse. Recent data such as an upside surprise in core inflation has prompted ECB pricing to shift to a terminal rate of 4% by July, suggesting a lot of room for give back if financial risks broaden. If the central banks stays away from guiding for another 50bps in May, that could come as a dovish surprise for markets. The latest inflation forecasts will also be key, with core inflation expectations likely to be revised higher for 2023 after strong reads in January and February. UK budget on watch for growth and fiscal picture; jobs data key for BOE The UK Chancellor of the Exchequer Jeremy Hunt will be delivering the spring budget on March 15, which will be a key watch especially after the market turmoil in September when Hunt's predecessor Kwasi Kwarteng and former Prime Minister Liz Truss unveiled lavish tax cuts roiling the markets. Expectations are for the Hunt to prioritize keeping public finances steady, announce less near-term borrowing but only a marginally improved medium-term fiscal outlook. Lower energy prices will also likely boost the short-term growth outlook, helping recession fears recede, although longer-term growth may remain marred with low labor force participation and weak productivity growth. Before the focus turns to UK budget on Wednesday, the UK labor market data will be released on Tuesday and investors will be scrambling to gauge how much room does the BOE have to tighten further. Bloomberg consensus expects the unemployment rate to rise to 3.8% in the three months to January from 3.7% previously, with headline jobs growth likely to ease to 60k from 102k in January. However, even with a slightly softer jobs report, the BOE is expected to continue its hiking cycle in March as activity data has been stronger than expected, but the trend in labor market from here will be key to see where BOE could pause its tightening cycle.  Australian pulse checks: business and consumer confidence and jobs numbers Australia business and consumer confidence, numbers released on Tuesday will give a gauge of how the economy is feeling after the RBA made its 10th rate hike, with businesses and consumers likely to lean into the RBA’s comments that it could pause rate hikes soon. Later in the week on Thursday, the all-important unemployment rate will be released for February – with Bloomberg’s consensus suggesting the jobless rate will fall from 3.7 to 3.6%, with 50,000 jobs expected to be added last month. If the data shows employment is rising, contrary to what the RBA expects, then the Australian dollar would likely gain pace, as the RBA would gain power to keep rising rates by 0.25% for the next few months, with the market expecting hikes can made till September. Macro data on watch this week: Monday 13 March India CPI (Feb) Tuesday 14 March US CPI & Core CPI (Feb) U.K. Employment (Jan) & Payrolls (Feb) Australian consumer and business confidence Wednesday 15 March US Retail sales (Feb) US PPI & Core PPI (Feb) Eurozone Industrial production (Jan) UK Budget Japan BoJ monetary policy meeting minutes (17-18 Jan) China Retail sales, industrial production, & fixed asset investment (Feb) Thursday 16 March US Housing starts & building permits (Feb) US Initial jobless claims Australian employment data – jobless rate (Feb) ECB policy rate decision Japan exports (Feb) Japan Machinery orders (Jan) Friday 17 March US Industrial production (Feb) US university of Michigan Consumer Sentiment Survey (Feb) UK BoE/Ipsos Inflation next 12 months (Feb) Japan Tertiary industry activity (Jan)   Earnings on watch this week: Tuesday: Volkswagen, Lennar, Foxconn Wednesday: Adobe, Constellation Software, BMW, E.ON, Ping An Insurance, Alimentation Couche-Tard Inc Thursday: FedEx, Dollar General, Enel, Li Ning Friday: Vonovia, Longfor, CMOC Group Lt Source: Saxo Spotlight: What’s on the radar for investors & traders this week? | Saxo Group (home.saxo)

Summary:  A slight recovery in sentiment was seen into the Monday open as US regulators stepped in to prevent further fallout from the SVB crisis and announced an emergency bank term funding program assuring SVB depositors they will be fully protected and have access to their money as the week begins. US jobs data on Friday was mixed, putting focus on the CPI this week, although the banking crisis reduces the case for a 50bps rate hike this month.   What’s happening in markets? US equites pulled back on Friday after the Silicon Valley Bank fuelled fear The futures turned green, indicating Monday could potentially see buying return. Market jitters were calmed after the Fed announced an emergency bank term funding program, with SVB depositors to have access to all money from Monday. On Friday though, markets were hurting, SVB parent, SVB Financial Group’s (SIVB:xnas) demise was felt through markets, triggering a sharp sell-off in US equities with the Nasdaq 100 and S&P500 falling 1.4% on Friday and wiping off 3.8% and 4.6% over the week. The banking sector was hit hard, as investors worried about the risk of contagion after 16th largest bank failed, which lead to selling in other banks, and deposit withdrawals – with American losing faith in the banking system. The KBW Bank Index shed 3.9% on Friday, and 15.7% over the week. PacWest Bancorp (PACW:xnas) tumbled 37.9% on Friday and a massive 53.7% since Thursday. US equity futures rallied on Monday Asian hours after the Fed assured depositors in the Silicon Valley Bank they will be fully protected. Treasury yields plunged on safe-haven bids amid banking woes and Fed speculation Safe-haven demand and reduced likelihood of aggressive rate hikes drove down Treasury yields. Meanwhile, asset markets were jolted by the Silicon Valley Bank incident, leading to a surge in safe-haven buying of Treasuries. Prices of Treasuries climbed, and yields fell sharply, with the front end and belly of the curve seeing the best performance. Traders are now speculating whether the contagion of the crisis to other banks, and the widening of credit spreads will sway the Fed in favor of keeping the next hike at a modest 25bps, or perhaps even pausing earlier than expected. These speculations are supported by the slight 0.2% month-over-month or 4.6% year-over-year increase in average hourly earnings, and an increase in the labor force participation rate to 62.5% in February. Interest rates implied by SOFR contracts fell significantly, with June, September, and December 2023 plunging 28 basis points, 44.5 basis points, and 52.5 basis points, respectively. This brought the terminal down to 5.29% in June 2023, from 5.70% in September 2023 just two days earlier on Wednesday. The 2-year Treasury yield tumbled an astounding 28 basis points to 4.59%, while the 10-year yield dropped by 20 basis points to 3.70%. As a result, the 2-10-year yield curve steepened by almost 7 basis points to 89 basis points on Friday. Given the ongoing banking crisis, Treasuries are likely to remain in high demand. Hang Seng Index and China’s CSI 300 plummeted amid concerns about consumption recovery in China The Hang Seng Index and CSI300 experienced sharp declines on Friday, with losses of 3% and 1.3% respectively, resulting in weekly losses of 6.1% and 4%. This was attributed to investors selling China internet and consumer names after JD.COM's (09618:xhkg) downbeat comments on consumer spending prospects in China, causing JD.Com to plummet by 11.5%. The Hang Seng TECH Index also dropped significantly by 3.8%. Auto stocks, particularly BYD (01211:xhkg) and Great Wall Motor (02333:xhkg) took a major hit, with declines of 8.1% and 6.2% respectively, due to an intensification of price war prompted by Dongfeng (00489:xhkg) and other Chinese automakers' price cuts. Auto names were among the largest losers in A-shares on Friday. The tech war involving semiconductors may extend beyond advanced equipment to materials, leading to concerns about Japan restricting the export of crucial chemicals like photoresists to China. In addition, the turmoil in U.S. banking stocks overnight further weighed on sentiment. Australian equities (ASXSP200.I) somewhat unscathed following global rout. Gold miners charge After the demise of the US’ 16th largest bank, SVB with other US banks in jeopardy, Australia’s market has so far outperformed global equity markets, falling 1.9% last week, while the S&P500  shed 4.6% and Hong Kong’s Heng Seng slumped 6.1%. The prudential regulation over Australia’s banks is keeping ASX listed banks relativity unscathed, however smaller non-financial companies with less financial strength are being penalised. The worst performing ASX200 stocks today are BrainChip, and Lake Resources, both down over 4.6%. While capturing upside and lot of bids are, gold miners, with Capricorn Metals, Ramelius Resources and Regis Resources all up 7-9%. FX: Dollar on the backfoot on chatter of SVB bailout After slumping to fresh lows on Friday to get in close sights of 104, the US dollar reversed higher into Friday’s close but gains were short-lived as the announcement on a potential backstop funding from the Feb for distressed bank SVB brought risk trades back to the table. AUDUSD pushed back above 0.66 to highs of 0.6647 in early trading amid thin liquidity and a recovery in sentiment. NZDUSD also took another look at 200DMA at 0.6166. GBPUSD testing 1.21 handle again with this week’s focus being the Spring budget and the labor market data. ECB’s hike remains in focus, and EURUSD taking another hit at 1.07 as risk sentiment improved this morning in Asia. Crude oil prices jumped higher on Friday but closed with a weekly loss Fears of further monetary tightening, coupled with risks of a financial contagion, raised concerns of a demand weakness and saw crude oil prices slide lower last week. The weak sentiment was compounded by high crude oil inventories in the US. This dominant narrative continues to overshadow signs of stronger demand in China. Some respite was however seen on Friday and into early Asian trading on Monday as US regulators announced measures to protect depositors and let them withdraw money from SVB starting Monday. WTI prices touched $77 from lows of sub-75 on Friday and Brent was above $83 from sub-81 levels earlier. The spread between Brent and Dubai narrowed to USD2.70/bbl, as Dubai crude gained against the global benchmark, suggesting robust Asian demand. Gold making a fresh stride higher despite easing banking sector crisis concerns Gold prices saw a big jump on Friday and gains were extended further on Monday morning in the Asian session as a mixed US jobs report and risks of a contagion in the banking sector spooked investors and prompted safe-haven demand. Expectations of a rapid Fed tightening also eased, and Fed swaps fully priced in a 25bps rate cut by year-end. This, along with rising inflation (breakeven) expectations and a sharp drop in yields, has made gold attractive for investors with precious metal charging higher and breaking above key resistances. Gold prices touched highs of $1890 this morning before easing slightly.   What to consider? SVB fallout spreads; Fed announces plans to fully protect Silicon Value Bank and potentially Signature Bank After the demise of the US’ 16th largest bank, SVB, on Friday and its takeover by the FDIC – which marked the largest bank failure since the 2008 financial crisis, the fallout spread. Regulators took control of another bank, Signature Bank. Unlike SVB which supports venture capital firms, Signature bank specialises in providing banking to law firms. The Fed stepped in and announced an emergency bank term funding program, assuring SVB depositors they will be fully protected and have access to their money from Monday, with agencies said to enact a similar program for Signature Bank. All this follows the Venture Capital community urging startups to withdraw funds, which led to civilians taking their money out of banks. Regulators are seeking buyers for SVB. Meanwhile, the Fed said it’s providing additional funding to banks. US nonfarm payrolls remained elevated in February Nonfarm payrolls in the US rose by 311k last month, less than the January's blowout print of 504k (revised down from an initially stated 517k) but still remaining elevated and above consensus expectations of 215k. While the headline continued to reaffirm a tight labor market, other indicators from the report were rather weak. Average hourly earnings rose +0.2% MoM in February, lower than the expected and last month’s +0.3% MoM. The annual rate of averag hourly earnings rose from +4.4% in January to +4.6% YoY, a touch short of the 4.7% that the market was expecting. The unemployment also picked up by 0.2% pts to 3.6% against market expectations of no change, likely as participation rose 0.1% pt to 62.5%. The data remained short of cementing a 50bps rate hike possibility for March, also given the recent concerns on the US banking sector from the SVB collapse. Focus now turns to CPI release on Tuesday to further shape Fed expectations. China's February aggregate financing surged beyond expectations with 9.9% Y/Y Growth China's aggregate financing growth in February was much better than expected, reaching RMB 3160 billion, far above the RMB2300 consensus estimate. The outstanding aggregate financing growth also accelerated to 9.9% year-on-year (Y/Y) in February, up from 9.4% Y/Y in January. Furthermore, M2 increased at a faster pace in February, growing 12.9% Y/Y, up from January's 12.6%. The surge in outstanding RMB loans played a major role in driving the credit growth, increasing by 11.6% Y/Y in February, compared to January's 11.3% Y/Y. Corporate loans were the primary driver, while household loans remained weak. Bank of Japan’s Kuroda ends term without sparks The Bank of Japan kept its policy unchanged on Friday at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Despite some expectations of another tweak, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Incoming data will be key to watch for what tweaks the next governor Ueda can bring, but near-term focus shifts to US data on inflation, as well as the extent of fallout in the US banking sector as the market appears to be a panic mode after SVB’s collapse which may bring some safe haven flows to the yen.   For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 13, 2023 | Saxo Group (home.saxo) 

Summary:  The month of March kicked off with continued and broad weakness after China and the US, the world's two biggest commodity consuming nations, both delivered price softening news. Sentiment received a further setback after steep losses in two small US lenders helped drive the S&P 500 index to a two-month low. In the short term macro-economic developments, especially US data will be watched closely in order to decipher the pace and strength of future rate hikes. Today's Saxo Market Call podcast.Global Market Quick Take: Europe The month of March kicked off with continued and broad weakness after China and the US, the world’s two biggest commodity consuming nations, both delivered price softening news. Sentiment received a further setback after steep losses in two small US lenders – helping drive the S&P 500 index to a two-month low. The Bloomberg Commodity index, which tracks a broad basket of commodity futures spread evenly across energy, metals and agriculture, trades down 1.7% on the month and 7% on the year, with losses this month being led by energy and industrial metals. The strength of the expected demand recovery in China received a setback after its leaders announced a conservative growth target of 5% for 2023 – one of its lowest targets in decades. This, combined with only a modest increase in fiscal support, lowered expectations for additional stimulus to accelerate the economic recovery. In Saxo’s opinion, part of the reason for this is the Chinese government’s desire to avoid making the same mistakes other governments and central banks have made, which have driven inflation to a four-decade high. Development consumers are now suffering the consequences as central banks increasingly apply their interest rate weapon to bring inflation under control. Meanwhile, Federal Reserve Chair Powell stepped up his attack on sticky inflation. During his semi-annual two-day visit to Capitol Hill, he told lawmakers that he was prepared to increase the pace of rate hikes to a higher-than-expected level should incoming data continue to show strength. The swap market responded by lifting the terminal rate expectation above 5.66% from 4.75% at the beginning of February, before Thursday’s stock market rout across banking stocks helped bring the peak rate back down below 5.5%. During the Q&A session on Tuesday that followed his prepared statement, a tasty exchange between Powell and Sen. Elizabeth Warren (D) highlighted the risk the FOMC takes as it continues to hike rates until something potentially brakes. The senator asked Powell what he will say to the two million people losing their jobs if he keeps raising rates. He answered: “Will working people be better off if we just walk away from our jobs and inflation remains 5%-6%?”. His comment further supported the view that the FOMC will remain very data driven and, besides the small risk of a systemic event taking control, it will keep hiking rates despite the obvious risk to the economic outlook. Saxo will continue to watch the dollar closely, given its inverted correlation with commodities (especially gold) and increasingly how the market price the risk of a recession and with that the scale of the eventual drop-in rates. Saxo monitors this through the terminal Fed fund expectation and the size and speed of subsequent cuts once the terminal rate is reached, currently priced to occur around September this year. The trade stimulus from China’s reopening continued to fade, following a great deal of excitement at the start of the year, especially after the government set the mentioned moderate growth target. However, writing off China as a major driver for commodity demand growth is premature as it will take several months for the real impact to be felt and for prices to benefit. Not least considering producers tend to respond quicker in terms of adding supply before demand picks up. This was seen recently in China where a February rise in exchange monitored copper inventories has yet to be met by a corresponding pickup in demand.Crude oil remains rangebound despite headwinds stacking up The crude oil market remains rangebound with rising demand in Asia so far managing to offset darkening clouds elsewhere, especially in the US where Fed Chair Powell combatant performance on Capitol Hill this past week showed his willingness to risk a recession to bring inflation under control. While data points to a strong recovery in demand from a reopening China, the market was left disappointed after the government published the weakest growth target in decades. In addition, concerns about a banking crisis, however small, kept the risk appetite on the low side. Overall, these on balance price negative developments, have not been enough to force the market lower and out of the ranges that have prevailed since late November. In the short-term, the macroeconomic focus is likely to override any oil market developments, unless they have a material impact on prevailing supply and demand balances. Having broken the mini uptrend within the prevailing range, Brent may in the short term be exposed to further weakness, not least driven by long liquidation from funds who in recent weeks increased their net long to a 15-month high at 286k lots or 286 million barrels. At the same time, the gross short has continued to collapse – reaching a 12 year low at just 22k lots in the week to February 28.  Gold finds support in the numbers Gold and silver took a tumble mid-week when Fed Chair Powell, in his prepared remarks to Congress, said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Having failed to challenge resistance at $1864, gold tumbled before once again finding support ahead of $1800. Meanwhile, silver resumed its week-long slump, hitting a four-month low before finding some renewed buying interest around the $20 level. Relative weakness since late December has seen the gold-silver ratio surge higher from 75 (ounces of silver to one ounce of gold) to a six-month high at 91, a 21% underperformance, and it highlights the short-term challenge silver will be facing to attract fresh demand. In the short-term, with Powell signalling an incredible data dependency, the focus now turns to incoming US data with the first being Friday’s job report, a number which on balance eased the pressure on the Federal Reserve to increase the size of its next rate hike, pencilled in for March 22. Given the level of elevated rate hike expectation currently priced in, any weakness in incoming data may now trigger a stronger positive response than otherwise warranted. Saxo watches the timing of peak rates closely as well as how aggressive the market is pricing in a subsequent cut. According to the chart above, the peak rate is currently priced in around July around 5.34%, down from 5.70 earlier in the week. In addition, the subsequent pace of rate cuts has accelerated to 125 basis points during the following 12 months. This is important to note with gold historical performing well in the months that followed a peak in the Fed funds rate, with such a peak often being accompanied by a weaker dollar and lower bond yields. WASDE adds further downside pressure on corn and wheat futures  Chicago corn and wheat futures extended their slump this week after the USDA in its monthly supply and demand update said domestic stockpiles rose by more than expected in response to lower exports. The agency also boosted the outlook for Ukraine corn exports while wheat, already under pressure from Russian sales and expectations the Ukraine grain corridor deal will be extended, dropped to a 20-month low after the agency raised production estimates for Kazakhstan, Australia and India. Meanwhile, soybeans found support after the USDA slashed production from drought-stricken Argentina by more than expected. The world’s biggest exporter of soymeal and soy oil will harvest 33 million tons of beans this year, the smallest crop since 2011 and a 20% decline from the agency’s February estimate. All the major wheat futures contracts in Chicago and Paris remain under pressure and, according to the relative strength indicators, they have all reached oversold territory. This is a very different story to the price action that was seen this time last year when Russia’s invasion of Ukraine – a major supplier of high protein wheat ideal for human consumption – triggered panic buying. Chicago wheat topped out at $12.85 per bushel on March 9 before suffering a 50% setback to the current $6.66 a bushel level.   Source: Commodity Weekly: Commodities see bumpy start to March | Saxo Group (home.saxo)

Summary:  SVB Financials difficulties spreading to rest of banking sector in Europe and US. European Banking Sector seems to form top and reversal patterns whereas US Banking Sector taking out or testing key supports. SVB share price indicated open below 2016 level The Europe Stoxx 600 Banks sector has been hard hit this morning after bad news and heavy selling in US banks last night. The uptrend has been weakening past few weeks as indicated by the Divergence on RSI.The Lyxor Europe Stoxx 600 Banks ETF opened more than 5% down at the key support at around 22.75 and the 55 daily Moving average. At the time of writing buyers are lifting the Sector EFT from the support.If the Europe Stoxx 600 Banks ETF closes below 22.75 and RSI closes below 40 threshold downtrend is confirmed with a move down to support and 0.382 retracement at around 21.72-21.52 to be the likely scenario.To get Europe Stoxx 600 Banks ETF back to bullish trend minimum requirement is a close of the gap this morning. On weekly chart the ETF has formed a potential Bearish Engulfing top and reversal candle (unless it closes above 23.84 today Friday) testing lower steep rising trendline . A close below could pave the way for a downtrend to strong support area around 20.26-19.58. 19.58 is also the 0.618 retracement of the uptrend.To demolish and reverse the top and reversal scenario a close above 24.60 is needed. First singal of this to play out would be a close of the gap created with the opening this morning Source all charts and data: Saxo Group   The SPDR S&P Regional Banking ETF (KRE) was hard hist yesterday following the news in SVB Financial. SVB was the largest holding in the ETF.The Regional Banking ETF has broken below  key support at 56 thus breaking bearish out of a medium-term Descending triangle like pattern – see weekly chart. The downside potential, given that KRE closes the week below 56, is between 42 and 33 i.e., the Consolidation area from 2020. Illustrated by the vertical arrows.RSI is currently below 40 supporting the negative outlook for KRE.To reverse the bearish picture a close above 62.55 is needed. The SPDR S&P Banking ETF (KBE) closed bang on the key support at 42.60. Otherwise the technical picture is identical to the Regional Banking ETF KRE.RSI is below 40 i.e., in negative sentiment supporting the bearish outlook where KBE is likely to trade lower. Strong support at around 35.To reverse the bearish picture a close above 50.82 is needed. SVB Financial Group share price is back to 2016 levels. Pre-market it is indicated lower around 60 USD which is around the 2011-2013 level.   Source: Technical analysis EU and US banking sector | Saxo Group (home.saxo)

Summary:  Financial market turbulence returned on Thursday after steep losses in two small US lenders, SVB Financial and Silvergate Capital Corp triggered a 7.7% sell off in the KBW Bank Index which includes major US banks. The S&P 500 fell to the lowest since January 19 while bond yields reversed sharply lower to surrender most of the gains triggered by Fed Chair Powell’s combatant statements on Capitol Hill earlier in the week. Lower yields saw the dollar trade softer while the loss of risk appetite sent crude oil and industrial metals lower. Before the banking woes took center stage, stocks had gained after a bigger than expected jump in weekly jobless claims raised speculation about a soft US job report due later today. What is our trading focus? US equities (US500.I and USNAS100.I): a warning shot has been fired The equity market has moved into risk-off mode following the 60% plunge in SVB Financial (indicated down again pre-market) as the bank has been forced to sell a considerable amount of its bond holdings causing big losses and the need raise more equity and hybrid capital. The S&P 500 Banks Index plunged 6.5% with JPMorgan Chase down 5.4%. We have seen a more muted reaction in the VIX Index only increasing to 22.6 which is a low figure given the risks coming into the market. Bill Ackman, a hedge fund manager, has said that the US government should consider bailing out SVB Financial as the bank is important the Silicon Valley ecosystem and for funding of start-ups in the US. The discussions about zero-days to expiry options (0DTE) and to what extent they can cause a big intraday move in the market will be tested today if the US jobs report fails to calm the market. Chinese equities (HK50.I and 02846:xhkg): tumbled on cautious consumer and tech war Hang Seng Index plunged 2.6% and CSI300 shed 1%. Investors were selling China internet and consumer names following downbeat comments from JD.COM on Chinese consumers.  The management of the Chinese e-commerce giant said that the sentiment of Chinese consumers is still fragile and consumers have become more prudent on discretionary items. In addition, reopening might also divert some of the online purchasing to offline consumption such as dining and traveling. JD.Com (09618:xhkg) tumbled 11.2%. Meanwhile, Hang Seng TECH Index dropped 3.2%. EV stocks fell sharply, led by an 8.7% decline of BYD (01211:xhkg). The tech war on semiconductors may extend from advanced equipment to materials. Investors are concerned that Japan may impose restrictions on the export of essential chemicals such as photoresist to China. The U.S. banking stock turmoil overnight in the U.S. also weighed on sentiment. FX: USD modestly weaker as risk sentiment weakens, JPY sold on unchanged BOJ The rise in jobless claims as well as the broader risk off arising from the SVB scare on Thursday saw yields dipping lower, taking the dollar off the recent highs as well but the decline remained modest with the USD coming in favor on the safe haven bid as well. Swiss franc also got a safe haven bid, and USDCHF plunged below 0.93 bringing the 50DMA at 0.9269 in focus. Bank of Japan’s unchanged monetary policy saw the JPY being the underperformer in the Asian session on Friday, but USDJPY could not pierce above 137. GBPUSD rose back above 1.19 ahead of UK data dump today likely to show that a recession has been delayed, but focus will shift to NFP later as the key USD driver in the very near-term. USDCAD continued to surge to fresh highs as Fed-BOC divergence widened and oil prices remained weak. The choppiness in crude oil prices continued Crude oil is heading for a weekly loss following another choppy session on Thursday which in the end took its cue from another loss of risk appetite as stress emerged in the US banking sector. Brent trades back below $81 after breaking below the trendline going back to the December low. While the signs of a pickup in Chinese demand remain mixed, the market has also been spooked by Powell’s combatant mood on Capitol Hill earlier in the week where he basically said recession was a price worth paying to get inflation under control. Gold finds support as stock market weakness drives bond yields sharply lower Gold caught a bid on Thursday in response to the high US jobless claims number and later a steep drop in US bond yields as the US banking sector slumped. The terminal US Fed fund rate dropped back to 1.5% while the market priced in a 1.25% rate cut in the following 12 months, developments that highlights the potential for US rates not being raised to the extend Fed chair Powell led the market to believe earlier in the week. Focus now turns to today’s job report after Fed Chair Powell in his testimony said the strength and duration of future rate hikes would be data dependent. Gold is once again testing the 21-day moving average resistance at $1835 ahead of at $1858 while support in the $1800 remains firm. Yields drop on financial market turbulence and spike in jobless claims A bounce in initial jobless claims to 211K (consensus 195K) from 190K kicked off the short-covering in the front end ahead of the employment report, due later today. The buying intensified later in the US on safe haven buying after the banking sector suffered its biggest drop since June 2020, with stocks in troubled Silvergate Capital and SVB Financial both tumbling. Yields on the 2-year plunged from 5.08% to 4.78% while the 10-year yield trades down to 3.82% from above 4% earlier in the week. The 2-10-year yield curve steepened to –97bps from –111 bps earlier in the session. What is going on? SVB’s 60% slump highlights the venture capital and tech bubble is spilling over to banks Investors were spooked by Silicon Valley Bank announcing it taking emergency steps to shore up capital after suffering a $1.8 billion after-tax loss in the first quarter. SVB sold about $21 billion of securities from its portfolio and plans to raise $2.25 billion. Having ended the regular session down 60% at 106 it went on the drop another 22% to 83 in afterhours trading. This reflects the pain of higher interest rates and tighter liquidity on the venture capital start-up bubble and it triggered heavy selling across banking stocks with KBW Bank Index tumbling 7.7%, its biggest drop since June 2020. Also on Thursday, another California lender, Silvergate Capital Corp, down 80% this month, which is targeting cryptocurrency firms, such as FTX, announced its winding down operations, following the meltdown of its financial strength, after digital assets plunged. Oracle shares down on cloud miss The software and database maker reported FY23 Q3 revenue growth of 18% y/y and adjusted EPS of $0.71 down 17%, but the disappointment was mostly in the outlook and especially in Oracle’s cloud business as customers are reducing spending growth. Oracle shares were down 4% in extended trading. Bank of Japan’s Kuroda ends term without sparks The Bank of Japan kept its policy unchanged at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Although data and recent communication had hinted at no change in monetary policy, there were some apprehensions given Kuroda is famous for giving surprises to the market. However, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Jobless claims cool, focus now on NFP data today Initial claims rose 211k in the week of 4th March, above the 190k prior and the 195k expected. It was the first time that the jobless claims came above the 200k mark since January, and it was the highest claim YTD. The continued claims also rose to 1.718 mn from 1.649 mn, coming in above estimates as well. While this may have raised some concerns that the US labor market is softening, the print is still strong and eyes now turn to the February payrolls data out today in the US. Our full preview is here, which says that Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. A strong print could further cement the case for a 50bps rate hike this month. US-India ties expand into semiconductors The US and India are looking to sign an agreement to boost coordination of their chip industry to focus further on information sharing and policy dialogue, as India forges ahead to boost its presence in the global technology supply chain amid China’s crackdowns on the private sector and growing geopolitical issues. CATL delivers stronger than expected results underscoring surging EV demand CATL, the world's biggest battery maker and Tesla’s battery supplier, delivered results eclipsing estimates, amid stronger EV demand, while its results also cement CATL as the industry leader. Net income surged 93% y/y, to CNY 30.7bn vs est. CNY 28.8bn with both its power battery and energy storage division’s revenue growing far more than expected amid clean energy demand. What are we watching next? The Australia, UK and US alliance thrusts the Defence and Nuclear sectors into the spotlight US President Joe Biden will host a meeting with the UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese in San Diego on Monday, where they are expected to decide on how to move ahead with a multibillion submarine plan, which could involve Australia buying as many as five US Virginia class nuclear-powered submarines in the 2030s. They are also expected to deliberate on how to get other high-tech weaponry to Australia. This is all a part of the AUKUS alliance, which was formed 18 months ago, aimed at the countries sharing defence and military capabilities, to protect the Indo-Pacific region, and counter China. For the investor, it makes one reflect on the capital being spent in the industry, which may present as a potential investment opportunity to explore. So, we break down the next steps of the AUKUS alliance, where the vessels will be built, the potential financial outlay, the likely companies involved and Saxo’s Equity Defence and Nuclear theme equity baskets to watch. Read our article here. Earnings to watch Today’s key earnings releases are not market moving and thus the focus is on next week’s earnings with the most interesting earnings releases being Volkswagen, BMW, Adobe, and FedEx. Friday: Daimer Truck, AIA Group, DiDi Global Next week’s earnings releases: Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) 1330 – US Feb. Nonfarm Payrolls Change 1330 – US Feb. Unemployment Rate 1330 – US Feb Average Hourly Earnings 1330 – Canada Feb. Employment Data   Source: Global Market Quick Take: Europe – March 10, 2023 | Saxo Group (home.saxo)

Summary:  Bank of Japan Governor Kuroda’s last meeting ended without any surprises as policy settings were left unchanged. While incoming data will be key to watch for what tweaks the next governor Ueda can bring, the near-term focus shifts to US data on non-farm payrolls and inflation, as well as the extent of fallout in the US banking sector as the market appears to be a panic mode after SVB’s hasty fundraising. Kuroda’s parting message lacked sparks The Bank of Japan kept its policy unchanged at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Although data and recent communication had hinted at no change in monetary policy, there were some apprehensions given Kuroda is famous for giving surprises to the market. However, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Growth and inflation dynamics do not support the case for immediate policy tweaks The BOJ still stays on the transitory camp for inflation, with today’s statement again highlighting that cheap energy and fading hit from import prices will slow inflation, although it adds that prices will pick up again due to rising wages and changing expectations. Ueda has also signalled a similar narrative, suggesting that he does not see Japan’s inflation as structural or sustainable. Recent data has also shown some softening in Tokyo CPI for February, mainly due to government subsidy measures to keep utility bills from going through the roof. Further measures from PM Kishida to ease cost of living pressures may continue to point towards easing inflation pressures, but wages are being pushed higher as well as companies announce wage hikes on political push, and the evolution of both wages and inflation will be key to watch to gauge how BOJ policy can change under the new Governor. Meanwhile, growth momentum is weakening and the BOJ policy sounded a caution on exports and production although the overall economic assessment was left unchanged. Still, the recent downside surprises in GDP growth, household spending and wage growth continue to suggest that it will be tough for the BOJ to pare stimulus in the near future. Market entering panic mode While the BOJ stayed short of invoking market fears, other global developments have been pointing towards a risk of crisis. Silvergate Capital Corp.’s abrupt shutdown and SVB Financial Group’s hasty fundraising have sent the US banks and the KBW Bank Index plummeting. This together with the expectation of faster tightening from the Federal Reserve and the deepest inversion of the Treasury yield curve is invoking concerns of a deep incoming recession. Source: Bloomberg, Saxo Key concerns stem from the reason SVB gave for needing to raise capital – startups pulling out cash deposits. This is mainly driven by venture-backed technology and health-care companies that went public last year, and questions are now being raised if SVB is just the tip of the iceberg as higher interest rates continue to push valuations lower presenting broader risks for lenders. The MSCI Asia Pacific Index dropped as much as 2% on Friday, dragged down by financial shares, keeping the risk-off sentiment alive. China reopening is also still in its early stages and data has been mixed, suggesting lack of catalysts to continue to drive a recovery, and Chinese stocks erased most of 2023 gains in light of the deteriorating risk sentiment. Japanese equities also slipped by 1.5% despite the ultra-loose monetary policy conditions being maintained. Overall sentiment appears fragile with equities plunging and rate hikes getting priced out as investors flock to bonds in a bid for safe havens. Yen direction unclear Domestically, the incoming growth and inflation data, including the outcome of the spring wage negotiations, remains key to watch to assess if Ueda could consider policy normalization, given that he exhibited an openness to being flexible in addition to his message on policy continuity at the testimony last month. Still the message on flexibility was more directed towards responding to market disorders, and there is unlikely to be a pressing need for policy tightening unless inflation takes an ugly turn again. This means the forthcoming data from the US, particularly the NFP jobs data and the February CPI, will be key to cement the case for a 50bps rate hike from the Fed this month and the primary driver for the Japanese yen in the short run. The base case remains for the data to remain hot, and even if we still get a 25bps rate hike in March, the possibility of the dot plot being revised upwards is high. This could push USDJPY towards the 140 mark. However, the added concerns over the US banking sector spurring broader risk aversion could bring the yen support in focus. Depending on how far the SVB fallout extends, the yen’s safe haven bid could return and USDJPY could fall. Japanese stocks could remain interesting as monetary policy stays loose, provided the deterioration in global risk sentiment is contained.   Source: Macro Insights: Bank of Japan on hold – yen at the mercy of US data and risk sentiment | Saxo Group (home.saxo)

Summary:  The Australia, UK and US defence alliance nears implementation after forming 18 months ago, with the country heads to meet and progress their multibillion trilateral defence deal. This may include Australia buying as many as five US Virginia class nuclear-powered submarines in the 2030s. This reinforces NATO’s drive of encouraging countries to spend 2 per cent of national spending on defence. For the investor, it makes one reflect on the capital being spent in the industry, which may present as a potential investment opportunity to explore. What is the AUKUS alliance, and why was it formed?  AUKUS alliance was formed to share defence and military capabilities, and protect the Indo-Pacific region in countering China. But the alliance said its importance has grown in response to Russia’s invasion of Ukraine.US President Joe Biden will host a meeting with the UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese in San Diego on Monday, where they are expected to decide on how to move ahead with the submarine plan and get other high-tech weaponry to Australia.By the late 2030s, a new class of submarines will be built, with UK designs and US technology. While they’re being constructed, it’s expected that either the US will base nuclear subs in Australia, or sell submarines to the nation. The US and UK are said to be providing Australia with technology and capabilities to deploy the nuclear-powered submarines, which will be based in Australia, given its proximity to the Western Pacific and Indian Ocean. The fleet will also bolster the US submarine presence already there. The nuclear-powered submarine deal is expected to be double the size of the $90 billion French designed project This is according to Vice Admiral Jonathan Mead, who has headed the 18-month-long taskforce to acquire the nuclear-powered submarines. It is also expected to generate 10,000 jobs for Australia, double what the French project would require. Adelaide in South Australia, has been ear marked as the destination to build a shipyard, fit-for constructing nuclear-powered submarines. But hiring workers who are nuclear aware, competent and nuclear experts will prove one of the most difficult challenges of the project, according to Vice Admiral Mead,. Although we don’t know the financial outlay involved exactly, this alliance underscores the importance of reflecting on the monumental investment in the defence sector. For Australia alone, the AUKUS alliance marks the country’s biggest-ever defence project. This also follows Australia separately announcing it will double its Royal Australian Airforce cargo fleet, after signing a A$10 billion US military deal, to buy 24 Hercules planes. The cargo planes have historically moved troops, transported equipment in and out of war zones and evacuated civilians. Hercules planes have also made countless humanitarian flights to offer supplies to countries hit by natural disasters.  So once again, the defence sector and potential companies involved are thrust into the spotlight  Potential companies that could be involved in producing the nuclear-submarines, include a major submarine maker, Northrop Grumman. Lockheed Martin is the world’s largest defence company, and the US government’s biggest defence contractor. Lockheed is also the producer of Hercules planes. Given the rising cashflows and earnings in Defence companies, we've seen Defence shares outperform the market.Saxo’s Defence equity theme basket has produced some of the best returns year-on-year, among all the baskets with track, with a gain of 25%. The AUKUS alliance also puts the spotlight on nuclear and uranium companies... ...as the submarines for the alliance are going to be nuclear powered. Give this, we expect nuclear and uranium demand to increase. We encourage you to read more on Nuclear power, in Saxo's detailed report here, which explores everything you need to know about nuclear energy and potential companies involved.  You can also explore some of the largest nuclear energy producers, via Saxo's Nuclear Power equity theme baskets.   Source: The AUKUS alliance thrusts the Defence and Nuclear sectors into the spotlight | Saxo Group (home.saxo)

Summary:  U.S. banking stocks tumbled on Silicon Valley Bank’s liquidity crisis and bond portfolio losses as well as the winding-down of Silvergate Capital, a crypto-focused bank. The KWB Bank index tumbled 7.7%. Yields on the 10-year Treasuries dropped to 3.90%. All eyes today are on the Bank of Japan meeting and the U.S. employment report.   What’s happening in markets? US equities slide with banking stocks being heavily pressured Banks were front and center in yesterday’s sell-off in U.S. equities. Financials plunged 4.1% and were the biggest loser among the 11 S&P 500 sectors. The KWB Bank Index tumbled 7.7%, its biggest drop since June 2022. The S&P 500 broke below its 200-day moving average, a key support level, and ended 1.9% lower, while the Nasdaq 100 shed 1.8%. SVB Financial (SIVB:xnas), parent of Silicon Valley Bank, suffered a record 60% crash in share prices after the bank said it suffered from a liquidity crisis and sold off a swad of securities in a portfolio that’s been hit by significant losses. Silvergate Capital (SI:xnys) plunged 41.8% following the crypto-focused bank said that it was winding down and returning deposits to customers. Bank of America (BAC:xnys) plunged 6.2%; JP Morgan Chase (JPM:xnys) shed 5.4%. Oracle (ORCL:xnys) dropped 4.1% in extended-hour trading following reporting inline revenue and earnings beat but a miss in cloud license and on-premise license. Yields on U.S. Treasuries dropped on a spike in jobless claims and bank stocks woes A bounce in initial jobless claims to 211K (consensus 195K) from 190K triggered the short-covering in the front end ahead of the employment report which is scheduled to release on Friday. The buying intensified as banking stocks tumbled on woes on Silvergate Capital and SVB Financial. Large block buying emerged in the June 2023 SOFR contracts. Yields on the 2-year plunged 20bps to settle at 4.87%. The 10-year yield dropped 9bps to 3.90%. The 2-10-year yield curve steepened to -97bps, Hang Seng Index and China’s CSI 300 retreated as the Sino-American tech friction escalated Hang Seng Index dropped 0.6% and CSI 300 Index slid 0.4%. China’s CPI softened to 1% Y/Y and PPI declined 1.4% Y/Y in February did not excite investors with monetary stimulus expectations but added to the worries about the strength of the economic recovery in China. China consumer names were under selling pressure. Restaurant chains Xiabuxiabu (00520:xhkg) and Haidilao (06862:xhkg) plunged 7%  and 4.5% respectively. China Resources Mixc Lifestyle Services, a leading property management name, dropped 4.7% and was the biggest loser within the Hang Seng Index on Thursday. The latest announcement from the Netherlands to impose additional restrictions on exports of advanced microchip equipment to China and the U.S. moving close to banning TikTok caused concerns of escalation of the technology friction and geopolitical tension between China and the U.S. The Dutch company ASML is the world’s largest and most dominant supplier of advanced chip-making equipment including the immersion DUV lithography machines in the latest export ban. State-owned telcos continued to rise, with China Telecom (00728:xhkg) surging 4% and China Mobile (00941:xhkg) climbing 3.1%. COSCO China Shipping Energy Transportation (01138:xhkg) jumped 12.5% as investors anticipated the Chinese tanker and dry bulk shipping operator to benefit from increases in freight rates. In A-shares, consumer stocks were among the biggest losers with Chinese white liquor, retailer, catering, and tourism stocks leading the charge lower. Semiconductor names gained on anticipation of import substitution. Australian equities (ASXSP200.I) slide 1.6% on Friday, but are almost steady over the week Despite the S&P500 sliding 3% Monday to Thursday, the ASX200 is managing to hold almost steady, and is down 0.2% Monday to Friday (at the time of writing). Today most sectors are under water today, bar the defensive, Utility sector, while Financials down the most following alarm bells being rung in the banking sector on Wall Street. Pressure is also being felt in lithium stocks after CATL’s results beat expectations. Meanwhile BHP is trading 2% lower, despite the iron ore (SCOA) price moving up 1% to $129.10. FX: USD modestly weaker ahead of BOJ and NFP The rise in jobless claims on Thursday saw yields dipping lower, taking the dollar off the recent highs as well. The Japanese yen saw a recovery with lower yields, and focus now shifts to Bank of Japan meeting which can cause significant volatility. USDJPY finding support at 136 for now after reaching 3-month highs earlier this week on Powell’s hawkish testimony. GBPUSD rose back above 1.19 ahead of UK data dump today likely to show that a recession has been delayed, but focus will shift to NFP later as the key USD driver. CAD remained the underperformer, with USDCAD rising to 1.3830, as Fed-BOC divergence widened and oil prices remained weak. The choppiness in crude oil prices continued WTI prices ended the day below $76/barrel after touching highs of $78 earlier, while Brent dipped below $82 from $84 earlier. Even as the jobless claims data cooled, markets were in a flight to safety mode ahead of NFP as jitters on a tighter monetary policy remained. Demand concerns remained despite crude inventory recording its first weekly fall after several weeks of gains. EIA inventory report showed crude stocks down 1.7mn barrels last week vs. expectations of +1.6mn. Signs of a pickup in Chinese demand also remain mixed. The highs earlier in crude oil prices were reached on the back of supply concerns arising out of French refineries because of the nationwide strikes in France. Gold reverses back higher from support Gold caught a bid in the run upto the jobless claims release last night, reversing higher from near its support levels at $1800 to reach $1835. Focus turns to NFP today after Fed Chair Powell in his testimony this week opened the door to a 50bps rate hike in March. Now, data will need to confirm the need for that, else expectations may be quick to reverse. Support at 100DMA at $1806 remains key to hold.   What to consider? Jobless claims cool, focus now on NFP data today Initial claims rose 211k in the week of 4th March, above the 190k prior and the 195k expected. It was the first time that the jobless claims came above the 200k mark since January, and it was the highest claim YTD. The continued claims also rose to 1.718 mn from 1.649 mn, coming in above estimates as well. While this may have raised some concerns that the US labor market is softening, the print is still strong and eyes now turn to the February payrolls data out today in the US. Our full preview is here, which says that Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. A strong print could further cement the case for a 50bps rate hike this month. SVB’s nosedive of 60% highlights the venture capital and tech bubble is spilling to banks- Is this just the beginning? Investors were spooked by Silicon Valley Bank announcing its  taking emergency steps to shore up capital after suffering a $1.8 billion after-tax loss in the first quarter. SVB sold about $21 billion of securities from its portfolio and plans to raise $2.25 billion. SVB’s shares tumbled 60% on the announcement, taking its shares to its lowest level since September 2016, while erasing $9.6 billion in market value. This reflects the pain of higher interest rates and tighter liquidity on the venture capital start-up bubble and how that’s heavily flown right to banks - who are also now suffering a liquidity crisis. It seem a vicious cycle. While, at the same time, people’s trust in the financial system is weakening, which is why we saw the banking sector heavily sold off on Thursday, with the KWB Bank Index tumbling 7.7%, its biggest drop since June 2022. Not only have we seen floundering prominent startups go bust – such as FTX, but banks have been making exuberant investment in such firms for years. This is all despite banks slowing their pace of investing and offering stingier terms. This not only reflects the hot air been blown into starts up - yet banks have become heavily reliant on such risky and volatile businesses.Also on Thursday, another California lender, Silvergate Capital Corp, which is targeting cryptocurrency firms, such as FTX, announced its winding down operations, following the meltdown of its financial strength, after digital assets plunged, seeing Silvergate lose billions in deposits. After announcing plans to liquidate, it says it will repay all deposits in full. Silvergate was previously scrutinised by regulators for its dealings with fallen crypto giants FTX and Alameda Research. Silvergate shares sank 40%. Bank of Japan is the biggest event risk While data and commentary from officials has been less supportive of the case for further tweaks in Bank of Japan policy, outgoing governor Kuroda is known for his surprises. At his last meeting on Friday, he may want to part with some sparks resulting in a numb yen in the run upto the meeting. We discussed all this and more in our central banks note this week, and significant scope of two-way volatility in the yen is seen. China’s CPI softened sharply to +1% Y/Y, PPI deep into deflation at -1.4%Y/Y China’s CPI growth slowed to 1% Y/Y in February, much lower than the consensus estimate of 1.9%. Growth in food prices decelerated to 2.6% Y/Y from 6.2% Y/Y while growth in non-food prices halved to 0.6% Y/Y in February from 1.2% in January. PPI slide 1.4% Y/Y in February, bringing the producer prices deeper into deflation. US-India ties expand into semiconductors The US and India are looking to sign an agreement to boost coordination of their chip industry to focus further on information sharing and policy dialogue, as India forges ahead to boost its presence in the global technology supply chain amid China’s crackdowns on the private sector and growing geopolitical issues. CATL delivers stronger than expected results underscoring surging EV demand China’s Contemporary Amperex Technologies Limited (CATL), the world's biggest battery maker and Tesla’s battery supplier, delivered results eclipsing estimates, amid stronger EV demand, while its results also cement CATL as the industry leader. Net income surged 93% y/y, to 30.72-billion-yuan, vs 28.8 billion yuan expected – with both its power battery and energy storage division’s revenue growing far more than expected amid clean energy demand. Power battery revenue rose to 236.59 billion yuan, up from the 91.49-billion-yuan same time last year - while exceeding the 228.46-billion-yuan consensus expected. That said, its power battery gross margin came in at 17.2%, on par with estimates – as EV sales growth in China slowed in Q4 as the economy was hit by a wave of COVID-19 infections with Tesla cutting output in Shanghai, with CATL suffering rising inventory. That said, CATL’s outlook seems bright and it’s continuing its global expansion, planning to set up 13 production bases, including in Germany and Hungary, with five R&D centres. It recently licensed its LFP battery technology for Ford to use in a new $3.5 billion EV battery plant – which Ford will run in Michigan.  We expect CATL’s results will continue to grow strongly given COVID disruptions came to an end. Fitch suggests EV sales in China will account for 35% of vehicles sales this year, up from 27% in 2022. EV sales grew 60% in 2022 to 10.4 million units and are expected to reach 13.9 million units this year, with most growth in China, according to Bloomberg. This also reflects strong demand for EV batteries ahead, as well as the key battery components including lithium, copper, graphite and aluminium. You can explore some of the companies in this space in Saxo's Lithium- Powering EVs equity theme basket.  CATL's had 37% share of EV battery global market in 2022, which is testament to its cheaper-to-produce lithium-iron-phosphate batteries. In joint second place, South Korea’s LG Energy Solution and China’s BYD Co, with a 13.6% share each. JD.COM gave a downbeat Q1 revenue guidance citing cautious Chinese consumers JD.COM (09618) reported Q4 revenue of RMB 295 billion, rising 7% Y/Y, in line with consensus estimates. Benefiting from a 1.4pp Y/Y improvement in operating margin to 2.5%, the e-commerce giant’s non-GAAP net profit came in at RMB 7.66 billion, a 115% increase Y/Y and nearly 40% above consensus. However, the share price of its ADRs plunged 11.3% overnight or 6.2% from its Hong Kong closing price on Thursday, on downbeat guidance on Q1 revenues. JD.COM expects JD Retail’s sales to fall by a low-to-mid single-digit percentage Y/Y in Q1, below analysts’ estimates of 1-3% growth. The Company’s management said the sentiment of Chinese consumers is still fragile and consumers have become more prudent on discretionary items. Reopening might also divert some of the online purchasing to off-line consumption such as dining and traveling.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 10, 2023 | Saxo Group (home.saxo)

Summary:  Copper seems to be forming a corrective pattern. Key support at 394.Gold still holding on above key level at 1,800. Could reverse from hereSilver sell-off seems to be exhausting . Correction possibleGold/Silver ratio still on the rise but testing resistance level. Short-term correction could be seen Copper 394 support seems to be too strong for Bears to break. Copper could be forming a Descending triangle like pattern that could be corrective i.e., if closing above falling trendline correction is likely to be over and new highs should be expected.But, it could also be trading in a falling channel (indicated by the falling blue trendline) but here is the support at 394 key.A close below 394 could fuel a sell-off down to strong support at around 370. A close below 394 will also break the medium-term rising channel (weekly chart) and push Copper back below the 55 weekly Moving average. If Copper breaks above the short-term falling trendline in what could be a Descending triangle uptrend is likely to resume to test January peak around 435 but quite possibly moving higher to around 457-463Weekly RSI is positive without divergence suggesting higher Copper prices. Source all charts and data: Saxo Group Gold still holding up above 1,800 fluctuating around the 0.618 retracement at 1,813. A break below 1,800 could fuel a sell-off down to support at around 1,768 possibly down to 1,732. Weekly chart shows why 1,800 is key. 1,800 could be key pivot level for Bullish/Bearish trend.Weekly RSI is positive without divergence suggesting Gold will resume uptrend but if 1,800 is taken out Gold could re-visit the 200 weekly Moving average which is rising and will provide some support. A close above 1,865 and the 55 daily Moving average is needed for Gold to resume uptrend.An uptrend that is likely to take Gold back to 1,950-2,000 area. 100 and 200 daily Moving averages provide some support and very short-term Gold could be range bound between 55 and 100 daily Moving Averages.Daily RSI in negative sentiment and with no divergence adds to the rather blurry/range bound picture. Silver After reaching its Inverted Shoulder-Head-Shoulder potential Silver has totally collapsed taking it back below the Neckline  (See weekly chart). Weekly RSI is currently testing 40 threshold and if closing below there is further downside for Silver.The collapse has formed a short-term falling wedge like pattern with RSI divergence indicating the sell-off is exhausting. A close above the upper falling trend line will confirm that and a close above 21.30 will reverse the trend with strong resistance at around 22.04. 100 and 55 daily Moving averages will add to the resistance around 22.If Silver closes below 19,90 the down trend is likely to be extended. But keep an eye on the RSI, if it cancels the divergence i.e., closes below 24.00 from the 27th February. If that scenario plays out there is down side potential to around 19. Gold/Silver XAUXAG ratio is testing October peak at around 90.69. There is no RSI divergence however, indicating higher levels. A move to 0.786 retracement at 91.80 is likely but there is no strong resistance – if Gold/Silver closes above 90.68 before 96.50. For Gold/Silver to reverse trend a close below the lower rising trend line and below the 86.60 is needed.Weekly chart RSI is positive indicating higher levels. 96-96.50 seems likely to be reached   RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend   Source: Technical analysis Copper Gold Silver | Saxo Group (home.saxo)

Summary:  We are not in the recession camp. We believe that as long as the velocity of money is rising, the likelihood of a U.S. recession is low this year. At the end of 2022, the market consensus was expecting a recession in the United States for this year. This has not happened yet. And this is unlikely to happen, in our view. This week’s employment data for February are likely to show the economy is still very resilient despite broad-based inflationary pressures and higher cost of capital. The consensus expects that job creations are back to normal in February around 200k after a strong jump in January at 507k. The unemployment rate is expected to marginally increase to 3.5 %. These are very good figures. One can say that the labor market is a lagging indicator of the business cycle. This is true. More fundamentally, we don’t see how the United States could enter a recession in the short-term with the velocity of money being on the rise. The velocity of money (V) is the rate at which money is being spent in the economy. In simpler terms, this is how fast the same “100 USD” changes hands. V is generally a function of two things: the pace of growth in the economy and growth in the money supply. We can both use M1 and M2 for the calculation of the money supply. Think of M1 as the more focused number. It includes cash and transaction deposits whereas M2 is a larger indicator and encompasses savings and money markets among other things. Conventional economic theory usually considers that the faster the money changes hands (through the daily function of an economy), the more the economy grows. This fully makes sense. The below chart shows the evolution of V since the early 1960s in the United States. After reaching a peak in the mid-1990s at 2.2, it has decreased to an historical low of 1.1 in 2020 due to the deep and broad shock related to the pandemic. This is not surprising. What is interesting is that V is now increasing, though from a low starting level. As long as V is expanding, the probably is high the U.S. economy will grow. This can be puzzling given the cost of capital is rising and inflation is hitting purchasing power. In our view, the $5tr stimulus that was triggered to fight the economic consequences of the pandemic partially explains the rise in V. Our baseline is the U.S. economy will continue to grow this year, at a lower level than in 2022 of course. But a recession is far from certain (unless it is voluntarily engineered by the U.S. Federal Reserve to tame inflation – this is not the case so far).   

Summary:  Today we look at a market that is holding its breath in anticipation of incoming US data to refresh the probabilities that the Fed feels forced to re-accelerate the pace of rate hikes at the March 22. But as well, all traders need to consider the Bank of Japan meeting risk up overnight tonight as a surprisingly large adjustment from Kuroda could set even global bond and equity markets on edge, not just the Japanese yen. We also look at interesting stories in equities, from the latest on ASML to CATL and other companies. Today's pod features Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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: Bank of Japan could cast a very long shadow over global markets | Saxo Group (home.saxo)

Summary:  After Wednesday’s sentiment shock on hawkish Fed Chair Powell testimony, yesterday saw markets frozen in their tracks, awaiting key incoming data that will determine whether the Fed must continue turning the rate tightening screws, starting with the US February jobs data up tomorrow. In Asia’s Friday session tonight, we await the final Bank of Japan meeting with Kuroda at the helm before his exit next month. Will he surprise again as in December or leave the next steps in the direction of normalization for his successor? What is our trading focus? US equities (US500.I and USNAS100.I): more wait and see Following the big move in Tuesday’s session on Powell’s hawkish comments on policy rates and inflation yesterday’s session had much lower energy and ended with a small rebound in S&P 500 futures gaining 0.1%. Stronger than expected ADP job figures had a small initial negative impact as the jobs data continue to suggest a strong US labour market despite the higher interest rates underpinning the structurally higher inflation case. This morning the low energy in US equity futures continues and it feels like the equity market is back at the wait-and-see mode on inflation and the economy. As we have said before, it is the bond market that will dictate where equities go from here. If S&P 500 futures slips below Tuesday’s close, then the 3,950 level is the next level to watch and the approximate area for the 200-day moving average. Chinese equities (HK50.I and 02846:xhkg): oscillated in a lacklustre session Hang Seng Index and CSI 300 Index swung between small gains and losses. China’s CPI growth slowed to 1% Y/Y in February, much lower than the consensus estimate of 1.9%. Growth in food prices decelerated to 2.6% Y/Y from 6.2% Y/Y while growth in non-food prices halved to 0.6% Y/Y in February from 1.2% in January. PPI slide 1.4% Y/Y in February, bringing the producer prices deeper into deflation. Semiconductor Manufacturing (00981:xhkg) and Hua Hong Semiconductor (01347:xhkg) advanced, as investors expect the domestic chip making leaders to benefit from government policy initiatives and import substitution. COSCO China Shipping Energy Transportation (01138:xhkg) jumped 11.5% as investors anticipated the Chinese tanker and dry bulk shipping operator to benefit from recent rises in freight rates. FX: USD strength eases ahead of data. JPY firms. CAD weak on BoC The USD strength on the back of Fed Chair Powell testimony failed to find further momentum as the market awaits key incoming US data tomorrow (Feb. jobs report) and next Tuesday (Feb. CPI) for further conviction. With the rise in yields easing slightly, the JPY perked up after USDJPY failed to close above the 200-day moving average and as the market awaits a possible surprise from the outgoing Kuroda at tonight’s (Friday in Asia) Bank of Japan meeting (preview below). The Bank of Canada confirmed its prior guidance and did pause its rate tightening cycle at its meeting yesterday, continuing to signal a wait-and-see stance, which looks dovish in this environement. This saw CAD weak across the board yesterday, and USDCAD traded above 1.3800 at one point for the first time since November. Crude oil holds Powell-led losses, but support is not far away Crude oil futures remain stuck near a one-week low as the negative sentiment around further monetary tightening more than offset a surprise drop in US stocks, the first in ten weeks. Brent and WTI trade below their 21-day moving averages for a second day but the loss of momentum has yet to see either of them challenge trendline support, in Brent at $81.40 and WTI at $73.50. Rangebound for months and in no hurry to change that amid a balanced flow of supply and demand related news, the market is likely to pay close attention to the general level of risk appetite which is currently being dictated by the FOMC and its close attention to incoming data. With that in mind the next major market moving event is likely to be Friday’s US job report. Gold trades near key support on Powell’s higher, faster and longer threat Gold trades near support in the $1800 area as traders continue to digest Fed chair Powell’s comment on Capitol Hill that interest rates could go higher, faster and for longer. In the short-term with Powell signalling an incredible data dependency, the focus now turns to incoming US data, and ahead of Friday’s job report, another report showed US job openings drop to 10.8 million, still a number too high for the Fed. However, given the level of elevated rate hike expectation currently priced in, any weakness in incoming data may now trigger a stronger positive response than otherwise called for. Below the $1800 area the next level of interest is the 200-DMA at $1775. Yields on U.S. Treasuries moved higher on hot JOLTS job openings and a poor 10-year auction The Treasuries market did not react much to the hotter-than-expected ADP employment data and Powell’s second-day congressional testimony. Short-covering flows especially in the futures contracts drove the market higher and yields lower in the morning until selling emerged following the JOLTS job openings data which was stronger than estimates. Demand in the 10-year auction was weak as the auction stopped at nearly 3bps cheaper from the market level at the time of the auction and had a bid-to-cover ratio of 2.35, lower than 2.66 last time. The Treasury is auctioning USD 18 billions of 30-year bonds today. The 2-year yield rose 6bps to 5.07% and the 10-year yield edged up 2bps to 3.99%, inverting the curve further to -109bps. What is going on? The Netherlands proposing a chip gear export restriction to China As part of the US CHIPS Act the US pushing its trading partners to also restrict semiconductor technology to China which has hurt chipmakers including Nvidia. So far, the Dutch-based ASML, the world’s largest lithography machine makers for chip production, has said that those restrictions did not apply to them. However, non-compliance by ASML and other equipment makers would make it possible for China’s semiconductor industry to circumvent the intentions in the new US policy on semiconductors. Yesterday, the Dutch government announced that the Netherlands is proposing chip gear export restrictions to China and will include DUV (deep ultraviolet) lithography machines which are the most advanced machines for chip production. ASML says that the new export restrictions will not affect the 2023 outlook nor the long-term outlook, but the latter part might be a stretch and only time will tell. Apple to put more focus on India growth Apple is revamping its global sales unit shifting its focus to India from China with a new separate sales office and reporting line in India. This move follows the decision to increase production capacity of various Apple products to India from China underscoring the shifting geopolitical interest for the US and its corporate sector. With Apple being one of the most important companies in the US this is an important signal to other US companies about how to change global supply chains and where to get revenue exposure. WASDE adds further downside pressure on corn and wheat futures Chicago corn and not least wheat futures extended their slump on Wednesday after the USDA said domestic stockpiles rose by more than expected in response to lower exports. The agency also boosted the outlook for Ukraine corn exports while wheat, already under pressure from Russian sales and expectations the Ukraine grain corridor deal will be extended, dropped to an 18-month low after the agency raised production estimates for Kazakhstan, Australia and India. Soybeans meanwhile found support after the USDA slashed production from drought-stricken Argentina by more than expected. The world’s biggest exporter of soymeal and soyoil will harvest 33 million tons of beans this year, the smallest crop since 2011 and a 20% decline from its February estimate. More hot job data coming out of the US The ADP Employment report had a 242K increase in jobs in February, rising from 119K (revised from 106K previously reported) in January and way above the 200K consensus estimate. JOLTS Job Opening also came in stronger than expected at 10,824K (consensus estimate: 10,546K; January 11,234K). Bank of Canada confirms pause in rate tightening regime The Bank of Canada confirmed its guidance from the prior meeting and did not hike the policy rate yesterday, a particularly jarring divergence relative to the hawkishness we saw this week from Fed Chair Powell which has the market debating a re-acceleration in the pace of Fed hikes, and at a time when the ECB, for example, is priced to hike another 150 basis points or more this year. The Bank of Canada continues to expect that inflation in Canada will ease to “around 3%” by mid-year. The guidance on further in the policy statement remained unchanged: "Governing Council will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2% target.". One particularly complicating factor for the Canadian economy is the heavy load of private debt, much of it in mortgages, with a large minority of Canadians financing with adjustable rate mortgages and even fixed rate mortgages adjust their rate every five years, which will stress the budgets of a growing portion of Canadian households with every month that passes at the current yield levels – several multiples of where rates were for the 2020-2021 timeframe. Powell largely repeated his message on the second day of his testimony On the second day of his congressional testimony, this time to the House Financial Services Committee, Powell told lawmakers that no decision had yet been made on the size of the rate hike at the March FOMC while he reiterated that the Fed was likely to bring the policy rate higher than previously anticipated and could move at a faster pace. What are we watching next? Bank of Japan meeting tonight will be Kuroda’s last after 10 years as Governor Significant two-way volatility potential for the JPY tonight on the Bank of Japan meeting as the market well remembers the surprise decision from Governor Kuroda to expand the yield-curve-control “band” for 10-year Japanese Government bonds (really a cap in this era of higher interest rates) to +/- 0.50% from the prior 0.25%. One-week implied volatility in USDJPY options remains very elevated at almost 19% in anticipation of tonight’s decision and guidance, as the market is uncertain whether Kuroda might significantly tighten policy at his last meeting as a kind of declaration of victory on succeeding in bringing more sustained inflation to the Japanese economy, or whether he will leave the bulk of the tough process of policy normalization to his likely successor, Kazuo Ueda. USDJPY rose above its 200-day moving average this week at 137.20 and traded most of the way to 138, but has retreated this morning to well below 137.00. The market is only pricing a policy rate (the short rate) of positive 0.15% by the end of this year, versus –0.10% currently. More likely for the Bank of Japan to focus on loosening yield-curve-control for now rather than tinkering with the policy rate. Earnings to watch Today’s key earnings release to watch are CATL and JD.com which will provide fresh information from China’s corporate sector. JD.com is expected to report FY22 Q4 earnings before the US market open with analysts expecting revenue growth of 7% y/y down from 23% y/y a year ago, and EBITDA of CNY 8.06bn up from CNY 5.08bn a year ago. The outlook from JD.com matters a lot this time as it will reflect management’s confidence and expectations related to the Chinese reopening. CATL is expected to report sometime after the Chinese equity market close and is expected to report Q4 revenue growth of 87% y/y reflecting the strong demand for electric vehicles and batteries. Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 1200 – Mexico Feb. CPI 1230 – US Feb. Challenger Job Cuts 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1530 – EIA's Weekly Natural Gas Storage Change 1800 – US Treasury to auction 30-year T-bonds 1845 – Canada Bank of Canada Deputy Governor Rogers to speak Asian session: Bank of Japan meeting   Source: Global Market Quick Take: Europe – March 9, 2023 | Saxo Group (home.saxo)

Summary:  The ADP employment and JOLTS job opening numbers released on Wednesday leaned into the notion that the Fed can resume a faster pace. But it seems the market is coming to terms with the fact that interest rates will remain elevated as the VIX Index declined, and the US Dollar Index steadied manner. Ahead are CATL results, JD.com and DocuSign. The all-important jobs report on Friday and the U.S. CPI next week could bring about another round of market volatilities. Read on for more.   What’s happening in markets? US equities edged up modestly, digesting the message from Powell and job data The Nasdaq 100 (NAS100.I) gained 0.4% and S&P 500 (US500.I) inched up 0.1% on Wednesday, remaining calm to the hotter-than-expected ADP employment and JOLTS job openings data and Powell’s congressional testimony in his second day. The volume of 10.2 billion shares across U.S. exchanges was below average. As WTI crude fell by more than 1% to USD76.5, the energy sector was the biggest loser within the S&P500. Telsa (TSLA:xnas) slid 3%, following the National Highway Traffic Safety Administration highlighting potential issues in the EV maker’s Autopilot system and steering wheels that can detach on the Model Y SUVs. Campbell Soup (CPB:xnys) gained nearly 2% on earnings beat and sales increases. Crowdstrike (CRWD:xnas) rose 3.2%, paring some of the post-result after market gains the day before. In Europe, the STOXX Europe 600 finished the session flat. Yields on U.S. Treasuries moved higher on hot JOLTS job openings and a poor 10-year auction The Treasuries market did not act much to the hotter-than-expected ADP employment data and Powell’s second-day congressional testimony. Short-covering flows especially in the futures contracts drove the market higher and yields lower in the morning until selling emerged following the JOLTS job openings data which was stronger than estimates. Demand in the 10-year auction was weak as the auction stopped at nearly 3bps cheaper from the market level at the time of the auction and had a bid-to-cover ratio of 2.35, lower than 2.66 last time. The Treasury is auctioning USD18 billion of 30-year bonds today. The 2-year yield rose 6bps to 5.07% and the 10-year yield edged up 2bps to 3.99%, inverting the curve further to -109bps. Hang Seng Index and China’s CSI 300 decline on regulatory overhaul in China and U.S. interest rates Yesterday, the Hang Seng Index dropped by 2.4% and the Hang Seng TECH Index plunged by 3.2%.  EV and China Internet stocks led the charge lower. XPeng (09868:xhkg) plunged 7.1% and Li Auto (02015:xhkg) lost 6.3%. China internet names slid, with Alibaba (099088:xhkg), Meituan  (03690:xhkg) and JD.com (09618:xhkg) each down 3-4%. On top of the tighter U.S. interest rate outlook stemming from Fed Chain’s Powell’s testimony, the establishment of the National Financial Regulation Bureau and the National Data Bureau and the consolidation of power around them may have stirred up concerns about uncertainty in the mind of investors about the regulatory trend on areas such as mobile payment and e-platform data.  China telecommunication stocks were among the top gainers. China Unicom (00762:xhg) rose 3.5% after reporting Q4 earnings in line with estimates. TVB (00511) jumped 85% on Wednesday, following the Hong Kong TV broadcasting company holding its first live-streaming online shopping on the Taobao platform in mainland China. The 6-hour live-streaming session had around 4.85 million viewers. Over the past 4 sessions, the share price of TVB has gone up by 247%. In A-shares, the CSI300 finished 0.4% lower, clawing back most of the early losses, with telecommunication, defense, computing, media, and 6G concept names leading the rebound.  The US dollar consolidates, post-Powell gains The US dollar was little changed versus major currencies and was consolidating its strong gains after Powell’s first-day testimony the day before. USDJPY fell back below 107. Australia’s shares are under pressure as the heavy weights trade ex-dividend today BHP and Rio are trading ex-dividend, which is pressuring the equity market, while on the other side Myer shares jolted higher after the retailer declared a super-sized dividend. While accounting software company Xero also trades higher on announcing it will cut 800 jobs to improve its profitability. Meanwhile, in breaking news - part of the Aukus security partnership, Australia looks set to buy as many as five nuclear-powered Virginia class submarines from the US, with the submarine plan expected to be announced next week – when US President Joe Biden meets UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese  - as part of the 18-month old Aukus partnership. Gold ticks higher as the market digests the latest hawkish Fed commentary that could lead the US into a recession Gold advanced on Wednesday after slipping about 2% in the prior session  - gaining strength as the US dollar's rally cooled. Despite the stronger dollar overall, gold has found support in the $1800 area – driven by economic uncertainty and the probability of a recession creeping higher. We await Friday’s jobs report – given rates are expected to remain higher – weakness in the data on Friday may be a catalyst for the US dollar to take a step back, which could theatrically trigger upside in the precious metal.   What to consider? Bank of Canada kept rates unchanged The Bank of Canada (BOC) was the first major central bank to pause from hiking rates. As widely expected, The BOC kept the policy rate unchanged at 4.50% but the door is open to come back on the hiking track to fight inflation as the central bank dropped the forward guidance that it expects to hold the policy rate unchanged if the economy evolves in line with its outlook. Powell largely repeated his message on the second day of his testimony On the second day of his congressional testimony, this time to the House Financial Services Committee, Powell told lawmakers that no decision had yet been made on the size of the rate hike at the March FOMC while he reiterated that the Fed was likely to bring the policy rate higher than previously anticipated and could move at a faster pace. More hot job data coming out of the U.S. The ADP Employment report had a 242K increase in jobs in February, rising from 119K (revised from 106K previously reported) in January and way above the 200K consensus estimate. JOLTS Job Opening also came in stronger than expected at 10,824K (consensus estimate: 10,546K; January 11,234K). Europe leads Australia, with more females in executive roles. The US lags  Various studies have shown that gender diverse executive teams can outperform the overall equity market. So, for International Women’s Day we dissected the makeup of listed companies' executive teams. We found that Europe has the most female representation followed by Australia - with the US lagging. An astounding 33 companies in the Stoxx600 have executive teams that are made up of over 50% women. Healthcare company Halma - also in the Stoxx600 - has a 60% female executive team. While media business- Future PLC, takes the cake - with a 100% female executive team. Australia follows Europe with a high portion of diversity.  14 of the ASX200 companies have executive teams that are over 50% female lead. Gold mining giant- Newcrest Mining- has an 86% women executive team. What’s also pleasing to see is that the world’s biggest mining company, BHP has over 50% female representation on its executive leadership team. And lastly- in the US- in the S&P500, just five companies have executive teams that are made up over 50% women. That includes Bed & Body Work with its 60% executive team - being female. To explore this thematic further, refer to Saxo’s Women in Leadership equity basket.   China’s inflation is expected to slow in February The growth in CPI is expected to slow to 1.9% Y/Y in February from 2.1% in January and PPI to contract further to -1.3% Y/Y. Eyes on CATL’s growth and outlook CATL, the world’s largest battery maker - and Tesla’s battery supplier - reports results on Thursday. It’s expected to report revenue growth of over 80%. However, there is room for a positive surprise - given strong battery and energy storage demand. CATL is also expanding overseas - teaming up with Ford to build a battery manufacturing plant in Michigan, which we will hopefully get detail on. As for its outlook - we expect it to be strong, as CATL’s increased its war chest, after selling its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. We also think guidance could be upgraded - given auto sales in China are expected to rise in 2023, following years of lockdowns. CATL outlook’s will be closely watched by not only EV makers - but also by EV investors – as they could give a gauge on how much car maker’s battery costs could rise.   Other company reports to watch ahead include JD.com - a Chinese consumer spending bellwether and DocuSign- a covid-19 stalwart All eyes will be on JD.com, the Amazon equivalent in China. It could give further insight into Chinese consumers’ appetite post lockdown. And what they’re seeing in consumer spending ahead. It's also worth watching Saxo’s China Consumer and Technology basket of stocks. And in the US - DocuSign reports after the market close on Thursday – this will be interesting to watch as over the last two years DOCU has beaten EPS and revenue estimates. The electronic signature company raised full its guidance when it reported third-quarter results that topped expectations. It’s also joined the spate of tech companies making mass-layoffs and cut 10% of its employees.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 9, 2023 | Saxo Group (home.saxo)

Summary:  Gold and especially silver slumped on Tuesday after Fed Chair Powell said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Gold has despite the stronger dollar and rising rates risk managed to find support ahead of key support in the $1800 area, driven by the risk of either economic data turning softer or higher rates forcing a policy mistake leading to peak rates and recession, all events that may end up being supportive for gold and precious metals in general Today's Saxo Market Call podcastToday's Market Quick Take from the Saxo Strategy TeamEquity update: Powell turns hawkish - The calm before the storm?Forex update: Powellb surprises hawkish, data still in driver's seat Gold and especially silver slumped on Tuesday after Fed Chair Powell, in his prepared remarks to Congress, said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Terminal Fed rate expectations shifted higher to 5.66% with the market now pricing in a 60% risk of a 50 bp move at the March 22 meeting.  Across market risk appetite tumbled, not least due to the dollar hitting a fresh high for the year,  with the selloff in metals being led by silver’s 4.6% slump to a four-month low near $20. Gold meanwhile has given back most of last week's bounce and following the failure to challenge resistance at $1864 and stay above the 21-day moving average, a development that otherwise would have signalled a return of positive momentum, the market is once again looking for support in the $1800 area ahead of $1775, the 200-day moving average. Source: Saxo During the Q&A session that followed his prepared statement, a tasty exchange between Powell and Sen. Elizabeth Warren (D) highlighted the risk the FOMC, not fully understanding their limitations in bringing inflation under control, will continue to hike rates until something brakes. The senator asked Powell what he would say to two million people losing their jobs if he keeps raising rates. To this he answered: “Will working people be better off if we just walk away from our jobs and inflation remains 5%-6%?”.His comment further supported the view that the FOMC will hike faster, higher and for longer, with the obvious risk to the economic outlook and with that the eventual need to cut rates. We will continue to watch the dollar closely given its strong inverted correlation with gold, and now also increasingly how the market price the risk of a recession and with that the scale of the eventual drop in rates. We follow this through the size of the 2-10 year inversion of the US yield curve, currently at 107 basis points, and highest since 1981, and the one year spread between the September 2023 and September 2024 Fed funds futures. From a the current peak priced in around September the spread is looking for a +100 basis point drop the following twelve months. This is important given gold’s often powerful performance in the months that followed a Fed pause in rates. In the short-term with Powell signalling an incredible data dependency, the focus now turns to incoming US data with the first being Friday’s job report. Given the level of elevated rate hike expectation currently priced in, any weakness in incoming data may now trigger a stronger positive response than otherwise called for.   

Summary:  Equity markets sold off steeply on a hawkish Fed Chair Powell, who testified before a Senate panel yesterday, and said that the Fed is willing to consider larger hikes again. Market pricing of peak Fed rates rose above 5.6% as the market now leans for a 50 basis point hike at the March 22 meeting. The US dollar was particularly reactive to Powell’s testimony, jumping to aggressive new highs for the cycle across the board. What is our trading focus? US equities (US500.I and USNAS100.I): fresh hawkish pivot from Powell reverses rally US equities turned sharply south yesterday on a hawkish pivot from Fed Chair Powell as he is clearly not comfortable with the most recent data. This took the 2-year rate above 5% for the first time in over 15 years and reversed the recent market rally, taking the S&P 500 back below the 4,000 level, though with some ways to go before the 200-day moving average comes into view just below 3,950. The Nasdaq 100 likewise reversed course, but is far more elevated relative to recent lows and the 200-day moving average – with the cash index trading 12,150, some 250 points above the moving average. Incoming US data and its impact on Fed expectations and especially longer yields will be key through next Tuesday’s US February CPI data. Hang Seng Index and CSI 300 declined on regulatory overhaul and US rates outlook Hang Seng Index dropped by 2.7% and the Hang Seng TECH Index plunged by nearly 4%. EV and China Internet stocks led the charge lower. In A-shares, CSI300 slid nearly 1%. On top of the tighter U.S. interest rate outlook stemming from Fed Chain’s Powell’s testimony, the establishment of the National Financial Regulation Bureau and the National Data Bureau and the consolidation of power around them may have stirred up concerns about uncertainty in the mind of investors about the regulatory trend on areas such as mobile payment and e-platform data.  FX: USD rips higher on hawkish Powell. CAD in focus on Bank of Canada meet today With Powell’s hawkish remarks, 2-year Treasury yields jumped some 13 basis points to close above 5% for the first time since 2007 and the USD rushed to fresh YTD highs. AUD and NZD were hurt by the deterioration in risk sentiment, with the former also pressured by a dovish turn from the RBA. Widening yield differential between US and Japan weighed on the yen, and USDJPY pierced above 137.50 in the Asian session despite volatility risks from the Bank of Japan meeting scheduled on Friday. GBPUSD broke below the 200DMA to reach YTD lows in the low 1.1800’s, with BOE’s Mann commenting that sterling could weaken further. EURUSD dropped below 1.0550, paring the hawkish ECB Holzmann reaction earlier in the week. CAD will be in focus today after the Bank of Canada trid to position for a tightening pause at its most recent meeting (read more below), with USDCAD likely to take a look at 1.38+ levels if the BoC doesn’t shift hawkish in line with the Fed. Gold and silver slump on Powell warning Gold and silver slumped after Fed Chair Powell, in his prepared remarks to Congress, said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Terminal Fed rate expectations shifted higher to 5.66% with the market pricing in a 60% risk of a 50 bp move at the March meeting. Across market risk appetite tumbled with the selloff in metals being led by silver’s 4.6% slump to a four-month low near $20.  Gold meanwhile has given back most of last week's bounce and following the failure to challenge resistance at $1864 and gain a foothold above the 21-DMA, the market is once again looking for support in the $1800 area ahead of $1775, the 200-DMA. With Powell signalling an incredible data dependency, the focus now turns to Friday’s job report. Crude oil drops over 3% on hawkish Powell Crude oil made an abrupt turnaround from a three-week high on Tuesday with growth and demand concerns taking center stage after Powell signaled his determination to fight inflation with more rate hikes. The most inverted US yield curve in decades now signals an even bigger risk of a recession and with that weakening demand for fuel. Together with China’s lower than expected growth target and OPEC Chief Haitham Al-Ghais seeing slowing oil consumption in US and Europe, both WTI and Brent dropped towards support at the lower end of their current ranges, in Brent at $81.30 and WTI at $73.50.  EIA also released its short-term energy outlook and lowered its crude oil production forecasts for US supply for both this year and next amid signs of subdued growth and higher costs. Copper trades back below the $4 mark Base metals were broadly pushed lower on Tuesday as the dollar surged to fresh YTD highs on remarks from Powell’s testimony opening the door for a bigger hike in March and a higher terminal Fed funds rate. China import data also gave mixed signals on the first two months of the year, with mined copper ore imports increasing but inflows of refined copper declining. Supply constraints from Peru also seemed to ease as the Peruvian government expects shipments of copper and zinc will normalise with days, following months of social unrest prompted by the impeachment of former President Pedro Castillo. Copper trades back below $4, bringing last week’s low of $3.93 and the 200DMA at $3.77 into focus. US Treasury yield curve sees next extreme in inversion. (TLT:Xmas, IEF:xnas, SHY:xnas) Fed Chair Powell’s surprisingly explicit rhetoric on the willingness to consider hiking by larger amounts again shocked the 2-year Treasury yield some 13 basis points higher with yields following through a few bps higher still in overnight trading. The 10-year yield only edged a few basis points higher and is still stuck near 4.00% this morning, which means the yield curve inversion has reached its deepest level yet for the cycle and sinc 1981 at below –105 basis points. The 3-year auction yesterday showed strong demand.  A 10-year auction is up today. What is going on? Powell’s testimony opens the door to a 50 bps rate hike in March Fed Chair Powell, in his prepared remarks to Congress, said that if “the totality” of incoming data indicates faster tightening is required, the Fed is prepared to increase the pace of rate hikes, warning that the ultimate level of interest rates is likely to be higher than previously anticipated given the string of hot January data. This is another signal that March “dot plot” of Fed rate forecasts could see an upward shift for this year and next. Powell even explicitly said that a 50-bp rate hike in March is possible and market pricing has shifted to favouring a bigger hike on March 22. Terminal rate expectations have shifted higher to 5.63% from 5.48% previously. Remarks brought the 2-year yields above 5% and the deepest inversion in the 2-10 year yield curve. Adidas cuts dividends and confirms uncertain outlook Adidas shares are down 3% in pre-market trading as the German sports retailer reports Q4 revenue of €5.2bn vs est. €5.3bn and operating loss of €724mn vs est. €717mn in addition to cutting 2022 dividend to €0.70 vs est. €1.64. The key questions remain for Adidas of whether China growth can come back, what to do with the Yeezy inventory of sneakers and clothes, and finally is the brand impacted so much that the turnaround case will take longer than estimated. Investing with a Gender Lens Gender Lens Investing is a strategy which puts weight on gender-based considerations in your investment decisions, so you can in some way contribute towards efforts to close the “gender gap”. As today is the International Women’s Day, we explore why and how we can invest with a gender lens in this video. We also look at some ETFs and Saxo's Women in Leadership equity theme basket which can help you get exposure to this theme. Here’s wishing everyone a very happy International Women’s Day from Saxo What are we watching next?  Bank of Canada meets next After RBA’s dovish hike, the stage is set for the Bank of Canada to pause on its tightening cycle at the meeting today. In light of the weaker-than-expected data and BOC’s signal from the January meeting, market is not expecting any rate hikes today although the message is likely to convey policy flexibility. Read our full preview here to know what it means for the CAD as the divergence of BOC to the Fed widens. More Powell today. Next US macro data and Bank of Japan loom After Powell surprised yesterday, the incoming data will need to support the market’s shift to a more hawkish stance, with potential for a further cementing of a 50 basis point move at the March 22 FOMC meeting possible on uniformly hot data (currently just above 40 basis points priced for March 22). Today we will get the February ADP payrolls change number and January JOLTS job openings data (together with some revisions of prior data), but these weigh less heavily than the official jobs report on Friday. Easily as important, the US February CPI data is up next Tuesday and will likely prove the arbiter of whether the Fed moves 50 basis points at the meeting. In the meantime, the global lift in yields is piling pressure on the yen this week, and on the Bank of Japan to shift away from its yield-curve-control policy ahead of its meeting this Friday, which will be the final meeting with Kuroda at the helm before he leaves early next month. Earnings to watch There are on US earnings releases today of importance. The market will focus on Adidas earnings (see review above) and then focus on earnings tomorrow from CATL and JD.com.  Wednesday: Ping An Bank, Thales, Adidas, Geberit  Thursday: CATL, Deutsche Post, JD.com  Friday: Daimer Truck, AIA Group, Oracle, DiDi Global  Economic calendar highlights for today (times GMT)  1000 – ECB President Lagarde to speak 1315 – US Feb. ADP Employment Change 1330 – US Jan. Trade Balance 1330 – Canada Jan. International Merchandise Trade 1500 – Canada Bank of Canada decision 1500 – US Fed Chair Powell to testify before House Panel 1500 – US Jan. JOLTS Job Openings 1530 – EIA's Weekly Crude and Fuel Stock Report 1700 – USDA's World Agriculture Supply and Demand Estimates (WASDE) 1800 – US 10-year Treasury Auction 1900 – US Fed Beige Book 0001 – UK Feb. RICS House Price Balance 0130 – China Feb. CPI/PPI Source: Global Market Quick Take: Europe – March 8, 2023 | Saxo Group (home.saxo)

Summary:  Powell’s testimony to the Congress started with a hawkish message. Market is now tilting in favor of a 50bps Fed rate hike this month and a terminal rate expectation of over 5.6%. Friday’s jobs data and next Tuesday’s CPI print will be key tests for whether a 50bps March rate hike gets cemented, but what is clear is that Powell’s shift to disinflation narrative in February was premature. Risk assets may remain under pressure if data stays hot, while the path of least resistance for the dollar is higher. Powell’s credibility at risk The semi-annual testimony from Fed Chair Powell was indeed hawkish, despite a political stage being set up. Instead of being relieved by incoming growth indicators, Powell still seemed worried about inflation despite his relaxed stance at the February FOMC meeting where he started the chatter on disinflation. Powell increased the prospect of a return to larger rate hikes, saying, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes”. The resulting increase in the probability of a 50bps rate hike at the March 22 FOMC meeting is shown in the chart below. He also added that with the latest economic data having “come in stronger than expected”, it “suggests that the ultimate level of interest rates is likely to be higher than previously anticipated”. This change in stance, after just one month of strong data, is proof that Powell took comfort in disinflation prematurely. High stakes for the next set of data The reaction to Powell’s testimony remains at risk of reversal, unless upcoming data supports it. Friday’s jobs report or next Tuesday inflation print will be key to watch to make or break the expectations of a 50bps rate hike in March. Hotter-than-expected prints can also bring the terminal rate pricing closer to the 6% mark, making the Fed’s lag to the market ugly. Moreover, shifting to a 50bps rate hike after just one go at the 25bps rate hike pace will be an embarrassment for Fed and its models. Bloomberg consensus expectations point to another strong jobs report after the blowout report of January. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. The unemployment rate is expected to remain unchanged at 3.4%, while wage growth is projected to accelerate. Most early indicators such as the business surveys from S&P pointed to an acceleration in hiring, while applications for unemployment benefits remained historically low. Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Risky assets to remain under pressure Along with a higher probability of a 50bps rate hike in March, the shift in tone from Powell has also seen the terminal rate pricing for the Fed Funds target rate to rise to 5.65% from 4.9% at the end of 2022 and the 5-5.25% hinted in the December dot plot. A brutal sell off in Treasuries followed the remarks, with the yield on 2-year Treasuries rising over 12bps to over 5% for the first time since July 2007 and rising further to 5.05% in Asian session. The longer end of the curve, however, recovered from their intraday lows with the 10-year yield closing only 1bp cheaper at 3.96% and the 30-year yield 2bps richer at 3.87%. This made the 2-10-year yield curve flatten to -105bps, the deepest inversion since September 1981. But something seems amiss with the higher-for-longer message not moving the 10-year yields. Either the 10-year yield will need to move higher or the 2-year will need to revert back lower to give a consistent message. This means higher interest rate volatility will remain in the cards, also suggesting higher risk premium for equities. This keeps diversification beyond US equities in favor. We expect European and Asian equities to outperform this year. China also appears poised for an upswing in growth as economic momentum picks up, but the recovery can remain bumpy in light of regulatory and geopolitical risks. Dollar’s path of least resistance is higher The US dollar is now back at its YTD high with potential for another leg higher after a minor correction. For the DXY index, key levels to watch are the 200DMA and 76.4% retracement at 106.45. The dollar is benefitting from a host of tailwinds including: elevated short-end rates a restrained rise in long-end yields suggesting a bid for safety China’s lower-than-expected growth target for 2023 dovish turns from some central banks such as RBA, and BOC likely to pause this week excessive pricing in for ECB and BOE rates remaining at risk of a correction Even if the Fed was to go for a 25bps rate hike again at the March meeting, there is enough reason to believe that that the dot plot will shift higher. That will also be sufficient for the USD to stick to its current range. Source: Saxo   Source: Macro Insights: Bumpy inflation or bumpy Powell? | Saxo Group (home.saxo)

Summary:  Equities tumbled as 2-year Treasury yields surged above 5% and dollar reached its YTD high on Powell opening the door for a bigger rate hike and a higher terminal rate. As risk sentiment deteriorated, AUD was a notable underperformer with RBA also going for a dovish hike. CAD in focus today with Bank of Canada expected to pause. China import data also remained mixed, and oil prices slumped by over 3% while Copper broke below the key $4 mark.   What’s happening in markets? S&P fell below 4000 after Powell’s testimony The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated following Jerome Powell’s testimony to the Senate. Powell warned that the FOMC would probably hike rates more and possibly faster than previously anticipated, given the latest data has come in stronger than expected. The S&P 500 fell 1.50% to 3986, below the 4000-handle and the benchmark’s 50-day moving average, while the Nasdaq 100 lost 1.2%. Rivian (RIVN:xnas) plunged 14.6% after the EV maker announced a private offering of USD1.3 billion convertible notes. Tesla (TSLA:xnas) shares fell over 3.2% and Apple (AAPL:xnas) lost 1.5%. Facebook’s parent Meta Platforms (META:xnas) closed almost steady after it was reported the social media giant plans another round of layoffs that could affect thousands of workers. Meanwhile, in Europe, stock markets also closed in the red - the benchmark Euro Stoxx 600 fell 0.8% with Santander being one of the worst performers, losing 2.4% most despite the business moving to target institutional clients. 2-year US Treasury yield jumped above 5%, for the first time since July 2007 Following Fed Chair Powell opening the door for a 50bp rate hike at the March FOMC meeting, investors sold the front-end of the Treasury curve and saw the 2-year finishing the session at 5.01%, the highest level since July 2007. The longer end of the curve, however, recovered from their intraday lows with the 10-year yield closing only 1bp cheaper at 3.96% and the 30-year yield 2bps richer at 3.87%. The 2-10-year yield curve flattened to -105bps, the deepest inversion since September 1981. The interest rate futures are pricing an over 60% chance for a 50bp rate hike at the next FOMC and a terminal rate at around 5.64% by September this year. The USD 40 billion 3-year auction went well with strong demand. Hang Seng Index and China’s CSI 300 dropped as SOE telcos rally faded to reverse lower After the follow-through rally, n central-government-owned enterprises in Hong Kong and mainland bourses in the telecommunication space lost steam, and the Hang Seng Index and CSI 300 dropped 0.3% and 1.5%. China Telecom (00728:xhkg) slid 4% and China Mobile (00941:xhkg) retreated 2.7%. China Tower came down 2.1%, paring some of the strong gains yesterday. On the other hand, SOE oil and gas giants managed to sustain gains and finish Tuesday higher with PetroChina (00857:xhkg) up 4.4%, Sinopec (00386:xhkg) up 4.2%, and CNOOC (00883:xhkg) up 3.3%, Chow Tai Fook (01929:xhkg) plunged 6% following the departure of the jeweller’s mainland operation chief. SJM (00880:xhkg) slid 4.1% after the loss widened to HKD7.8 billion in FY22. Australian equities slide after Powell’s comments Despite the RBA today suggesting it is at a closer point of pausing rate hikes, the Australian share market’s benchmark, the ASX200 has fallen 0.93% - taking it below its 50-day moving average. The pressure on Aussie market comes after Fed Chair Powell gave hawkish remarks to the US Senate – the FOMC would possibly hike rates faster than previously anticipated. Some of the day’s laggard on the ASX include Woodside (WDS) which has fallen 1.8% after going ex-dividend. BHP and Rio Tinto down by 0.5% ahead of going ex-dividend tomorrow. For what ex-dividend means for investors and traders, click here for possible implications. Despite the overall tone being negative today – as set by the Fed - the best performing companies are those that are benefiting and are likely to continue to benefit from China’s reopening  - with Qantas and Webjet trading over 1.4% higher, with Webjet hitting a 52-week high of $7.01. US dollar notches its biggest gain in a month. The Aussie dollar sinks over 2% After Powell said the US central bank is likely to raise rates higher than previously thought, the US dollar index surged to a fresh cycle high, moving back to levels not seen since December. That resulted in the Aussie dollar tumbling over 2%. Compounding on the AUD pressure, the RBA Governor said today, it is closer to where it's appropriate to pause rate rises. This comes just a day after Australia’s central Bank hiked interest rates for the 10th straight meeting, taking the cash rate to 3.6%. The RBA said monthly inflation had ‘peaked’, goods prices were expected to moderate in the months ahead, and the Bank alluded to services inflation being only temporary. Futures markets now suggest Australia’s cash rate could peak at 4% in September. The Aussie dollar against the US (AUDUSD) trades at 0.6585. Further declines could see the pair move to the next support level, at perhaps the 0.649 level. FX: JPY descent continues; CAD in focus With Powell’s hawkish remarks, 2-year Treasury yields jumped over 5% after a 12bps gain and the USD was pushed to fresh YTD highs. AUD and NZD were hurt by the deterioration in risk sentiment, with the former also pressured by a dovish turn from the RBA. Widening yield differential between US and Japan weighed on the yen, and USDJPY was seen testing 137.50 in the Asian morning session despite volatility risks from the Bank of Japan meeting scheduled on Friday. GBPUSD broke below the 200DMA to reach YTD lows, with BOE’s Mann commenting that sterling could weaken further. EURUSD dropped below 1.06 paring some of the hawkish ECB Holzmann reaction earlier in the week. CAD could be in focus today with a potential pause coming from BOC (read below), with USDCAD likely to take a look at 1.38+ levels. Crude oil drops over 3% on hawkish Powell After touching the top of the recent range, crude oil prices slid on Tuesday as Powell hinted at bigger and longer rate hikes, raising concerns of demand weakness. This comes along with a weaker-than-expected growth target from China for this year which continues to limit the optimism on Chinese demand recovery. Meanwhile, short-term supply concerns are subdued. OPEC Chief Haitham Al-Ghais also said that slowing oil consumption is US and Europe poses a concerns for the market, despite strong growth from Asia. EIA also released its short-term energy outlook and lowered its crude oil production forecasts for US supply for both this year and next amid signs of subdued growth and higher costs. WTI prices touched lows of $77 while Brent was back at $83 from $86+ earlier. Copper broke below $4 mark Base metals were broadly pushed lower on Tuesday as dollar surged to fresh YTD highs on remarks from Powell’s testimony opening the door for a bigger hike in March and a higher terminal Fed funds rate. China import data also gave mixed signals on the first two months of the year, with mined copper ore imports increasing but inflows of refined copper declining. Supply constraints from Peru also seemed to ease as the Peruvian government expects shipments of copper and zinc will normalise with days, following months of social unrest prompted by the impeachment of former President Pedro Castillo. Copper prices fell 2.8% to close below the $4 mark, bringing last week’s low of $3.93 and the 100DMA at $3.86 into focus. What to consider? Powell’s testimony opens the door to a 50bps rate hike in March Fed Chair Powell, in his prepared remarks to Congress, said if incoming data indicates faster tightening is required, the Fed is prepared to increase the pace of rate hikes, warning that the ultimate level of interest rates is likely to be higher than previously anticipated given the string of hot January data. This is another signal that March dot plot could see an upward shift. Not just that, but Powell has also opened the door to a 50bps rate hike in March and market pricing has shifted more in favor of a bigger hike on March 22. Terminal rate expectations have shifted higher to 5.63% from 5.48% previously. Remarks brought the 2-year yields above 5% and the deepest inversion in the 2-10 year yield curve. China’s exports and imports dropped further in February China’s exports fell 6.8% Y/Y and imports dropped 10.2% in February. The larger-than-expected decline in imports was partially due to the fall in commodity prices while commodity import volume grew. China to establish the Ministry of Science and Technology and the National Data Bureau At the National People’s Congress, China announced the establishment of the Ministry of Science and Technology to promote innovation in technology, the National Financial Regulation Bureau to replace the China Banking and Insurance Regulatory Commission (CBIRC) and take over from the People’s Bank of China the regulation of financial holding companies and from the China Securities Regulatory Commission investor protection, and the National Data Bureau to promote the development of the digital economy. The overhaul of the financial regulatory authorities, as we noted in our Two Sessions preview, is to strengthen the Chinese Communist Party’s leadership in the institutional setup, the division of functions, governance. China’s Foreign Minister reaffirmed the strategic partnership with Russia In a press conference on the side-line of the Two Sessions, China’s Foreign Minister Qin Gang reiterated the “China-Russia comprehensive strategic partnership of coordination for a new era” and downplayed Russia’s invasion into Ukraine to that the “Ukraine cries has complex historical fabrics and practical reasons with the underlying nature being the eruption of the conflicts in the security governance of Europe”. The pro-Russian stance, as opposed to the more conciliatory-leaning stance in recent months toward the West, added to investors’ concern over the Sino-American relationship. The Bank of England (BoE) worries about core inflation Yesterday, BoE’s Catherine Mann, former Global Chief Economist at Citibank, expressed concerns about the persistence of core inflation in the United Kingdom. It is currently running at 5.80% year-over-year versus a long-term average of 1.84%. Mann embraced a hawkish tone, highlighting the need for further interest rate hikes. She indicated that the terminal rate is beyond forecast horizon now. The monetary market forecasts it will be at 4.75 %. This implies three consecutive hikes of 25 bp in March, May and June. She also mentioned that the evolution of the sterling plays a very important role for monetary policy due to the high levels of imports. Despite worries about the state of the UK economy, the sterling has been rather resilient this year. It is down only 0.47% against the euro YTD. Most economists still expect the UK economy will go through a period of recession in 2023 (drop of GDP estimated at 0.6%). But a minority of them even expect the UK economy could avoid a recession if the decrease in energy prices continues. This is quite a change compared to forecasts initially released at the end of 2022. Iron ore price steady ahead of peak Chinese construction season Iron ore  - the steel-ingredient is trading slightly lower today, down 0.2% at $126.75, but holds around 2023 highs, after its price rose 2.1% yesterday. China is expected to increase demand - as it usually does ahead of China’s peak construction season. Around this time of year, steel mills typically start restocking iron ore, ahead of building work ramping up amid supportive weather. Adding to sentiment, yesterday Rio Tinto (RIO) said it’s seeing good demand from China - with the country shaking off pandemic restrictions. BHP and Rio go ex-dividend tomorrow, March 9. For implications of ex-dividends click here.   Bank of Canada meets next After RBA’s dovish hike, the stage is set for the Bank of Canada to pause on its tightening cycle at the meeting today. In light of the weaker-than-expected data and BOC’s signal from the January meeting, market is not expecting any rate hikes today although the message is likely to convey policy flexibility. Read our full preview here to know what it means for the CAD as the divergence of BOC to the Fed widens. Investing with a Gender Lens Gender Lens Investing is a strategy which puts weight on gender-based considerations in your investment decisions, so you can in some way contribute towards efforts to close the “gender gap”. As today is the International Women’s Day, we explore why and how we can invest with a gender lens in this video. We also look at some ETFs and Saxo's Women in Leadership equity theme basket which can help you get exposure to this theme. Here’s wishing everyone a very happy International Women’s Day from Saxo   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 8, 2023 | Saxo Group (home.saxo)

Summary:  TikTok bans are gathering momentum in the US following the EU parliament's decision to ban TikTok use across three EU institutions and recommending EU staff to delete the app on their personal devices due to cybersecurity issues. US social media stocks responded positively to this news with Snap shares gaining 9.5% as this social media platform has the youngest user base and thus would likely see the most increased engagement if TikTok sees demand dropping from these bans and recommendations. TikTok bans gather momentum Yesterday’s session saw significant interest in US social media stocks as the US is set to follow the EU in banning some foreign technology companies including the popular TikTok app which is delivered by the Chinese-based ByteDance. The concerns driving this legislation are whether US user data could be accessed by the Chinese intelligence agencies. Last Tuesday, the EU parliament banned TikTok from its staff devices due to cybersecurity issues and is now banned across three major EU institutions and the EU parliament also put out a “strongly recommended” notice to all staff of deleting the TikTok app from their personal devices. The nervousness over data breaches is not a one-way street as Chinese authorities urged a couple of weeks ago state-owned enterprises to phase out using the big four accounting firms, which all from Western countries, driven by concerns of data security. These bilateral moves underscore the decoupling between China and Western countries across several key technologies. Snap gained the most on upcoming US legislation bill The upcoming bill legislating foreign technology caused US social media stocks to rally yesterday with Snap (+9.5%) gaining the most with the three other social media stocks were mixed; Meta (-0.2%), Alphabet (+1.6%), and (+1.1%). The reason for why Snap reacted the most positively is that TikTok is heavily used by young people which is also the target of Snap and if parents get more aware of the potential cybersecurity issues then usage of TikTok might switch to Snap. Google’s YouTube is another social media platform that could see a positive effect from TikTok bans. While social media stocks got a boost yesterday the 5-year performance across these companies has been below the overall equity market except for Alphabet highlighting an industry that has lost its growth dynamics and interest of investors. Social media equity valuations are historically low The hangover from the pandemic boom has drastically impact equity returns and equity valuations since the peak with the most dramatic change observed in Snap shares with the 2-year forward EV/sales ratio falling from just above 18x at the peak to around 3x today. Investors are paying significantly less for revenue and revenue growth among social media stocks. One thing is that TikTok dramatically changed the social media landscape in the US and Europe, but Apple’s data privacy changes also impacted online advertising prices because tracking got more difficult. With energy crisis, surging commodity prices, reshoring, the US CHIPS Act, and the war in Ukraine it seems investors are most interested in companies and themes that are thriving on the comeback of the physical world.  

Summary:  Today we look at the choppy equity market failing to extend the upside momentum for now as we triangulate mid-range ahead of a series of event risks, among these two days of Fed Chair Powell testimony starting today. Overnight, Australia's RBA announced a dovish hike, clearly looking for excuses to pause its tightening regime - is this a policy mistake in the making? We also look at evidence on what may have driven China's about-face on stimulating its economy, crude oil, natgas and wheat & other grain markets and much more. Today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.  

Summary:  While the focus stays on Fed, Powell and treasury yields, we get the first few central banks this week taking a less hawkish turn. Reserve Bank of Australia’s dovish hike may be followed by Bank of Canada’s pause, but the key message has remained around policy flexibility rather than claiming a victory on inflation. Comments suggest that central banks are not convinced about disinflation and continue to keep the door open for more rates hikes in Q2/H2. The fist two months of the year have been a roller-coaster, but markets have recently become more certain of stickier inflation and resilient economy going into the month of March. Global money market curves have re-priced higher to reflect the tighter monetary policies as a result. For the Fed, markets have now fully priced in a 5.5% terminal rate, somewhat higher than what was suggested by the median dot plot in December. Meanwhile, 160bps of additional rate hikes are priced in for the ECB with terminal rate forecast approaching 4%. While Powell’s testimony and the US jobs data remain key to watch this week to get a confirmation on the current market expectations for the Fed, some of the other G10 central banks have started to be more flexible in their tightening cycles despite the risks of inflation remaining elevated. This mostly includes the Reserve Bank of Australia and Back of Canada, both of which have pronounced property market risks compared to the other G10 economies. If inflation returns because of accelerating global growth or China reopening, both BOC and RBA may be forced to hike again. USD could remain firm in light of the relative hawkishness that can continue to be priced in from the Fed vs. ECB or BOE where a lot is priced in, as shown in the chart below. Reserve Bank of Australia opening the door to a pause The RBA raised rates for the 10th consecutive time, taking the cash rate target to an 11-year high of 3.6%. Despite one more rate hike being signalled for the April meeting, RBA Governor Lowe sounded less hawkish in the wake of the recent slew of weaker than expected data on GDP, employment, wages and inflation. Market pricing for terminal rate eased from 4.2% to 4.0%. AUDUSD has been hurt recently by the weaker global risk sentiment and the rise in geopolitical tensions, bringing the 0.67 level in focus for the first time since November. China’s growth targets have also been towards the lower end of the expected range, keeping the boost to AUD limited. Still, as better-than-expected Chinese headlines start to flow in from this month after the full reopening and the impact of Lunar New Year holiday, there are reasons to believe that AUD could continue to find support. The 61.8% retracement of the gains from the October low at 0.6547 will be the key support level to watch. Bank of Canada likely heading for a pause Market expects the BOC to pause its tightening cycle, keeping rates unchanged at 4.5%, after its message of “one and done” last month. Still, the message is likely to emphasise that the pause is conditional and the bank remains open to hiking rates again later in the year if inflationary pressures re-emerge. Employment and wage growth has softened, while the January CPI also eased from 6.3% YoY to 5.9% YoY. GDP growth for Q4 was also much weaker than expected as it came out flat vs. expectations of 1.6% annualized growth with Q3 being revised lower as well. CAD is down 1.7% against the USD since the January 25 meeting even as oil prices remained mostly range-bound. More so, CAD has been stronger on the crosses with AUDCAD down 3.7%. There could be potentially more tactical weakness to come for CAD as risks of a lag to the US policy rate broaden, and a recovery will have to wait until the USD story starts to weaken or oil prices pick up materially. Bank of Japan is the biggest event risk While data and commentary from officials has been less supportive of the case for further tweaks in Bank of Japan policy, outgoing governor Kuroda is known for his surprises. At his last meeting on Friday, he may want to part with some sparks resulting in a numb yen in the run upto the meeting. Japan’s labour unions have reportedly been asking for a record pay rise this year, which fueled some expectations that inflation may stay elevated. However January earnings data reported today showed real earnings down over 4%, the worst since 2014. Growth is nominal wages also slowed after a bonus-driven jump in December. Tokyo CPI for February was also softer than expected, and incoming Governor Ueda’s testimony remarks suggested he would be looking at policy continuity along with flexibility to respond to market pressures. The outcome of meeting on March 10 could range from anywhere between a further tweak to the yield curve control policy all the way to Kuroda claiming victory with his policy and giving pressing remarks to maintain yield control as inflation remains externally-driven. The base case is still a no change and JPY has its eyes more firmly set on Powell’s testimony and the path of US yields from here. Source: Macro Insights Central banks on the agenda RBA BOC and BOJ | Saxo Group (home.saxo)

Summary:  The snapback rally in equities extended and then faded yesterday, a mirror-image of the action in treasury yields, which failed to hold an extension lower. Oil rebounded and the gold rally faded. In Australia overnight, the Reserve Bank of Australia hiked as most expected, but signaled it would like to pause the tightening regime soon, triggering a sharp slide in the Aussie. Today, Fed Chair Powell will testify on the economy and monetary policy before a Senate panel. What is our trading focus? US equities (US500.I and USNAS100.I): US equity momentum extends US equities gained slightly yesterday with S&P 500 futures closing at 4,052 after trading as high as 4,082 intraday. This morning in early European trading hours S&P 500 futures are extending their gains as the US 10-year yield continues to push lower lifting overall sentiment. During yesterday’s session social media stocks such as Meta, Pinterest, Snap, and Alphabet were rallying as TikTok bans across the US and Europe are gaining traction. The earnings and macro calendars are light today so the only market moving event is Fed Chair Powell’s speech later today at 1500 GMT. Hang Seng Index and CSI 300: rally fades on Sino-American tensions After follow-through rallies in state-owned enterprises in Hong Kong and mainland bourses in the telecommunication and energy space in the morning, the Hang Seng Index and CSI 300 lost steam and turned south, losing 0.7% and 1.2% as of writing. In a press conference on the side-line of the Two Sessions, China’s Foreign Minister Qin Gang reiterated the “China-Russia comprehensive strategic partnership of coordination for a new era” and downplayed Russia’s invasion into Ukraine to that the “Ukraine crisis has complex historical fabrics and practical reasons with the underlying nature being the eruption of the conflicts in the security governance of Europe”. The pro-Russian stance, as opposed to the more conciliatory-leaning stance in recent months toward the West, added to investors’ concern over the Sino-American relationship. FX: AUD in the dumps on dovish RBA, EUR firm The US dollar is not the focus at the moment as the market awaits further signals from Fed Chair Powell today and tomorrow in his two days of testimony before Congressional panels. The euro is firm on hawkish rhetoric from the ECB (more below) that has the market pricing more than 150 basis points of further tightening this year. Elsewhere, the Aussie weakened sharply as the statement overnight suggested the RBA is looking for excuses to pause its tightening regime – more on that below. The JPY trades passively as we await a pivotal Bank of Japan meeting on Friday, Governor Kuroda’s final meeting before he leaves office in early April. Crude oil climbs to a five-week high Cude oil trades higher for a sixth session amid a broader rally in stocks and a softer dollar. The market will keep an eye on comments from oil insiders, currently meeting in Houston at the annual CERAWeek, one of the world's premier energy conferences. Commentary made alluded to a pickup in demand, while supply remains somewhat restricted. It was said at the conference that 75% of global oil demand growth will come from China this year. Meanwhile, Estonia called for the EU to halve the $60 price cap on Russian oil this month. Overall, crude oil remains rangebound with Brent currently stuck between $81 and $87. US natural gas plunged on forecasts for milder-than-expected weather, and in just two trading sessions it gave back almost half the 53% gain achieved during the prior two weeks. Gold eying Powell’s testimony Gold (XAUUSD) hit a five-week high on Monday at $1858 before reversing lower overnight to test support around the 21-DMA at $1844. Together with US real yields reversing higher following last week’s drop when inflation expectations moved higher, the market sentiment is becoming a bit more cautious ahead of testimonies on Capitol Hill from Fed Chair Powell today and tomorrow. However, with the market currently pricing in a terminal Fed fund rate around 5.5%, any weakness in incoming data – the next major being Friday’s job report – may add further support. For the current recovery to become more than just a bounce, the price as a minimum need to break above $1864, the 38.2% of the February drop. US wheat drops below $7/bu as market awaits monthly supply/demand report The Chicago benchmark wheat contract (ZWc1) dropped below $7 a bushel on Monday for the first time in 17 months, pressured by adequate global supplies, especially from Russia, and optimism a deal can be reached to extend the UN-brokered Ukraine grain corridor deal when the current deal expires later this month. Ukraine’s grain exports are down 26.6% at 32.9 million tonnes in the 2022/23 season so far. Meanwhile, the Australian Bureau of Agricultural and Resource Economics raised its estimate of its 2022/23 wheat harvest by 2.6 million tons to a record 39.2 million tons. Traders now look ahead to USDA’s monthly supply and demand report (WASDE) on Wednesday, in which the main change is expected to be another sizable drop in Argentine’s soybean and corn harvests following a troubled crop year hit by droughts and excessive heat. US Treasury yields (TLT:Xmas, IEF:xnas, SHY:xnas) close near unchanged after probe lower The US 10-year yield extended to below 3.90% at one point yesterday before resistance came in and yields rebounded to unchanged near 3.95% ahead of two days of testimony from Fed Chair Powell today, although yields may pay more attention to the February US jobs report this Friday and CPI next Tuesday as Powell may bring little new to the table in his semi-annual testimony today, which is often more about the political theatre of the Congressional politicians. What is going on? Dovish hike from the RBA, which guides for a tightening pause The RBA hiked by 25bps as expected to 3.6%, with the RBA seeing further tightening ahead. But a small change of phrase positioned this as a dovish hike and an RBA that may be seeking to pause its hiking regime at coming meetings. In the guidance on further tightening, February’s “In assessing how much further interest rates need to increase”, was changed in March to “In assessing when and how much further interest rates need to increase”, with the introduction of “when” a tip-off that the RBA is hoping to pause. Australia’s 2-year yield dropped some 14 basis points as the implied Australian cash rate this year peak fell from 4.1% to 4%. The RBA is concerned both that services inflation remains too high, but also that the lag effects of interest rates had not yet been felt in full by mortgage holders. AUDUSD erasing its intraday gain and slid into the red to below 0.6700 at one point. Hawkish ECB chatter supporting EUR ECB’s Holzmann called for interest rates to be raised by 50bps at each of the next four meetings, and suggested a restrictive policy rate would start from ~4%. President Lagarde and Chief Economist Lane were also on the wires suggesting more rate hikes as well. One of the investment banks, as a result, came out with a terminal rate forecast of 4.25% in wake of Holzmann's remarks, and this led to a drop in EU bonds and a surge higher in EUR crosses. HelloFresh slips 9% in pre-market trading The world’s largest meal-kit provider reports Q4 revenue of €1.87bn vs €1.92bn ahead of the European equity session and EBITDA of €160mn vs est. €137mn. HelloFresh is guiding FY23 EBITDA of €460-540mn vs est. €543mn. Investors are not impressed by these figures sending the shares down 9% in pre-market trading. TikTok ban making progress in the US Senate Intelligence Committee Chairman Mark Warner is set to unveil a bill Tuesday that would allow the US to ban the popular video-sharing app TikTok and other Chinese technology. He said that the law will give the US the power to ban or prohibit foreign technology where necessary, considering companies like TikTok do not keep American data safely and is also a propaganda tool. US tech stocks Snap (+9%), Alphabet (+1.6%) and Pinterest (+1%) rallied on reports. Similar TikTok bans are sweeping through the continent of Europe with the EU parliament banning TikTok across three institutions and other EU members are considering national bans. Trip.com beats estimates Trip.com beat revenue and EPS forecasts as it reported Q4 results yesterday, fuelling more weight to the case for the upcoming surge in Chinese outbound travel demand. We had launched the APAC tourism basket to get exposure to this trend, and Trip.com is also included in this basket. Trip.com reported revenue of $729mn (vs. $709mn expected) and EPS of 11 cents (vs. loss of 3 cents expected). What are we watching next? Powell’s testimony kicks off today Fed Chair Powell will begin his two-day testimony today before Congress, beginning with a session before the Senate Banking panel today. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Most Fed members have also sounded hawkish, raising the prospect of a shift higher in March dot plot. If a similar message is conveyed by Chair Powell, we could see US Treasury yields rising again and the USD reversing back to an uptrend. Earnings to watch Today’s key earnings release is Crowdstrike expected to report FY23 Q4 (ending 31 Jan) results after the US market close. Analysts expect revenue of $625mn up 45% y/y and EBITDA of $113mn up from $7mn a year ago. Crowdstrike is expected to remain optimistic on its outlook as demand overall for cyber security solutions remain strong. It recent partnership with Dell Technologies provides additional exposure to on-premise workloads and should help on the outlook. Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 1500 – US Fed Chair Powell before Senate Banking Panel 1700 – EIA's Short-term Energy Outlook (STEO) 1730 – Switzerland SNB President Jordan to speak 1800 – US Treasury to sell 3-year Notes 2130 – API's Weekly Crude and Fuel Stock Report 2155 – Australia RBA’s Lowe to speak   Source: Global Market Quick Take: Europe – March 7, 2023 | Saxo Group (home.saxo)

Summary:  As the market awaits Powell’s testimony to Congress and jobs figures, the stock market ran out of puff, with the Nasdaq 100 closing slightly in the black and the S&P500 nudging further above its 50-day moving average. The Australia dollar is in danger, of hitting 0.67, but could the RBA’s decision today avert its course? Meanwhile the EUR is higher on a hawkish ECB. Gold’s next move hinges on Powell’s testimony which kicks off today. And why CATL’s results could have ripple effects, along with a TikTok ban.   What’s happening in markets? Mixed start to the week for the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I)  As the market awaits Powell’s testimony to Congress and jobs figures, the stock market ran out of puff, with the Nasdaq 100 closing slightly in the black and the S&P500 nudging further above its 50-day moving average. Six S&P500 sectors rose, while five closed in the red. Apple shares were a standout, rising 1.9% after a US investment bank initiated a “Buy” on the company. Meanwhile, Tesla shares fell about 2% after its Model S and Model X prices were slashed for the second time this year, after lithium price retreated. Meanwhile, Meta shares fell about 0.2% despite the TikTok potential ban gaining momentum in the US - with several countries in Europe considering the same thing. US Treasuries pared early gains in an uneventful session With a light economic calendar and ahead of Fed Chair Powell’s testimony at the Senate Banking Committee, Treasuries took clues across the pond from German Bunds and were pressured in the afternoon after ECB’s Holzmann signalled potentially four or more 50bp rate hikes in the Eurozone. Hedging flows also weighed on Treasuries as corporate supply picked up with around USD 17 billion in new issues. Th e 10-year pared early gains to finish at 3.96%, 1bp higher in yield.  Hang Seng Index and China’s CSI 300 oscillated on a modest Government Work Report The Hong Kong stock market experienced a mixed session as investors digested the economic targets set in China’s Government Work Report, which came in with a modest GDP target set at around 5%. Hang Seng Index (HSI.I) managed to finish 0.2% higher with Chinese SOE names in the telecommunication outperforming as China is accelerating the construction of 5G infrastructure and development of 6G. China Tower (00788) surged 7.9% and China Mobile (00941:xhkg) gained 3.2%. Chinese property developers were laggards during the session following the Government Work Report emphasized again “housing is nor living in, not for speculation” and warned against the “disorderly expansion of capital” of property developers. China Merchant Bank (03698:xhkg) plunged 4.2% on its high exposure to the Chinese housing sector.  In A-shares, CSI300 retreated 0.5%. Property developers, coal mining, and financials were the top losers while telecommunication, solar energy, and tourism advanced. Australian equities are on edge, awaiting the RBA’s decision and commentary The RBA is expected to hike interest rates for the 10th straight time today, with a 25bps hike expected, which will likely impact forward earnings of Australia’s consumer discretionary, tech and real estate sectors. The RBA’s rate hikes mount despite, bellwethers, such as Commonwealth Bank of Australia, flagging that some households are likely remain under duress this year  - amid inflation and rising interest rate pressures – with Australia’s biggest bank putting aside a capital cushion for bad debts provisions and delinquencies. Philip Lowe’s guidance for further tightening will be on watch, especially as the last several economic readings have been weak. Interest rate futures suggest rates will peak at 4.1% in September, with no rate cuts this year. The Aussie dollar could notch fresh YTD lows, but if RBA is more aggressive than expected, the Aussie dollar (AUDUSD) could knee-jerk higher.  FX: AUDUSD is close sight of 0.67 ahead of RBA; EUR higher on hawkish ECB The USD started the week on the backfoot before equity markets got jittery about Powell’s speech later today. A soft GDP target out of China however weighed on AUD, with AUDUSD hitting a low of 0.6717. The AUD is now down 6.5% from its Feb 2 high. The RBA meets today with another 25bps rate hike expected, although focus will be more on Lowe’s comments on the path of interest rates from here. NZDUSD was also pushed lower to 0.6173. EURUSD however pushed above 1.0680 on hawkish ECB chatter (read below). Swiss inflation data came in hotter than expected at 3.4% YoY for February from 3.1% exp and 3.3% previous. USDCHF pushed lower to test the 0.93 handle while EURCHF wobbled.  Crude oil trades flat  The oil price is steady at just over $80 amid CERAWeek - the world's premier energy conference. Commentary made alluded to a pickup in demand, while supply remains somewhat restricted. It was said at the conference that 75% of global oil demand growth will come from China this year, while companies such as Chevon are working on options to export natural gas to Europe this year. Meanwhile, Estonia called for the EU to halve the $60 price cap on Russian oil this month. And US natural gas plunged on forecasts for milder-than-expected weather.  Gold eying Powell’s testimony Gold (XAUUSD) prices inched up to their highest levels since mid-February on Monday before a reversal from the peak at $1858 to 21-DMA at $1844 in the Asian morning today as caution on Fed Chair Powell’s testimony today starts to set in. The surge higher earlier came despite China’s modest growth target and risk of more rate hikes from the Federal Reserve. However, it must be noted that the recent rise in yields has come with higher breakeven inflation as well, suggesting that the market is now looking at inflation to settle higher in the medium-term. This has kept real yields under pressure, supporting the yellow metal. For the recovery to stay intact, however, support at 200DMA of $1840 and the last week’s low of $1805 will be eyed.    What to consider?   Powell’s testimony kicks off today Fed Chair Powell will begin his two-day testimony before the Senate and the House committees today. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Most Fed members have also sounded hawkish, raising the prospect of a shift higher in March dot plot. If a similar message is conveyed by Chair Powell, we could see US Treasury yields getting above critical levels and USD reversing back to an uptrend.  Hawkish ECB chatter supporting EUR ECB’s Holzmann called for interest rates to be raised by 50bps at each of the next four meetings, and suggested a restrictive policy rate would start from ~4%. President Lagarde and Chief Economist Lane were also on the wires suggesting more rate hikes as well. One of the investment banks, as a result, came out with a terminal rate forecast of 4.25% in wake of Holzmann's remarks, and this led to a drop in EU bonds and a surge higher in EUR crosses.  Why CATL’s results could have ripple effects  CATL, the world’s largest battery maker - and Tesla’s battery supplier - reports results on Thursday. It’s expected to report revenue growth of over 80%. However, there is room for a positive surprise - given strong battery and energy storage demand. CATL is also expanding overseas - teaming up with Ford to build a battery manufacturing plant in Michigan, which we will hopefully get details on. As for its outlook - we expect it to be strong, as CATL’s increased its war chest, after selling its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. We also think guidance could be upgraded - given auto sales in China are expected to rise in 2023, following years of lockdowns. CATL outlook’s will be closely watched by not only EV makers - but also by EV investors – as they could give a gauge on how much car maker’s battery costs could rise.  TikTok ban making progress in the US  Senate Intelligence Committee Chairman Mark Warner is set to unveil a bill Tuesday that would allow the US to ban the popular video-sharing app TikTok and other Chinese technology. He said that the law will give the US the power to ban or prohibit foreign technology where necessary, considering companies like TikTok do not keep American data safely and is also a propaganda tool. US tech stocks Snap (+9%), Alphabet (+1.6%) and Pinterest (+1%) rallied on reports. Iron ore majors face rising volatility    China’s top economic body, the NDRC held a meeting with some industry experts over potential measures to curb iron ore price rises. The iron ore price has risen 62% from its October low - amid rising demand from China, and expectations this will continue - while supply remains tight. It’s not the first-time accusations have come from China. But this time - its allegedly some in the industry are calling on the Chinese government to tighten futures and spot markets oversight and punish those for hoarding and price gouging.  BHP and Rio make over 50% of their annual revenue from iron ore, Fortescue makes about 90%. Shares in Fortescue are trading lower for the third day, while BHP trades 2.3% lower at A$47.27, and Rio Tinto has fallen for the second session, losing 2%. Be mindful, BHP and Rio go ex-dividend on March 9. For potential implications on ex-dividends, click here.   Trip.com beats estimates Trip.com beat revenue and EPS forecasts as it reported Q4 results yesterday, fueling more weight to the case for the upcoming surge in Chinese outbound travel demand. We had launched the APAC tourism basket to get exposure to this trend, and Trip.com is also included in this basket. Trip.com reported revenue of $729mn (vs. $709mn expected) and EPS of 11 cents (vs. loss of 3 cents expected).   Corporate calendar to watch, including results and companies going ex-dividend   On Tuesday March 7, CrowdStrike (CRWD) reports results well as Darktrace (DARK) its peer. Ashtead Group, Sea Ltd, Ferguson also report.  On Wednesday March 8, Adidas (AD) and Campbell Soup (CPB) are due to report results, along with Ping An Bank, Thales, Geberit. Woodside (WDS) goes ex dividend.  On Thursday March 9, CATL (300750) is due to release results, as well as Jd.com (JD) and Deutsche Post. BHP (BHP) and Rio Tinto (RIO) go ex dividend, along with CSL (CSL), Occidental (OXY) and eBay (EBAY).  On Friday March 10, Oracle (ORCL), DocuSign (DOCU), Daimer Truck, AIA Group, and  DiDi Global are due to report.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For our short black style Week Ahead – read or watch The Week Ahead.For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 7, 2023 | Saxo Group (home.saxo)

Summary:  Today we look at the strong comeback in equity markets Friday as yields dipped sharply, providing some relief after the recent strong ramp higher. Still, it is interesting to note that inflation expectations may be undergoing a sea change as well, which has come to the aid of gold. Elsewhere, we gauge the market reaction to China's policy signals, note the busy week ahead on the central bank front, with the RBA up tonight, Fed Chair Powell out speaking in testimony before Congressional panels tomorrow and Wednesday and the Bank of Japan on Friday, which will be Governor Kuroda's final meeting. This and much more on today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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: Bulls celebrate yield dip. Heavy central bank calendar this week | Saxo Group (home.saxo)

Summary:  DAX cancelling down trend build up. Uptrend could be extended.FTSE 100 and FTSE 250 range boundWith levels on GER40, UK100 and UK250MID Today's Saxo Market Call podcast.Today's Market Quick Take from the Saxo Strategy TeamDAX broke below lower rising trend line last week only for buyers to lift it back above cancelling the bearish break out. Testing February peak the Index is set for higher levels.RSI still showing divergence since January but is now back above 60 supporting the bullish move. If closing above 15,659 uptrend is confirmed and DAX is set for a push to all-time highs around 16,290. Minor resistance at 15,736.For DAX to turn bearish a close below 15,150 is needed Source all charts and data: Saxo Group The GER40 cfd is within a few cents of the February peak at 15,656. A close above will confirm uptrend has resumed despite divergence on RSI. An uptrend that will likely take GER40 to all-time high level around 16,298. Minor resistance at 15,738. For GER40 to turn bearish a close below 15,231 is needed. FTSE 100 is holding up above 7,850 support. A close below FTSE will confirm a down trend possible taking the Index down to around 7,708.Until that scenario plays out the uptrend is intact. However, RSI is showing divergence indicating a correction should be expected. UK100 cfd levels. Support at 7,848 and 7,700. Uptrend is intact until a break below 7,848. FTSE 250 still range bound between 19,574 - 19,938. A close below 19,574 i.e., the Neckline will confirm the Shoulder-Head-Shoulder pattern to unfold with potential down to 18,500. A close above the uptrend is likely to resume. Levels on UK250MID cfd RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend   Source: Technical Update - DAX, FTSE 100 & FTSE 250 | Saxo Group (home.saxo)

Summary:  Equity markets surged higher on Friday as the treasury market suddenly found solid support on Friday, taking the US 10-year yield back below 4.00%. At the weekend, China set a “modest” growth target of around 5% at key meetings. The week ahead is thick with central bank action, starting with the RBA on Tuesday, with Fed Chair Powell testimony up tomorrow and Wednesday, and Friday’s Bank of Japan meeting the likely highlight of the week, as it is Governor Kuroda’s last meeting. What is our trading focus? US equities (US500.I and USNAS100.I): strong rally as bond yields decline US equities rallied strongly on Friday with S&P 500 futures gaining 1.7% pushing above the 4,000 level closing at 4,050 with the momentum extending this morning. The rally in US equities came on the back of a ISM report showing the US economy is still humming along. US bond yields declined on Friday together with a weaker USD helping lift sentiment in equities which was an odd move given that inflation expectations were rising last week. This week we have Fed President Powell’s speech that could impact equities (read our preview below). In S&P 500 futures the 4,100 is a key upside level to watch if momentum extends. Hang Seng Index and CSI 300 oscillated on a modest Government Work Report The Hang Seng Index and CSI 300 Index oscillated after China set out a modest GDP growth target for 2023 and signalled a measured approach to fiscal and monetary policies as well as balanced support to the housing sector with avoiding systemic risks as a key priority. Lenovo (00992:xhkg) rising over 4% and reaching a new high, was the biggest gainer. The PC and server maker gained following its arch-rival in the server business, Inspur (000977:xsec) might be having difficulties in getting US parts after Inspur’s parent being put on the US ‘entity list’. FX: GBP recovers post-Bailey losses The USD was broadly weaker last week after a run higher in February on expectations that most of the Fed’s tightening is priced in and yields are potentially reaching close to their peaks. This week brings a test of this rhetoric with Chair Powell’s testimony and the US jobs report scheduled for release. GBPUSD once again found support at 1.1920 despite a dovish turn by BOE Gov Bailey last week, and returned to 1.2040. AUDUSD worth a watch again this week with support at 0.67 being eyed as the RBA meets Tuesday and China’s lower growth expectations may weigh. USDJPY has reversed back below 136 as yields gains ease, but if US yields continue their run higher and/or Governor Kuroda stays overly dovish at his final Bank of Japan meeting this week then a return to 137+ remains likely. Crude oil whipsaws with no clear direction yet to emerge  Crude oil prices faced strong two-way action on Friday with an initial move lower by over 2% on a WSJ report, later denied, saying the UAE is debating internally whether to leave OPEC, before finishing on a strong note on short covering after across market risk appetite improved and traders looked to China’s policy meetings over the weekend for support.  Overnight, however, crude declined after China, the world’s top oil imported, announced cautious growth targets and avoided any larger stimulus measures. Crude oil remains stuck within narrowing ranges, Brent between $81 and $89 with focus returning to the US and speeches from Powell to policy makers on Capital Hill Tuesday and Wednesday, as well as Friday’s job report.    Gold supported by drop in US real yields Gold rallied strongly last week after the market started pricing in higher long-term inflation, thereby challenging the FOMC’s own targets. While support was provided by US ten-year yields dropping back below 4% on Friday to end the week close to unchanged, it was developments in Breakeven (inflation) up 14 bps on the week and real yields, down 13 bps that helped support gold’s recovery. The close back above the 21-DMA on Friday, now at $1844, signaling a return of positive momentum, the strength of which may still be challenged this week with Powell speeches and Friday's job report the focus. For the current recovery, to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the recent period of weakness. Copper takes China’s cautious growth target on the chin Copper trades close to unchanged after China set a cautious economic growth target with no major new stimulus measures being announced. With the focus primarily on supporting and stabilizing the economy, the metal could still be challenged in the short term by long liquidation from bulls having bet too heavily on the recovery story and increased spending towards infrastructure projects. Especially considering the recent buildup in inventories monitored by futures exchanges in London and not least in Shanghai. We maintain our long-held bullish outlook for copper and industrial metals in general but with China not providing growth stimulus, the short-term outlook may equally depend on whether other large economies can avoid a recession. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rallied with the 10-year yield reversing to below 4% After spending one day above 4% on Thursday, yields on the 10-year Treasury notes reversed and returned to below 4% and settled at 3.95% to close the week on Friday. Headlines were light. The decline in the ISM Services Index in February was smaller than expected and initially saw the short-end lower in prices and higher in yields before the losses faded and reversed as strong bids emerged in the long ends in the afternoon. The 2-10-year spread bull flattened 7bps to -91. What is going on? China’s 2023 GDP growth target at “around 5%” China sets a real GDP growth target of "around 5%" for 2023 in the Government Work Report to the National People's Congress. This target is at the lower end of expectations ranging from 5% to 5.5% going into the meeting. Other key macroeconomic targets include adding 12 million jobs to urban area employment for 2023, a consumer inflation target of 3%, and a fiscal deficit target of 3% of nominal GDP. The report emphasizes the importance of boosting domestic aggregate demand, particularly household consumption, and aims to deepen the reform of state-owned enterprises. For more details, see our note here. COT reporting on Brent and (delayed) gold Hedge funds raised bullish bets on Brent crude oil by 9.4k lots to near a 15-month high at 286k lots in the week to February 28. The cost of holding a short position in Brent, reflected through the current backwardation, supported a continued collapse in the gross short to a 12-year low at 22k lots.  While the ICE Europe Exchange is up to date in its reporting, the US CFTC is still catching up following a January 31 cyberattack on ION Cleared Derivatives, a third-party software and service provider for derivative trading. The latest report covered the week to February 7, when gold reached $1975 before crashing to $1885, triggering a 29% drop in the net long to 79k. The CFTC is expected to be up to data around mid-March. US ISM services stays strong The headline ISM services cooled less than expected in February, falling to 55.1 from 55.2 in January, better than the expected 54.5. The prices paid component, which raised concerns again about the disinflation rhetoric from the manufacturing ISM report last week, cooled only slightly to 65.8 from 67.8 in January, showing sticky services prices. Employment rose to 54 from 50.0, matching the highest since March 2022 and therefore showing more signs of a tight labour market. New orders accelerated to 62.6 from 60.4 but business activity slowed to 56.3 from 60.4. Fed members continue to sound hawkish, eyes on Powell Fed member Mary Daly (non-voter in 2023) was on the wires over the weekend, and sounded hawkish as she raised the prospects of an upward shift in the Fed’s dot plot as well. She said that inflation is still high, and the Fed has to think about 'continuous tightening', signalling higher rates and remaining at elevated levels for a longer period of time, if inflation stays hot. Another member Barkin (non-voter in 2023) also clearly said that there will be no rate cuts this year. Focus will be on data in the runup to the Fed’s March meeting, but Chair Powell’s testimony before the Congress and the February jobs report this week will be key for the markets, as noted below.. Japan unions pushing for record wage increase The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) says its survey of 2000+ unions in the country shows an average pay rise request of 4.49% this year. This is the highest since 1998's 4.36% and is much higher than the 2.97% sought in 2022. The Bank of Japan continues to highlight that wage growth is key for achieving sustained demand-pull inflation. Japan's "shunto" spring wage talks will be key to watch this month as any larger than expected increase in wages will fuel more tightening expectations for the Bank of Japan, having a profound impact on global liquidity as well. What are we watching next? Busy agenda this week for central banks, topped by BoJ on Friday It’s a busy week for central bank messaging this week. First up is the RBA, which we expect will hike the policy rate another 25-basis points to 3.60%. This is not fully priced into market expectations, and the market has priced a total of 52 basis points of tightening over the next three meetings, including tonight’s.  The terminal rate is currently priced near 4.15%. On Wednesday, the BoC will discuss the pace of monetary policy, but at its last meeting signaled that it would like to pause the hike cycle to assess the economy, given the steep pace of policy tightening. We expect interest rates will remain unchanged at 4.5% after eight consecutive hikes. In the US, Fed Chair Powell will testify before Senate and House panels on Tuesday and Wednesday, respectively, on the economy and monetary policy. He will face hours of questioning and political posturing from Congress members. Finally, the most anticipated central bank meeting of the week will be Friday’s Bank of JA France general strike against pension reform France will face a rolling general strike against the pension reform starting tomorrow. The strike is likely to be prolonged for at least 10 days according to the trade unions. This could push the country’s GDP into contraction this quarter. Union representatives at EDF warned of the risk of reduced power output from France’s nuclear power plants due to the strike. US February labor market data up on Friday The US Feb. Nonfarm payrolls change report for February will be released on Friday. In January, US job creation increased at a very strong pace (507k). Consensus expectation look for a return to trend in February (consensus at +200k). The February unemployment rate is expected to marginally increase to 3.5% from the multi-decade low of 3.4% posted in January. Overall, the U.S. labor market is still very resilient, in a very good shape. This is unlikely to influence the Fed’s monetary policy decisions in the short-term. Earnings to watch This week’s most important earnings releases are listed below with the most market attention going to earnings from Adidas, CATL, and JD.com. Adidas has a huge inventory of Yeezy sneakers following the abrupt end to the partnership with Ye that caused a massive writedown in the previous quarter and investors have generally lost short-term trust in Adidas following a string of bad results. Analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn. CATL is the world’s largest battery maker and is firing on all cylinders with analysts expecting Q4 revenue growth of 87% y/y and EPS of CNY 2.65 down 11% y/y as the company has not passed on all input costs to its EV customers after a significant surge in lithium carbonate prices last year. Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 0930 – UK Feb. Construction PMI 1000 – ECB Chief Economist Lane to speak 1000 – Eurozone Jan. Retail Sales 1500 – Canada Feb. Ivey PMI 1500 – US Jan. Factory Orders 2330 – Japan Jan. Labor Cash Earnings 0030 – Australia Jan. Trade Balance 0330 – Australia RBA Cash Rate Target announcement    Source: Global Market Quick Take: Europe – March 6, 2023 | Saxo Group (home.saxo)

Summary:  The US Treasury yields have started the week softer, but the narrative that the Fed’s hawkishness is priced in by the market may be put to test as Chair Powell appears for testimony and the US jobs data for February comes out in the week ahead. China’s modest growth targets for 2023 set at the weekend meetings may spur some caution and further policy announcements remain on watch. In addition, central bank meetings from Australia, Canada and Japan are likely to create short-term FX volatility, while company earnings from Trip.com, CATL, JD.com, Oracle and others will be on the radar. Powell’s testimony and US jobs data to keep markets wobbly The next test of the US economy comes at the tail end of this week as the February jobs data is reported. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Bloomberg consensus expectations point to another strong jobs report after the blowout report of January, with headline jobs expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. The unemployment rate is expected to remain unchanged at 3.4%, while wage growth is projected to accelerate. Most early indicators such as the business surveys from S&P pointed to an acceleration in hiring, while applications for unemployment benefits remained historically low.  Ahead of Friday’s jobs report, investors will also be watching Congressional testimony from Fed Chair Jerome Powell on Tuesday and Wednesday. He is expected to keep a hawkish stance in light of the strong data over the last few weeks. US yields and the US dollar can continue to run higher in that case, but if the message from Powell remains neutral then equities could continue to rally again. RBA expected to be more aggressive with its tone on Tuesday and Wednesday The RBA is expected to hike rates again by 25bps. However, the key is to watch RBA commentary - and if the RBA continues with its more hawkish tone. Consider the RBA’s aggressive rhetoric of making further hikes has pressured the Australian equity market, with the market now expecting interest rates to peak at 4.2% in September, with potentially no rate cuts this year. Should the RBA maintain its aggressive shift, the Aussie dollar (AUDUSD) could knee-jerk higher. RBA Governor Philip Lowe speaks the next day, on Wednesday, at the AFR Business Summit. Key agenda items to watch on China’s Two Sessions this week The key events to watch on the agenda of the National People’s Congress (NPC) this week are the presentation of the state institution reform proposal on Tuesday and the announcements of the appointment of top leaders and senior officials from Friday to Sunday. The NPC will conclude next Monday morning, March 13. China’s outstanding aggregate financing expected to rise as loans and bond issuance picking up While seasonality may drive a fall in new aggregate financing in February from January, the year-on-year growth of the outstanding amount is expected to pick up steam due to increases in bank loans and government bond issuance. The growth in CPI is expected to slow to 1.9% Y/Y in February from 2.1% in January and PPI to contract further to -1.3% Y/Y but the week’s highlight in the data front will be on the aggregate financing. Bank of Japan Governor Kuroda’s final meeting This week will be the last Bank of Japan meeting for its current Governor Kuroda, and there remain risks that he may part with sparks. Inflation and wage growth continue to pick up pace in Japan, even though growth signals have been bleak lately and are relying on a strong pickup in Chinese demand. Incoming Governor Ueda has also signaled policy continuity, with hints that he echoes Kuroda’s views on inflation being externally-driven and likely to come off soon. Tokyo CPI for February also came off its January highs, but mostly driven by PM Kishida’s subsidies that reduced the electricity price burden. If Kuroda ends his term with a very dovish tone, that could spell trouble for yen, especially if US yields continue their run higher this week. Company news to watch this week All eyes will be CATL - which is Tesla’s battery supplier and the world’s largest battery maker. The market is expecting revenue growth of above 80% and full-year EPS of 2.65. We think CATL’s results could be a pleasant surprise to the market, given it sold its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. CATL’s outlook will also be watched closely – as a guage of how much car makers battery costs could rise in 2023. Adidas results will also be on watch. As reported in Saxo’s Quick Take on Friday, the company accrued a large amount of Yeezy sneaker-inventory after Adidas abruptly ended Ye’s partnership. After a poor string of results, analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn.Also on watch, are CrowdStrike (CRWD), Campbell Soup (CPB), JD.com (JD) and Oracle (ORCL) results. We cover what’s worth watching with these industry proxies in our Week Ahead report, which you can access here. The world’s largest commodity miners go-ex-dividend; which could trigger a rise in volatility   Woodside goes ex-dividend on March 8, followed by BHP and Rio on March 9. For investors it means they will  have a volatile week, while option holders of these stocks won’t see a change. For other investors implications and what else to know, click here.   Macro data on watch this week: Monday 6 March South Korea CPI (Feb) Eurozone S&P Global Construction PMI (Feb) Germany S&P Global Construction PMI (Feb) United Kingdom S&P Global/CIPS Construction PMI (Feb) Eurozone Retail Sales (Jan) United States Factory Orders (Jan) Tuesday 7 March South Korea GDP (Q4, revised) Australia Trade Balance (Jan) China (Mainland) Trade (Feb) Australia RBA Cash Rate (7 Mar) Germany Industrial Orders (Jan) Taiwan CPI and Trade (Feb) United States Wholesale Inventories (Jan) Fed Chair Powell’s Testimony Before Senate Wednesday 8 March Japan Current Account (Jan) Germany Industrial Production and Retail Sales (Jan) Eurozone GDP (Q4, revised) United States ADP National Employment (Feb) United States International Trade (Jan) Canada Trade Balance (Jan) United States JOLTS Job Openings (Jan) Canada BoC Rate Decision (8 Mar) Fed Chair Powell’s Testimony Before House Thursday 9 March Japan GDP (Q4, revised) China CPI, PPI (Feb) Malaysia Overnight Policy Rate United States Initial Jobless Claims Friday 10 March Germany CPI (Feb, final) United Kingdom monthly GDP (Jan) United Kingdom Goods Trade Balance (Jan) United States Non-Farm Payrolls, Unemployment, Average earnings (Feb) Canada Unemployment Rate (Feb) Japan BOJ Rate Decision (10 Mar) China M2, New Yuan Loans, Loan Growth (Feb) Earnings on watch this week: Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit, Cathay Pacific Thursday: CATL, Deutsche Post, JD.com, Prada Friday: Daimer Truck, AIA Group, Oracle, DiDi Global   Source: Saxo Spotlight: What’s on the radar for investors & traders this week? | Saxo Group (home.saxo)

Summary:  US stock indices had a strong finish to the week, with the Nasdaq 100 rising 1.6% and the S&P 500 surging 2%. Despite the fading expectations for interest rate cuts in 2023, the S&P 500 has risen 5.4% and the Nasdaq 100 has soared 12.4% since the beginning of the year. Yields on the 10-year Treasury notes reversed and returned to below 4%, settling at 3.95% to close the week on Friday. On the first day of the First Session of the 14th National People’s Congress, China's Premier Li delivered his last Government Work Report. The report set a target of around 5% for the real GDP growth for 2023, which was at the lower end of expectations.   What’s happening in markets? US equities bounced on Friday to finish the week higher Nasdaq 100 (NAS100.I) rose 1.6% and S&P 500 (US500.I) surged 2% on Friday, securing a weekly gain of 1.9% and 2.6% respectively. All 11 sectors within the S&P 500 advanced, led by information technology, consumer discretionary, and communication services. Meta (META:xnas), First Solar (FSLR:xnas), and Broadcom (AVGO:xnas) were among the top gainers, rising more than or nearly 6%. Apple (AAPL:xnas) gained 3.5% after announcing the departure of its cloud business head next month. Rivian (RIVN:xnas) jumped 7.6% following raising its EV production target by 24% to 62,000 units. Since the beginning of the year, the S&P 500 has risen 5.4% and the Nasdaq 100 has soared 12.4% despite the expectations for interest rate cuts in 2023 having largely faded. NVidia (NVDA:xnas) up 65%, Tesla (TSLA:xnas) up 63%, and Meta up 53.9% were among the best-performing stocks that drove the indices higher. US Treasuries rallied with the 10-year yield reversing to below 4% After spending one day above 4% on Thursday, yields on the 10-year Treasury notes reversed and returned to below 4% and settled at 3.95% to close the week on Friday. Headlines were light. The decline in the ISM Services Index in February was smaller than expected and initially saw the short-end lower in prices and higher in yields before the losses faded and reversed as strong bids emerged in the long ends in the afternoon. The 2-10-year spread bull flattened 7bps to -91. Hang Seng Index and China’s CSI 300 advanced ahead of the Two Sessions On Friday, Hang Seng Index (HSI.I) was up 0.7%. Hang Seng TECH Index (HSTECH.I) was up 2.1% ahead of the Two Sessions in China, annual meetings of China’s legislature, and top political advisory body. Technology, auto, and Chinese developer stocks led the charge higher. Closing at 20567, Hang Seng Index was up 2.79% over the week.  Hang Seng TECH Index gained 2.8%, with China internet names leading the charge higher. Bilibili (09626:xhkg) surged 10.3% following the online entertainment firm reporting a smaller net loss in Q4. TVB (00511:xhkg) soared 51.6% on heavy volume after the television broadcaster announced cooperation plans with Alibaba’s Taobao for live-streaming broadcasts.  Wynn Macau (01128:xhkg) fell 4.3%, weighed on by hedging flows after the Macao casino operator issued a USD600m of convertible bonds. Benchmark A-share indices advanced. The CSI300 (000300.I) climbed 0.3% on Friday and gained 1.7% over the week. The Shanghai Stock Exchange Composite Index gained for the fifth day in a row, closing at 3328.39, the highest level since July 2022. The net purchase of northbound funds was RMB 2 billion. Large state-owned companies in strategic industries, typically those starting with the prefix “China”, were among the top gainers ahead of the Two Sessions. Australian equities remain pressured The Australian share market fell for the fourth straight week last week. And with BHP and Rio and Woodside all going ex-dividend this week, it could be very volatile week. For more on what to watch this week, refer to Saxo’s Week Ahead. FX: GBP recovers post-Bailey losses The USD was broadly weaker last week after a run higher in February on expectations that most of the Fed’s tightening is priced in and yields are potentially reaching close to their peaks. This week brings a test of this rhetoric with Chair Powell’s testimony and the US jobs report scheduled for release. GBPUSD once again found support at 1.1920 despite a dovish turn by BOE Gov Bailey last week, and returned to 1.2040. AUDUSD worth a watch again this week with support at 0.67 being eyed as the RBA meets this week and China’s lower growth expectations may weigh. USDJPY has reversed back below 136 as yields gains ease, but if US yields continue their run higher and/or Governor Kuroda stays overly dovish at his final Bank of Japan meeting this week then a return to 137+ remains likely.  Crude oil whipsaws but bulls in control Crude oil prices faced 2-way action on Friday with an initial move lower by over 2% on a WSJ report saying the UAE is debating internally whether to leave OPEC. But these reports were denied later on, and enthusiasm of the oil bulls going into China’s policy meetings over the weekend with policy stimulus expectations running high helped crude oil make a quick reversal. WTI prices got close to $80/barrel from a dip to $76 earlier, while Brent rose to $86 from $82.50. A modest weakness is coming back again this morning in Asia, keeping the range intact. However, China’s weaker than expected growth target set over the weekend may still keep oil prices choppy, with eyes also on any possibility of hawkish remarks from Chair Powell this week or the US jobs report.    What to consider? China’s 2023 GDP growth target at “around 5%” China sets a real GDP growth target of "around 5%" for 2023 in the Government Work Report to the National People's Congress. This target is at the lower end of expectations ranging from 5% to 5.5% going into the meeting. Other key macroeconomic targets include adding 12 million jobs to urban area employment for 2023, a consumer inflation target of 3%, and a fiscal deficit target of 3% of nominal GDP. The report emphasizes the importance of boosting domestic aggregate demand, particularly household consumption, and aims to deepen the reform of state-owned enterprises while encouraging private enterprises to grow. For more details, see our note here. US ISM services stays strong The headline ISM services cooled less than expected in February, falling to 55.1 from 55.2 in January, better than the expected 54.5. The prices paid component, which raised concerns again about the disinflation rhetoric from the manufacturing ISM report last week, cooled only slightly to 65.8 from 67.8 in January, showing sticky services prices. Employment rose to 54 from 50.0, matching the highest since March 2022 and therefore showing more signs of a tight labour market. New orders accelerated to 62.6 from 60.4 but business activity slowed to 56.3 from 60.4.  China’s Caixin Services PMI came in at the highest level since Sept 2022 Caixin Services PMI rose to 55 in February (consensus estimate: 54.5), the highest level since September 2022, from 52.9 in January, echoing the strength of the recovery in the official NBS PMI survey earlier in the week. Both the business activities component and the new order components were in the expansion territory. The Biden administration is drafting new rules to prohibit some U.S. investments in China In reports sent to Congress, the Biden administration told lawmakers that the Treasury Department and the Commerce Departing are drafting new regulations to prohibit U.S. companies from making advanced technology investments abroad, which is understood as focusing on China. Fed members continue to sound hawkish, eyes on Powell Fed member Mary Daly was on the wires over the weekend, and sounded hawkish as she raised the prospects of an upward shift in the Fed’s dot plot as well. She said that inflation is still high, and the Fed has to think about 'continuous tightening', signalling higher rates and remaining at elevated levels for a longer period of time, if inflation stays hot. Another member Barkin also clearly said that there will be no rate cuts this year. Focus will be on data in the run upto Fed’s March meeting, but Chair Powell’s testimony and the February jobs report this week will be key for the markets. Japan unions pushing for record wage increase The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) says its survey of 2000+ unions in the country shows an average pay rise request of 4.49% this year. This is the highest since 1998's 4.36% and is much higher than the 2.97% sought in 2022. The Bank of Japan continues to highlight that wage growth is key for achieving sustained demand-pull inflation. Japan's "shunto" spring wage talks will be key to watch this month as any larger than expected increase in wages will fuel more tightening expectations for the Bank of Japan, having a profound impact on global liquidity as well. COT reporting on Brent and (delayed) gold  Speculators or hedge funds raised bullish bets on Brent crude oil by 9.4k lots to near a 15-month high at 286k lots in the week to February 28. The cost of holding a short position in Brent, reflected through the current backwardation, supported a continued collapse in the gross short to a 12-year low at 22k lots.  While the ICE Europe Exchange is up to date in its reporting, the US CFTC is still catching up following a January 31 cyberattack on ION Cleared Derivatives, a third-party software and service provider for derivative trading. The latest report covered the week to February 7, when gold reached $1975 before crashing to $1885, triggering a 29% drop in the gold net long to 79k. The CFTC is expected to be up to data around mid-March.  Moving Visa, Mastercard, and Paypal from IT to Financials in the S&P500 Starting from 17 March, the S&P 500 will move Visa (V), Mastercard (MA), and Paypal (PYPL), which specialize in payment services from its Information Technology sector to the Financials sector, and Automatic Data Processing (ADP), which provide human resources services from the Information sector to the Industrials sector. For what to watch in the markets this week – read or watch our Saxo Spotlight.  For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 6, 2023 | Saxo Group (home.saxo)

Summary:  It is Women's Day next week and therefore it makes good sense to revisit our Women in Leadership basket. While there is a growing evidence that a higher share of female executives is good for long-term equity returns our basket did not reflect that over the past year. Our revisit of the basket has also led to 12 companies being substituted in the basket. A key observation on the new basket is that the Nordic countries are overrepresented relative their size in equity markets with six companies in the 20 stocks basket. Performance the past year and revisit the case for leadership diversity We launched our Women in Leadership theme basket because we wanted to make a different point on ESG than the classical ways of forming ESG portfolio. The “E” was already covered well across our renewable energy, green transformation, and energy storage baskets, so we thought that we could make an interesting angle on the “S/G” and here our view was to highlight companies with the highest share of female executives across the daily executive management team and board of directors. There is a growing evidence in the literature that gender diversity in the executive body of a company adds to long-term performance, and the Credit Suisse note Higher Returns with Women in Decision-Making Positions from 2016 links to a lot of great information on this observation. Just like we diversify portfolios for better risk-adjusted returns, management teams should also be diversified across gender, age, and other characteristics to ensure decision-making includes different perspectives. While the literature is mixed on men’s overconfidence and the scientific question is how do we isolate this effect properly, but we do have strong evidence of over-confident behaviour among men in trading and investing compared to women. If this trait extends into general decision-making behaviour we can see why companies dominated by men could lead to sub-optimal decision-making and thus bad long-term performance. We revisiting the case for more female executives and why it matters because of the Women’s Day coming up next week on 8 March. While there is good case to be made in terms of equity returns from companies with a higher share of female executives we have not seen that over the past year in our basket. The Women in Leadership basket has performed in line with the MSCI World Index since the last Women’s Day on 8 March 2022 declining 1.3% compared to a decline of 1.2% in the MSCI World Index. The five year performance looks better but here as with all our other baskets we have be aware of the selection bias as we select the highest market cap stocks in each theme at inception which tend to inflation historical performance underscoring the conventional wisdom that past performance is not an indicator of future performance. Basket update and the Nordic leadership on female executives In this year’s update to the Women in Leadership basket 12 companies have left the basket and 12 new companies have entered. The new basket is shown in the table below representing a combined market cap of $860bn and a median percentage of female executives of 55%. The median revenue growth rate for these companies is 17% compared to a year ago and the companies also generally have a high operating margin with the median close to 22%. All stocks have a positive spread to the price target meaning that those price targets are above the current price. An interesting observation is that Norwegian companies are heavily overweight in this basket with four companies and if Swedish-based Investor and Danish-based Novozymes are added then the Nordic countries represent 30% of the companies in the basket. This highlights that the Nordic region is leading the transformation towards a higher share of female executives. The selection criteria for this basket are companies with a market cap above $10bn, publicly listed in North America, Europe, Singapore, Australia, Japan, Hong Kong, or New Zealand, the number of female executives* is above three to avoid the percentage number to be inflated by a small management group, and finally a market cap filter from highest to lowest. The 20 companies at the top after applying these filters are selected for the basket. * The definition of a female executive is whether the person is a member of management or the executive body including board of directors Source: Women in Leadership The Nordics are leading the transformation | Saxo Group (home.saxo)

Summary:  Today we discuss the lack of conviction in the market after the action spilled lower below the 200-day moving average but failed to follow through and backed up to close the session higher, despite fresh pressure from rising yields, as the 10-year treasury benchmark took out the 4.00% level. In equities, a breakdown of what European equities have to offer relative to US equities. In commodities, focus on gold and natural gas. A look at the week ahead calendar for both earnings and especially macro as well. Today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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: Neither bulls nor bears have conviction here. Week ahead a big one for macro | Saxo Group (home.saxo)

Summary:  Major US Indices forming bottom and reversal patterns indicating a strong rebound.In this analysis: S&P 500/US500, Nasdaq 100/USNAS100 & Dow Jones Industrial/US30 S&P 500 opened below yesterday the 200 daily Moving Average dipping down to touch the 0.618 retracement at 3,929 to close above key support at 3,949 forming a Bullish Engulfing candle which is a strong indication of a bottom and reversal.RSI is still above 40 meaning it is still in a positive sentiment with no divergence from the February peak. S&P 500 seems set for a rebound and if the Index closes above 4,030 the uptrend is likely to resume.A first indication of this scenario to play out could be if RSI closes above its falling trendline.If S&P 500 closes below Thursday low and RSI closes below 40 S&P 500 has demolished the bottom and reversal picture and would be in a confirmed bear trend. Source all charts and data: Saxo Group US 500 cfd bounced from the 100 daily Moving Average and the 0.618 Fibonacci retracement to close above 200 daily Moving Average to close back above key support at 3,947.50. RSI still in positive sentiment. If US500 moves back above 4,027 it is likely to resume uptrend.A close below yesterday’s low at 3,919 the rebound picture is demolished and US 500 is likely to drop lower towards 3,800. Nasdaq 100 Buyers in control throughout yesterday’s session lifting the Index back above 200 daily Moving Average and key support at 11,906 forming a Bullish Engulfing candle.RSI is still above 40 meaning it is still in a positive sentiment with no divergence from the February peak. If Nasdaq 100 closes above 12,385 and above the 21 daily Moving Average the uptrend has resumed.A first indication of this scenario to play out could be if RSI closes above its falling trendline.A close below 11,830 i.e., yesterday’s low is likely to lead to a sell-off down to around the 0.618 retracement at 11,515 possibly down to support at around 11,259.   USNAS100 Double Top pattern potential is still unfolding. After the break below 12,213 there is down side potential to around the 0.618 retracement at 11,518 as illustrated by the two vertical arrows. However, USNAS100 has found support at the 200 daily Moving Average and after its strong rebound yesterday the bearish picture could be reversed. If USNAS100 closes back above 12,234 and above the 21 daily Moving Average the Double top pattern is demolished and uptrend is likely to resume with potential to February peak level. Dow Jones Industrial has formed a Morning Doji Star bottom and reversal pattern (circled) bouncing from the support at around 32,573. Despite RSI being negative the Index could experience a nice rebound to around the 55 daily Moving Average but room up to resistance at around 34,342-34,712.If Dow Jones closes below 32,500 down trend is set to resume US30 cfd has bounced from support at around 32,472 and seems set for a rebound to the upper range in the side ways range US30 has been trading in since November. A break below 32,470 is likely to push US30 down to 31,715, possibly lower   Source: Technical Update - US Stock Indices set for a rebound: S&P500, Nasdaq & Dow Jones | Saxo Group (home.saxo)

Summary:  China is holding the Two Sessions starting this weekend. Investors will watch closely the Government Work Report delivered on 5 March, in which the focus will be on the GDP growth target of 2023. Expectations are for something between 5% and 5.5%. The Two Sessions will also decide on the 2023 fiscal budget and bond financing quotas. Much interest will also be in the decisions on leadership reshuffle at the State Council, ministerial offices, and regulatory bodies as well as reform of state institutions The GDP growth target is likely to come between 5% and 5.5% China is holding the national committee annual sessions of the National People’s Congress ("NPC") and the Chinese People’s Political Consultative Conference ("CPPCC"), which together are known as the “Two Sessions, this weekend. The National People’s Congress meeting will start on 5 March and the outgoing Premier Li will deliver his last Annual Government Work Report on the first day of the meeting. The market’s focus will be on the GDP growth target for 2023 contained in the report. The weighted average of provincial GDP targets released was around 5.6% and it is quite typical for the national target to be set at 0.5% below the provincial average. Therefore, economists are expecting a national target most likely to be set at “above 5%” or “around 5.5%”, higher than the actual GDP growth rate of 3% in 2022 but much lower than the average growth rate of 7.3% during the 10 years preceding the pandemic from 2010 to 2019. Investors will also pay attention to the fiscal deficit target and quota for bond financing. In addition, investors will pay close attention to the leadership reshuffle at the State Council and other top government bodies. It is widely expected that Li Qiang will be the new Premier and He Lifeng will be one of the Vice Premiers and given the portfolio of economic and financial affairs. Fiscal budget deficits and bond financing quotas are likely to be moderate The Annual Government Work Report presented for the NPC’s deliberation will include the government budget for 2023 and the quota of government bond financing. Economists in general are expecting China’s fiscal deficit target to rise to 3%-3.2% of GDP or around RMB 4 trillion in 2023 from the around 2.8% target (actual 4.7%) last year. The Annual Government Work Report will propose quotas for the issuance of central government general bonds and local government general bonds. Expectations are the quotas will be moderately but not a lot higher than RMB2.65 trillion and RMB 0.72 trillion in 2022. Stimulus policies may be measured As the fiscal budget deficits are likely to be constrained, fiscal spending to stimulate the economy will also be measured. With a still sluggish property market, local governments’ budgetary conditions are dire in the absence of land sale revenues. Policies aiming at encouraging household consumption will be an important feature of China’s attempt to boost the economy in 2023. Investors however will continue to watch closely for indications from the NPC for any new initiatives to expand infrastructure construction and in what industries. Infrastructure spending will remain, after consumption, a key driver for growth this year. The monetary stimulus may be oriented to structurally support China’s industrial policies and ensure stability in key sectors of the economy rather than injecting liquidity into the economy en masse. China’s central bank, the People’s Bank of China, said in its Q4 Report on the Execution of Monetary Policy released recently that the primary objective of countercyclical monetary policy was to smooth the volatility in aggregate demand so as to avoid the destructive effects of excessive fluctuations of aggregate demand on the factors of production and the wealth of the society. The report emphasizes that the force of monetary policy must be stable and not bring about excessive liquidity that induces excessive investment, a surge in debts, and asset bubbles. In support of the real economy, the Q4 Report emphasizes stability and sustainability of credit growth but omits the stronger wording of “more forceful” and “increases of credit support” that were in the Q3 Report. Reform of the state institutions to deepen the Party’s leadership The second plenary session of the Chinese Communist Party’s 20th Central Committee (the “Second Plenary Session”) that took place between 26 and 28 February discussed and adopted a draft plan for the reform of party and state institutions. Part of the draft plan, believed to be the portion of the plan that is about state institutions, will be presented to the NPC for deliberation and adoption. The last reform to the state institution was in 2018 and has made extensive changes to the organization of the State Council, ministerial institutions, and the governance structure. The readout of the Second Plenary Session emphasizes the need to deepen institutional reform in key areas of state institutions and optimize the Chinese Communist Party’s leadership in the institutional setup, the division of functions, and governance.  Market chatters are focusing on a potential shakeup of the regulatory, organization, and leadership in the financial system of China. For example, according to media reports, the top regulatory authority over the financial system may be transferred to a re-established Central Financial Work Commission, which would be led by Ding Xuexiang, a CCP’s Politburo Standing Committee member while the State Council’s Financial Stability and Development Committee under Vice Premier Liu He may be abolished. He Lifund, a Politburo member is reportedly to be appointed Vice Premier and concurrently party secretary of the People’s Bank of China. Reforming governance of SOEs On top of an ideological preference for ensuring a strong state-own sector in the economy, China has been increasingly relying on SOEs to implement its industrial policies, including but not limited to developing strategic industries in technology, infrastructure, energy, and materials, which are key to the internal circulation and self-reliance notions of the new development pattern. Besides the reform of ministerial departments and regulatory bodies, China may at the Two Sessions pursue to further reform in the governance of state-owned enterprises (“SOE”). Since 2013, the role of the CCP, through party committees established within SOE, has been strengthening. Party committees have pre-decision powers over the “three importants” and “one large” decisions including important decisions in strategies, appointments, and projects as well as large-scale capital decisions. Party secretaries are often the chairmen of the board at the SOEs. The SOE Reform Three-year Action Plan (2020-2022) rolled out in September 2020 took the implementation of this approach into high gear. As the Action Plan came to an end in 2022, the NPC will set out some directions for further reform of the governance of SOEs including further strengthening party leadership at the call from the Second Plenary Session. The Two Sessions are likely to conclude by 11 March After the delivery of the Annual Government Report on 5 March, the NPC will continue to convene to discuss and approve the Annual Government Report, personnel reshuffles, reform of state institutions, and relevant laws and rules through the week of 6 March. The announcement of the personnel changes will come during the week. The CPPCC may conclude next Friday 10 March and followed by the NPC on Saturday 11 March but these dates are not preannounced and are still fluid.  Source: China Update: a preview of the Two Sessions commencing this weekend | Saxo Group (home.saxo)

Summary:  Equities came back from the brink yesterday, as US stocks rallied late in the session after the major indices had broken below the 200-day moving average earlier in the day. Still, considerable tension afoot here as the 10-year US Treasury yield rose above 4.00% on further signs of a tight jobs market and ahead of today’s February ISM Services survey. European stocks have been choppy of late, but are generally resilient despite the jump in ECB rate tightening expectations this week on hot February inflation data. What is our trading focus? US equities (US500.I and USNAS100.I): can S&P 500 futures climb above 4,000? US equities rallied yesterday on no real news, so we expect it to be mainly flow driven rather than driven by changes to fundamentals. S&P 500 futures closed at the 3,985 level still failing to push above the 4,000 level, and if the US 10-year yield remains above the 4% our view is that US equity futures will struggle to maintain momentum into the close before the weekend. The upside risk to that view is of course the ISM February report out later today which could send another bullish signal on the US economy extending the rebound in economic activity we saw in January. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) rallied ahead of the Two Sessions Hang Seng Index advanced over 1% and CSI 300 climbed 0.3% ahead of the Two Sessions, which are the annual meetings of China’s legislature and top political advisory body, commencing this weekend. Caixin Services PMI rose to 55 in February from 52.9 in January, echoing the strength of the recovery in the official NBS PMI survey earlier in the week. Hang Seng TECH Index gained 2.8%, with China internet names leading the charge higher. BiliBili (09626:xhkg) surged 11.2% following the online entertainment firm reporting a smaller net loss in Q4. In A shares, shipping, semiconductor, and lodging stocks gained. FX: USD firm on higher US treasury yields The US dollar rose sharply yesterday on a surge in US treasury yields after another firm weekly jobless claims print & upward revision in Unit Labor Costs for Q4 (see below), but perhaps as well on the 4.00% psychological resistance in the US 10-year benchmark treasury yield falling. The greenback’s strength faded in late trading as risk sentiment managed to stage a comeback, with US equities avoiding a meltdown after testing below key support. The February ISM Survey is in focus today, but as we emphasize below, trust in this survey may be weak. Crude oil rises on China demand optimism Crude oil prices are heading for a weekly gain but overall remain stuck within a narrowing range as China demand optimism is being offset by concerns about US monetary policy as the battle against inflation remains a key focus. Overall, however, with the dollar trading down on the week and prompt spreads indicating a tightening market, prices have managed to recover. Brent trading above its 21-DMA for a third day may add some technical support with the next level of resistance being the February high at $86.90. Focus on China where the annual National People’s Congress kicks off this weekend (see below). Gold supported by China comeback and sticky inflation Gold is heading for its best week since mid-January following a week that saw a hot EU inflation print and strong economic data from China, a top buyer of gold. The result being a softer dollar and gold has moved higher to challenge the 21-DMA, currently at $1844 for the first time since February 3. Atlanta Fed’s Bostic saying rates could rise to 5.25% and stay there well into 2024 has been shrugged off as the market is already pricing a terminal rate around 5.5%. It is also worth noting that this week's 10 basis point jump in US 10-year bond yields has primarily been driven by rising breakeven rates (inflation) leaving real yields close to unchanged. For the current recovery to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the current corrections. US natural gas rally pauses after weekly stock report US natural gas prices fell on Thursday following a six-day rally which lifted the front month futures price by 29% in response to signs of lower production and rising exports. In addition, a current cold spell through mid-March has also supported the short-term demand outlook. The small correction seen yesterday came after the EIA reported an 81 bcf drop in stocks compared with a five-year average decline of 134 bcf for this week. The smaller than normal draw lifted total stocks to 2,114 bcf, some 19.3% above the 5yr avg. for this time of year, and highest surplus since May 2020. A mild winter suppressing not only demand but also producers’ willingness to maintain record production levels has created a very volatile market in recent months. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on ISM Price Paid Index The 10-year US Treasury yield surged above the psychologically important 4.00% that appeared to be supporting the treasury market of late, rising as high as 4.09% before retreating overnight to 4.03% in early European trading this morning. The sharp rise in EU yields has lead global yields higher this week on a series of hot inflation numbers across the bloc, capped by a further acceleration in the EU core CPI yesterday. But short yields in Europe retreated several basis points from new cycle highs yesterday, as did the US 2-year yield, which trades this morning at 4.87% after as high as 4.94% in the immediate wake of yesterday’s US data. The Treasury Department announced the auction of $40 billion of 3-yr notes, $32 billion of 10-year notes, and $18 billion of 30-year bonds next week. What is going on? Worrying inflation prints in the eurozone Eurozone core inflation rose to 5.60 % year-over-year in February with both core goods (6.8 %) and services (4.8 %) reaching new record highs. This is much higher than expected (5.3 %). We pay more attention to core inflation as it can show how entrenched inflation is, and it appears the inflation headache will remain an issue for most of the year. All the country prints which were released earlier this week came in above expectations, topped by Germany’s 9.3% vs 9.0%. In these circumstances, talks about a potential monetary policy pause are ill-timed, and from a monetary policy perspective, we think the ECB is unlikely to slow the pace of tightening until we see the first signs of underlying inflation peaking. Expect at least two more 50 basis point hikes in March and in May (there is no meeting in April). Depending on the trajectory of inflation, the market consensus forecasts that another 25-basis point hike could happen in June. Fed officials hinting at a higher dot plot The biggest headlines today are referring to Fed member Bostic’s (non-voter) comments as dovish, while he said he is firmly in favour of a 25bps hike path (to reduce the possibility of a hard outcome) and even said we could be in a position to pause by mid-to-late summer which appears to be exactly in-line with current market expectations. If his comments suggest 25bps rate hikes each at the March, May and June meetings, we still may end up in the 5.25-5.50% terminal rate which is higher than what the December dot plot suggested. Waller (voter) also hinted at an upwards shift in the dot plot, more clearly so, saying that Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if the incoming job and inflation data does not pull back from strong readings for January. US claims and unit labor cost data feed the inflation narrative US initial jobless claims fell by 2k to 190k last week from 192k prior and 195k expected, continuing to signal a tight US labor market. Unit labor costs were revised sharply higher to an annualized 3.2% in the fourth quarter, versus the initial 1.1% read. Increased labor costs keep concerns of a wage-price spiral alive and will likely keep the Fed on its toes in tightening policy. Japan’s Tokyo CPI for February hinting at sticky prices Japan’s Tokyo-CPI for February came in at 3.4% YoY for the headline, softer than last month’s 4.4% but still hotter than the 3.3% expected. The slower print is partially a result of PM Kishida’s latest stimulus announcement to support utilities prices which included a 20% discount on household electricity rates. Core CPI at 3.3% YoY matched estimates while the core-core measure (ex-fresh food and energy) was a notch higher at 3.2% YoY vs. 3.1% expected. Inflation continues to be sticky and above the BOJ’s 2% target although the incoming Governor Ueda is unlikely to rush into any monetary policy moves at this point. India’s Adani Group gets foreign interest as prices drop After a drop of over +$150 billion in market value to $83 billion, the Adani group stocks got a respite with US boutique investment firm GQG Partners purchasing shares worth $1.87 billion in four Adani group companies. The deal shows investor interest may be returning to Adani after record drops in its share prices, and any further interest from foreign investors could potentially put a floor to near-term pressures for the conglomerate. This week, the group told bondholders it had secured a $3bn credit line from investors including a sovereign wealth fund. Four days of gain this week has seen the total market capital across the ten companies in the group rise to $103 billion. What are we watching next? February US ISM Services in focus today after erratic readings in Dec. and Jan. The US ISM services survey for February will be on watch later today and is expected to ease to 54.5 from a big jump to 55.2 last month but remain comfortably in expansion. The last two months of this data series have shown erratic moves, with a bizarre collapse in the survey December to 49.2 after 55.5 in November and then the January survey resurgent at 55.2. Can we trust this data series? Attention will also be on the prices paid component after a similar component from the ISM manufacturing survey this week created jitters and services prices are likely to be stickier. China’s “two sessions” in focus Following on from Wednesday’s stronger than expected PMI which supported the view that China’s economy is picking up steam, focus now turns to the Chinese government and what they will do to further help along a post-lockdown economic recovery. The first session of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) will begin on March 4 and followed up the following day by the 14th National People’s Congress (NPC. During what is collectively known as the “two sessions”, Chinese officials will release a set of social and economic development goals and various policy measures to achieve them. Earnings to watch There are no important earnings releases today. We have highlighted next week’s most important earnings releases below with the most market attention going earnings from Adidas, CATL, and JD.com. Adidas has a huge inventory of Yeezy sneakers following the abrupt end to the partnership with Ye that caused a massive writedown in the previous quarter and investors have generally lost short-term trust in Adidas following a string of bad results. Analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn. CATL is the world’s largest battery maker and is firing on all cylinders with analysts expecting Q4 revenue growth of 87% y/y and EPS of CNY 2.65 down 11% y/y as the company has not passed on all input costs to its EV customers after a significant surge in lithium carbonate prices last year. Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final Feb. Services PMI 0930 – UK Feb. Final Services PMI 1000 – Eurozone Jan. PPI 1330 – Canada Jan. Building Permits 1445 – US Feb Final Services PMI 1500 – US Feb. ISM Services 1600 – US Fed’s Logan (Voter 2023) to speak 1700 – ECB's Wunsch to speak 2000 – US Fed’s Bowman (Voter) to speak Source: Global Market Quick Take: Europe – March 3, 2023 | Saxo Group (home.saxo)

Summary:  Despite U.S. bond yields continuing to climb and the 10-year going above 4% in yield, U.S. stocks managed to rebound nearly 1% on Fed Bostic comments. Hong Kong and China stocks slid and gave back some of the gains from the previous session in the absence of notable headlines ahead of the “two sessions” meeting starting this weekend. The US dollar gained broadly against major currencies. Crude oil continued to climb with WTI crude finishing Thursday at USD78.2.   What’s happening in markets? Nasdaq 100 and S&P 500 rebounded on Fedspeak The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) clawed back early losses after dovish comments were made by the Fed’s Raphael Bostic  - seeing the indices gain 0.9% and 0.8% respectively. All sectors in the S&P 500 except consumer discretionary and financial advanced. Salesforce (CRM:xnys) shares rose 11.5% on a Q4 earnings beat and upbeat guidance – making it the top gainer in the S&P500. Kroger (KR:xnys) rose 5.4% after the grocery chain reported sales and earnings beat. Tesla (TSLA:xnas) fell 5.9% as investors were somewhat disappointed with the EV giant’s Investor Day held on the prior day. US Treasury curve bear steepened, 10-year yield at 4.06% US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off across the curve in the morning following an upward revision of Q4 unit labour costs to 3.2% from the previously reported 1.1% and initial jobless claims continued to come in below 200K. After Atlanta Fed Bostic’s comments in favour of a 25bp hike at the March meeting and the Fed could pause by mid to late summer saw yields on the 2-year paring much of the loss from an intra-day high yield of 4.94% to finish at 4.89%. Yields on the belly of the curve however remained 6bps higher by the time of closing, with the 5-year yield at 4.31% and 10-year at 4.06%. The Treasury Department announced the auction of USD40 billion of 3-year notes, USD32 billion of 10-year notes, and USD18 billion of 30-year bonds next week. Hong Kong’s Hang Seng Index and China’s CSI300 retreated after yesterday’s sharp gains Hang Sang Index (HSI.I) dropped 0.9% and CSI300 (000300.I) slid 0.2% on Thursday after rising sharply the day before. China Internet names led the decline with Alibaba (09988:xhkg) falling 4.7% without notable news. Bilibili (09626:xhkg) plunged 7.8%.  After the Hong Kong market close, the online entertainment platform reported Q4 earnings beating the consensus estimate. Nio (09866:xhkg) tumbled 13.2% on a Q4 margin miss and a weaker-than-expected Q1 2023 guidance. Container liners outperformed, with Orient Overseas (00316:xhkg) rising 6.7% and COSCO Shipping (01919:xhkg) up 4.1% on an improved outlook of China’s exports. In A-shares, telcos and communication equipment makers advanced, following the news that the Ministry of Industry and Technology said that China will accelerate the rolling of 6G infrastructure. Australian equities (ASXSP200.I) trade lower for the fourth week  - markets prices out rate cuts – PMIs rise   So far this week - Monday to Friday the market is trading lower - marking its fourth straight week of losses. It comes as the Australian share market prices out rate cuts this year – and looks ahead to the RBA interest rates decision and commentary next week - with another 25bp hike expected. Today - hotter Australian and manufacturing prints showed PMIs rose back to expansionary phase, pushing Australian bond yields higher, up 6 bps to 3.92% - that’s near YTD highs of 4%, which is a cautionary signal given this is a better return than the average yield for the Australian share market.    FX: GBP edges below 1.2000 on dovish Bailey The US dollar was broadly in gains on Thursday as yields continued to surge higher despite supposedly dovish comments from Fed member Bostic. SEK was the underperformer on the G10 board amid risks of a deepening recession in Sweden. GBPUSD continued to tumble further below the 1.20 handle after dovish comments from BOE governor Bailey this week attempting to engineer a pause in market expectations. EURUSD also gave up some of its post-regional CPI gains to inch below 1.06. AUDUSD still in close sights of 0.67 as risk sentiment deteriorates while pickup in metals prices remains unconvincing for now. Crude oil volatility continues Oil fluctuated with traders weighing up a revival in demand from China, vied with inflation fears and OPEC boosting supplies. OPEC increased supplies by 120,000 b/d to 29.24 million a day in February – with Nigeria accounting for two-thirds of the increase - with its output hitting a one-year high. Meanwhile Russian seaborne diesel exports stranded at sea hit new records. This comes all while nations such as Turkey are trimming purchases of Russian crude. What to consider? Fed officials hinting at a higher dot plot The biggest headlines today are referring to Fed member Bostic’s (non-voter) comments as dovish, while he said he is firmly in favour of a 25bps hike path (to reduce the possibility of a hard outcome) and even said we could be in a position to pause by mid-to-late summer which appears to be exactly in-line with current market expectations. If his comments suggest 25bps rate hikes each at the March, May and June meetings, we still may end up in the 5.25-5.50% terminal rate which is higher than what the December dot plot suggested. Waller (voter) also hinted at an upwards shift in the dot plot, more clearly so, saying that Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if the incoming job and inflation data does not pull back from strong readings for January. US labor market strength sustains, focus shifting to ISM services US initial jobless claims fell by 2k to 190k last week from 192k prior and 195k expected, continuing to signal a tight labor market. Unit labor costs climbed an annualized 3.2% in the fourth quarter from the initial 1.1% read, well above expectations for a rise to 1.6%. Increased labor costs keep concerns of a wage-price spiral alive, and will likely keep the Fed on its toes in tightening policy. ISM services for February will be on watch later today, and is expected to ease to 54.5 from a big jump to 55.2 last month, but still remain comfortably in expansion. Attention will also be on the prices paid component after a similar component from the manufacturing print this week created jitters and services prices are likely to be more sticky. Worrying inflation prints in the Eurozone Yesterday, the eurozone core inflation rose to 5.60% year-over-year in February with both core goods (6.8%) and services (4.8%) reaching new record highs. This is much higher than expected (5.3%). We pay more attention to core inflation as it can show how entrenched inflation is. As a matter of that, it appears the inflation headache will remain an issue for most of the year. All the country prints which were released earlier this week came in above expectations: Germany 9.3% vs 9.0% exp. France 7.2% vs 7.0% exp. Spain 6.1% vs 5.7% exp. In these circumstances, talks about a potential monetary policy pause are ill-timed. From a monetary policy perspective, we think the ECB is unlikely to slow the pace of tightening until we see the first signs of underlying inflation peaking. Expect at least two other 50 basis point hikes in March and in May (there is no meeting in April). The market consensus forecasts that another 25 basis point hike could happen in June. It will depend on the evolution of inflation, of course. China and Australian trade relations are improving – adding to our optimist view that the commodity bull run could resume in Q2 China and Australia resumed diplomatic and economic discussions to stabilize and improve bilateral relations. It comes as China’s Foreign Minister Qin Gang met with counterpart Penny Wong at the G-20 summit in India. This is supporting commodity prices today – with the Iron Ore (SCOA) price trading higher for the fourth session following on from stronger-than-expected Chinese manufacturing data - showing overall Chinese orders are back at 2017 levels. Despite this the Aussie dollar vs the USD (AUDUSD) is little changed on the day and week at 0.6729 after losing 0.5% on Thursday. Downside is still in play with the Aussie trading below the d Qantas hires 8,500 workers – underscoring the aviation industry’s growth trajectory Qantas Airways (QAN) plans to hire 8,500 more workers in the next decade - which is about the same number it cut during in the pandemic. This highlights the aviation’s growth trajectory less than a year after the crisis. The hires include pilots, cabin crew and airport staff – with about 300 new aircraft arriving in the next 10 years – and Qantas also planning to open an engineering academy to help maintain its feet. For more on the travel sector, refer to Saxo’s Asia Pacific Travel equity theme basket.  We are in the early inning of the comeback of European equities European equities have previously outperformed US equities over long periods of time, but the relentless bull market in US technology stocks over the past 13 years has erased our memory of European equities being an interesting market. But since October last year, European equities have significantly outperformed US equities and clients are most interested than ever. In an article yesterday, Peter Garnry, Saxo’s Head of Equity Strategy, provides an overview of how Europe's equity market is constructed and how it differs from the US equities, and also why they are more interesting for investors amid the comeback of the physical world. His three main points are: Europe lost the digital technology race to the US with a 13-year-long period of significant underperformance, but since October 2022 things have turned around and maybe we are in the early inning of Europe’s comeback. European equities have 20 super-sectors and the diversification of European equities is much better compared to US equities. European equities are cheaper relative to US equities and they have recently improved their operating margins while US equities have seen a significant margin compression. China’s Caixin Services PMI is expected to rise to 54.5 Caixin Services PMI is expected to confirm the continuous expansion of activities in the services sector as indicated in the official NBS PMI survey. According to Bloomberg, Caixin Services PMI is expected to rise to 54.5 in February from 52.9 in January. China’s “Two Sessions” meeting commences this weekend China is holding the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, which together are known as the “Two Sessions, this weekend. Premier Li will deliver the Government Work Report on 5 March, in which the focus will be on the GDP growth target for 2023. The weighted average of provincial GDP targets released was around 5.6% and economists are expecting a national target of between 5% and 5.5% for 2023. Investors will also pay attention to the fiscal deficit target and quota for bond financing. In addition, investors will pay close attention to the leadership reshuffle at the State Council and other top government bodies. It is widely expected that Li Qiang will be the new Premier and He Lifeng will be one of the Vice Premiers and given the portfolio of economic and financial affairs. Japan’s Tokyo CPI for February hinting at sticky prices Japan’s Tokyo-CPI for February came in at 3.4% YoY for the headline, softer than last month’s 4.4% but still hotter than the 3.3% expected. The slower print is partially a result of PM Kishida’s latest stimulus announcement to support utilities prices which included a 20% discount on household electricity rates. Core CPI at 3.3% YoY matched estimates while the core-core measure (ex-fresh food and energy) was a notch higher at 3.2% YoY vs. 3.1% expected. Inflation continues to be sticky and above the BOJ’s 2% target although the incoming Governor Ueda is unlikely to rush into any monetary policy moves at this point. Bilibili earnings beat, non-GAAP net loss narrowed as operating margin improved Q4 Revenues in Bilibili rose 6% Y/Y to RMB6.14 billion, slightly higher than the RMB6.12 billion expected. Non-GAAP net loss came in at RMB1.31 billion, better than the consensus of RMB 1.43 billion and 20.6% smaller than in Q4 last year. Mobile games revenue falling 12% Y/Y and advertisement revenue falling 5% Y/Y  were weaker than expected. Revenues from E-Commerce and others grew 13% Y/Y and those from Value-added Services rose 24%, both above consensus estimates. The number of monthly active users increased 20% Y/Y to 326 million. India’s Adani Group gets foreign interest as prices drop After a drop of over $100 billion in market value, Adani group stocks got a respite with US boutique investment firm GQG Partners purchasing shares worth $1.87 billion in four Adani group companies. The deal shows investor interest may be returning to Adani after record drops in its share prices, and any further interest from foreign investors could potentially put a floor to near-term pressures for the conglomerate. This week, the group told bondholders it had secured a $3bn credit line from investors including a sovereign wealth fund.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 3, 2023 | Saxo Group (home.saxo)

Summary:  European equities have not been this hot among investors since 2007 before the US equity market entered their golden era of digitalisation sweeping the world and conquering global equity markets. The comeback of the physical world plays into the advantage and composition of the European equity market. In today's equity note we provide an extensive overview of how Europe's equity market is constructed and how it differs from the US equities, and also why they are more interesting for investors amid the comeback of the physical world. Executive summary European equities have previosly outperformed US equities over long periods of time, but the relentless bull market in US technology stocks over the past 13 years has erased our memory of European equities being an interesting market. But since October last year, European equities have significantly outperformed US equities and clients are most interested than ever. This equity note aims to provide an extensive overview of European equities. The three main points are: Europe lost the digital technology race to the US and with it a 13-year long period of significant underperformance, but since October 2022 things have turned around and maybe we are in the early inning of Europe’s comeback. European equities have 20 supersectors and the diversification of European equities is much better compared to US equities. European equities are cheaper relative to US equities and they have recently improved their operating margins while US equities have seen a significant margin compression. The lost technology revolution Life used to be good in European equities with the continent’s equity market outperforming its nearest competitor across the Atlantic ocean. European equities outperformed US equities from December 1969 to October 1990 in USD terms by 2.7% annualised. The end of that period marked the transition period into the age of digitalisation which was a natural extension of the developments in semiconductors, CPUs and the first versions of an operating system for computers. During the 1990s, the Internet came to live for the ordinary person and the first pure digital companies outside software companies were born including Amazon in 1994. During the 1990s, the US economy began to accelerate faster than the European economy and the Internet boom in Silicon Valley accelerated into the first big bubble in US equities since the ‘Nifty-Fifty’ days in the 1960s. From October 1990 to June 1999 the US equity market outperformed European equities by 6.4% annualised putting US equities on the map in a way not seen in decades. During the subsequent period until November 2007, European equities outperformed again driven by the credit boom, post euro adoption leading to inflows of capital, Chinese driven commodity supercycle, and the first sizeable export boom to the roaring tiger economies in Asia. In November 2007, the US equity market reached its all-time relative low against European equities since December 1969. From November 2007 to October 2022 was a one-way highway for US equities as the digitalisation accelerated at an ever increasing speed with technology giants such as Microsoft, Apple, Amazon, Nvidia, Alphabet (parent company of Google), Meta (parent company of Facebook), Salesforce, and Adobe conquering the world of the digital age. US equities outperformed European equities by a staggering 7.5% annualised outpacing even the run-up to the Dot-Com Bubble. The technology race was effectively lost by Europe many years before this period, but the ultimate crystallisation for investors was during this period. Nobody wanted to touch Europe. It was the old sick man of the global economy according to investors. Silicon Valley was where the returns were to be made. European equities have outperformed US equities by 16.7% since October 2022 with the outperformance this year being 3.9% in USD terms. This significant comeback for European equities have made our clients more interested in European equities and wanting to understand this market. If we are right about the renaissance of the physical world as outlined in our Q1 Outlook, then European equities could continue to outperform. Understanding the European equities and the STOXX 600 Index The European equity market is the second largest combined equity market in the world with the STOXX 600 being the leading benchmark index consisting of the 600 most liquid equities in Europe. The STOXX 600 Index had market capitalisation of €12.7trn on 31 January 2023 compared to the S&P 500 total market capitalisation of around €32.8trn, so almost three times larger. The four largest country weights in the STOXX 600 Index are Great Britain, France, Switzerland, and Germany, and the largest sector being the health care sector. This is also evident in the top 10 components list where four health care companies are on the list (Novo Nordisk, Roche, AstraZeneca, and Novartis). The three biggest individual index weights are Nestle, ASML, and LMVH. Source: stoxx.com Source: stoxx.com Europe’s supersectors The STOXX 600 Index divides its constituents into 20 supersectors defined by the Industry Classification Benchmark (ICB) which can be seen in the table below. The STOXX 600 Index is a free-floating market weighted index and thus we have used the free-float market cap which sums to €9.7trn which is lower than the previously stated market cap. The reason is that free-float market cap only measures the shares that are part of the securities markets. Some shareholders have a more permanent status and are thus not available for sale in public markets. In terms of number of companies the biggest supersector is the Industrial Goods and Services consisting of 103 companies with the three largest being Siemens, Schneider Electric, and Airbus. The most profitable supersector measured by the return on equity (ROE) is Media with a ROE of 43.9%. The three largest companies in the media supersector are RELX, Wolters Kluwer, and Publicis Groupe. In terms of earnings growth over the past year the winner has been energy with earnings per share up 225%. Europe’s three largest energy companies are by far Shell, BP, and TotalEnergies. The most expensive supersector measured by the 12-month forward P/E ratio is Consumer Products and Services and the largest companies in this supersector are LVMH, L’Oreal, and Richemont. A significant contributor to Europe’s outperformance since October 2022 has been luxury stocks which are part of this supersector as investors have looked for good bets on the Chinese reopening post its zero-Covid policy. Interested readers can read our equity note from 17 February on the global luxury industry which is dominated by European companies. The most cheapest supersector measured by the 12-month forward P/E ratio is Automobiles and Parts and the largest companies in this supersector are Mercedes-Benz, Stellantis, and BMW. A more diversified and cheaper equity market Another interesting observation on European equities is the huge difference in GICS sector weights between the STOXX 600 and S&P 500. The biggest difference is in Information Technology with a 19%-points difference. US equities also have a higher exposure to Communication Services which includes media related companies such as Meta. European equities have a higher exposure to Financials, Industrials, Consumer Staples, and Materials (mining and chemical) which are all tangible-driven sectors. If we are right about reshoring, the geopolitical trajectory of the world splitting into two value systems, the green transformation and the tight supplies of key metals such as copper, the need for massive infrastructure spending then European equities should in theory outperform US equities. What we also observe is that European equity markets are more diversified and using the Herfindahl-Hirschman approach of comparing sum of squared weights we can conclude that US equities are 19% more concentrated on sector level than European equities. Being overweight US equities is essentially a significant active bet on technology companies to continue outperforming. Another positive factor for European equities in 2023 is that forward valuations are much more intriguing with STOXX 600 trading at 13.2x on 12-month forward EPS compared to 17.8x for the S&P 500. In other words, US equities are valued at a 35% premium to European equities. Which is still in the highest percentiles of the US valuation premium range since 2008 and a convergence of equity valuations back to the historical average should provide tailwind for European equities. A key driver to close the valuation premium gap is to close the operating margin gap between US and European companies which has been significant since 2009, but over the past year with the comeback to tangible-driven industries Europe has closed a big part of that gap.   Source: European equities A rising phoenix or a continuous fall | Saxo Group (home.saxo)

Summary:  Today we look at the market closing on a weak note on a fresh rise in Treasury yields and then spilling lower in later trading after Tesla's investor event was a damp squib. Elsewhere, inflation remains very much on the brain in Europe, with today's Eurozone-wide inflation print for February rounding out the set of February CPI reports across the bloc. In FX, sterling feels the heat on dithering BoE governor Bailey. In commodities, the latest on copper and crude oil and in equities, thoughts on where we are in the current historic drawdown. Today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available 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.   Read next: Twitter Employees Are Overburdened As Elon Musk Tries To Run Twitter With Fewer Staff| 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: Podcast: Tesla nothingburger and 4.0% 10-yr yield sets market on tilt | Saxo Group (home.saxo)

Summary:  US equity futures are edging lower overnight and are below the critical support at the 200-day moving average that has been tested of late, setting up a compelling test of animal spirits in coming sessions. The treasury market is providing fresh headwinds as the US 10-year treasury yield edged above 4.00% for the first time since November. Sterling was thrown overboard on dovish comments from Bank of England Governor Bailey, while the euro remains firm on hot inflation data this week. What is our trading focus? US equities (US500.I and USNAS100.I): the ‘ketchup effect’ in US bond yields is here US equities continued their slide lower with S&P 500 futures making a new lower close at 3,956, the lowest level since 20 January, and this morning the index futures have continued lower trading around the 3,932 level. This suggests investors are sceptical that China’s reopening will make a significant difference for global growth in the first half. The decline also reflects that the US 10-year yield has finally pushed above the 4% level this morning trading around 4.04% which is a significant breakout and pushing interest rates to the highest level since 10 November. With S&P 500 futures breaking below many key levels over the past couple of session the 3,900 level is definitely in play now. Hang Seng Index (HSI.I) and CSI300 (000300.I) retreated after yesterday sharp gains Hang Sang Index slid 0.8% and CSI300 inched down 0.3%. China Internet names led the decline with Alibaba (09988:xhkg) falling 4.3%. Container liners outperformed, with Orient Overseas (00316:xhkg) rising 4.4% and COSCO Shipping (01919:xhkg) up 3.8% as yesterday’s new export orders sub-index in the PMI surveys signaled an improvement in China’s export outlook. Following the Ministry of Industry and Technology ‘s statement in a press conference that China will accelerate the rolling of 6G infrastructure, A-share telcos and communication equipment makers advanced. FX: GBP blasted on Bailey comments, USD edges higher as sentiment wilts The US dollar found only hesitant support in places yesterday on a fresh surge in treasury yields, where the longer portion of the yield curve finally tested a bit higher and the 10-year Treasury benchmark yield poked above 4.00% for the first time since November. But as the focus in recent days has been on hot EU inflation data and yesterday’s hot German CPI number, EU yields have led the charge higher this week, so the euro is quite firm togethe with the greenback. The JPY remains under pressure as EURJPY returned back above 145.00. Elsewhere, sterling was thrown overboard after Bank of England Governor Bailey’s noncommittal comments on inflation risks and policy tightening (see more below). GBPUSD south of 1.2000 this morning and EURGBP has now rejected its test below 0.8800 and what semed a capitulation back into the lower range, surging to nearly 0.8900. Crude oil weighs China demand against hawkish Fed speak Crude oil prices trade near recent highs supported by the strong signal on Chinese demand recovery from upbeat PMI data. In addition, the inventory data was also bullish signalling a recovery of demand in Asia and Europe. US commercial crude oil inventories gained less than expected last week, rising only 1.2 million barrels as US exports of crude hit a record 5.6 million barrels a day last week. However, on the other hand, US ISM data and hawkish comments from Atlanta Fed Bostic continued to highlight inflation fears are here to stay and may spark some US demand concerns. WTI futures traded just below $78/barrel while Brent touched $84.50. Gold trades lower on ISM and Bostic comment Financial markets, including the investment metals, have gone back to worrying about inflation, interest rates and growth after the prices paid component of the ISM index for February rose for a second month to 51.3. In addition, the Atlanta Fed’s Bostic said rates could rise to 5.25% and stay there well into 2024. Currently the market has priced a terminal rate around 5.65%. Gold gave back some of Wednesday’s strong gains after ten-year US yields topped the closely watched 4% and the dollar drifted higher. With +3 additional 25 basis point hikes priced in, the selling pressure on gold and silver have eased but for the current recovery to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the current corrections. Metals complex excited about China, but.. Copper drifted lower in Asia with profit taking emerging after futures in New York and London failed to build on yesterday’s strong China PMI-led gains. The report reignited the reopening theme but as we wrote in are recent update, the next sustained move higher is unlikely to be triggered until the second quarter or later, the timing to a certain extend depending on the economic outlook for the rest of the world and whether recession, as we believe, will be avoided. For now, the 30-cent wide downward sloping channel is providing some resistance at $4.2/lb in HG and $9115/tons in LME. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on ISM Price Paid Index The 10-year US Treasury yield breached 4% briefly during the session and edged higher overnight following a ISM Price Paid index shooting up above the expansion/contraction threshold. The implied terminal Fed Fund rate rose above 5.5% at one point yesterday. Comments from the Fed’s Kashkari saying he is undecided between a 25bp and 50bp hike at the March FOMC and Bostic’s 5-5.25% “well into next year” remarks added fuel to the selloff. Yields on the 2-year notes rose 6bps to 4.88%, the highest level since 2007. What is going on? Mixed US ISM Manufacturing survey details – but steady message on inflation The US ISM manufacturing marginally rose to 47.7 from 47.4, coming in below expectations of 48.0. New orders lifted to 47.0 (prev. 42.5), while employment fell to 49.1 (prev. 50.6), entering contractionary territory. But the message on price pressures continued to roil markets. ISM priced paid rose back into expansionary territory to 51.3, well above the prior 44.5 and the expected 45.1, re-affirming that it may be too soon to call goods inflation disinflationary. Hawkish Fed talk brings 10-year yields to top 4% Fed member Kashkari (voter) signaled an openness for a 50bps hike at the March meeting, saying he is open to both 25bps and 50bps. Still, he emphasized that the terminal rate is more important than the size of rate hikes, where also he hinted that it could be revised higher from December. Another member Bostic (non-voter) maintained his view that the Fed policy rate needs to rise to 5.00-5.25% range, but said that the rate should be left there “until well into 2024”. 10-year Treasury yields rose above the key 4% mark for the first time since November, sending another warning signal to equities. Hot German inflation print creates further pressure for the ECB Coming on the heels of hotter than expected inflation prints in France and Spain for February, German CPI print was also hotter than expected at 9.3% YoY (vs. +9.0% exp and +9.2% prior). The message on disinflation has therefore continued to weaken, and both Fed and ECB are likewise pressured to do more on policy tightening to ensure the inflation comes back to target. The aggregate Eurozone print is out today and expectations of a softening to 8.3% from 8.6% last month may be tested. Bank of England Governor Bailey comments pound sterling The Bank of England governor preferred to keep in question whether the Bank of England will continue to tighten policy or pause here, which looks especially dovish at a time when especially ECB expectations are ratcheting higher on hot inflation data for February released this week. “I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more....nothing is decided.” EURGBP rallied hard from the lows since January near 0.8750 to nearly 0.8900 yesterday. Tesla shares down 5% on Investor Day presentation There was little for Elon Musk to present. No new magic around boring tunnels or making robots run or thinking. It felt empty all along and shareholders agreed sending shares down 5%. The only real new news, which had already been leaked, was the new EV manufacturing plant in Mexico which would increase Tesla’s production capacity. At the very end of the presentation Elon Musk talked about the need for a significant increase in renewable energy production without sacrificing economics, but that was as concrete as it could get this time. A more detailed plan would be announced later. For all the showman Elon Musk is, there was a lot to support the grandiose show. Earnings recap: First Solar, Salesforce, and Snowflake First Solar shares surged about 16% to its highest since 2009 after the panel maker’s backlog of orders look like they will take the second half of the decade to fill. The surging demand comes as the company is benefiting from the Inflation Reduction Act, signed last year by President Joe Biden. The software giant Salesforce gave a surprisingly upbeat forecast for the year ahead - and plans to step up share buybacks to $20bn, which is positive vs its $167bn market cap. Operating margins will be about 27% in FY24 exceeding Bloomberg consensus estimates of 22.4%. This eases pressures Salesforce faces from a group of activist investors. Salesforce shares rose 14% in post market trade, after closing at $167.35 in normal trade. Snowflake shares fell 6% in extended trading following Q1 revenue guidance fell short of expectations and the fiscal year guidance on revenue was $2.7bn vs est. $2.8bn as companies are cutting down on their cloud spending. What are we watching next? China’s “two sessions” in focus Following on from Wednesday’s stronger than expected PMI which supported the view that China’s economy is picking up steam, focus now turns to the Chinese government and what they will do to further help along a post-lockdown economic recovery. The first session of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) will begin on March 4 and followed up the following day by the 14th National People’s Congress (NPC. During what is collectively known as the “two sessions”, Chinese officials will release a set of social and economic development goals and various policy measures to achieve them. Earnings to watch Today’s key US earnings releases are Dell Technologies and Broadcom both reporting after the close. Analysts expect Dell to report FY23 Q3 revenue growth of -16% y/y and EBITDA of $2.39bn down from $4bn a year ago as declining technology spending is hitting technology providers such as Dell hard. Analysts expect Broadcom to report FY23 Q1 (ending 31 Jan) revenue growth of 16% y/y and EBITDA of $5.6bn up from $4.4bn a year ago. Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 1000 – Italy Feb. Preliminary CPI 1000 – Eurozone Feb. Preliminary CPI 1230 – ECB Meeting Minutes of Feb. ECB meeting 1330 – US Weekly Initial Jobless Claims 1500 – UK Bank of England Chief Economist Huw Pill to speak 1530 – EIA's Weekly Natural Gas Storage Change 1900 – US Fed’s Waller (Voter) to discuss economic outlook 2100 – New Zealand Consumer Confidence Survey 2300 – US Fed’s Kashkari (Voter 2023) to speak 2330 – Japan Tokyo Feb. CPI 0145 – China Feb. Caixin Services PMI   Source: Global Market Quick Take: Europe – March 2, 2023 | Saxo Group (home.saxo)

Summary:  China’s PMI data came in stronger than expected and signaled the economic recovery is picking up steam. The data triggered sharp rallies in the Hang Seng Index and commodity prices, particularly industrial metals. U.S. bond yields rose and equities slid, following the ISM price paid index rising to 51.3 and Fed officials’ hawkish comments keeping a 50-bp hike in the March FOMC on the table.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slump to new lows on higher Fed rate bets Stocks were pressured after fresh economic data highlighted persistent inflationary pressures remain – pushing the S&P500 to close at its lowest level in six weeks after shedding 0.5%. It’s the second straight day the S&P closed under its 50-day moving average. While most sectors declined within the S&P500, energy rallied strongly by nearly 2%. The strong China PMI data helped sentiment in the materials and industrial sectors, both rising on Wednesday. Nasdaq 100 slid 0.9%. The extra pressure on equities came as the prices paid component of the ISM in surging above the 50 expansion/contraction threshold and higher for longer comments from Fed officials (see below). Key U.S. company news In regular trading, First Solar (FSLR:xnas) shares surged about 16% to its highest since 2009 after the panel maker’s backlog of orders look like they’ll take the 2nd half of the decade to fill. The surging demand comes as the company is benefiting from the Inflation Reduction Act- signed last year by President Joe Biden. Meanwhile, after close of trade - software giant Salesforce (CRM:xnys) gave a surprisingly upbeat forecast for the year ahead - and plans to step up share buybacks to $20 billion, which is positive vs its $167b market cap. Operating margins will be about 27% in fiscal 2024, exceeding Bloomberg consensus estimates of 22.4% growth. This also potentially eases pressures CRMs faces from a group of activist investors. Salesforce shares rose 14% in post market trade, after closing at $167.35 in normal trade. Next, we will be watching - Campbell Soup (CPB:xnys) which reports after market close Thursday. US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on Fed comments The 10-year yield breached above 4% briefly during the session before closing a touch below that at 3.99%, following comments from the Fed’s Kashkari saying undecided between a 25bp and 50bp hike at the March FOMC and Bostic’s 5-5.25% “well into next year” remarks. Yields on the 2-year notes rose 6bps to 4.88%, the highest level since 2007. The jump of the ISM Prices Paid (see below) also added fuel to the selloff. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) jumped on strong China PMIs Hang Seng Index surged 4.2% and CSI300 gained 1.4% on Wednesday following the release of strong PMI data in China much above consensus estimates. Hang Seng Tech Index jumped 6.6% as technology hardware, China internet, and EV makers advanced sharply. The percentage increase in the Hang Seng Index was the largest since early November and turnover in the Stock Exchange of Hong Kong reached HKD154 billion, the highest since late January. Chinese developers were among the top winners, with Longfor (00960:xhkg) up 9.6% and Country Garden (02007:xhkg) up 8.3% leading the charge higher. The chairman of Country Garden announced retirement. ASMPT (00522:xhkg) jumped 9% after the semiconductor equipment maker reported Q4 revenues beating estimates. After market close, Techtronic (00669:xhkg) reported H2 EPS of USD0.27 and revenues of USD6.2 billion, both below the consensus estimates due to soft demand for power tools.  In A-shares, telco, digital economy, software, gaming, media, and AI-generated content stocks were the top winners. Australian equities (ASXSP200.I) rise to four-day highs on commodities rebounding  - beware of companies going ex-dividend ahead After China PMIs beat expectations, with new orders surging back to 2017 level - focus is on commodities strongly rebounding - with the iron ore (SCOA) price rising to a five-day high $126.70, the spot Copper (HG1) price trading at a five-day high, while aluminium is also higher. Coles (COL), Woolworths (WOW) go ex-dividend today, along with Pilbara Minerals (PLS).  As a reminder – dividend paying giants, BHP and Rio go ex-dividend this time next week, which could pressure equities. FX: Dollar unable to bask in yields glory The US dollar was weaker on Wednesday mostly pressured by the gains in Chinese yuan in the Asian session after the upbeat China activity data sent the China reopening theme roaring once again. USDCNH dropped from 6.96 to sub-6.88. Some reversal in the dollar was seen in the US session but it was not enough to reverse earlier losses. Some other currencies also got a bid from the China theme, particularly EURUSD that surged to highs of 1.0691 also underpinned by rising hawkish ECB expectations after hot regional inflation prints. NZDUSD was the outperformer in G10 FX, rising to 0.6276 with Q4 terms of trade returning to positive territory at 1.8% from last month’s -3.9% QoQ. GBPUSD stayed below 1.2100 despite Bailey signaling more BOE hikes may be needed, and saying that the experience in the 1970s showed that doing "too little with interest rates now" may mean more increases later on.   AUD reverses course, rising above its 100-day moving average The Australian dollar against the US (AUDUSD) advanced for the first time following four days of losses, after China's manufacturing activity boosted sentiment – hitting a decade high – with new orders improving in February, surging to 54.1 - the highest level since September 2017. This enthusiasm is buoying commodity prices on the notion that demand will rise – the iron ore (SCOA) has risen to a five-day high of $126.70, spot Copper (HG1) hit a five-day high, while aluminium is also higher. This optimism is offsetting the slowing Australian prints released yesterday- with GDP grinding down to pace of 2.7% YoY in the 4Q as expected- while monthly CPI cooled to 7.4% YoY vs the 8.1% price growth forecast. It’s also important to note, short covering has also added to the Aussie dollar rising. Our view is that the Aussie dollar could see strength return in Q2, in line with our view that the commodity bull market will strongly restart in Q2. Crude oil struggling to lean on Asia/Europe vs. US demand Crude oil prices remained near recent highs despite the strong signal on Chinese demand recovery from upbeat PMI data. In addition, the inventory data was also bullish signalling a recovery of demand in Asia and Europe. US commercial crude oil inventories gained less than expected last week, rising only 1.2 million barrels as US exports of crude hit a record daily high of 5.6 million barrels last week (+22.4% w/w). However, on the other hand, US ISM data and hawkish Fed speakers continued to highlight inflation fears are here to stay and sparking some US demand concerns. WTI futures traded just below $78/barrel while Brent touched $84.50. Metals complex excited about China Copper, aluminum, zinc and iron all traded higher following the outperformance of Chinese PMI data on Wednesday, driving a return of focus to the China reopening theme. Copper, which earlier found support at $4 surged to $4.17 in the Asian morning today, and may take another look at $4.20. However, our head of Commodity Strategy Ole Hansen wrote that the next sustained move higher is unlikely to be triggered until the second quarter or later, the timing to a certain extend depending on the economic outlook for the rest of the world and whether recession, as we believe, will be avoided.   What to consider? Mixed US ISM survey details – but steady message on inflation The US ISM manufacturing marginally rose to 47.7 from 47.4, coming in below expectations of 48.0. New orders lifted to 47.0 (prev. 42.5), while employment fell to 49.1 (prev. 50.6), entering contractionary territory. But the message on price pressures continued to roil markets. ISM priced paid rose back into expansionary territory to 51.3, well above the prior 44.5 and the expected 45.1, re-affirming that it may be too soon to call goods inflation disinflationary. Hawkish Fed talk brings 10-year yields to top 4% Fed member Kashkari (voter) signaled an openness for a 50bps hike at the March meeting, saying he is open to both 25bps and 50bps. Still, he emphasized that the terminal rate is more important than the size of rate hikes, where also he hinted that it could be revised higher from December. Another member Bostic (non-voter) maintained his view that the Fed policy rate needs to rise to 5.00-5.25% range, but said that the rate should be left there “until well into 2024”. 10-year Treasury yields rose above the key 4% mark for the first time since November, sending another warning signal to equities. China’s PMIs signaled recovery picking up steam The headline official NBS PMI surged to 52.6 in February, the highest print since 2012, from 50.1 in January. The strength was across the board with production and new orders improving markedly and the new export orders unexpectedly surging to 52.4, the first time into the expansion territory in 23 months. The NBS non-manufacturing PMI and the Caixin Manufacturing PMI, also released today, both bounced strongly and signaled economic expansion. Readers can find more on China’s PMI here. Hot German inflation print creates further pressure for the ECB Coming on the heels of hotter than expected inflation prints in France and Spain for February, German CPI print was also hotter than expected at 9.3% YoY (vs. +9.0% exp and +9.2% prior). The message on disinflation has therefore continued to weaken, and both Fed and ECB are likewise pressured to do more on policy tightening to ensure the inflation comes back to target. Th aggregate Eurozone print is out today and expectations of a softening to 8.3% from 8.6% last month may be tested. Tesla plots a path to renewable energy at Tesla Investor Day As part of Tesla’s “Master Plan” for the company, Musk said Tesla’s next phase of growth will be built around building clean energy sources – that can serve a much larger world population - without great economic sacrifice. Moving into sustainable energy might mean moving into heat pumps- as they can dramatically cut home and office heating costs. Tesla dubs them one of the low hanging fruits in the sustainable energy transition. Tesla’s shares are up 97% from their January low.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Sharp rise in China’s PMI data; inflation concerns in the U.S. - 2 March 2023 | Saxo Group (home.saxo)

Summary:  Today we look at the stunning official February Manufacturing PMI numbers out China overnight, which suggested the most rapid pace of expansion in China's manufacturing sector in over a decade. We look at how this development propagated through commodities and currencies, as well as the impact on EU rates after hot CPI numbers from France and Spain yesterday. Thoughts on inflation and real growth, stocks and earnings to watch, weakening US Consumer Confidence expectations and what that signals 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 - slides are available 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.   Read next: Elon Musk Is Richest Man Again, The State Bank Of India Had Raised $1 Billion From Global Banks| 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: Podcast: The China reopening narrative tries to get back on the rails | Saxo Group (home.saxo)

Summary:  The official NBS Manufacturing PMI and Non-manufacturing PMI, and the Caixin Manufacturing PMI data released today confirm that the ongoing economic upturn in the Chinese economy is picking up momentum. Chinese consumer and technology stocks are likely to resume the uptrend after spending January consolidating. China’s little giant companies in the A-share market may present opportunities to long-term investors who are looking for participating in growth stocks in niche technology markets. The surge in China’s PMI surveys signals economic recovery picking up momentum The headline official National Bureau of Statistics Manufacturing Purchasing Managers Index (NBS Manufacturing PMI) surged to 52.6 in February, the highest level since 2012, from 50.1 in January. The strength was across the board with the Production sub-index and New Orders sub-index improving markedly to 56.7 and 54.1 respectively. When a diffusion index goes above 50, it signals expansion. The export sector, which has until now been sluggish, showed signs of a strong recovery. The New Export Orders sub-index in the NBS survey unexpectedly surged to 54.1 in February from 46.1 in January and was the first time returning to the expansion territory in 23 months. Caixin Manufacturing PMI, which covers smaller and more private enterprises in the export-oriented coastal region relative to those covered in the NBS survey, also recovered strongly to 51.6 in February from 49.2 in January and the new order sub-index in the Caixin survey bounced to 52.2 from 49.3. The NBS non-manufacturing PMI continued to accelerate well into expansion, rising to 56.3 from 54.4. Both major sub-indices rose further, with the Services sub-index advancing to 55.6 and the Construction sub-index soaring to 60.2. The surge in the PMI data is the latest confirmation of the economic recovery in the making from the confluence of the reopening from Covid-19 containment and upturns in the credit cycle and the regulatory cycle (normalization and stability instead of tightening), and the emergent tendency of a more conciliatory external policy as noted in our Q1 outlook. China consumer and technology stocks are likely to benefit from the cyclical upturn As economic activities, household income and people mobility pick up from the pandemic containment, consumption is set to recover in the coming months. The in-person service industries will probably experience the biggest jump in activities. Technology stocks that operate B2C e-Commerce platforms will benefit from the increase in consumption. In addition, the more relaxed and institutionalized approach of regulation over the tech industries will also remove some of the uncertainty overhangs troubling investor sentiment towards mega-cap China internet stocks. Chinese consumer and technology stocks may benefit from the PMIs today and more incoming economic data that confirm a cyclical upturn is in place in the Chinese economy. Below is Saxo’s China Consumer and Technology equity theme basket for the inspiration of ideas. They are not stock recommendations and readers are encouraged to do further research into companies listed in the theme basket.  Saxo China Consumer and Technology equity theme basket China Little Giant stocks present long-term growth opportunities While the more established mega-cap technology stocks are likely to benefit most in the near term as the market rallies and investors rush to raise their Chinese equity weighting, in the longer-term, medium-sized innovative companies that have a track record of success in a niche market may present better growth opportunities. China’s Ministry of Industry and Information Technology has accredited over 9,000 companies with the title of “little giants” according to the following criteria: Specialising in a niche sector Commanding a high market share in the niche sector Demonstrating strong innovative capacity Dedicating at least 3% of revenues to research and development Minimum 5% p.a. revenue growth of its main business Being profitable in the preceding two years Over 760 of these little giant companies are listed companies, mainly in the A-share market. We have created a China Little Giants equity theme basket which investors can make reference to and potentially, after making their own further research and giving due consideration to the risks associated with smaller private companies operating in China, through the Stock Connect from the Stock Exchange of Hong Kong.  Saxo China Little Giants equity theme basket Source: China update - Economic recovery picks up steam | Saxo Group (home.saxo)

Summary:  US equities posted an uninspiring session, as the price action is bottled up ahead of the key support of the 200-day moving average in the major indices. Overnight, China’s official Manufacturing PMI ripped higher in February with its strongest reading since 2012, strong suggesting that the China re-opening is swing into motion. Hot inflation data from France and Spain pulled ECB expectations sharply higher yesterday, with German Feb. CPI up today. What is our trading focus? US equities (US500.I and USNAS100.I): caught between growth and inflation US equities headed lower yesterday with S&P 500 futures closing at the 3,975 level. The index futures are trying to rebound this morning following stronger than expected China February PMI figures suggesting the economy is responding positively to the reopening. This growth impulse lifted Hang Seng futures by 4.2% and breathed fresh air into commodities. The growth impulse from China will keep inflation pressures high in the global economy and that could force long-term bond yields in the US and Europe higher from current levels which will make equities caught between responding positive to growth or negatively to inflation and potentially higher interest rates. Hang Seng Index (HSI.I) and CSI300 (000300.I) jumped on strong China PMIs Hang Seng Index surged 3.5% and CSI300 gained 1.7% by in the morning session following the release of strong PMI data much above consensus estimates. The headline official NBS Manufacturing PMI surged (more below). The NBS non-manufacturing PMI and the Caixin Manufacturing PMI, also released today, both bounced strongly and signaled economic expansion. Mega-cap China internet names surged 5-7% and EV stocks jumped 5-8%. In A-shares, telcos, digital economy, software, gaming, and media stocks led the charge higher. FX: AUD and JPY were the laggards last month as dollar regained ground The dollar closed firmer at the end of the month as inflation concerns returned and sent the short-end yields surging to 15-year highs. AUDUSD was the weakest on the G10 board as a beating of the risk sentiment and weaker metal prices saw pair test 0.67 despite the return of RBA’s hawkish stance. Yen had a double blow from surging yields and the dovish read of Ueda’s nomination hearing for the Bank of Japan governorship, and USDJPY tested close to 137 yesterday before reversing back below 136.50. EURUSD touched highs of 1.0650 after the French/Spanish inflation prints yesterday but is back below 1.0600 this morning. GBPUSD nearly hit 1.2150 yesterday after the N. Ireland border announcement, but is back closer to 1.2050 this morning. Crude oil recovers as strong China PMI re-ignites demand focus Brent crude trades near $84 and WTI at $77.50 as both futures markets continue to recover from the latest the macroeconomic related selloff. With a hawkish Fed having been priced in, the dollar has started to weaken allowing traders to return their focus to an ongoing recovery in China. The strength of which was confirmed overnight when China’s PMI data showed across the board strength. The official headline surged to 52.6 and highest since 2012 while production and new orders improving markedly and new export orders move well above 50 and into expansion territory for the first time in 23 months. Increased tightness is being signaled through steepening prompt spreads with Brent trading at 59 cents a barrel from a recent 34 cent low. Also supporting are reports that Russia is struggling to find new buyers with million of barrels currently stored at sea. Ahead of EIA’s weekly stock report, the API said US inventories rose 6.2m barrels last week. Short-term momentum indicators point to higher prices with Brent once looking to challenge the downtrend from last March around $84.50. Silver led gold higher, but more work needed to shift sentiment Precious metals trade higher for a third day after the market concluded the latest round of hawkish comments from US FOMC members and additional rate hikes were now being fully priced in. Continued strength in US yields, near recent highs, have been offset by weaker dollar, allowing buyers once again to gain the upper hand. Silver, down around 12% in January, led the recovery which gathered speed overnight following the release of stronger than expected economic data in China (see below). The gold-silver ratio which yesterday hit a four-month high at 88.4 (ounces of silver to one ounce of gold) has since retraced to around 86.80. Gold as a minimum needs to break $1864, and silver $22 to signal an end to the current corrections Industrial metals jump on strong China rebound Copper and not least aluminum, zinc and iron ore traded higher following a batch of economic data from China showed improved factory activity as well as rising home sales, both driving expectations for an accelerated demand recovery, thereby once again replacing concerns about the economic impact of additional US rate hikes. Having found support below $4, the HG copper futures contract trades back above its 21DMA, a sign momentum is turning positive again. Since mid January the price has traded within a 30 cents downward trending channel, and for that to change, the price needs to break above $4.20, some 2% above the current level. Focus now turns to on China’s “Two Sessions” starting at the weekend. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) steady near recent highs US Treasury yields staid pinned near recent cycle highs, with the 2-year trading above 4.8% this morning again and the 10-year benchmark hovering just below 4.00%. Yields were dragged higher yesterday by a fresh surge in European short yields on the French and Spanish CPI data for February (see below) and stayed elevated in the US despite the weak February Consumer Confidence print. The next test for the US treasury market is perhaps the February ISM Services survey on Friday. What is going on? China's economy shows strong recovery as PMI’s beat expectations The official NBS China Manufactuing PMI surged to 52.6 in February, the highest level since 2012, from 50.1 in January. The strength was across the board with the Production sub-index and New Orders sub-index improving markedly to 56.7 and 54.1 respectively. When a diffusion index goes above 50, it signals expansion. The export sector, which has until now been sluggish, showed signs of a strong recovery. The New Export Orders sub-index in the NBS survey unexpectedly surged to 54.1 in February from 46.1 in January and was the first time returning to the expansion territory in 23 months. The Caixin Manufacturing PMI, which covers smaller and more private enterprises in the export-oriented coastal regions of China relative to those covered in the NBS survey, also recovered strongly to 51.6 in February from 49.2 in January and the new order sub-index in the Caixin survey bounced to 52.2 from 49.3. The NBS non-manufacturing PMI continued to accelerate well into expansion, rising to 56.3 from 54.4. Both major sub-indices rose further, with the Services sub-index advancing to 55.6 and the Construction sub-index soaring to 60.2. US consumer confidence in a surprise drop, labor market strength intact The Conference Board's US consumer confidence index saw a surprise fall to 102.9 in February (vs. exp 108.5) from January’s 106 which was also revised lower from 107.1. The present situation index looked resilient at 152.8 from 151.1 and reaching its highest levels since April 2022, but the forward expectations index declined to 69.7 from 76.0 previously. While the headline figures may be a small input for the Fed, the labor-supply mismatch has become more evident from the consumer confidence report. The report showed that the labor differential improved to 41.5 in February from 37 in the prior month, rising for a third consecutive month and reaching its highest levels since April 2022. The differential represents the percentage of respondents who say jobs “are plentiful” less those who say jobs “are hard to get”. Its rise could be an early indication of labor market strength heading into next week’s February Payrolls data. Focus turns to ISM manufacturing survey today which is expected to improve but still remain in contraction. ECB rate hike bets pick up after higher French and Spanish inflation Consumer prices in France jumped by a record 7.2% YoY in February as food and services costs increased, while Spain saw a stronger-than-expected 6.1% YoY advance. The strong inflation now results mostly from companies passing through to consumers higher prices in the service sector and higher food prices. Looking at the French data, food prices (price increase of+14.5% YoY) contribute twice more to inflation than energy prices. The increase of prices in the service sector (which represents about 50% of the CPI basket) is another source of worry. Expect it to get worse in the short-term. We also see a similar trend in most European countries (the situation is even uglier in the CEE region), with the first print of German February inflation due today and the Eurozone print due tomorrow. Euro bonds slid with German yields up 7bps and Spanish yields up 6bps as ECB terminal rate pricing briefly touched 4%. AUD swings to a gain after China’s economy shows signs of a stronger rebound After China's manufacturing activity hit a decade high as noted above, the Australian dollar against the US dollar (AUDUSD) rose sharply. Iron ore, copper and aluminium prices all gained. This supported the AUDUSD pair rebounding from 10-week lows, which it hit earlier after Australian GDP slowed to pace of 2.7% YoY in Q4 as expected while headline monthly CPI cooled to 7.4% YoY, vs the 8.1% growth forecast. Short covering also added to the Aussie dollar whipsawing higher. What are we watching next? Tesla Investor Day Tesla’s annual ‘Investor Day’ is scheduled for tonight at 21:00 GMT and will be livestreamed on Tesla’s website. Elon Musk has teased in tweets that the Investor Day presentation will revolve around the part 3 in his ‘Master Plan’ which was first announced back in 2006 and Elon Musk has specially written that the ‘Master Plan 3’ is about ‘the path to a fully sustainable energy future for Earth...’ suggesting it might be around energy. One the key variables in the path to electrifying society is about energy production, energy storage, and the electric grid, and as such it might be that Tesla will aim solve these issues so Tesla’s growth is not constrained too early by the lack of investments and solutions on the infrastructure side of the equation. Germany’s Feb. CPI data today, Eurozone Feb. CPI tomorrow After French and Spanish February CPI readings sparked higher expectations for the ECB as noted above, we will get a look at German regional CPI releases this morning for February and the nationwide data this afternoon at 1300 GMT, with the German 2-year yield having leaped to nearly 3.20% yesterday after starting the weak below 2.9%. Expectations are for a reading of +0.5% MoM and +8.5% YoY vs. +8.75 in January, with the “EU Harmonized” reading seen slowing to +9.0% YoY vs. 9.2% in Jan. Earnings to watch Today’s key US earnings releases to watch are Salesforce (reporting after the close), Snowflake (reporting after the close), and NIO (reporting before the open). Analysts expect Salesforce to report 9% y/y revenue growth for the quarter that ended in January and EBITDA of $2.67bn up from $1.02bn a year ago as the software application maker is under pressure from several activist investors to improve profitability. Analysts expect Snowflake to report revenue growth of 50% y/y in the quarter that ended in January and EBITDA of $25mn up from $-146mn a year ago. NIO, that finally ramped up its EV production in Q4 after several quarters of slow increases, is expected to report 73% y/y revenue growth but still delivering an operating loss of CNY -3.4bn. Wednesday: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final Feb. Manufacturing PMI 0855 – Germany Feb. Unemployment Change / Claims 0930 – UK Jan. Mortgage Approvals 1000 – UK Bank of England Governor Andrew Bailey to speak 1300 – Germany Feb. CPI 1500 – US Feb. ISM Manufacturing 1530 – EIA's Weekly Crude and Fuel Stock Report 1830 – Mexico Central Bank Inflation Report 0030 – Australia Jan. Building Approvals   Source:Financial Markets Today: Quick Take – March 1, 2023 | Saxo Group (home.saxo)

Summary:  Hot Spanish and French inflation data, along with a soft US consumer confidence report and month-end flows, made for a bumpy ride in equities and bonds to close the month of February. Dollar strength however prevailed at the close of the month despite a bump higher in EUR and GBP earlier in the day. A big miss in Australia’s Q4 GDP and January inflation saw AUDUSD plunge 30bps. Target beat earnings estimates but missed margins and lowered annual guidance. On watch today will be China PMIs, German inflation and US ISM manufacturing.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slipped on falls in consumer confidence and Chicago PMI The major U.S. equity indices posted their second negative month in three - despite starting the year higher. Treasury yields are denting sentiment amid fears that higher Fed Reserve rates would remain in place for longer after inflation fears have been creeping back into the market - while stronger European inflation data strengthened the case for more hikes. On Tuesday, the S&P 500 dropped 0.3% and Nasdaq 100 slipped 0.1% following an unexpected decline in the Conference Board Consumer Confidence and a weaker Chicago PMI print. Most sectors within the S&P500 were down while materials, communication services, and financials inched up. Target (TGT:xnys) gained 1% after the discount store chain beat earnings estimates but missed margins and lowered annual guidance. With traders again reducing bets that the Fed will cut rates this year, the S&P 500 was down 2.6% last month. In contrast, European indices closed in gains for the month of February, with France’s CAC up 2.7%, Euro Stoxx 600 up 1.8% and German DAX up 1.6% despite a big surge in European yields as well. Yields on the short end of the US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) climbed on hotter-than-expected inflation prints in France and Spain Yields on U.S. Treasuries climbed in early trading following the sell-off in European government bonds in response to hot inflation prints in France and Italy. The long end of the Treasury curve recovered after the Chicago PMI, Richmond Fed Manufacturing Index, and Conference Board Consumer Confidence unexpectedly slipped. The 10-year notes pared most losses and finished Tuesday only 1bp cheaper at 3.92% while the yield on the 2-year was 4bps higher at 4.82%. The 2-10 year curve flattened to -89. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) ended a three-month streak of gains The Hang Seng Index and CSI300 index finished February with the first monthly loss since October 2022, ending a three-month streak of gains. In February, Hang Seng Index fell sharply by 9.4% while A-shares’ broad benchmark CSI300 outperformed, sliding moderately by 2.1%. The weakness in Hang Seng Index was driven by large declines in mega-cap e-Commerce platforms. Weighed on by the prospect of intensifying competition, JD.com (09618:xhkg) tumbled 25%, Meituan (03690:xhkg) down 22.4%, and Alibaba (09988:xhkg) down 19.6% over the month. Baidu (09888:xhkg) bucked the market trend and weakness among peers, climbing 1.8% on traction gained in AI-generated content solutions. In the near term, investors will be having a gauge into the strength of the economic recovery from the official NBS Manufacturing PMI, Non-manufacturing PMI, and Caixin China Manufacturing PMI scheduled to release today. After that, the focus will be on the State Council’s Government Work Report which includes, among other items, the growth target for 2023, delivered to the National People’s Congress on 5 March, and then the reshuffling of top leadership in the State Council and other key offices of the Chinese government during the National People’s Congress. Australian equities (ASXSP200.I) retreat back to January levels, with markets pricing in more Fed and RBA hikes Focus today is on commodities – with oil and copper moving higher, while the broad market is being pressured with markets adjusting to higher for longer CPI. We will be watching the reaction to China PMIs - which are expected to boost sentiment in commodities. Short term pressure continues for the Australia dollar after GDP and CPI slowed Australian GDP data showed fourth-quarter economic growth slowed down to pace of 2.7% YoY as expected- quashed by higher inflation and interest rates. Meanwhile, headline monthly CPI showed inflation is cooling – falling to a pace of 7.4% YoY vs the 8.1% price growth forecast. This theoretically pressures the Aussie dollar lower in the shorter term, while the US dollar is continuing to move up – with the dollar index up 4% from its lows - with the market pricing in more Fed rate hikes and potentially no Fed cuts this year – which is in line with our view. Our view is that the Aussie dollar could see strength return in Q2, and we maintain a longer-term bullish view on the Aussie dollar in line with our positive commodity outlook. In other news, Sydney property prices, the bellwether of the Australia market, rose for the first time in 13 months in February in - this is a positive sign for home values – but goes against the grain of what the RBA expected and supports the notion of the RBA keeping rates higher for longer. FX: AUD and JPY were the laggards last month as dollar regained ground The dollar closed firmer at the end of the month which spelled inflation concerns coming back and sent the short-end yields surging to record highs. AUDUSD was the weakest on the G10 board as a beating of the risk sentiment and weaker metal prices saw pair test 0.67 despite the return of RBA’s hawkish stance. Yen had a double blow from surging yields and Ueda’s dovish read, and USDJPY tested 137 last night before getting back below 136.50. EURUSD touched highs of 1.0650 after the French/Spanish inflation prints last night but is back below 1.0570 now. GBPUSD also got in close sights of 1.2150 but back closer to 1.2000 now. Commodities: Copper and oil nudge up - we think the commodity bull market run will be on pause till Q2   The oil prices rose 1.5% with traders reading between the lines at IEA commentary - which alluded to Chinese demand rising - while there is a bigger worry for the EU - should there be a complete halt to Russian flows - which would be a bullish scenario for oil and perhaps see prices move back up to last year's unsustainable highs. As for other commodities - Copper moved further above the key $4 mark after rising almost 2%. Aluminium rose 0.6%, while other metals were lower. At Saxo - our view is that the Commodity bull market will be on pause - before restarting strongly in Q2 with material demand expected to rise from China. Crude oil showing some early signs of life A rally in crude oil prices to the top of last week’s trading range is suggesting some early signs of a recovery towards the top of the trading range that has been established since late 2022. With the Fed rate hikes now well priced in by the markets, focus is moving back to sanctions on Russia that continue to threaten supplies. Meanwhile, sentiment on China demand recovery may be back with the Two Sessions likely to announce a strong policy commitment to growth rebound this year. This is offsetting global demand concerns emanating from API data showing a 10th straight weekly crude build. WTI prices touched $78 overnight and Brent was at $84.   What to consider? US consumer confidence in a surprise drop, labor market strength intact The Conference Board's US consumer confidence index saw a surprise fall to 102.9 in February (vs. exp 108.5) from January’s 106 which was also revised lower from 107.1. The present situation index looked resilient at 152.8 from 151.1 and reaching its highest levels since April 2022, but the forward expectations index declined to 69.7 from 76.0 previously. While the headline figures may be a small input for the Fed, the labor-supply mismatch has become more evident from the consumer confidence report. The report showed that the labor differential improved to 41.5 in February from 37 in the prior month, rising for a third consecutive month and reaching its highest levels since April 2022. The differential represents the percentage of respondents who say jobs “are plentiful” less those who say jobs “are hard to get”. Its rise could be an early indication of labor market strength heading into next week’s payrolls and JOLTs reports. Focus turns to ISM manufacturing survey today which is expected to accelerate but still remain in contraction. ECB rate hike bets pick up after higher French and Spanish inflation Consumer prices in France jumped by a record 7.2% YoY in February as food and services costs increased, while Spain saw a stronger-than-expected 6.1% YoY advance. The strong inflation now results mostly from companies passing through to consumers higher prices in the service sector and higher food prices. Looking at the French data, food prices (price increase of+14.5% YoY) contribute twice more to inflation than energy prices. The increase of prices in the service sector (which represents about 50% of the CPI basket) is another source of worry. Expect it to get worse in the short-term. We also see a similar trend in most European countries (the situation is even uglier in the CEE region), with the first print of German February inflation due today and the Eurozone print due tomorrow. Euro bonds slid with German yields up 7bps and Spanish yields up 6bps as ECB terminal rate pricing briefly touched 4%. China PMIs are expected to show further recovery in the economy Scheduled to release on Wednesday, the official NBS Manufacturing PMI, according to survey from Bloomberg, is expected to bounce further into expansion at 50.6 in February from 50.1 in January and the Non-manufacturing PMI is forecasted to climb to 54.9 from 54.4. Despite the sluggishness in exports, Caixin China PMI is expected to return to the expansionary territory at 50.7 in February, from 49.2 in January. The Emerging Industries PMI jumped to 62.5 in February from 50.9 in January adding to the favourable forecasts for the NBS and Caixin PMIs. Target’s earnings beat with stronger-than-expected sales growth but margins missed and annual guidance weaker-than-expected Target (TGT:xnys) reported FYQ4 (ending Jan 31, 2023) EPS of USD1.89, nearly 28% above the consensus estimate of USD1.48. The earnings beat was driven by a stronger-than-expected 0.7% Y/Y growth in same-store sales and a 1.3% Y/Y growth in total sales, while both were expected to fall. Notable strength was found in food and beverage, beauty, and household essentials. Discretionary categories remained soft. Weakness, however, showed up in the gross margins which declined to 22.7% in Q4 from 25.7% in the prior-year quarter. EBIT margins fell to 3.7% from 6.8% a year ago. For the current fiscal year’s annual guidance, the management is expecting between a low-single-digit decline and a low-single-digit increase in same-store sales and a below-consensus operating income of about USD 4.9 billion. Brewers results on watch amid the reopening trade   Budweiser Brewing Co (1876 HK), the Asia distributor - is due to release results today. Q4 revenue is expected to get a little boost from the FIFA World Cup trading - but is still expected to dive. Its outlook could be tainted as higher beer taxes are ahead for South Korea - while Budweiser’s APAC brands are on notice with proposed liqueur taxes there looming – which could slow business growth. The world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) reports on Thursday, and could see higher volatility - for more click here. EV makers on watch: Tesla bolsters efforts to boost production, Rivian gives lacklustre outlook Tesla is continuing to march ahead with its lofty EV production goals - and now looks set to build a plant in northern Mexico. The news precedes Wednesday's reveal of Elon Musk's next phase "master plan," which will test the resurgent enthusiasm for the EV maker. Further details of the Mexico plan are expected to also be released this week. Meanwhile, Tesla’s competitor, Rivian forecasts 50,000 EVs will be produced this year – which was weaker than the market expected. Its fourth quarter revenue also missed expectations making $663 million – vs the $717 million consensus expected.     For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Markets Today: Crude oil and copper recover – 1 March 2023 | Saxo Group (home.saxo)

Summary:  Today we look at yields remaining near cycle highs, with US equities struggling into the close after an odd, intraday rally stumbled. Note that end of month is rolling into view today after a terrible month for bonds, with the US 2-year yield up 60 basis points month-to-date into today. On that note, we delve into whether yields really have any bearing on company investment. Elsewhere, pondering what inspires crude to pull itself out of the range, forward curves in the commodity space, the struggling JPY, Tesla's incoming Investor Day and much 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 available 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.   Read next: Elon Musk Is Richest Man Again, The State Bank Of India Had Raised $1 Billion From Global Banks| 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: Podcast: Can yields also be the cart and not the horse? | Saxo Group (home.saxo)

Summary:  In FX, The US equity market tried to rally yesterday after Friday’s pummeling on hot inflation data, but generally failed to maintain altitude and dropped back close to unchanged on the session as key support remains in place. End of month flows could drive volatility today. In FX, sterling modestly firmer in the wake of post-Brexit settlement between the EU And UK on the Northern Ireland border issue. What is our trading focus? US equities (US500.I and USNAS100.I): S&P 500 futures remain in limbo US equities bounced back yesterday at point engulfing the entire selloff from last Friday before S&P 500 futures gave up its gains towards the end of the session. This morning the index futures opened higher but have sold off trading around the 3,984 level in early European trading hours. Equities have moved into a short-term hibernation until the market gets more clearer evidence of where the bond market wants to go and whether growth is picking up in China following the reopening of the economy post its zero-Covid policy. Hang Seng Index (HSI.I) pared early gains as tech names tumbled The Hang Seng Index jumped over 1% in early trading before paring all the gains and headed south, losing about 0.3% in the absence of headline drivers. Chinese developers, technology, and solar names led the charge lower. While A-share solar, energy storage, and chemical stocks retreated, the CSI300 was supported by consumer, textile, and pharmaceutical names and managed to advance 0.5%. FX: GBP rallies on Brexit trade deal, AUD still a laggard The USD softened in early Monday trading in the US yesterday, nearly erasing all of Friday’s gains as yields fell and stocks jumped in a risk-on environment, but the risk rally faded and the USD rebounded slightly. US durable goods data missed estimates, cooling off some of the momentum in short US yields. However, inflation fears continue to spell caution and no reversal in Fed’s tightening expectations was seen. Most of the USD softness came on the back of GBP strength on UK-EU finalizing a deal to smoothen Northern Ireland trade. GBPUSD surged from 1.1923 to 1.2060 and EURGBP slid below 0.88. AUDUSD failed to break below 0.67 handle but remained near recent lows even as metals recovered a notch. Crude oil remains anchored near lower end of range Crude oil futures slipped again on Monday before finding a bid overnight in Asia. Developments that continue to see the price action being confined within a narrowing range. Crude oil may nevertheless be heading for a fourth monthly loss as concerns about tighter monetary policies raises concerns about a hard landing and with that weaker demand for crude and products. While a slower than expected start to the year has triggered price downgrades from banks, the consensus still points to a pickup in demand and prices above $90 later in the year. A view shared by Vitol, the world’s largest independent oil trader who sees oil rise later in the year in response to a 2.2 million barrels a day jump in 2023 demand. In Brent we find ascending trendline support at $80.70 with resistance at $83.60. Copper back above $4 amid risk-on, Lithium supply concerns return A broad recovery in base metals was seen on Monday as the focus turns to this week’s Two Sessions gathering in Beijing where traders will be looking for fresh signals from the government. Copper trades back above $4 after finding support around $3.94, the December high. Also, in focus this week is China’s PMI releases due on Wednesday to assess the pickup in Chinese activity after Covid restrictions have been eased. Aluminum also gained following four weeks of losses amid ongoing supply concerns. Zinc and aluminium smelters in Yunnan have been asked to reduce output due to power rationing. Concerns about Lithium supply are also likely to rise as China investigates illegal mining. Operations in Yichun have been ordered to halt work indefinitely. The move could impact between 8-13% of global supply. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) flat ahead of end-of-month US Treasury yields rose slightly again yesterday to new 15-year highs after Friday’s jump on hot US PCE inflation but then eased back to approximately unchanged. It’s been a tough month for treasuries, with the 2-year yield benchmark surging some 60 basis points this month and the 10-year benchmark yield up over 30 basis points. Today is the last trading day of February and could see month-end rebalancing as we await incoming US data. Read next: EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained| FXMAG.COM What is going on? UK-EU Brexit deal on Northern Ireland trade sealed The UK and EU reached a deal on Northern Ireland's trading arrangements aimed at ending years of friction caused by Brexit. The deal, known as “Windsor Framework”, aims to considerably cut customs paperwork and checks on goods moving from Great Britain but destined to stay in Northern Ireland. Existing requirements on trade from Northern Ireland to the UK will be removed. GBPUSD surged on the news to 1.20+. Yellen in Kyiv to show support Janet Yellen made an unannounced trip to Ukraine to highlight US support. She met with Zelensky and PM Shmyhal and also announced a disbursement of $1.25 billion in fresh economic aid, the first out of a total $10 billion pledged by the administration. It was also reported that the dignitaries discussed additional sanctions on Russia, including confiscating frozen Russian assets to benefit Ukraine's recovery, despite legal obstacles. Tesla shares gains 5% on German production ramp up Reuters reported yesterday that Tesla’s German car plant production hits 4,000 cars/wk which is ahead of schedule boosting sentiment. At this point, we do not know how big the cannibilazation is against its Shanghai production plant which has been the main exporter to Europe. On Friday, one of its more prolific investors Ross Gerber pulled his activist board seat bid suggesting shareholders are holding back from their criticism. Overnight one of Tesla’s suppliers, South Korea based L&F, announced that it had won a KRW 3.8trn cathode materials order, again suggesting demand is ramping up for Tesla. Zoom video rallied over 7% in post-market trading on a strong profit outlook The company reported slightly weaker sales than expected, but forecast Q1 profit of 96-98 cents per share versus analyst consensus of 87 cents and full year profits and especially 2024 profits well above analyst estimates. Zoom is reporting growth in enterprise customers while a shrinking revenue from individual consumers and small businesses. Energy giant Occidental reports disappointing results Occidental reported record quarterly earnings, but missed expectations after costs rose more than expected. The company guided for higher spending ahead, including on its direct air carbon reduction project. For the year ahead, it expects capital expenditure to be as high as $6.2b - vs $5.66b expected. OXY increased its dividend by 38% and announced a new $3 billion share buyback. Its adjusted EPS came in at $1.61, missing the $1.79 Bloomberg consensus. The miss also comes as it received lower than expected realised prices for natural gas - while realised prices for oil were slightly higher than expected.  Warren Buffett’s Berkshire Hathaway is the largest shareholder. A conference call to discuss the results for OXY is at 1 pm ET on Tuesday. Occidental shares fell 1% after hours. Occidental is the only major oil company reporting recently that missed market expectations – while Shell, BP and Woodside all beat. What are we watching next? Softer Eurozone flash February CPI may not be a big relief Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed. France and Spain report preliminary Feb. CPI figures today, while Germany reports CPI tomorrow. Earnings to watch Today’s key US earnings to watch is Coupang and First Solar with the former being part of our earnings preview from last Friday and analysts expecting Coupang to announce 7% revenue growth and EBITDA of $197mn up from $-248mn a year ago as the company is under pressure to increase profitability. Coupang reports its Q4 earnings releases after the US market close. First Solar is expected to report its Q4 earnings after the US market close with analysts expecting 10% revenue growth y/y and EBITDA of $48mn down from $262mn a year ago. Tuesday: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 0745 – France Feb. Flash CPI 0800 – Spain Feb. Flash CPI 1215 – UK Bank of England Chief Economist Huw Pill to speak 1330 – Canada Dec. GDP 1400 – US Dec. S&P CoreLogic Home Price Index 1500 – US Feb. Consumer Confidence 1500 – US Feb. Richmond Fed Business Conditions 1530 – US Feb. Dallas Fed Services Activity 1930 – US Fed’s Goolsbee (Voter 2023) to speak 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Q4 GDP 0030 – Australia Jan. CPI 0130 – China Feb. Manufacturing/Non-manufacturing PMI 0145 – China Feb. Caixin Manufacturing PMI     Source: Financial Markets Today: Quick Take – February 28, 2023 | Saxo Group (home.saxo)

Summary:  Risk sentiment revived on Monday, paring some of the jitters from a hot PCE report on Friday. Month-end flows saw Treasuries firmer and stocks higher, and the losses in dollar were accentuated by GBP strength after UK-EU deal to smoothen Northern Ireland trade. European indices however outperformed while Asia Pacific indices ASX and HSI remain in downtrends. Metal prices firmed up amid a softer dollar with Copper back above $4 support. Focus today on Eurozone flash CPI before US ISM and China PMIs take away the headlines.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) moved up cautiously, European equities outperform On Monday markets seemed pacified a little in a thin volume session after US headline durable goods orders fell in January while the UK and the EU reached a deal on Northern Ireland’s trading arrangements after years of friction caused by Brexit. The S&P 500 rose as much as 1.2% to 4018 in early trading before paring much of the gains to close 0.3% higher. Gains in the benchmark index were driven by consumer discretionary, industrials, and information technology stocks. The Nasdaq 100 finished Monday rising 0.7%. Union Pacific (UNP:xnys) surged 9.4% after the railroad company announced to search for a new CEO. Solar energy equipment makers Enphase Energy (ENPH:xnas) and SolarEdge Technologies (SEDG:xnas) each advanced 5.9%.Telsa (TSLA:xnas) rallied 5.5% amid its German plant hitting a production level of 4,000 per week, three weeks ahead of schedule. European equities started the week on a stronger footing as well with EuroStoxx 600 and Germany’s DAX each up 1.1%, France’s CAC index up 1.5% and UK’s FTSE 100 up 0.7%. Some of the optimism came from UK PM Sunak striking a deal with the EU on Northern Ireland trade (read below). Retailers bounced higher as consumer spending remains resilient after fears of recession and energy crunch have eased and the prospect of Chinese demand. The short end of the US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) rallied as the long lend dragged by supply Yields on the 2-year through 5-year Treasury dropped 5bps on short covering amid mixed economic data with a decline in headline durable goods orders due to weak Boeing orders, strong pending home sales, and a weak Dallas Fed manufacturing activity index. The long end underperformed, with yields on the 10-year shed 3bps and the 30-year finished the Monday session unchanged. Upcoming corporate supply estimated to be more than USD30 billion this week weighed on the long end. Across the pond, the 10-year German Bund yield rose to as high as 2.59%, the highest level since 2011 following hawkish comments from ECB Governing Council member Vujcic. Yields on the 10-year Gilts jumped 15bps to 3.81% following the UK and the EU reached an agreement on treading arrangements in Northern Ireland. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) slid; Chinese consumer names bucked the decline Hang Seng Index and CSI300 extended their declines, falling around 0.3% and 0.4% respectively. Haidilao (06862:xhkg), surging 13.7%, was the best-performing stock within the Hang Seng Index, following the Chinese hotpot restaurant chain preannounced positive profit alert with an FY22 earnings beat. The Chinese consumption space did well overall. Budweiser Brewing (01876:xhkg) and China Resources Beer (00291:xhkg) each advanced over 2%. Xiabuxiabu (00520:xhkg) climbed 1.2%. The performance of China internet names was mixed. Kuaishou (01024:xhkg) gained 2.6% and was the biggest winner with the Hang Seng TECH Index. Nonetheless, news about China’s National Radio and Television Administration studying measures to tighten regulation over short videos broke out after the Hong Kong market close. Baidu (09888) rose 2% while Alibaba (09988:xhkg) slid 0.7%. In the EV space, BYD (01211:xhkg) lost 3.4% on price cuts while Li Auto (02015:xhkg) advanced 2.1% after reporting a 41% Y/Y jump in Q4 non-GAAP earnings, beating estimates. XPeng (09869:xhkg) edged up 0.3% after being added to the Hang Seng China Enterprises Index with a weight of 0.59%. In A-shares, solar, AI generated content, media, electronic, and construction materials declined. Food and beverage, and Chinese white liquor names, coal mining, chemical, and communication bucked the overall trend of decline. Kweichow Moutai (600519:xssc) climbed 1.3%; Wuliangye (000858:xsec) advanced 1.8%. Australian equities (ASXSP200.I) move up - but remain at the lowest levels since Jan 12 The ASX200’s short term downtrend still appears to be at play, despite the market rising 0.6% today. Pressuring equities now are a trifecta of reasons- not only a more hawkish RBA, plus its ex-dividend season – marking the 2nd worst month of the year, and thirdly, from a technical perspective, quant traders will be on their toes as the ASX200 is testing a rising trend line, that it formed last year. If it breaks below the area tested yesterday - the market could be at risk of falling further. What does it mean when shares are trading ex-dividend? It’s simply where the dividend right is transferred to shareholders, ahead of dividends being paid out. This typically pressures share price performance. For longer term investors and those seeking yield (dividends)– it be worth considering buying a company’s shares before the ex-date if you wanted to be entitled to the upcoming dividend to be paid. But also keep in mind, when a company goes ex-dividend on the day, it usually falls. For example yesterday Fortescue shares fell 4.1% after going ex-dividend, moving FMG under its 50-day moving average. Today, one day after going ex-dividend Fortescue’s shares trade  3% higher. Though it is worth mentioning, the iron ore price rising 0.7% is adding to positive sentiment after the iron ore price fell over 3% on Monday. So - it’s important to consider companies going ex-dividend ahead. Today, Origin Energy, Evolution Mining, WorleyParsons and Domino’s go ex-dividend. Coles and Woolworths go ex-dividend on March 2, along with Pilbara Minerals. Next week on March 9 - BHP and RIO go ex-dividend, along with Mineral Resources, South32, the ASX, and CSL. FX: GBP surged on Brexit trade deal, AUD still a laggard The USD softened on Monday, nearly erasing all of Friday’s gains as yields fell and stocks jumped in a risk-on environment. US durable goods data missed estimates, cooling off some concerns of another uptick in the tightening pace. However, inflation fears continue to spell caution and no reversal in Fed’s tightening expectations was seen. Most of the USD softness came on the back of GBP strength on UK-EU finalizing a deal to smoothen Northern Ireland trade. GBPUSD surged from 1.1923 to 1.2060 and EURGBP slid below 0.88. AUDUSD failed to break below 0.67 handle but remained near recent lows even as metals recovered a notch. Copper back above $4 amid risk-on, Lithium supply concerns return A broad recovery in base metals was seen as the PCE data from Friday didn’t materialize in risk sentiment capitulation. Copper prices rose ~1.5% after dropping to lows of $3.94 yesterday. Focus this week is on China’s PMI releases due on Wednesday to assess the pickup in Chinese activity after Covid restrictions have been eased. Aluminum also gained following four weeks of losses amid ongoing supply concerns. Zinc and aluminium smelters in Yunnan have been asked to reduce output due to power rationing. Concerns about Lithium supply are also likely to rise as China investigates illegal mining. Operations in Yichun have been ordered to halt work indefinitely. The move could impact between 8-13% of global supply.   What to consider? UK-EU Brexit deal on Northern Ireland trade sealed The UK and EU reached a deal on Northern Ireland's trading arrangements aimed at ending years of friction caused by Brexit. The deal, known as “Windsor Framework”, aims to considerably cut customs paperwork and checks on goods moving from Great Britain but destined to stay in Northern Ireland. Existing requirements on trade from Northern Ireland to the UK will be removed. GBPUSD surged on the news to 1.20+. Yellen in Kyiv to show support Janet Yellen made an unannounced trip to Ukraine to highlight US support. She met with Zelensky and PM Shmyhal and also announced a disbursement of $1.25 billion in fresh economic aid, the first out of a total $10 billion pledged by the administration. It was also reported that the dignitaries discussed additional sanctions on Russia, including confiscating frozen Russian assets to benefit Ukraine's recovery, despite legal obstacles. Food price inflation continues to ease – wheat prices tumble to lowest levels since Sept, 2021   As mentioned in Saxo’s Quick Take global wheat prices remain under pressure from a flood of Russian supplies forcing EU and US sellers to lower prices to stay competitive. In Chicago the soon to expire March wheat contract trades near a 17-month low, down 48% from the March 2022 panic peak while Paris Milling wheat has declined by 38%. The focus is turning to the outlook for global wheat crops this year. According to Bloomberg, US farmers are likely to plant more than analysts expect, and nearly all of France’s soft-wheat crop is in good to very good shape. Traders are also watching talks on the Ukraine grain-export deal, which is up for renewal in March. Click for the technical levels to watch in Wheat, Corn and Soybean Energy giant Occidental goes against the grain of the energy sector and disappoints   Occidental reported adjusted EPS of $1.61, missing the $1.79 Bloomberg consensus expected for the fourth quarter. Despite production increasing by about 3% YoY, the miss on earnings was a result of lower than expected realised prices for natural gas, while it received slightly higher realised prices for oil than expected. This was all while OXY increased capital expenditure to $1.5b, vs the $1.3b expected in the quarter and repaid $1.1 billion of debt. Despite delivering record earnings that missed expectations, OXY increased its dividend by 38% and announced a new $3 billion share buy back. Warren Buffett’s Berkshire Hathaway is the largest Occidental shareholder. The company will hold a conference call to discuss these results Tuesday at 1 p.m. ET. For the year ahead, OXY guides for cap ex to be as high as $6.2b (vs $5.66b). Occidental shares fell 1% after hours, moving further away from its 50-day moving average. Occidental is the only major oil company lately to report results that missed market expectations; with Shell, BP, and Woodside all beating. Softer Eurozone flash February CPI may not be a big relief Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Risk sentiment recovers; Month-end flows in play – 28 February 2023 | Saxo Group (home.saxo)

Summary:  Markets have been spooked recently by higher US inflation reinforcing the higher-for-longer interest rates rhetoric. Inflation risks continue to point towards further acceleration despite the easing of supply chain disruptions, mostly driven by services cost pressures underpinned by high wages. China’s reopening and the no-landing narrative will also bring fears of an additional inflationary impulse, along with structural issues of deglobalization and energy crunch. Broader expectations last year were inflation will fall back towards target in 2023, allowing central banks to cool down their pace of policy tightening. We have been in the inflation higher-for-longer camp since the days it has been called “transitory”, and a rude awakening for the markets is happening now bringing inflation expectations higher. January inflation data for the US and the Eurozone came in hot, fueling bets that central banks will have to do more to bring prices under control. Meanwhile, wages remain high due to the demand/supply imbalance in labor market further aggravating inflation concerns. US inflation concerns aggravate Fed’s preferred inflation gauge, the PCE deflator, came in hotter-than-expected for January. In addition, upward revisions to the previous month’s prints sent a strong hawkish signal to the markets reinforcing the Fed’s higher-for-longer message. Core PCE rose 4.7% YoY, accelerating from the upwardly revised 4.6% and above the expected 4.3% and the Fed’s target of 2%. The MoM rose 0.6%, hotter-than-expected and upwardly revised prior of 0.4%. This comes on top of a hot January CPI as well as PPI, all together underscoring persistent inflationary pressures and the need for the Fed to continue hiking rates. Supply chain disruptions easing, but risks won’t go away The cost of shopping containers have retreated from the covid-era peaks. Spot rates from Asia to the US West Coast, which increased more than 15-fold during the pandemic, have since returned to pre-Covid levels. Still, prices remain significantly higher that the pre-covid times, such as the short-term prices for containers from Europe to the US East Coast are still more than double what they were in late-2019. More importantly, risks remain elevated amid a rapidly deglobalizing world. The geopolitical tensions never went away since the year-ago Russian invasion of Ukraine, but have accelerated meaningfully again the last few weeks as we approached the one-year anniversary of the war. Alongside, rising tensions over Taiwan and the US-China relations have become an increasing focus. So even if spot prices in shipping are easing, the contracts have been renegotiated at higher prices in 2021 and 2022 at much higher rates, and the potential for discount remains limited for now given the high risk environment. That is a key reason why the disinflation in goods prices, which was highlighted by Chair Powell at the February FOMC, has quickly reversed and remains volatile at best. It’s hard to get comfortable about the trend in goods inflation, let alone the surging services inflation. Source: Freightos, Bloomberg, Saxo Wage pressures are a key concern Despite widespread news of tech layoffs, the January jobs growth of +517k sent a shockwave to the markets. Unemployment rate touched a 53-year low as service providers expanded their activities. Likewise, jobless claims data and surveys on unemployment all continue to point at hiring and wages would remain on an upward path. With the demand and supply imbalance in the labor markets continuing, companies are feeling wage pressures eat into their margins. As the US consumer is still holding up well even in the wake of high inflation and interest rates, companies with pricing power will pass on these wage costs to the consumers, thereby creating more upside pressures to inflation and a potential wage-price spiral. Re-acceleration of cyclical growth Transition from a recession to a goldilocks/soft-landing narrative to the current no-landing/acceleration narrative isn’t all positive for the markets. The Atlanta Fed GDPNow model estimate for real GDP growth in Q1 is now at 2.7% from 0.7%, which is hardly a sign of recession or stagnation. Overall, recent economic data suggests that the US economy is reheating, and the market is moving to price that in by bringing the terminal rate forecast higher and driving out the rate cuts priced in for this year to 2024. This also brings back the risk of higher inflation. The reopening of the Chinese economy also brings fears of an inflationary impulse through commodity and raw material prices. Cleveland Fed economists Randal Verbrugge and Saeed Zaman have said that it will likely take US inflation many more years than central bankers and financial markets expect to close in on 2% without a deep recession. Upward repricing of the Fed path Beyond cyclical risks, inflation continues to face upside threat from structural factors such as shortage of labor, deglobalization as well as the energy supply crunch. US breakevens are signalling renewed concern that inflation will stay elevated in the shorter term, with the 2-year rate above 3% for the first time since August 2022 and the 10-year rate holding at around 2.5%. As such, market expectations of the Fed path have seen a dramatic shift from expecting a pause/pivot to now pricing in a terminal rate of 5.4% from sub-5% a month back. Calls for 6-7% terminal rates have also picked up. But the Fed has already transitioned to a 25bps rate hike pace, and it would potentially be a credibility issue if they were to move back to 50bps rate hike increments. So, a longer tightening cycle looks like the most likely outcome. Source: Bloomberg, Saxo Source: Macro Insights: Inflating inflation fears | Saxo Group (home.saxo)

Summary:  US PCE inflation data on Friday spooked the market as the Fed terminal rate for this year was taken higher still, with discussion of the risk of larger hikes even afoot. Both the US S&P 500 Index and Nasdaq 100 touched their 200-day moving averages intraday on Friday as yields jumped. This week’s focus still on geopolitical developments, faltering confidence in the China re-opening narrative and US Feb. ISM Surveys Wednesday and Friday, with the key US employment figures not up until next week. What is our trading focus? US equities (US500.I and USNAS100.I): bonds will continue to dictate where equities go US equities continued their decline on Friday with S&P 500 futures declined 1.1% to the lowest close since around mid-January as US inflation figures (PCE deflator) surprised to the upside. As we have explained in recent equity notes the equity market will be driven by the talk about structural inflation over the coming months and how that discussion recalibrates long-term US bond yields to higher levels. In late April and May when the Q1 earnings are released the discussion about margin compression will heat up again, so there are plenty of downside risks still in equities in 2023. Hang Seng Index (HSI.I) and CSI300 (000300.I) slid amid economic, policy, and geopolitical uncertainties Hang Seng Index and CSI300 extended their declines with both indices falling around 0.4-0.5%. Investors trimmed positions as sentiment was dampened by resurge of tension between the U.S. and China over Russia and Ukraine and the lack of substantive recovery in the Chinese economy aside from credit expansion and survey data. China’s central bank emphasized in its Q4 Report on the Execution of Monetary Policy that the monetary policy must be stable and not bring about excessive liquidity that induces excessive investment, a surge in debts, and asset bubbles. Investors interpreted that as a signal to lower the expectations of the market on aggressive monetary easing. The CCP’s central committee is holding a meeting from 26-28 February to decide on the recommendation list of candidates for top government posts to be sent to the National People’s Congress to finalize during the latter’s meeting commencing from 5 March. FX: Japanese yen touched YTD lows, GBP in focus with Brexit talks The dollar strength was back in focus as hot core January PCE inflation data on Friday took the repricing of the Fed’s path higher once again. With 2-year yields surging to their fresh highs, along with BOJ governor nominee Kazuo Ueda’s continued push for a loose monetary policy coming against market’s hawkish expectations, the Japanese yen plunged to its lowest levels this year, with USDJPY testing 136.50 overnight. Also worth watch will be AUDUSD which plunged in close sights of 0.67 as risk sentiment and commodity prices are taking a beating. Elsewhere, UK PM Sunak is making headlines with reports saying that he may have won big concessions in the looming Brexit deal, with reports suggesting that an agreement between the UK and European Union on Northern Ireland appears to be very close. UK PM Sunak and EU head Ursula Von Der Leyen will hold talks mid-day on Monday. These are being described as 'final talks'. This will be followed by a news conference and Sunak’s statement to the parliament. GBPUSD dropped below 1.20 with the 200DMA at 1.1928 in focus. Crude oil remains anchored near lower end of range Crude oil remains anchored near the lower end of its the established range that has prevailed since the end of 2022, in Brent between $80 and $89, and WTI between $82 and $73. Overall, the sentiment across markets, including commodities, suffered another blow last week after traders and investors in response to another hot US inflation data increased forecasts for US interest rates. Higher rates may hurt economic growth and with that fuel demand from consumers. China meanwhile remains on a recovery track but for now it has only prevented an even deeper selloff in crude oil. A disruption in oil supply to Poland via the Druzhba pipeline from Russia, a day after Poland delivered its first Leopard tanks to Ukraine, is having a limited impact. Speculators meanwhile hold an elevated long position in Brent according to COT data released on Friday (see below). In focus this week, the annual International Energy Week which kicks off in London on Tuesday. Gold (XAUUSD) slumps towards next area of support The US dollar reached a multi-week peak in the aftermath of hot US data and together with higher yields have weighed on the yellow metal, with gold risking further weakness towards the 200DMA at $1776 amid a tough macro environment. US ISM PMIs in focus this week, along with more Fed speakers, as a guide to high how interest rates could go. Silver (XAGUSD) fell harder, down 2.5% on Friday and closing with a weekly loss of 4.5%, breaking below the 200DMA at $21. The gold-silver ratio meanwhile has spiked to 87.80 high, a 16% underperformance relative to gold since mid-December. Copper trades below $4 support With the US PCE data further aggravating concerns on Fed’s rate hike path and bringing the 2-year yields to fresh highs, base metals plummeted. Copper prices plunged to a seven-week low below the key $4 support with the next key support being the 200DMA at $3.77, the break above which triggered January’s surge. Incongruent signs of a pickup in Chinese demand also continue to underpin, and the PMI reports this week will be key to signal whether activity levels are picking up. However, with supply over time potentially struggling to keep up with demand, we view the current weakness as temporary and part of the general loss of confidence that has hit markets this month. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jump after hot core PCE inflation data The hot core US January PCE inflation data released on Friday (more below) shocked US yields to new cycle highs, with the 2-year treasury benchmark yield reaching above 4.8% for the first time since 2007 as the market moved to completely price in at least a 25bp hike each at the March, May, and June FOMC meeting plus about a 25% chance that the hike in March is 50bps, bringing the terminal rate to 5.4. The Jun-Dec 2023 spread narrowed 11bps to -11.5bps, almost entirely eliminating expectations for rate cuts in the second half of 2023. Ten-year yields poked toward the recent cycle highs just shy of 4.00% and the 2-10 yield slope closed the week at a new multi-decade inversion record of –89 basis points (an intraday spike on Feb. 15 saw it briefly below –90 bps). What is going on? Hot US PCE brings Fed terminal rate expectations up to 5.4% The PCE deflator for January came in hotter-than-expected, and together with upward revisions to the previous month’s prints these sent a strong hawkish signal to the markets reinforcing the Fed’s higher-for-longer message. The Core PCE rose 4.7% Y/Y, accelerating from the upwardly revised 4.6% and above the expected 4.3%. The M/M rose 0.6%, hotter than the expected and upwardly revised prior of 0.4%. This brought an upward repricing of the Fed path, with increasing calls for 50 bps at the March meeting and the terminal rate now priced in at 5.4% (82+ bps of further hiking from current level) and the end-2023 expectation at –12 bps relative to peak rates, Fed members remain cautious on the path of inflation Fed voter Jefferson spoke about labor market strength on Friday, saying that ongoing imbalance between supply/demand for labour suggests high inflation may come down only slowly and said the argument that policymakers should accept that disinflation will be costly is well-reasoned. Bullard (non-voter) was on the wires again as well, and reaffirmed the need to move quickly to shield credibility. Collins, also a non-voter, said that recent US data affirms the case for more rate hikes. Mester (non-voter) said the Fed has to do "a little more" on rate hikes saying the new inflation data affirms the case for more rate hikes to get inflation back to target. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. COT data shows unwavering support for higher Brent prices The ICE Futures Europe exchange released four weeks' worth of delayed COT data on Friday with reporting now up to date following the January cyber-attack on ION Trading UK, which caused delays in trades being reported. The US CFTC meanwhile released one COT report for the week ending January 31 with data unlikely to be up to date for another three weeks. ICE Brent data showed unwavering support for higher prices with funds holding a net long of 277k lots, a 16-month high and the weakest gross short position at 28k since 2011. The ICE gasoil (diesel) net long meanwhile dropped to 33.7k lots and lowest since November 2020. The futures contract (FPH3) trades near a one-year low with refinery margins under pressure as Middle East and Asian shipments replace supply from Russia. Food price inflation continues to ease One year on from the Russian attack on Ukraine which triggered a surge in wheat, corn and edible oils we a seeing prices continuing to deflate. Global wheat prices remain under pressure from a flood of Russian supplies forcing EU and US sellers to lower prices to stay competitive. In Chicago the soon to expire March wheat contract trades near a 17-month low, down 48% from the March 2022 panic peak while Paris Milling wheat has declined by 38%. The focus is turning to the outlook for global wheat crops this year. According to Bloomberg, US farmers are likely to plant more than analysts expect, and nearly all of France’s soft-wheat crop is in good to very good shape. Traders are also watching talks on the Ukraine grain-export deal, which is up for renewal in March. Berkshire Hathaway Q4 operating earnings miss estimates Warren Buffett’s holding company Berkshire Hathaway announced over the weekend operating earnings of $6.7bn vs est. $7.3bn driven by weaker results in its railroad and insurance businesses due to higher input costs for materials and labour. Berkshire Hathaway is still striking a positive outlook on the US economy. Warren Buffett also talks about the repurchases saying that they are not all bad if they are bought below the fair value. Woodside Energy reported profits triple in 2022 Following the theme of strong energy company earnings reports Woodside’s bottom line profits rose 228% fuelled by the rise of oil and gas prices, but also as Woodside output rose over 70%, after it acquired BHP’s oil and gas business. Woodside reported a larger final dividend of $1.44 per share, up from $1.05 a year ago. Its full year dividends payout stands at $4.8bn. On top of that, Woodside is now seeking opportunities to expand again narrowing in on potential buying assets in the Gulf of Mexico. Woodside’s record profit results follow a set of strong numbers from oil and gas producers including Shell, BP and Santos. This also sets the tone for energy companies in 2023. Woodside Energy shares ended 1.5% higher on Monday in Australia. Keep an eye on US and London listed Woodside.  Read next: Pfizer Is In The Early Stages Of An Acquisition Of Biotech Company Seagen, Twitter's Staff Has Shrunk Since Elon Musk Took Over| FXMAG.COM What are we watching next? China Government Work Report is delivered on 5 March This year’s Government Work Report will be delivered on 5 March. This will provide more details on policy action for urbanization and the property market. There will likely be two main points of interest: affordability (measures to increase accessibility to mortgage loans) and rural construction (focus on rural land transfers and reduction of complexity in regulation). With further stimulus measures in sight, we are confident that China will probably announce a higher GDP target at the upcoming National People’s Congress – meaning 5.5 %. US ISM surveys to be the next test for yields and US dollar The recent data out of the US has shown firm inflation and growth dynamics, prompting an upward repricing of the Fed’s path and bringing yields to critical levels. The ISM surveys this week will be key to watch for further direction, with the manufacturing survey out on Wednesday and services out on Friday. The consensus is for the manufacturing ISM to improve to 48.0 in February from 47.4 in January, but still in contraction (below 50) for a fourth consecutive month. The ISM services index saw a surge to 55.2 in January after a drop to 49.2 in December, partially a reflection of winter weather trends. Gains are likely to moderate, and consensus expects 54.5. EVs in focus – Tesla Investor Day and Li Auto and NIO report earnings China reopening theme is under strain, with the Asian reporting season underway, and this week brings earnings reports from two large EV manufacturers. Li Auto (02015:xhkg/LI:xnas) reported on Monday before China open while Nio (09866:xhkg/NIO:xnas) reports on Wednesday. It will be key to watch how Tesla’s steep discounts and the end of government subsidies impacts the outlooks for these two Chinese EV manufacturers which got off to a slow start this year, and whether the decline in lithium prices lifts the outlook higher. Tesla (TSLA:xnas) will hold an Investor Day event on March 1 in what could be one of the key days of the year for the electric vehicle giant. Nio, Li Auto and XPeng (09868:xhkg/XPEV:xnys) also report February deliveries this week, and China’s EV and battery giant BYD (01211:xhkg/BYD:xnys) should release February sales by Friday. Occidental earnings preview Oil and gas companies have again reported the best earnings growth this US and Australian corporate reporting season - with increased profits and higher dividends from Shell, BP and Santos. Occidental Petroleum’s outlook will be a focus today, as well as Canadian Natural Resources results later in the week. Occidental is expected to report its highest-ever Q4 net income, with the US energy giant set to benefit from high energy prices amid tight supplies. The oil and gas giant generated about $2.8bn in free cash flow in the period after years of austerity and debt reduction, according to Bloomberg consensus. Investors will closely monitor its 2023 spending and capital-returns outlook with adjusted EPS of $1.79 expected. Occidental's shares are down 6.6% this year. Earnings to watch Today’s key US earnings releases are Occidental Petroleum, Li Auto, and Zoom Video with a preview of Occidental Petroleum in the section above. Zoom Video will be watched as many retail investors still have a big interest in this pandemic winning company with analysts expecting FY23 Q4 (ending 31 Jan) up 3% y/y and EBITDA of $353mn up from $278mn a year ago. Li Auto is also in focus as the electric vehicle adoption continues to accelerate with Chinese production expected to expand more rapidly in 2023 as the zero-Covid policy has ended. Analysts expect Li Auto revenue growth of 66% y/y. The three other key earnings we are watching this are Salesforce, Snowflake, and Coupang which we highlight in our earnings watch note from last Friday. Monday: Woodside Energy, Alcon, Occidental Petroleum, Workday, Li Auto, Zoom Video Tuesday: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 1000 – Eurozone Feb. Confidence Surveys 1330 – US Jan. Preliminary Durable Goods Orders  1530 – US Feb. Dallas Fed Manufacturing Activity 1530 – US Fed’s Jefferson (Voter) to speak 1700 – ECB Chief Economist Lane to speak 2350 – Japan Jan. Industrial Production 0000 – New Zealand Feb. ANZ Business Confidence 0030 – Australia Jan. Retail Sales Source:Financial Markets Today: Quick Take – February 27, 2023 | Saxo Group (home.saxo)

Summary:  The U.S. ISM survey and China’s PMI reports are the key data to watch this week. After the hot employment and inflation data from the U.S., investors are searching for additional data to discern the competing scenarios of recession, soft-landing, and no-landing (i.e. strong growth). Investors are also in need of signs of economic recovery from China or additional positive policy signals from the Chinese authorities to sustain the U-turn in sentiment towards Chinese equities since November last year which has started to fade somewhat. Ueda, the new BOJ chief’s rhetoric on policy continuity will be put to test with this week’s Tokyo CPI due on Friday. US ISM surveys to be the next test for yields and US dollar The recent data out of the US has shown firm inflation and growth dynamics, prompting an upward repricing of the Fed’s path and bringing yields to critical levels. The 2-year yields in the US have touched their highest levels since 2007, and 10-year yields are in close sight of the key 4% zone which can spell further risk aversion. The ISM surveys this week will be key to watch for further direction, with the manufacturing survey out on Wednesday and services out on Friday. The consensus is for the manufacturing ISM to improve to 48.0 in February from 47.4 in January, but still remain in contraction (below 50). The ISM services index saw a surge to 55.2 in January after a drop to 49.2 in December, partially a reflection of winter weather trends. Gains are likely to moderate, and consensus expects 54.5. Also on watch will be the US durable goods orders for January, as mentioned in the Weekly Watch.   China PMIs are expected to show further recovery in the economy Also Wednesday - China’s PMI surveys are expected to show the recovery is progressing in February. We expect good news - with the services sector driving growth and manufacturing picking up slightly. These will be important signals - as monthly activity data won’t next be available until mid-March. The official NBS Manufacturing PMI, according to survey from Bloomberg, is expected to bounce further into expansion at 50.7 in February from 50.1 in January and the Non-manufacturing PMI is forecasted to climb to 55.0 from 54.4. Despite the sluggishness in exports, Caixin China PMI is expected to return to the expansionary territory at 50.8 in in February, from 49.2 in January. The Emerging Industries PMI jumped to 62.5 in February from 50.9 in January added to the favourable forecasts for the NBS and Caixin PMIs. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. Australian Economic news on tap to potentially pressure the ailing Aussie dollar Australian GDP data on Wednesday will likely show fourth-quarter economic growth slowed down to pace of 2.7% YoY - quashed by higher inflation and interest rates. And monthly CPI should show inflation is cooling. In these instances, that would theoretically pressure the Aussie dollar lower, while the US dollar is continuing to move up - so that’s something to watch. Softer Eurozone flash February CPI may not be a big relief, ECB minutes on tap as well Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed. Core measure on focus in Japan’s Tokyo CPI release The new Bank of Japan chief Kazuo Ueda’s testimonies in the parliament hinted at an unchanged monetary policy in the near-term, and a steadfast focus on achieving 2% inflation sustainably. Ueda remains in Kuroda’s camp on inflation, saying that the current inflationary pressures are mostly import-driven and inflation is expected to peak soon. This rhetoric will be put to test with this week’s Tokyo CPI due on Friday. Consensus expects the headline CPI to soften to 3.3% YoY from 4.4% YoY last month, perhaps signalling that nationwide numbers could ease as well. However, the core-core measure (ex-fresh food and energy) is likely to be firmer at 3.1% YoY in February from 3.0% previously. Energy companies will be a focus - after so far delivering the strongest earnings this season and last year Energy companies have again reported the best earnings growth this US and Australian corporate reporting season - with increased profits and dividends. Occidental Petroleum’s outlook will be a focus on Monday as well as Canadian Natural Resources - when they report later this week. Occidental is expected to report its highest-ever fourth-quarter net income – with the US energy giant to benefit from high energy prices amid tight supplies. The oil and gas giant generated about $2.8 billion in free cash flow in the period after years of austerity and debt reduction, according to Bloomberg consensus. Investors will closely monitor its 2023 spending and capital-returns outlook with adjust EPS of $1.79 expected. Occidental's shares are down 6.6% this year. For what Australia’s oil and gas giant - Woodside Energy reported on Monday see our daily team note – Markets Today. Also, keep in mind, we expect the oil price to stay around $80 this quarter and move up to $90 next quarter. Brewers will be interesting to watch amid the reopening trade Budweiser Brewing Co (1876 HK) which is a distributor is Asia - is due to release results on Wednesday with Q4 revenue to get a lifeline from the FIFA World Cup trading- but income is still expected to dive. However, the world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) may gain more attention when it reports on Thursday, as option volume rose 8% last week in BUD, with the market expecting EPS to grow from 1.94 to 3.01. For more on Brewers click here. EVs also in focus – Tesla Investor Day and Li Auto and NIO report earnings China reopening theme also continues to be on test with the Asian reporting season underway, and this week brings earnings reports from two key EV manufacturers. Li Auto (02015:xhkg/LI:xnas) reported on Monday before China open while Nio (09866:xhkg/NIO:xnas) reports on Wednesday. It will be key to watch how Tesla’s steep discounts and the end of government subsidy impacts the outlooks for these two Chinese EV manufacturers which got off to a slow start this year, and whether the decline in lithium prices lifts the outlook higher. Tesla (TSLA:xnas) will hold an Investor Day event on March 1 in what could be one of the key days of the year for the electric vehicle giant. Nio, Li Auto and XPeng (09868:xhkg/XPEV:xnys) also report February deliveries this week, and China’s EV and battery giant BYD (01211:xhkg/BYD:xnys) should release February sales by Friday.   Tech earnings to watch in the tech space: Salesforce, Snowflake, and Coupang In a note last Friday, Peter Garnry,  Saxo’s Head of Equity Strategy draws investors attention to Salesforce (CRM:xnys), Snowflake (SNOW:xnys), and Coupang (CPNG:xnys) announcing this week. Activist investors have entered Salesforce, a cloud-based enterprise software provider, over the past year and the pressure is going up on management to drastically improve profitability which is already being reflected in analyst estimates. Analysts expect revenue growth of 9.2% y/y down from 26% y/y a year and EBITDA of $2.67bn up from $1.02bn a year ago; Salesforce reports FY23 Q4 earnings (ending 31 Jan) on Thursday after the market close. Snowflake was one of the hottest IPOs before the interest rate shock cooled the stock to being more ordinary. The cloud infrastructure company is expected to report FY23 Q4 (ending 31 Jan) earnings on Thursday after the US market close with analysts expecting revenue growth of 50% y/y down 102% y/y a year ago and EBITDA of $25mn up from $-146mn a year ago. The third company to watch is Coupang because of its e-commerce exposure to South Korea which could potentially provide some colour consumer spending patterns in one of Asia’s most cyclical economies. If China’s reopening is progressing well then it should spill over into a more positive outlook for South Korea. Coupang reports earnings on Tuesday after the US market close with analysts expecting revenue growth of 7% y/y down from 34% y/y a year ago and EBITDA of $197mn up from $-248mn a year ago. The CCP’s Central Committee convenes the Second Plenum The 20th Central Committee of the Chinese Communist Party is holding the second plenum from 26 to 28 February to decide on the recommendation list of candidates for top government posts to be sent to the National People’s Congress to finalize during the latter’s meeting commencing from 5 March. Investors will watch closely the personnel arrangement on the state administration side, especially who will be put in the top positions in various financial policy-setting and regulatory authorities amid market chatter of the Party’s plan to pursue a major shake-up of the financial system. Macro data on watch this week Monday 27 FebruaryUS                   Durable goods orders (Jan)Eurozone         Consumer confidence/economic confidence/industrial confidence (Feb) Tuesday 28 FebruaryUS                   Chicago PMI (Feb)Japan              Industrial production (Jan)Japan              Retail sales (Jan)Japan              Housing starts (Jan)India                Real GDP (Q4) Wednesday 1 MarchUS                   ISM manufacturing Index (Feb)Germany          Unemployment (Feb)Germany          CPI (EU harmonized; Feb flash)Australia          Real GDP (Q4)Australia          CPI (Jan)South Korea    Exports (Feb) Thursday 2 MarchUS                   Non-farm productivity (Q4, final)US                   Unit labor costs (Q4, final)Eurozone         CPI (harmonized, Feb flash)Eurozone         Unemployment (Jan)Eurozone         ECB Policy Meeting Minutes (Feb)Japan              Consumer confidence (Feb)South Korea     Industrial production (Jan) Friday 3 MarchUS                   ISM Services (Feb)Eurozone         PPI (Jan)France             Industrial production (Jan)Japan              Tokyo-area CPI (Feb)Japan              Unemployment rate (Jan)Singapore        Retail sales (Jan) Company earnings to watch Monday 27 Feb: Woodside Energy, Alcon, Occidental Petroleum, Workday, Li Auto, Zoom Video Tuesday 28 Feb: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday 1 Mar: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday 2 Mar: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies   For Saxo’s live economic and news calendar click here.  

Summary:  Equities and bonds took a hit on Friday amid another hot inflation data from the US as the January PCE came in higher-than-expected. That saw a hawkish shift in market expectations of the Fed path, bringing the terminal rate pricing to 5.4% and reducing the rate cuts priced in for 2023. US 2yr yields surged to fresh highs with the dollar higher as well, and Japanese yen being the weakest G10 currency amid Ueda’s neutral stance at the testimony. Focus this week on geopolitics amid China’s peace proposal, while more convincing signs of a pickup in Chinese activity are also awaited.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) tumbled as expectations of the Fed rate path shifted The white-hot Personal Consumption Price Indices released on Friday weighed on U.S. equities as investors increased rate hike expectations to 25 basis points each in the March, May, and June FOMC meetings as well as the expectation for rate cuts in the second half of 2023 almost completely vanished. The S&P 500 lost 1.1% and the Nasdaq 100 plunged 1.7%, bringing the weekly losses of the two benchmark indices to 2.9% and 3.8% respectively. Nine of the 11 sectors of the S&P 500 declined on Friday, with the rate-sensitive real estate sector and information technology sector, each down 1.8%, leading the charge lower. Autodesk, a leading computer-assisted design software firm tumbled 12.9% on releasing downbeat Q1 earnings guidance below analyst estimates and was the biggest loser in the S&P500 and Nasdaq 100 on Friday. Boeing (BA:xnys) lost 4.8%, following the aircraft manufacturing giant halted deliveries of the 787 Dreamliner jets due to documentation problems. Live Nation Entertainment (LYV:xnys) plunged 10% amid concerns over the COVID reopening play having peaked and increases in regulatory scrutiny. Farfetch (FTCH:xnys), an online luxury apparel product retailer, jumped 11% following an upbeat outlook for 2023. Farfetch is one of the constituent stocks in Saxo’s newly released Luxury Goods theme basket. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) extended a five-week losing streak Treasuries tumbled in price, rising in yields after the stronger-than-expected PCE reports which registered strong upticks in January (including upward revisions of December data). Powell’s favoured measure, PCE Services less Housing jumped to 4.6% Y/Y in January from 4.3% Y/Y in December. The market has moved to completely price in at least a 25bp hike each at the March, May, and June FOMC meeting plus about a 25% chance that the hike in March is 50bps, bringing the terminal rate to 5.4. SOFR Jun-Dec 2023 spread narrowed 11bps to -11.5bps, eliminating expectations for rate cuts in the second half of 2023. Yields on the 2-year surged 12bps on Friday or 20bps over the week to 4.81%, the highest level since 2007. Yields on the 10-year climbed 7bps on Friday or 13bps over the week to 3.94% Hong Kong’s Hang Seng (HIG3) lost nearly 12% from January highs Hong Kong's Hang Seng Index declined 1.7% bringing the 4th weekly loss in a row to 3.4% or nearly 12% from its intraday high on 27 January. China Internet names reported quarterly results generally in line with market consensus estimates but investors tended to trim positions as sentiment was dampened by resurge of tension between the U.S. and China over Russia and Ukraine and the lack of substantive recovery in the Chinese economy aside from credit expansion and survey data. During the week, JD.com (09618xhkg) was down 15%, Alibaba (09988:xhkg) down 9.5%, and Meituan (03690:xhkg) down 6.8%, as concerns about competition heating up among eCommerce platforms. Alibaba announced results beating estimates but the shares of the eCommerce giant plunged 4.6% on Friday following management comments on the need to increase investments to stay competitive in the year ahead. On Friday, NetEase (09999:xhkg) plunged 11.2%, following an earnings miss dragged down by recognition of royalty fees on expiration of game licence. Techtronic (00669:xhkg) bounced 4.4% but was still down more than 22% over the week on an alleged overstatement of earnings by capitalizing expenses. The auto space was sold, led by a 9.1% decline in Great Wall Motor (02333:xhkg). Baidu (09888:xhkg) slid 6% in the Hong Kong bourse while A-share ChatGPT concept names rallied in mainland bourses. Digital China (000034:xsec) advanced by 6.8%. CSI300 slid 1% on Friday but managed to finish the week 0.7% higher and stay above its 50 and 200-day moving averages. Financial, food and beverage, and new energy vehicle stocks led the charge lower on Friday while defense and computing names bucked the decline. Australian equities (ASXSP200.I) are continuing their short term down trend That said, stocks benefiting from the economic reopening are up the most this year, including Flight Centre, Eagers Automative which are trading up over 20% this year. In terms of the ASX200 sectors- the Consumer Discretionary sector is up the most, up 8%, YTD, followed by the Information Technology sector up 6%. While the Mining (Materials) and Finanical sectors have been pulling back, which is pressuring the market. Some investors were spooked by weaker than expected results from BHP and RIO last year, while big banks such as CBA are allocating more capital for the year ahead - for bad debts provisions, as consumers are felling the pinch of higher interest rates. All in all, the ASX200 is continuing its short term downtrend/correction amid the RBA’s more hawkish tone. For the technical levels to watch, read our Technical Analyst, Kim Cramer Larsson’s note. Australia’s oil and gas giant - Woodside Energy (WDS) reported results today; delivering profits that more than trebled in 2022 - with bottom line profits up 228% - fuelled by the oil and gas price rallies, but also as it acquired BHP’s oil and gas business. Woodside reported a larger final dividend with of US$1.44 a share, up from US$1.05 a share at the same time last year. Its full year pay-out stands at US$4.8 billion thanks to cash flows surging. This sets the tone for energy companies for 2023. Keep in mind at Saxo, we expect the oil price to stay around $80 this quarter and move up to $90 next quarter. FX: Japanese yen at YTD lows, GBP in focus with Brexit talks The dollar strength was back in focus as PCE data on Friday in the US continued to push upwards the repricing of the Fed’s path. With 2year yields surging to their fresh highs, along with BOJ governor nominee Kazuo Ueda’s continued push for a loose monetary policy coming against market’s hawkish expectations, saw the Japanese yen plunge to its lowest levels this year. USDJPY now back top testing 136.50 and Ueda’s testimony in the upper house will be in focus today. Also worth watch will be AUDUSD which plunged in close sights of 0.67 with risk sentiment and commodity prices taking a beating. UK PM Sunak is making headlines with reports saying that he may have won big concessions in the looming Brexit deal, with reports suggesting that an agreement between the UK and European Union on Northern Ireland appears to be very close. UK PM Sunak and EU head Ursula Von Der Leyen will hold talks mid-day on Monday. There are being described as 'final talks'. This will be followed by a news conference and Sunak’s statement to the parliament. GBPUSD dropped below 1.20 with the 200DMA at 1.1928 in focus. Crude oil (CLJ3 & LCOJ3) reversed higher on Friday Crude oil prices jumped back higher recording gains of 1.2% on Friday, and extended gains in the Asian morning hours amid reports of further supply disruptions as Poland’s largest oil company unexpectedly stopped receiving oil via Russia’s Druzhba pipeline. Still, unconvincing signs of a pickup in demand from China so far continues to keep oil prices range-bound, and focus this week will be on geopolitics as well as China’s PMIs. WTI futures are now back above $76/barrel after taking a look below $74 last week, while Brent is above $83. Copper broke the $4 support With the US PCE data further aggravating concerns on Fed’s rate hike path and bringing the 2-year yields to fresh highs, base metals plummeted. Copper prices plunged below the key $4 support to $3.95, closing Friday with a weekly loss of 4%. Incongruent signs of a pickup in Chinese demand also continue to underpin, and the PMI reports this week will be key to signal whether activity levels are picking up. However, with supply potentially struggling to keep up with demand, we view the current weakness as temporary and part of the general loss of confidence that has hit markets this month. Gold (XAUUSD) breaks support but losses still contained Higher US dollar in the aftermath of hot US data and higher yields has weighed on the yellow metal. Gold prices broke below the $1820 support to lows of $1809 bringing the key 1800 level in focus. Risk remains of a further weakness towards $1788 followed by the 200DMA at $1776 amid a tough macro environment. US ISM PMIs in focus this week, along with more Fed speakers, as a guide to high how interest rates could go. Silver (XAGUSD) fell harder, down 2.5% on Friday and closing with a weekly loss of 4.5%, breaking below the 200DMA at $21.   What to consider? Hot US PCE brings terminal rate expectations up to 5.4% The PCE deflator for January came in hotter-than-expected, and together with upward revisions to the previous month’s prints these sent a strong hawkish signal to the markets reinforcing the Fed’s higher-for-longer message. Core PCE rose 4.7% Y/Y, accelerating from the upwardly revised 4.6% and above the expected 4.3%. The M/M rose 0.6%, hotter than the expected and upwardly revised prior of 0.4%. This brought an upward repricing of the Fed path, with increasing calls for 50bps at the March meeting and the terminal rate now priced in at 5.4% and only one rate cut being priced in for this year from three previously. US consumer confidence also rose in February to its highest in a year, with University of Michigan sentiment accelerating to 67 from 66.4 in January. Personal incomes grew 0.6% MoM in January, a notch below expectations but consumer spending was higher-than-expected at 1.8% due to low savings rates and increased use of consumer credit. Resilient spending, along with sustained wage growth, means Fed could continue to find it tough to bring inflation back to its 2% target. Fed members continue to remain cautious on the path of inflation Fed voter Jefferson spoke about labor market strength on Friday, saying that ongoing imbalance between supply/demand for labour suggests high inflation may come down only slowly and said the argument that policymakers should accept that disinflation will be costly is well-reasoned. Bullard (non-voter) was on the wires again as well, and reaffirmed the need to move quickly to shield credibility. Collins, also a non-voter, said that recent US data affirms the case for more rate hikes. Mester (non-voter) said the Fed has to do "a little more" on rate hikes saying the new inflation data affirms the case for more rate hikes to get inflation back to target. BOJ Ueda’s upper house testimony on tap today After Friday’s testimony in the lower house of the parliament, Bank of Japan governor nominee Kazuo Ueda now moves to the upper house today. His initial policy stance appeared to be confirming continuity of the current ultra-easy monetary policy in Japan, coming against market’s hawkish expectations. This saw the yen plunge 1.3% on Friday against the USD and being the weakest currency on the G10 board. Today markets will be looking at more hints on what tweaks may be considered by Ueda and lack of further color could mean more weakness in the yen, especially with global yields surging to new highs. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. China’s Q4 Report on the Execution of Monetary Policy emphasized stability and signalled not to induce excessive investment, debts, and bubbles China’s central bank, the People’s Bank of China, said in its Q4 Report on the Execution of Monetary Policy that the primary objective of countercyclical monetary policy was to smooth the volatility in aggregate demand so as to avoid the destructive effects of excessive fluctuations of aggregate demand on the factors of production and the wealth of the society. The report emphasizes that the force of monetary policy must be stable and not bring about excessive liquidity that induces excessive investment, a surge in debts, and asset bubbles. In support of the real economy, the Q4 Report emphasizes stability and sustainability of credit growth but omits the stronger wording of “more forceful” and “increases of credit support” that were in the Q3 Report. China may be sending a signal to lower the expectations of the market on monetary easing.   For a global look at markets – tune into our Podcast.   Source: Markets Today: Hot US PCE brings 2yr yields to fresh highs – 27 February 2023 | Saxo Group (home.saxo)

Summary:  The policy stance of Bank of Japan’s governor nominee Kazuo Ueda, became much clearer with the parliamentary hearings kicking off today. He assured continuity of the current easy monetary policy with a steadfast focus on achieving 2% inflation sustainably. However he was cognizant of the side effects of yield curve control, and flexible to responding to market pressures with tweaks as needed. This comes against market’s strong anticipation of a hawkish tilt. The highly awaited event of the week was the parliamentary hearing of new Bank of Japan governor nominee Kazuo Ueda in the lower house. That went ahead without creating much sparks, with Ueda broadly sticking to the outgoing Governor Kuroda’s script initially, but later qualifying that with remarks that suggested he will remain flexible and open to policy normalization. As we highlighted earlier, Ueda has been out of touch with BOJ policy making since 2005 and will likely take it slow to even consider policy normalization at some stage. His neutral comments today, coming against market’s hawkish expectations and together with the rising global yields, suggest yen could embark on a weakening trend again once we are past this volatility. Japanese equities have responded positively, and continue to look promising. Inflation goal unlikely to be changed Markets have continued to believe that PM Kishida’s choice for the next BOJ governor to be someone from outside the bank or the Ministry of Finance has meant that people from within the circles didn’t want the job. This has reaffirmed the view that policy is moving towards an exit and boosted expectations that the joint statement from Ueda and the government could alter the 2% inflation goal. That seems unlikely for now. Ueda’s comments clearly echoed Kuroda-san’s view that the current inflationary pressures in Japan are import-driven and unsustainable. While he continued to emphasise the importance of wage growth, he also said that a number of factors will be key to determine price pressures and it will take time to achieve the 2% target in a sustainable and stable manner. As such he continued to emphasize that the key goal for the BOJ is to achieve the 2% inflation sustainably, while fiscal policy can be used to mitigate supply-side sources of inflation. Source: Bloomberg, Saxo Policy tweaks rather than normalization Ueda was not as closed to considering policy normalization as Kuroda. He said that it is his responsibility to ensure that normalization is carried out at the right time if the 2% inflation goal is reached. This means if inflation proves sticky, then the review of the yield curve control is now more likely that it ever was under Kuroda. However, given Ueda’s view that inflationary pressures are currently unsustainable, normalization remains unlikely for now. Ueda still accepted that there are side effects of yield curve control, and remained open to considering policy tweaks. What tweaks may be considered? Ueda stopped short of hinting at just what policy tweaks may be considered, but he remained open to considering tweaks like shortening the long-term interest rate target to 5-year or 7-year from 10-year currently, or even widening the band. This was a contrast to his comment ten days back, where he stated that gradually raising the ceiling creates waves of speculation as market participants just position for the next yield target. While expectations of an abrupt exit may have cooled, market’s hawkish expectations can continue. Other options to embark on policy normalization if inflation proves more than transitory will be ‘creative’. He hinted at moves such as raising interest rates on financial institutions' reserves parked with the central bank rather than selling bonds. Communication with the markets Markets can however expect somewhat improved communication from Ueda, both domestically but also in terms of coordination with foreign central banks which will be key if the YCC policy is abandoned at some point in the next 5 years given its massive global implications. This should reduce speculative positions and bring the safe haven status of yen back in focus.     Source: Macro Insights: Bank of Japan’s new governor Ueda – continuity with flexibility | Saxo Group (home.saxo)

Summary:  Markets remain nervous as new local lows were probed yesterday in the US equities but were rejected just ahead of the 200-day moving average in the S&P 500. A first Chinese peace proposal for the Russian aggression in Ukraine was dismissed by commentators on the first anniversary of the war. Elsewhere, nomination hearings for Kazuo Ueda, who would replace Kuroda as Bank of Japan governor, saw the JPY slightly weaker. What is our trading focus? US equities (US500.I and USNAS100.I): back to wait and see on inflation and rates US equities were bouncing around in yesterday’s session with S&P 500 futures ending the session above the 4,000 level as the US 10-year yield came down despite initial jobless claims suggesting the US labour market remains extremely tight. There are no major earnings releases in today’s session, so we expect a quiet session going into the weekend. The key upside level to watch is yesterday’s close in the S&P 500 futures at the 4,019 level on the downside it is the 4,000 level. Hong Kong’s Hang Seng Index (HIG3) and China’s CSI300 (03188:xhkg) declined around 1% The Hang Seng Index declined 1.2% and the CSI300 slid 0.8% as of writing. Alibaba (09988:xhkg) announced results beating estimates but the shares of the eCommerce giant plunged 4.6% following management comments on the need to increase investments to stay competitive. According to Nikkei Asia, Chinese regulators have told Tencent (0070:xhkg) and Alibaba’s Ant Group not to offer access to ChatGPT services to the public directly or through third party as the regulators are increasingly concerned about uncensored replies given to users. FX: USD bobs up and down with risk sentiment. JPY lower after Ueda testimony. The US dollar posted new highs yesterday, as EURUSD probed below 1.0600 for the first time since early January, AUDUSD took a peek below its 200-day moving average and below 0.6800 and GBPUSD tested the waters below 1.2000, but the USD rally seemed a passive coincident development with the swings in risk sentiment, with a late rally in US equities pushing the greenback back lower. In Japan overnight, the JPY was firm early in the Asian session despite slightly softer CPI data, and then weakened slightly later in the session during Kazuo Ueda’s nomination hearings for the Bank of Japan governorship, as he signalled little urgency on tightening BoJ policy. Crude oil rises despite another US inventory build Crude oil trades higher for a second day but remains on track for a monthly loss within the established range, in Brent between $80 and $89, and WTI between $82 and $73. The technical driven bounce occurred despite another built in US inventories, but soaring exports of 4.6m b/d and a continued rise in US gasoline demand helped underpin prices. Supply side concerns may also be in focus after Russia announced this week that it will cut exports to the West in March, in addition the previously announced production cuts. Gold (XAUUSD) slumps to support again Gold dropped to the lowest level of the year on Thursday amid continued pressure from USD and higher yields which both moved close to their cycle highs earlier in the week before easing a bit on Thursday. The yellow metal has so far managed to find support around $1820 but until macro-economic developments turn more friendly the risk remains of a further weakness towards $1788 followed by the 200DMA at $1,776. Gold has been troubled by a recovering dollar and rising treasury yields after recent US data strength supported the view the Fed will keep rates higher for longer to fight inflation and to cool the economy. US PCE deflator, the Fed’s preferred inflation gauge, will be watched closely today with expectations pointing to a robust print, both in headline and core. Copper retreats as hawkish Fed weighs on sentiment. Copper has retreated from the highest close in three weeks, and yesterday’s drop, the biggest one-day slump this year, has taken it back towards key support in the $4 a pound area. Together with other industrial metals, copper is heading for a monthly loss as the market becomes increasingly impatient with the recovery in demand in China. Instead, the attention has been turning to worries that higher US rates for longer may strengthen the dollar and hurt the outlook for growth and demand. However, with supply potentially struggling to keep up with demand, we view the current weakness as temporary and part of the general loss of confidence that has hit markets this month. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) drop. US Treasury yields fell yesterday after probing the cycle highs in the wake of another strong weekly jobless claims number, with the 2-year little changed, but longer yields falling more sharply, as the 10-year closed at 3.87% after posting a cycle-high 3.97% in early US trading. Read next: The Euro Fell Below 1.06, The USD/JPY Pair Is Close To 135.00| FXMAG.COM What is going on? US GDP revised a notch lower, jobless claims fell The second estimate of US Q4 GDP was revised lower to 2.7% from the prelim 2.9%. The Core PCE measure, the Fed’s preferred measure of inflation, was revised to 4.3% from 3.9%, suggesting price pressure in Q4 was higher than previously reported. While slower activity and higher inflation are making the Fed’s task more difficult, the labor market remained strong, suggesting that any slowdown in growth will likely be very slow. Weekly initial jobless claims dropped to the lowest in 4 weeks at 192k from the prior 195k. Worrying signal on the inflation front in the eurozone Yesterday, inflation was confirmed higher than initially reported in the eurozone in January (headline at 8.6 % year-over-year and core at 5.3 % - this represents a 0.1 percentage point higher). What is even more worrying is that the EZ CPI basket showed the most broad-based price increase on record. 76 % of the basket experienced a month-over-month increase above 0.2 %. This is up from 52 % in December 2022. There is little doubt that the European Central Bank (ECB) will hike interest rates by 50 basis points in March. But we think the ECB is not done anytime soon with the tightening process. The terminal rate is probably closer to 4 % than expected by the market consensus. Block results beat on the back of Bitcoin revenue rising more than expected Block rallied over 7% after Q4 net revenue rose more than expected, up 14% to $4.7bn, beating estimates of $4.6bn. It comes as Bitcoin revenue rose to $1.8bn vs est. $1.8bn, while hardware revenue from its Square terminals and Square registers rose slightly more than expected. Block sees FY23 adjusted EBITDA of $1.3bn vs est. $1.3bn. Japan’s January CPI softer than expected, BOJ gov nominee Ueda’s hearings bring flexibility to dovishness January inflation print in Japan came in-line with expectations on the headline at 4.3% YoY from the prior 4.0% YoY but was marginally below expectations on the core measures. Ex fresh food and energy was out at 3.2% YoY, above last month’s 3.0% YoY but below the expected 3.3%. Inflation remains above the Bank of Japan’s 2% target, and price pressures are broad-based. BOJ nominee Kazuo Ueda’s parliamentary hearings in the lower house today brought some clarity over his policy direction, suggesting he will stick to easing for now while remaining flexible to tweaks as needed. What are we watching next? The week ahead in geopolitics after China peace proposal issues and on macro dataNext week’s macro calendar is not the usually busy one as a new month rolls into view, as the key US labor market data is not up until Friday the 10th of March, although the latest string of strong weekly US jobless claims offer no evidence of a softening labor market. Next Wednesday we’ll get the latest ISM survey data as regional US manufacturing surveys for February thus far suggest little chance of a resurgence in the recessionary ISM Manufacturing survey, with the last three readings in a row below 50 ahead of the survey release next Wednesday. The ISM Services survey, meanwhile, is up on Friday and bears watching after two confusing prior readings – a very weak one in December followed by a resurgent one in January of 55.2. Otherwise, the intense focus on geopolitics will remain as the US considers making public the intelligence it has gathered on China considering supporting Russia’s war effort in Ukraine, as well as how China deals with US warnings against China providing lethal aid to Russia in the conflict. China’s first attempt at wading into the situation as a peace-broker with a cease-fire “position paper” today was dismissed by a US official and is seen as a likely “non-starter with the US and most European countries” according to Neil Thomas, a senior analyst at the Eurasia group. Earnings to watch Today’s key earnings release is from BASF which has already reported which is sour reading for investors. The German chemical company is terminating its share buyback programme on top of reporting revenue and EBIT below estimates. In addition, the company is cutting 2,600 jobs in response to the higher energy costs. There is also good news in the Q4 earnings release that might lift the mood of investors, and that is the FY23 revenue outlook of €84-87bn vs es.t €81.8bn. Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 1330 – US Jan. Personal Income and Spending1330 – US Jan. PCE Inflation1500 – US Jan. New Home Sales1500 – US Feb. Final University of Michigan Sentiment1515 – US Fed’s Mester (Non-voter) to speak1600 – US Feb. Kansas City Fed Services Activity1830 – US Fed’s Collins (Non-voter) to speak1830 – US Fed’s Waller (Voter) to speak   Source: Financial Markets Today: Quick Take – February 24, 2023 | Saxo Group (home.saxo)

Summary:  US equity markets erased their losses overnight, aided by a rise in Nvidia shares boosting chip and tech stocks. Fed’s preferred inflation gauge the PCE is up next and may reaffirm sticky inflation again. The Japanese yen volatility is in focus after softer-than-expected January inflation print, and as policy stance of BOJ nominee Ueda is evaluated from the ongoing parliamentary hearings. Crude oil prices reversed higher but Copper back close to the key $4 area.   What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) had a wild session, but ended higher after bond yields fell from three-month highs US equity markets had a bumpy Thursday, awaiting the Fed’s core inflation gauge –the personal consumption index being released. However, after four days of losses, the S&P500 gained 0.5%, although it’s still down 1.6% Monday to Thursday. The S&P500 managed to move back above 4,000 level after the 10-year US bond yield fell from its fresh high - moving back to December levels of 3.871%. While bullish outlooks supported the market higher as well – with Nvidia shares up 14% on its bullish outlook - with Microsoft and Apple following higher. Despite that, US earnings are still muted YoY - highlighting margin compression- while there is still nervousness in the air- as the FOMC meeting minutes pointed to more tightening on the horizon. While there is also risk if the Fed’s inflation gauge (PCE) rises more than expected, the Fed could gain reason to become more hawkish – and that could see the S&P500 quickly test the 200-day moving average.  Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) had a mixed day; Techtronic tumbled 19%. Hong Kong's Hang Seng Index and China's CSI300 had a mixed day of trading. The Hang Seng Index slid 0.4%, while the CSI300 was flat. Techtronic (00669:xhkg) shares plunged 19% after a forensic research firm accused the power tool maker of inflating profits by capitalizing expenses as assets. Meanwhile, China internet names, tech hardware, and EV stocks rallied, with Bilibili (09626:xhkg) rising 3.6%, NetEase (0999:xhkg) climbing 4.1%; Lenovo (00992:xhkg) surging 5.5%, and Nio (09866:xhkg) up 4%. Baidu (09888:xhkg) fell 0.5%, despite reporting revenues and earnings that beat market expectations and announcing a share buyback program of up to USD5 billion. According to Nikkei Asia, Chinese regulators have told Tencent Holdings and Ant Group not to offer ChatGPT services to the public as the regulators are increasingly concerned about uncensored replies given to users. Australian equities (ASXSP200.I) moved up after three days of declines The Australian share market moved up 0.3%, up slightly above its 50-day moving average today - after a bevy of better than expected company earnings bolstered sentiment. Global pallet business, Brambles shares rose almost 7% to six month highs after upgrading its profit guidance ~7% to 15-18% growth with pallet demand in the US and UK improving. Australia’s biggest lithium company, Pilbara Minerals shares are up 2.6% after reporting record results- a A$1.24 billion net profit and declared its first ever dividend – of A$0.11. Just like Albemarle, Pilbara sees a strong lithium market ahead. Pilbara also upgraded its production guidance for the year – expecting to produce 600,000 to 620,000 dmt of spodumene concentrate – up from its prior guidance of 540,000 to 580,000 dmt. This reflects what we have been seeing this Australian reporting season – mining companies are upgrading their output guidance to keep up with expectations for strong demand, plus they are also seeing improved labour conditions. Block Inc (SQ and SQ2) rallied 7% to $116.44 on the ASX after 4Q net revenue rose more than expected, up 14% to $4.65 billion, beating estimates of $4.57 billion. It comes as Bitcoin revenue rose more than expected, to $1.83 billion vs $1.79 billion expected, while hardware revenue from its Square in store payments rose slightly more than expected. As for the year ahead  - Block sees 2023 adjusted EBITDA of $1.3 billion - which is more than $1.28b est - and its margin growing by at least 1 percentage point. So far this year, Afterpay sales are up 19% and credit quality is holding up- despite higher interest rates. Afterpay's loss rate is expected to stay 1% in Q1 this year - which is a slight improvement of its Afterpay loss rate in 2019 and 2018 of 1.1% and 1.5%.   Broadly the Aussie market has been pressured by Australian bond yields moving to their highest levels since January- 3.87%. That’s a better yield/ return than the broad Australia share market’s 3.5% yield. This shift has pressured the ASX200 down 3.8% from its record highs. But some stocks are still rising, with a cohort of companies benefiting from the reopening of the Chinese economy  - and on expectations of higher earnings ahead. Such stocks are in the travel sector; shares  FX: JPY volatility in focus The Japanese yen started the Asian session stronger after a weaker-than-expected inflation print for January, but the start of BOJ nominee Ueda’s parliamentary hearings brought a reaffirmation of the loose BOJ monetary policy and that saw USDJPY bidding up to 134.80. Yen volatility will remain in focus today and next week, also parking concerns of volatility in the global bond markets, as Bank of Japan’s renewed policy direction remains in focus. Crude oil (CLJ3 & LCOJ3) prices rebound 2% despite higher inventories Crude oil prices rallied on Thursday despite another higher inventory built. US crude stocks built 7.6mn barrels last week, significantly higher than analyst expectations of 2mn. The supply side concerns may have been in focus after Russia announced this week that it will cut exports to the West in March, in addition the previously announced production cuts. However, focus was also on indications of a pickup in gasoline demand along with a decline in US gasoline inventories. Copper prices decline on higher USD and awaiting China activity improvement Copper prices were down 3% amid rising concerns of further rate hikes by central banks after a marginally hawkish FOMC minutes this week. The market is also becoming increasingly impatient with the recovery in demand in China. There has been little meaningful sign that demand is rebounding. Copper prices fell to $4.05/lb bring the $4 support in focus.  Read next: The Euro Fell Below 1.06, The USD/JPY Pair Is Close To 135.00| FXMAG.COM What to consider? US GDP revised a notch lower, jobless claims fell The second estimate of Q4 GDP was released in the US, and was revised lower to 2.7% from the prelim 2.9%. The Core PCE measure, the Fed’s preferred measure of inflation, was revised to 4.3% from 3.9%, suggesting price pressure in Q4 were higher that previously reported. While slower activity and higher inflation components seem to be making the Fed’s task more difficult, labor market still remained strong which suggests that any slowdown in growth will be likely very slow. Weekly initial jobless claims dropped to the lowest in 4 weeks at 192k from the prior 195k. Japan’s January CPI softer than expected, eyes on Ueda’s hearings January inflation print in Japan came in-line with expectations on the headline at 4.3% YoY from the prior 4.0% YoY but was marginally below expectations on the core measures. Ex fresh food and energy was out at 3.2% YoY, above last month’s 3.0% YoY but below the expected 3.3%. Inflation remains above the Bank of Japan’s 2% target, and price pressures are broad-based. Focus now turns to BOJ nominee Kazuo Ueda’s parliamentary hearings in the lower house today as markets ponder over his policy direction. Worrying signal on the inflation front in the Eurozone Yesterday, inflation was confirmed higher than initially reported in the eurozone in January (headline at 8.6% year-over-year and core at 5.3% - this represents a 0.1 percentage point higher). What is even more worrying is that the EZ CPI basket showed the most broad-based price increase on record. 76 % of the basked experienced a month-over-month increase above 0.2 %. This is up from 52 % in December 2022. There is little doubt that the European Central Bank (ECB) will hike interest rates by 50 basis points in March. But we think the ECB is not done anytime soon with the tightening process. The terminal rate is probably closer to 4% than expected by the market consensus. Booking Holdings (BKNG:xnas) reports record 2022 revenue suggesting travel demand surge Booking Holdings reported higher-than-expected revenue for Q4 at $4.05bn (up 36% YoY), beating analyst forecasts of $3.9bn. Adjusted EPS of $24.74 was also above the expected $21.51. Q1 forecast was also upbeat, suggesting resilient travel demand despite inflation pressures. Booking Holdings is a part of our Asia Pacific Tourism equity theme basket which we launched in anticipation of the recovery in Chinese outbound travel demand. Alibaba (09988:xhkg/BABA:xnas) beats earnings estimates on cost cutting Alibaba reported better-than-expected results for its fourth quarter. Adjusted EPS of 19.26 yuan (on revenue of 247.76bn yuan) was above consensus of 16.63 reflecting deep cost cutting measures. EBITA grew 16% Y/Y on cost cuts and smaller losses from Taocaicai. The cloud computing revenue was only up 3.3% while the core Chinese commerce business slid 1%. The eCommerce giant’s ADRs closed down 2.9% from the level of Hong Kong closing amid management comments on the need to increase investments to stay competitive in the year ahead. OCBC (O39:xses) reports Q4 net income miss Oversea-China Banking Corp. reported an increase of 34% in net profits in the fourth quarter to S$ 1.31bn which fell short of estimates of S$ 1.68bn. Net interest income was up 60% YoY but non-interest income slid 42% due to lower wealth management fee. Final dividend of S$0.40 was up from S$0.12 last year, and the lack of a DBS-like special dividend could mean the stock could be beaten up near-term.     For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Markets Today: BOJ stance in focus, PCE inflation report ahead – 24 February 2023 | Saxo Group (home.saxo)

Summary:  When Tesla cut its prices by 20% in mid-January it looked like lunacy because the EV-maker operates at a 25% gross margin which would surely compress its margins. Higher inventories by Q4 were an approximate cause but it turns out that the real decision variable was a high risk bet by Elon Musk and the management team that lithium carbonate prices had finally begun falling from its highs. By the time Tesla made its decision lithium carbonate prices were already down 20% and has continued down since down 34% from the peak. Tesla's bet is paying off for now but risks to its margin remain high. A risky bet by Elon Musk on lithium When Tesla in mid-January announced that it slashed its prices across its various car models by 20% on average it was a big shock to the car industry as an abrupt price change causes big disruptions in the secondary market. Our initial thought was that a 20% price cut on average is a desperate move considering a gross margin of 25%. It would effectively erode the majority of Tesla’s profits. The price cuts also led to angry customers that had just bought a new Tesla. Initially we thought that the price cut was to increase demand that had seen a negative impact from higher and more volatile electricity prices in many key markets. Tesla had also raised prices several times in the previous year increasing the price point. When Tesla announced its Q4 deliveries it was clear that inventory was building as deliveries were lower than production which is a bad signal of demand, but it also locks up capital on the balance sheet. While demand considerations were a key decision variable for Tesla something else was happening. During several speeches in the late part of 2022, Elon Musk expressed his frustration with lithium carbonate prices saying lithium refinery margins were making it a ‘gold mine’ and urged entrepreneurs to enter the industry. Around mid-November the 99.5% lithium carbonate price out of China topped out at CNY 598,000 per tonne and by the time of Tesla’s price cuts the price on lithium carbonate had fallen 20%. This is when Elon Musk and the management made their big bet aggressively cutting prices. It has since worked out for Tesla with lithium carbonate price down 34% from the peak in November offsetting most of Tesla’s hit to its gross margin. However, in the case that lithium carbonate prices should rebound it will eat into Tesla’s gross margin. One of the reasons why lithium carbonate prices are falling is of course extra supply coming into the market but also CATL’s, China’s largest battery maker, decision to dump prices as it is lowering its margin in its mining division to lower prices on its batteries and fuel demand even more. Lithium carbonate price | Source: Bloomberg Tesla share price | Source: Bloomberg EV adoption is continuing at a blistering pace While we are still waiting for Q4 delivery figures from VW and BMW it is safe to say that EV adoption is acceleration at a blistering pace. By the time we get the Q1 2023 figures it will show that BEV (battery EVs) deliveries will have increased 10x in just three years. With Toyota’s new CEO recently saying that Toyota has made a mistake on hybrids and would chase the BEV technology to catch up with Tesla the whole industry will massively accelerate production in the years to come. Extrapolating the expected trend in EV adoption will create massive changes to our society. Right now the current fleet of EVs is displacing around 1.5-2mn barrels per day of oil demand with passenger cars only being less than 20% of this displacement. The expected peak in oil demand from road transportation is expected in 2027, but with the current pace it could very likely earlier. By 2050 the oil demand from road transportation could be down more than 20mn barrels per day. If net-zero carbon is achieved then it is closer to 45mn barrels per day. These are some of the points that this transition will cause: Oil prices will likely remain high as oil and gas majors will adjust capital expenditures to reflect the rapidly declining oil demand. EVs will eventually lead to more stable electricity grids through V2G (vehicle-to-grid discharging) which will happen first in Europe, because the continent has the most advanced electricity grid in the world. Air pollutions levels in big cities will drastically improve potentially creating new biodiversity in cities Massive growth in electricity production potentially creating the second renaissance of electricity with the first growth phase happening 100 years ago. Electric utilities could transition away from boring stable growth to high growth companies. The transition will significantly increase the need for investments and thus add demand for capital underpinning the structural inflation outlook   Source: Teslas big bet on falling lithium is paying off | Saxo Group (home.saxo)

Summary:  Sentiment remains under significant pressure as higher global yields and a firmer US dollar are pressuring sentiment and financial conditions around the world. Europe remains resilient, but can’t expect to hold out on its own if the negative pressure persists. In currencies, focus will swing to Bank of Japan Governor nominee Kazuo Ueda, who will testify before Japan’s Lower House on Friday in Japan. What is our trading focus? US equities (US500.I and USNAS100.I): watch the bond market for clues on direction US equity futures were wobbly yesterday finishing lower with S&P 500 futures closing at the 3,999 level, the first close below 4,000 since 20 January, after intraday briefly flirting with the 200-day moving average. The equity market has now erased a good portion of this year’s rally and the upcoming inflation figures and the bond market’s reaction will determine where we go from here. As we wrote in our equity note yesterday, the next potential themes getting attention is margin compression during the upcoming Q1 earnings in April and May and the discussion about structural inflation. US equity futures were lifted late last night by a better-than-expected outlook from Nvidia. S&P 500 futures are trading around the 4,015 level in early European trading hours. Hang Seng (HIG3) and CSI300 (03188:xhkg) failed to sustain an attempt to rally The Hang Seng Index and CSI300 bounced in early trading but the attempt to rally failed to sustain itself. Both the Hong Kong and mainland benchmarks slipped by about 0.3%. Techtronic (00669:xhkg) plunged 17% and was the biggest loser within the Hang Seng Index, following a forensic research firm published a report alleging the tool maker inflating profits by capitalizing expenses as assets. Baidu (09888:xhkg) lost 1.1% despite reporting revenues and earnings that beat market expectations and announcing a share buyback programme of up to USD5 billion. The hype of ChatGPT concept cooled down somewhat as AI-generated content names were sold on mainland bourses. FX: USD eases off the pedal ahead of BoJ Governor nominee Kazuo Ueda testimony The US dollar eased back lower as risk sentiment stabilized in the wake of another nervous session yesterday and after EURUSD nearly touched 1.0600, AUDUSD took a stab at its 200-day moving average, and USDJPY rose toward 135.00. Risk sentiment will likely continue to drive USD pairs in coming session, with the Friday PCE inflation data the next more important event risk on the calendar (though a weekly refresh of the US labour market data is up with today’s weekly claims number.) Elsewhere, plenty of attention on the Japanese yen later today, as Japan reports its January CPI figures tonight, but even more importantly as the nominee to replace Kuroda as governor of the BoJ will speak at a confirmation hearing at the Lower House of Japan’s parliament overnight. Crude oil (CLJ3 & LCOJ3) prices steady after slumping around 3% A firmer dollar and expectations of more rate hikes from the Fed gathering pace saw a bearish momentum return in commodities on Wednesday, even ahead of the release of the marginally hawkish FOMC minutes in the US session. Crude oil prices slid by close to 3% with WTI below $74/barrel and Brent at $80 despite a Reuters report stating that Russia intends to cut crude exports from its western ports by a quarter in March/February, after prior reports that the country is cutting production in March by 500k BPD. API inventories were however higher, with crude stockpiles increasing by 9.9mn barrels last week suggesting demand weakness. Prices recovered marginally overnight in Asia. Gold (XAUUSD) slumps to support again Gold gave up its recent gains amid the renewed pressure from USD and higher yields which are now close to their cycle highs despite some softening yesterday. The yellow metal edged closer to the $1820 support again yesterday, but has rebounded above 1,830 overnight. A break below 1,810-1,800 would bring the 200DMA at 1,776 in focus. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) ease back from cycle highs US Treasury yields eased back slightly from new cycle highs yesterday, with a strong 5-year auction showing bidding metrics at the higher end of the longer term range. A 7-year auction is up today and US January PCE inflation data is out Friday. The Japanese government bond market could sway global fixed income if nominee Kazuo Ueda makes any pointed comments in his confirmation hearing tonight. What is going on? FOMC minutes marginally hawkish Despite the FOMC minutes stemming from the FOMC meeting three weeks ago and prior to the January US CPI print, they sounded hawkish at the margin suggesting there may be room for further escalation of that rhetoric, given how the economic data has fared since the Jan 31-Feb 1 Fed meeting. A few of the participants favoured raising the rates by 50bps, and all agreed more rate hikes are needed thrashing pivot hopes. It also noted that a number of participants observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy. While this risk of a recession was noted, data since the meeting, including the most recent PMI numbers this week have continued to allay recession concerns. Apple announces ability to monitor blood sugar non-invasively Apple’s Exploratory Design Group, a previously secretive outfit within the company, is reporting success in measuring blood glucose levels without needing to break the skin to test via a blood sample, with a method using semiconductor chips and silicon photonics. The project has been ongoing for years. The hope is to integrate the technology longer term into the Apple Watch, helping to boost Apple’s effort to grow its presence in health care. US considering release of intel on China’s potential arms transfer to Russia Chinese senior diplomat Wang Yi’s visit to Moscow was accompanied with China and Russia confirming stronger ties and President Xi’s visit to Russia in the coming weeks. This is suggesting that these escalated geopolitical tensions are here to stay. The red line for US and Europe will be if there is evidence that China is supplying weapons to Russia, and that could threaten a potential escalation of the war into an outright proxy-war style confrontation between Russia and China on the one side and Ukraine and the US-led Nato military alliance on the other. A WSJ article reported that Western nations are considering making public the intelligence they possess that Beijing might end its previous self-imposed restraint on weapons supplies to Russia, according to U.S. and European officials, although it appears that China hasn’t yet made a final decision. Nvidia jumps on AI chips outlook Nvidia reported last night Q4 revenue of $6.05bn in line with estimates with the gaming segment beating estimates while the data center segment disappointed. Q4 EPS came in at $0.88 vs est. $0.81 driven by a higher than estimated Q4 gross margin of 66.1% vs est. 65.8%. Nvidia guides Q1 revenue of $6.5bn +2/-2% vs est. $6.35bn driven by strong demand in gaming and data center segments. The company is also rolling out its own cloud service together with Oracle which will later be offered by Microsoft and Google. Nvidia does not expect more downward pressure on GPU prices and thus the inventory risk is largely behind the company. While Nvidia keeps ignoring the cryptocurrency industry’s impact on demand we guess that the acceleration in speculation in cryptocurrencies and higher mining activity is what is driving Nvidia’s higher demand this quarter. Shares rose 8% in extended trading. BAE Systems sees muted 2023 revenue growth The UK-based defence company reports this morning higher than expected FY22 revenue at £23.3bn and underlying EBIT of £2.5bn. The earnings statement the company states that it expects 3-5% revenue growth in 2023 and 4-6% growth in EBIT suggesting expanding margins on pricing power amid surging demand. In our view, the revenue guidance seems a bit conservative given the signals over the weekend from the Munich Security Conference. Rio Tinto’s profits and dividend slide, guides for a stronger 2023 Rio Tinto shares declined 3.4% after reporting underlying profit fell 38% to $13.3bn in 2022 vs est. $14bn. Rio’s profit fell after realised commodity prices fell from their records in the second half of 2022 while earnings were also impacted by higher energy, raw materials prices and wages. Rio Tinto’s free cash flows fell 49% y/y in 2022 to $9bn, resulting in the miner cutting its final (HY) dividend to $2.25 a share down from $4.17, taking its total 2022 dividend to $4.92. Rio Tinto’s output looks stronger in 2023 with higher copper, alumina, aluminium and iron ore production What are we watching next? Market sentiment is fragile after recent break lower in equities – next moves pivotal Rising global yields and the firmer US dollar have risk sentiment and financial conditions under significant pressure, particularly in the US indices, but also in emerging markets and credit spreads on corporate bonds. European equities have fared better, but have lost their upside momentum. With the break of key supports in the US, the next levels of even more critical support are not far away to the downside (200-day moving average in the US S&P 500 at 3,941 on the cash index, for example). Volatility expansion is a prominent risk on a capitulation in sentiment, with further pressure from rising yields or rising concerns of geopolitical tensions possible triggers. Earnings to watch Today’s key earnings are in the European session, so the impact from earnings in the US session is minimal. Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 1000 – Eurozone Final Jan. CPI 1100 – Turkey Rate Decision 1330 – US Jan. Chicago Fed National Activity Index 1330 – US Q4 GDP Revision 1330 – US Weekly Initial Jobless Claims 1530 – US Weekly Natural Gas Storage Change 1600 – US Feb. Kansas City Fed Manufacturing Activity 2330 – Japan Jan. National CPI BoJ Governor Nominee Kazuo Ueda confirmation hearing 0001 – UK Feb. GfK Consumer Confidence   Source: Financial Markets Today: Quick Take – February 23, 2023 | Saxo Group (home.saxo)

Summary:  The Nasdaq 100, and S&P 500 fall for the second session with bond yields remaining at three-month highs as the FOMC meeting minutes show more tightening is on the horizon. CPI is ahead. Australian equities fall for third day on bond yields remaining at January highs. Reopening bellwethers in logistics, car dealership and air travel guide for stronger earnings ahead. Qube and APE shares lift, while Qantas needs to splurge on more aircraft to keep up with demand. Plus what to know about Rio's results and why to watch the AUDNZD. What’s happening in markets?   The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fall for the second session with bond yields remaining at three-month highs    US equity markets remain pressured as the US 10-year yields trades in the neighborhood of three-month highs at ~3.92% with the FOMC meeting minutes showing more tightening is on the horizon. The Nasdaq 100 fell for the second day, closing at its lowest level since February 1. The S&P500 also fell the second session - moving under the key 4,000 level, at 3,991, bringing the 200-day moving average just ~1% away - at the 3,941 mark - which will quickly be tested.  Intel shares were a laggard down 2.2% after the computer processor giant cut its dividend 66% - declaring a quarterly payout of 12.5 cents a share. This followed on from Intel reporting one of its weakest quarterly earnings forecasts in its history. All in all, this highlights that companies are trying to preserve capital amid margin compression – and that’s been a major theme of earnings seasons and we think it will continue to play out in Q1 earnings reports.   Australian equities (ASXSP200.I) fall for third day -  but reopening stocks in logistics and car dealing seem supported on stronger earnings The Australian share market is being pressured by Australian bond yields rising, with the 10-year yield at its highest levels since January 4 - after the RBA affirmed it will continue to hike rates in the months ahead. The ASX200 fell briefly under its 50-day moving average with mining giants BHP and Rio trading lower after Rio reported weaker than expected numbers after the market close yesterday – but guided for a stronger 2023.    Travel stocks are continuing to gain attention on the revival of the travel sector – with a lack of fleet becoming an issue to keep up with strong demand. Qantas posted a record profit of A$1 billion in the six months to Dec 31, and announced A$500 million share buy back – as its sees relentless flight demand in 2023 - underscoring the surge in travel, post the pandemic. In fact, Qantas’ flagged higher than expected spending being needed to buy an extra aircraft, including nine Airbus A220s to keep up with surging passenger demand. Capital expenditure in the financial year ending June will rise by as much as A$400 million to between A$2.6-A$2.7 billion and will get as high as A$3.2 billion in the following 12 months. Despite guiding for strong demand, shareholders didn’t like hearing costs will need to rise – which send Qantas shares down 6% to $6.02, below its 100-day moving average. Qantas’ outlook underscores the pace and intensify of the travel industry’s recovery. Logistics giant, Qube is trading up 10% after its half year profit rose 41% to $125 million and it also noted it sees stronger growth ahead in 2023 – supported by China’s reopening. Car dealership giant, APE is up by about 7% after its results beat expectations, and it guides for a stronger year ahead with demand for new vehicles continuing to outstrip supply. Today’s earnings highlight the reopening trade is gaining pace and also growing beyond market expectations – this could be a driver of the Australian equity market in the half year, while commodity companies continue to guide for a stronger year ahead – backing our bullish commodity outlook. FX: A stronger US dollar – pressures the Australian dollar lower  With ‘a few’ FOMC members supporting a larger hike to curb inflation - with James Bullard still favouring hiking rates to 5.375% as fast of possible, the US dollar gained the upper hand, pressuring most G10 currencies lower including the Aussie dollar. The AUD/USD pair closed below trend support, which opens up for a move lower to 0.6629, being the December low.The AUD/NZD pair however made a cleaner break down lower - with the Aussie against the Kiwi falling below its 50-day moving average. Weight on the pair also came after Australian wage growth data and construction work done were softer than expected, meaning the path of RBA hikes could slow after the RBA makes its tabled hikes in the ‘months’ ahead, versus the RNBZ, that just hiked by 50bps yesterday but gave a hawkish guidance.   What to consider with Rio Tinto's results?  Rio Tinto’s profits and dividend slide in 2022, but Rio guides for a stronger 2023 - underpinned by ‘climate change scenarios’  Shares of Rio Tinto in NY fell 3.3% overnight and are down 3% on the ASX today after the world’s second largest miner reported underlying profit fell 38% to $13.28 billion in 2022 - vs the expected $13.96 billion consensus forecast. Rio’s profit fell after realised commodity prices fell from their records in the second half of 2022 – while earnings were also impacted by higher energy, raw materials prices and wages. Rio’s free cash flows fell 49% Y/Y in 2022 to $9.01 billion, resulting in Rio cutting its final (HY) dividend to $2.25 a share (down from $4.17), taking its total 2022 dividend to $4.92 - that’s a 60% pay-out ratio.Similar to BHP, Rio’s output looks stronger in 2023 with Rio guiding for higher copper, alumina, aluminium and iron ore production (but lower diamond production). It sees commodity prices being underpinned by ‘climate change scenarios’ which drive demand. Also note - in recent weeks - signs of a recovery in China have fuelled iron ore and copper prices up -with iron ore prices up 15% year to date. Rio is expanding its copper-gold presence, with the purchase of Turquoise Hill Resources- that will see Rio double its stake in the Oyu Tolgoi copper-gold project in Mongolia. Rio is also progressing the Rincon Lithium Project in Argentina – cementing itself in lithium. And despite the Serbian Government quashing its lithium mine Rio is ‘continuing to explore possibilities   To listen to our global team's take on markets - tune into our Podcast.   Source: Financial Insights: S&P500 and ASX200 pressured. But Travel, Logistics & Car dealerships see stronger earnings ahead | Saxo Group (home.saxo)

Summary:  Rate hike worries were kept alive by the FOMC minutes, even though these were from the pre-January economic data prints that have been more hawkish than expected. US equities closed mixed as yields stayed near recent highs, while Chinese equities on the backfoot again amid escalating geopolitical tensions. USD strength pressuring AUD despite hawkish RBA. Crude oil prices slumped about 3% and Gold is back to testing key support at $1820 again.   What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fall for the second session with bond yields remaining at three-month highs US equity markets remain pressured as the US 10-year yields trades in the neighborhood of three-month highs at ~3.92% with the FOMC meeting minutes showing more tightening is on the horizon. The Nasdaq 100 fell for the second day, closing at its lowest level since February 1. The S&P500 also fell the second session - moving under the key 4,000 level, at 3,991, bringing the 200-day moving average just ~1% away - at the 3,941 mark - which will quickly be tested. Intel shares were a laggard down 2.2% after the computer processor giant cut its dividend 66% - declaring a quarterly payout of 12.5 cents a share. This followed on from Intel reporting one of its weakest quarterly earnings forecasts in its history. All in all, this highlights that companies are trying to preserve capital amid margin compression – and that’s been a major theme of earnings seasons and we think it will continue to play out in Q1 earnings reports.  Yesterday, Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) slid with A-shares leading Hong Kong's Hang Seng Index (HSI) fell by 0.5% on Wednesday, with ongoing tensions between the U.S. and China over the latter’s alleged support to Russia, reports about China instructing state-owned enterprise to phase out the big-4 audit firms as their auditors for national security considerations, and overnight U.S. equity market weaknesses weighing on investor sentiment. Shares of banks outperformed but failed to offset losses in technology and industrial stocks. HSBC (00005) surged 5.3% and Hang Seng Bank (00011:xhkg) climbed 2.7%, being the top two gainers in the benchmark Hang Seng Index. Techtronic (00669:xhkg), plunging 6.9%, was the biggest loser. JD.com (9618:xhkg), down 3% led the decline in the China interest space. Hong Kong released its budget for this fiscal year, including HK$5000 per head in consumption vouchers, stamp duty reduction for first-time homebuyers, and support for airline operators. Hong Kong retail and property developer stocks rallied, with Chow Tai Fook (01929) rising 2.2%, Wharf Real Estate Investment (01997:xhkg) up 2%, and Henderson Land (00012:xhkg) up 1.6%. After Hong Kong market close, Baidu (09888:xhkg) reported revenues and earnings beating market expectations despite weaker advertisements in Q4. The search engine giant announced a share buyback programme of up to USD5 billion.  Baidu’s ADR (BIDU:xnas) fell 3.7%. In mainland China, the CSI300 slid 0.9%. Construction materials, media, brokerage, and non-ferrous metals led the decline.  Australian equities (ASXSP200.I) fall for third day -  but reopening stocks in logistics and car dealing seem supported on stronger earnings.  The Australian share market is being pressured by Australian bond yields rising, with the 10-year yield at its highest levels since January 4 - after the RBA affirmed it will continue to hike rates in the months ahead. The ASX200 fell briefly under its 50-day moving average with mining giants BHP and Rio trading lower after Rio reported weaker than expected numbers after the market close yesterday – but guided for a stronger 2023.  Travel stocks are continuing to gain attention on the revival of the travel sector – with a lack of fleet becoming an issue to keep up with strong demand. Qantas posted a record profit of A$1 billion in the six months to Dec 31, and announced A$500 million share buy back – as its sees relentless flight demand in 2023 - underscoring the surge in travel, post the pandemic. In fact, Qantas’ flagged higher than expected spending being needed to buy an extra aircraft, including nine Airbus A220s to keep up with surging passenger demand. Capital expenditure in the financial year ending June will rise by as much as A$400 million to between A$2.6-A$2.7 billion and will get as high as A$3.2 billion in the following 12 months. Despite guiding for strong demand, shareholders didn’t like hearing costs will need to rise – which send Qantas shares down 6% to $6.02, below its 100-day moving average. Qantas’ outlook underscores the pace and intensify of the travel industry’s recovery. Logistics giant, Qube is trading up 10% after its half year profit rose 41% to $125 million and it also noted it sees stronger growth ahead in 2023 – supported by China’s reopening. Car dealership giant, APE is up by about 7% after its results beat expectations, and it guides for a stronger year ahead with demand for new vehicles continuing to outstrip supply. Today’s earnings highlight the reopening trade is gaining pace and also growing beyond market expectations – this could be a driver of the Australian equity market in the half year, while commodity companies continue to guide for a stronger year ahead – backing our bullish commodity outlook. FX: A stronger US dollar – pressures the Australian dollar lower With ‘a few’ FOMC members supporting a larger hike to curb inflation - with James Bullard still favouring hiking rates to 5.375% as fast of possible, the US dollar gained the upper hand, pressuring most G10 currencies lower including the Aussie dollar. The AUD/USD pair closed below trend support, which opens up for a move lower to 0.6629, being the December low. The AUD/NZD pair however made a cleaner break down lower - with the Aussie against the Kiwi falling below its 50-day moving average. Weight on the pair also came after Australian wage growth data and construction work done were softer than expected, meaning the path of RBA hikes could slow after the RBA makes its tabled hikes in the ‘months’ ahead, versus the RNBZ, that just hiked by 50bps yesterday but gave a hawkish guidance.  Crude oil (CLJ3 & LCOJ3) prices slump ~3% A firmer dollar and expectations of more rate hikes from the Fed gathering pace saw a bearish momentum return in commodities on Wednesday, even ahead of the release of the marginally hawkish FOMC minutes. Crude oil prices slid by close to 3% with WTI below $74/barrel and Brent at $80 despite a Reuters report stating that Russia intends to cut crude exports from its western ports by a quarter in March/February, after prior reports that the country is cutting production in March by 500k BPD. API inventories were however higher, with crude stockpiles increasing by 9.9mn barrels last week suggesting demand weakness. Gold (XAUUSD) slumps to support again Gold gave up its recent gains amid the renewed pressure from USD and higher yields which are now close to their cycle highs despite some softening yesterday. The yellow metal is now close to the $1820 support, which held up last week after inflation concerns escalated. A break below will bring the 200DMA at 1776 in focus.  Read next: The AUD/USD Pair Remains Under Selling Pressure, The GBP/USD Pair Is Below 1.21 Again| FXMAG.COM What to consider? FOMC minutes marginally hawkish Despite the FOMC minutes being pre-January inflation print, they sounded hawkish at the margin suggesting there may be room for further escalation of that rhetoric given how the economic data has fared since the Jan 31-Feb 1 Fed meeting. A few of the participants favoured raising the rates by 50bps, and all agreed more rate hikes are needed thrashing pivot hopes. It also noted that a number of participants observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy. While this risk of a recession was noted, data since the meeting including the most recent PMI numbers this week have continued to ease recession concerns. US considering release of intel on China’s potential arms transfer to Russia No reports of a peace treaty, and instead Chinese senior diplomat Wang Yi’s visit to Moscow was accompanied with China and Russia confirming stronger ties and President Xi’s visit to Russia in the coming weeks. This is suggesting that these escalated geopolitical tensions are here to stay, and our Defense equity theme basket provides a good way to hedge geopolitical risks. The red line for US and Europe will be if there is evidence that China is supplying weapons to Russia, and that could threaten a potential escalation of the war into a confrontation between Russia and China on the one side and Ukraine and the US-led Nato military alliance on the other. A WSJ article reported that Western nations have picked up on intelligence that Beijing might end its previous self-imposed restraint on weapons supplies to Russia, according to U.S. and European officials, although it appears that China hasn’t yet made a final decision. Rio Tinto’s profits and dividend slide in 2022, but Rio guides for a stronger 2023 - underpinned by ‘climate change scenarios’ Shares of Rio Tinto in NY fell 3.3% overnight and are down 3% on the ASX today after the world’s second largest miner reported underlying profit fell 38% to $13.28 billion in 2022 - vs the expected $13.96 billion consensus forecast. Rio’s profit fell after realised commodity prices fell from their records in the second half of 2022 – while earnings were also impacted by higher energy, raw materials prices and wages. Rio’s free cash flows fell 49% Y/Y in 2022 to $9.01 billion, resulting in Rio cutting its final (HY) dividend to $2.25 a share (down from $4.17), taking its total 2022 dividend to $4.92 - that’s a 60% pay-out ratio. Similar to BHP, Rio’s output looks stronger in 2023 with Rio guiding for higher copper, alumina, aluminium and iron ore production (but lower diamond production). It sees commodity prices being underpinned by ‘climate change scenarios’ which drive demand. Also note - in recent weeks - signs of a recovery in China have fuelled iron ore and copper prices up -with iron ore prices up 15% year to date. Rio is expanding its copper-gold presence, with the purchase of Turquoise Hill Resources- that will see Rio double its stake in the Oyu Tolgoi copper-gold project in Mongolia. Rio is also progressing the Rincon Lithium Project in Argentina – cementing itself in lithium. And despite the Serbian Government quashing its lithium mine Rio is ‘continuing to explore possibilities’. UOB (U11:xses) reports higher Q4 earnings Singapore bank UOB reported 13% increase in Q4 net income on higher net interest income offsetting the drop in fees from wealth management and rising impairment charges. Core net profit, after adjusting for one-off expenses related to the acquisition of Citigroup’s Malaysia and Thailand consumer businesses, rose 37% to S$1.4bn. UOB has recommended a final dividend of 75 cents a share. Together with the interim dividend of 60 cents a share, the total dividend for the full year will be $1.35 a share, representing a payout ratio of 49%. OCBC (O39:xses) reports results on Friday. NVIDIA (NVDA:xnas) jumps on AI chips outlook NVIDIA reported stronger than expected Q4 results with EPS of $0.88 on revenue of $6.05 billion, compared to analyst estimates of $0.81 on revenue of $6.01 billion. After-market gains were however driven by a strong outlook for artificial intelligence processors which is helping to offset the slowdown in PCs. Q1 revenue guidance at $6.50 billion, vs. expectations of $6.35 billion. Alibaba (09988:xhkg/BABA:xnas) and NetEase (09999:xhkg/NTES:xnas) are reporting earnings Reporting results on Thursday after the Hong Kong market close but before the U.S. market opens, Alibaba and NetEase are scheduled to announce earnings. Analysts are expecting Alibaba’s results from last quarter to be soft, with the Adjusted EPS expected to fall slightly to RMB1.999 from RMB2.015 a year ago. Investors’ focus will be on the outlook regarding the current quarter. Analysts are expecting NetEase to achieve growth in both revenues and earnings on strength in the Justice Mobile and Eggy Party games.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source:Markets Today: Pre-CPI FOMC minutes suggest more rate hikes – 23 February 2023 | Saxo Group (home.saxo)

Summary:  Equity markets took it on the chin yesterday, dropping to a new 1-month low on the close and below the bottled-up range of the last few weeks as a fresh lift in the entire US yield curve weighed on sentiment. The S&P 500 Index closed just below the psychologically pivotal 4,000 level and the 200-day moving average lies a percent and a half lower. European equity markets have yet to show signs of contagion, but yields are steadily applying pressure there as well. What is our trading focus? US equities (US500.I and USNAS100.I): wage pressures and inflation pressures haunting again US equity futures moved big yesterday as the US 10-year yield hit 3.95%, the highest level since November, with S&P 500 futures declining 2% closing at 4,005 putting the 4,000 level into as play as we have highlighted for week. If S&P 500 futures decline below the 4,000 level, then the 200-day moving average at the 3,981 level will quickly be tested. Home Depot earnings release was received very negatively by the market sending its shares down 7% as the home improvement retailer indicates that the wage pressures are still excessive. This could accelerate the margin compression theme in equities when the Q1 earnings are out in April and May. FX: USD rebounds as US treasury yields lift to new highs The US dollar was modestly higher as US 10-year yields reached a YTD high and in close sight of the key 4% mark, closing at 3.95%. Higher-than-expected preliminary February PMIs in the US further faded recession concerns, bringing the market expectations of Fed terminal rate to a new high of 5.37%. The USD has also perhaps founds support from escalating geopolitical tensions as Putin suspended the Nuke deal with the US. GBP was the outperformer after very strong UK Flash Feb. PMIs (more belowø). GBPUSD touched highs of 1.2147 from 1.1987 before pulling back. AUDUSD was hurt by falling risk sentiment despite hawkish RBA minutes out yesterday and fell toward the range lows in the low 0.6800’s overnight, with the 200-day moving average a bit lower still. AUDNZD reversed sharply lower on the RBNZ’s surprisingly hawkish turn (more below). FOMC Minutes tonight in focus for the US dollar. Crude oil (CLJ3 & LCOJ3) still pressured lower Crude oil prices dipped further with dollar strength in play as the expectations of rate hikes from the Fed continued to ramp up. WTI crude traded close to $76/barrel while Brent was below $83. Geopolitical concerns still running high this week, potentially providing a floor to oil prices. Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere. Gold (XAUUSD) soft as maximum pressure applied by USD and yields Gold is slightly softer but holding up reasonably well, given the pressure from the stronger US dollar and US treasury yields rising to new highs for the cycle. The support zone below the recent lows is critical for the status of the trend in gold, as 1,800-1,810 was pivotal on the way up, and the 200-day moving average looms below at 1,776. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) lift to new cycle high US Treasury yields lifted to new cycle highs all along the curve as the Fed is priced to reach a terminal rate near 5.35% this year now (so effectively three further 25 basis point rate hikes expected from the Fed this year. A two-year auction was middle of the range in terms of bidding metrics, but well below the strong prior auction. The 10-year yield nudged higher to 3.95% yesterday, a new high since November of last year. A 5-year T-note auction is up today, and 7-year auction tomorrow. What is going on? Strong UK Services PMI not cooperating with the recession playbook The preliminary UK February PMI’s were released yesterday and suggest solid expansion in the UK’s Services sector, sparking a strong 17 basis-point surge in 2-year UK rates on the implications for further Bank of England tightening. The February reading for the services sector was 53.3 versus 49.2 expected and 48.7 in January, while the Manufacturing PMI reading was 49.2 versus 47.5 expected and 47.0 in January. More green shorts in the EZ data but… The EZ February PMIs are quite good at first glance. The French PMI composite was out at 51.6 versus prior 49.1 – this is a 7-month high and the first expansion above the 50 thresholds since October 2022. The German PMI composite is in the expansion zone too (at 51.1). But if we dig beneath the surface, this is not as good as expected. In France, the PMI report contains a warning about new export orders: “Overall, this marked a twelfth successive monthly decline in new export orders. Notably, manufacturers recorded the steepest slump since the first COVID-19 lockdown period in the first half of 2020”. We see a similar weakness in German data with a stagnation of exports to non-EU countries in January. Basically, in both cases, the order book and the manufacturing side look challenged while the services are the main drivers of the PMI composite. We still expect the eurozone will avoid a recession this year. Earnings recap: Walmart, Home Depot Despite beating against earnings estimates, Walmart’s profit forecast for this year fell short of analyst estimates and a cautious outlook suggested a lingering impact from the inventory build-up of last year as well as shifting consumer demand patterns considering the higher inflation and interest rates. Walmart shares recovered after gapping lower and closed higher for the session. It was a different story for home improvement retailer Home Depot, which missed expectations and gave a dull operating margin guidance – expecting FY operating margin at around 14.5% due to the extra wage costs, compared to an estimate of 15.1%. Home Depot shares plunge to close almost 7% lower and below the 200-day moving average. The results send a warning for other retailers like Target and Lowe’s due to report on March 1. Domino’s Pizza Enterprises crushed 23% in Australia after reporting earnings Dominos Pizza Enterprises is the Australian based franchise owner of Domino’s Pizza in Australia, New Zealand, Japan, Taiwan and several European countries. Its EBIT fell 21% Y/Y to A$113.9 million in the HY, with sales growth coming in weaker than expected as customers turned away from its higher prices. European operations faced significant geopolitical disruptions and were hit by the highest inflation levels across its business. Asian sales were materially stronger than pre-Covid - but its EBIT was lower. Guidance was weak and it cut its half-year dividend to A$0.674 per share. Domino’s Pizza shares fell 23% to A$54.71, which erased 2023’s gains. Australian wage growth comes in below expectations, AUD weaker Australian wage growth rose 3.3% YoY in Q4, slightly below the 3.5% expected and seen raising few new alarm bells at the RBA after evidence of a more precautionary hawkish shift recently. Construction data was weak in the quarter at –0.4% QoQ vs. +1.5% expected, but the Q3 data was revised up to 3.7% from 2.2%. Australian 2-year yields dropped 10 basis points, with money markets pricing a peak rate near 4.2% in August 2023. AUD weakened overnight, reversing back below 1.1000 in AUDNZD terms on a hawkish RBNZ meeting, while AUDUSD is heavy ahead of the range lows near 0.6800, with the 200-day moving average looming slightly lower still.  The next data the RBA will look at - will be next week’s release of retail sales, private sector credit and net exports of GDP.  RBNZ surprises hawkish, reaffirms expected terminal rate of 5.5% The RBNZ hiked the rate 50 basis points to take the policy rate to 4.75% and reaffirmed a forecast for the peak policy rate to reach 5.5%,  if over a longer period than previously. With recent disastrous floods raising expectations that the RBNZ might go with a smaller hike or no hike at all, this decision read hawkish and NZD sjumped versus the AUD and was somewhat resilient against the firmer US dollar. What are we watching next? FOMC minutes on tap today The minutes of the February 1st Fed meeting will be out later today (3am SGT), and will be key for the cues on inflation expectations and terminal rate forecasts as a gauge for what to expect in the dot plot in March. Still, the hotter than expected inflation print for January (both CPI and PPI) were released after the FOMC meeting and that has shifted the narrative to a hawkish. The criteria for a pause may be on the lookout, and whether that is any push to driving the market’s rate cut expectations further out. Earnings to watch Today’s key earnings release is Nvidia reporting FY23 Q4 earnings (ending 31 Jan) after the US market close with analysts expecting revenue of $6bn down 21% y/y and EPS of $0.81 down 32% y/y. With cryptocurrencies rallying lately there might be an upside surprise in the outlook as crypto mining activity might have increased the demand for GPUs. Wednesday: Rio Tinto, Genmab, Danone, Lloyds Banking Group, Iberdrola, Nvidia, TJX, Stellantis, Baidu, eBay Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 0800 – Sweden Riksbank Governor Thedeen to speak 0900 – Germany Feb. IFO Business Climate Survey 1800 – US 5-year US T-note auction 1900 – US FOMC Minutes 1910 – New Zealand Governor before parliament committee 2130 – API's Weekly Crude and Fuel Stock Report 2230 – US Fed’s Williams (Voter) to speak on inflation   Source: Financial Markets Today: Quick Take – February 22, 2023 | Saxo Group (home.saxo)

Summary:  Extra caution is creeping back into markets, with geopolitical tensions picking up, and hotter than expected economic prints, with swaps now expecting the Fed to hike rates at the March, May and June meetings. Sentiment was also weighed by downbeat outlooks from Walmart and Home Depot. On a weekly chart, the S&P500 fell under its 50 day moving average indicating traders could exercise risk-off trading ahead. Australian listed Domino’s Pizza reported weaker than expected numbers and a soggy outlook, sending its shares down 20%, which will likely impact Domino’s shares listed globally. FOMC minutes and Rio results ahead. The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fell ~2% while bond yields rose to new 2023 highs  The risk off tone was set by geopolitical tensions picking up -  as well as economic prints showing the US services and manufacturing PMIs improved more than expected – with swaps now projecting the Fed can keep pushing rates higher — with the market indicating 25-basis-point hikes are coming at the March, May and June meetings.  Sentiment was also weighed by downbeat outlooks from consumer spending bellwethers – Walmart (WMT) and Home Depot (HD). All while investors await Wednesday's Fed minutes release. Also ahead are earnings results from mining giant Rio Tinto (RIO), tourism and casino giant Ceazers Entertainment (CZR) and smartwatch and gadget business Garmin (GRMN). The three major indices shed at least 2%, with the Dow erasing 2023’s gains. On the weekly chart - the S&P500’s fell below its 50-day moving average –indicating there are more sellers than buyers – while also possibly indicating the market could potentially pull back. Pressuring sentiment - bond yields hit new 2023 cycle highs - with the 10-year note up 14 bps, while the dollar strengthened. Australia equities (ASXSP200.I) also seem pressured by the RBA’s fresh hawkishness  The Australian share market has fallen about 3.5% from its new cycle high that it hit on Feb 3. Pressure on the ASX200 comes after the RBA indicated it has more work to do to keep inflation and wage pressure in order. The ASX200 now appears to be pulling back, with Saxo’s Technical Analyst reinforcing the technical indicators suggest the ASX200 could drop further. However, if the ASX200 closes above 7,477, the uptrend can resume. Today, Origin Energy (ORG) is the best performer in large caps, up 13% after receiving a revised takeover offer from the Brookfield Asset Management-led group following months of due diligence. Meanwhile Domino’s (DMP) is the worst performer down 21% on reporting weaker than expected half year results. Meanwhile, BHP (BHP) shares are steady after reporting a stronger outlook yesterday. For more on BHP’s expectations for stronger fundamentals this and next year click here – also note BHP remains in a technical uptrend. Pizza chain Domino’s Pizza reports weaker than expected earnings amid inflationary pressures In the Australia session today, Domino’s reported underlying EBIT fell 21% Y/Y to A$113.9 million in the HY - with sales growth coming in weaker than expected and inflation also affecting earnings. Its European operations faced significant geopolitical disruptions, and the highest inflation levels across its business- while Asian sales were materially stronger than pre-Covid- but EBIT was lower. All in all, Domino’s financial metrics were down Y/Y, except its store count rose 16% Y/Y to 3,736 stores. The company also cut its half year dividend to A$0.674 per share. As for its - outlook that also disappointed -  as customer counts have not met expectations since December - especially in Europe and Asia  - which is lowering store profitability. New store openings will continue to grow in FY23 - but could be below Domino’s medium-term outlook for +8-10% growth. This implies there is less franchisee demand to open stores. That said, management is confident it will return to positive same store sales growth once customer demand increases. Domino’s Pizza (DMP) shares in gapped down in Australia , erasing 2023’s gains – taking DMP to A$57.97 – November 2022 levels. We will also be watching Domino’s in the US – DPZ, as well the London listed business – DOM.  To listen to our global team's take on markets - tune into our Podcast.     Source: Financial Insights: S&P500 falls below 50-day simple moving average on market pricing in more hikes. Domino's Pizza shares sliced | Saxo Group (home.saxo)

Summary:  Volatility charged higher as economic data continued to push for an upward repricing of the Fed path. US yields surged to fresh YTD highs, pushing S&P500 to close below 4,000 and NASDAQ 100 approaching 12,000. Fed’s terminal rate is now priced in at 5.37%, and dollar pushed higher with geopolitical concerns also still in play. Consumer stock earnings from Walmart and Home Depot sent margin pressure warnings. FOMC minutes will be dated, but may provide cues on what to expect from the March dot plot.   What’s happening in markets? The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fell ~2% while bond yields rose to new 2023 highs The risk off tone was set by geopolitical tensions picking up, as well as economic prints showing the US services and manufacturing PMIs improved more than expected – with swaps now projecting the Fed can keep pushing rates higher — with the market indicating 25-basis-point hikes are coming at the March, May and June meetings.  Sentiment was also weighed by downbeat outlooks from consumer spending bellwethers – Walmart (WMT) and Home Depot (HD). All while investors await Wednesday's Fed minutes release. Also ahead are earnings results from mining giant Rio Tinto (RIO), tourism and casino giant Ceazers Entertainment (CZR) and smartwatch and gadget business Garmin (GRMN). The three major indices shed at least 2%, with the Dow erasing 2023’s gains. On the weekly chart - the S&P500’s fell below its 50-day moving average –indicating there are more sellers than buyers – while also possibly indicating the market is likely to pull back to a cycle low. Pressuring sentiment - bond yields hit new 2023 cycle highs - with the 10-year note up 14 bps, while the dollar strengthened. Hong Kong’s Hang Seng Index (HIG3) fell amid intensifying competition among China’s eCommerce platforms Hong Kong stocks slipped on Tuesday amid signs that Chinese eCommerce platforms are heating up in competition for business. JD.com (09618:xhkg) plunged 8.5% following the eCommerce giant launching an RMB10 billion subsidy campaign to compete with rival Pinduoduo (PDD:xnas). Meituan (03690:xhkg) dropped more than 4.1% after the mainland food delivery giant announced hiring had started in Hong Kong, paying as much as HKD35,000 a month for delivery riders to prepare for an expansion to Hong Kong. Alibaba (09988:xhkg) and Tencent (00700:xhkg) also fell over 4%. HSBC (00005:xhkg) pared initial gains from an earning beat and special dividend as investors sold the shares of the banking giant citing concerns about a softer 2023 profit guidance and saw the shares down nearly 2% during Hong Kong trading hours. Meanwhile, Hang Seng Bank (00011:xhkg) rose 3.3% despite an earnings miss due to a jump in loan loss provision for mainland property loans. In mainland China, the CSI300 edged up 0.3%. Non-ferrous metals, coal, steel, and auto gained while beauty care, media, food and beverage, and retailing declined. Australia equities (ASXSP200.I) also seem pressured by the RBA’s fresh hawkishness The Australian share market has fallen about 3.5% from its new cycle high that it hit on Feb 3. Pressure on the ASX200 comes after the RBA indicated it has more work to do to keep inflation and wage pressure in order. The ASX200 now appears to be pulling back, with Saxo’s Technical Analyst reinforcing the technical indicators suggest the ASX200 could drop further. However, if the ASX200 closes above 7,477, the uptrend can resume. Today, Origin Energy (ORG) is the best performer in large caps, up 13% after receiving a revised takeover offer from the Brookfield Asset Management-led group following months of due diligence. Meanwhile Domino’s (DMP) is the worst performer down 19% on reporting weaker than expected half year results. Meanwhile, BHP (BHP) shares are up slighted after reporting a stronger outlook yesterday. For more on the world’s biggest mining company, and BHP’s expectations for stronger fundamentals this and next year click here – also note BHP remains in a technical uptrend. Ahead are earnings from Rio Tinto (RIO). FX: Yields and risk sentiment in play The US dollar was modestly higher as US 10-year yields reached a YTD high and in close sight of the key 4% mark, closing at 3.95%. Higher-than-expected PMIs in the US further faded recession concerns, bringing the market expectations of Fed terminal rate to a new high of 5.37%. USD gains were more restrained in that view, which also got a push higher from escalating geopolitical tensions as Putin suspended the Nuke deal with the US. GBP was the outperformer after very strong UK Flash PMIs, which suggested falling near-term recession concerns and pushed higher the odds of a 25bps rate hike from the BOE in March. GBPUSD touched highs of 1.2147 from 1.1987. AUDUSD was hurt by falling risk sentiment despite hawkish RBA minutes out yesterday and fell to 0.6848. AUDNZD still held up above 1.10 with the RBNZ expected to take a dovish turn today. USDJPY again testing 135 with FOMC minutes on tap, while EURUSD unable to sustainably break below 1.0650. Crude oil (CLH3 & LCOJ3) still pressured lower Crude oil prices dipped further with dollar strength in play as the expectations of rate hikes from the Fed continued to ramp up. WTI crude traded close to $76/barrel while Brent was below $83. Geopolitical concerns still running high this week, potentially providing a floor to oil prices. Meanwhile, an expected pickup in Chinese demand is also supporting. Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere.   What to consider? Putin suspends Nuclear pact with the US, threatens to push war in Ukraine Putin, in his State of the Nation address, announced a suspension of participation in the New START nuclear arms control treaty with the US. This was the last accord limiting their nuclear arsenals. He also vowed to press on with his faltering invasion of Ukraine. This has spurred the next leg of escalation concerns, invoking a response from President Biden in Poland saying that Russia will never win the war and pledging more support to Ukraine. The focus is now on China which needs to back up its peace treaty words with action after being accused of supplying arms to Russia. Senior Chinese diplomat Wang Yi is now visiting Russia and there are reports that President Xi could be visiting Moscow to meet with Putin in April or May. US S&P PMIs topped expectations, fading recession concerns Flash S&P PMIs for the US were better than expected, with services returning to an expansion territory of 50+. Manufacturing PMI also picked up traction coming in higher at 47.8 from 46.9 previously while Services and Composite both rose back into expansionary territory to 50.5 (exp. 47.2, prev. 46.8) and 50.2 (exp. 47.5, prev. 46.8), respectively. The report further pointed to fading recession concerns, while input price pressures also eased despite a shaper rise in output prices. Australian wage growth and construction data to keep the RBA on its hiking path for now With the RBA now being more hawkish and data dependent, today’s wage growth data and construction work done seemingly validate Australia’s central Bank, can keep on its hiking path for now. Australian wage growth grew 3.3% YoY, up from the revised higher read of 3.2% YoY prior. Despite wage growth growing less than 3.5% expected  - construction work done began to roll over  - falling 0.4% in Q4 – marking a slight fall the prior quarter’s revised jump of 3.7%. So despite both reads being softer than expected – we still need more data to validate core inflation could slow – especially as it’s still well above the RBA’s target. Money markets softened to imply a peak cash rate of 4.2% in August 2023 (down from 4.3%). The next data the RBA will look at - will be next week’s release of retail sales, private sector credit and net exports of GPD. More green shoots in the EZ data but… The EZ February PMIs are quite good at first glance. The French PMI composite was out at 51.6 versus prior 49.1 – this is a 7-month high and the first expansion above the 50 threshold since October 2022. The German PMI composite is in the expansion zone too (at 51.1). But if we dig beneath the surface, this is not as good as expected. In France, the PMI report contains a warning about new export orders: “Overall, this marked a twelfth successive monthly decline in new export orders. Notably, manufacturers recorded the steepest slump since the first COVID-19 lockdown period in the first half of 2020”. We see a similar weakness in German data with a stagnation of exports to non EU countries in January. Basically, in both cases, the order book and the manufacturing side look challenged while the services are the main drivers of the PMI composite. We still expect the eurozone will avoid a recession this year. Overall PMI for the bloc was also pushed higher by services sector outperformance which recorded a PMI of 53.0 (vs. 50.8 last month and 51.0 exp) while manufacturing lagged at 48.5 (vs. 48.8 last and 49.3 exp). Baidu (09888:xhkg) announces Q4 results Baidu is scheduled to announce its Q4 results on Wednesday. Investors are prepared for weaker advertising revenues, slower growth in its cloud business, and some margin compression. Analysts surveyed by Bloomberg are expecting adjusted EPS to fall by 22.4%. Walmart and Home Depot send margin pressure warnings Despite an earnings beat, Walmart’s profit forecast for this year fell short of analyst estimates and a cautious outlook suggested a lingering impact from the inventory buildup of last year as well as shifting consumer demand patterns in light of the higher inflation and interest rates. Meanwhile, home improvement retailer Home Depot missed expectations and gave a dull operating margin guidance – expecting FY operating margin at ~14.5% due to the extra wage costs, compared to an estimate of 15.1%. The results send a warning for other retailers like Target and Lowe’s due to report on March 1. Pizza chain Domino’s Pizza reports weaker than expected earnings amid inflationary pressures In the Australia session today, Domino’s reported underlying EBIT fell 21% Y/Y to A$113.9 million in the HY - with sales growth coming in weaker than expected and inflation also affecting earnings. Its European operations faced significant geopolitical disruptions, and the highest inflation levels across its business- while Asian sales were materially stronger than pre-Covid- but EBIT was lower. All in all, Domino’s financial metrics were down Y/Y, except its store count rose 16% Y/Y to 3,736 stores. The company also cut its half year dividend to A$0.674 per share. As for its - outlook that also disappointed - as customer counts have not met expectations since December - especially in Europe and Asia  - which is lowering store profitability. New store openings will continue to grow in FY23 - but could be below Domino’s medium-term outlook for +8-10% growth. This implies there is less franchisee demand to open stores. That said, management is confident it will return to positive same store sales growth once customer demand increases. Domino’s Pizza (DMP) shares in gapped down in Australia , erasing 2023’s gains – taking DMP to A$57.97 – November 2022 levels. We will also be watching Domino’s in the US – DPZ, as well the London listed business – DOM. The Chinese Communist Party’s Central Committee to hold a plenary session next week The Chinese Communist Party’s Politburo held a meeting on Tuesday and announced after the meeting to hold a Central Committee plenary session from Feb 26 to 28 to decide on key issues in preparation for the “two sessions” meeting of the government scheduled t commence on March 4. FOMC minutes on tap today The minutes of the February 1st Fed meeting will be out later today (3am SGT), and will be key for the cues on inflation expectations and terminal rate forecasts as a gauge for what to expect in the dot plot in March. Still, the hotter than expected inflation print for January (both CPI and PPI) were released after the FOMC meeting and that has shifted the narrative to a hawkish. The criteria for a pause may be on the lookout, and whether that is any push to driving the market’s rate cut expectations further out.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: US yields at fresh highs; FOMC minutes ahead – 22 February 2023 | Saxo Group (home.saxo)

Summary:  Outbound tourism from China has been the biggest contributor to global tourism pre-pandemic. With border measures being eased after three years, pent-up demand and accumulated savings of Chinese consumers will likely mean a surge in outbound travel demand over the next few years. The big and early winners of that will potentially be in Asia as the number of flights to the West destinations still remain limited. We have identified a list of stocks that provide exposure to the Asian hospitality sectors that mostly serve Chinese tourists. Chinese travelers dominate global tourism China’s outbound travelers have been the biggest contributor to global tourism before the pandemic. Before the pandemic, Chinese travelers made 155 million trips abroad in 2019 and spent almost $255 billion, amounting to 14% of global tourism revenue. After three years of pandemic restrictions, China has relaxed its Covid contained measures in a quicker-than-expected manner since November. We have been of the view that the biggest pivot for 2023 has been the faster-than-expected China reopening, and that will continue to be the key theme for traders and investors this and next year as the Chinese demand comes back online to drive local, regional and global markets. China Outbound Tourism Research Institute (Cotri) expects Chinese travelers to take 110 million international trips this year, which is about two-thirds of the 2019 level. This could mean an estimated spend of about $180 billion globally, which could be a source of revival for the hospitality industry that has seen a big void from the absence of Chinese tourists in the last three years. Since the reopening of China and easing of border restrictions in January, travel pickup has been restrained with concerns around spread of the virus and risks of new variants. However, there has been no sharp rise in cases reported even after the Lunar New Year celebration at the end of January, and China saw an average of 410,000 exits and entries per day, up 120% over the Lunar New Year holiday last year, as per the National Immigration Administration. Further recovery should start to pick up now into the second quarter as the May 1 Labor Day holiday approaches and gather further pace in the second half of the year and into the national holidays in September and October. China has a five-day holiday for Labor Day and a week off in early October for National Day, and both these are considered to be the golden periods for travel. Asia tourism growth to lead the global recovery While it is prudent to expect that full Chinese travel demand recovery will take a few years, there is no doubt that the floodgates are about to be open. The big and early winners of that will likely be some of the Asian travel operators as regional destinations remain the top choice for most Chinese travellers. These will include Hong Kong, Macau and Thailand, followed by Japan, South Korea, Australia and other Southeast Asian countries. Hong Kong received only 370,000 visitors from the mainland in 2022, down from around 50 million pre-pandemic. Expectations are for this to be revived to 60-70% this year, suggesting about 30-35 million tourists from China. Thailand expects to host 7-8 million Chinese tourists in 2023, also a 60-70% recovery from 2019 levels. Travel to further destinations in Europe and North America could take about an year or more to recover as the limited number of commercial flights and visa backlogs restrain a pickup. A lack of flights keeps the prices higher, although that may be offset slightly by higher budgets driven by accumulated savings over the pandemic years. Chinese travellers are also likely to chose safer destinations as travel resumes, given the surge in anti-Asian sentiment globally since the emergence of the pandemic. Asia Pacific Tourism equity theme basket We have launched a new Asia Pacific Tourism equity theme basket to capture the expectations of an improvement in China’s outbound tourism. The list contains predominantly Asian stocks across booking platforms, airlines, airport services, hotels, casinos and restaurants in countries that will likely see the biggest inflow of tourists from China over the course of the year. We have also included the key Thailand index given its heavy dependence on Chinese tourism. The basket represents a total market value of $476.6 billion with Booking Holdings leading the pack. Sales growth has returned to a positive territory over the last year after the Covid shock but earnings have remained under pressure. Analyst generally expect earnings rebound for these companies as Chinese travel rebounds, and this is reflected in median price targets being 12% above the current price currently. Source: Bloomberg, Saxo Risks to the view A lack of international flights, as well as the shortages of pilots and crew, is keeping travel prices higher and remains the biggest risk for the Chinese outbound travel recovery. In January, the capacity of global carriers' flights traveling to and from China was only 11% of the level compared with 2019. In April, the number is expected to rise to 25%, according to travel data provider Cirium. Higher prices could force Chinese consumer to push their international holiday plans to late 2023 or 2024. Other risks are seen from new Covid variants or mass spread of infections prompting another round of travel curbs around the region. Meanwhile, if economic growth across the region slows down enough to erode the purchasing power of consumers, that could mean a setback on demand for travel.   Source: The upcoming surge in Chinese outbound travel demand | Saxo Group (home.saxo)

  Summary:  Markets are quiet as we are now on the other side of a three day weekend in the US and as geopolitical tensions and elevated yields provide a nervous backdrop. Hong Kong’s HSI index is pushing on the lowest levels since the first week of the year. The focus in Europe this morning is on preliminary PMI’s for February as the Eurozone bloc’s economy may show signs of slight expansion in the month. What is our trading focus? US equities (US500.I and USNAS100.I): skating on thin ice US equity futures are picking up from Friday’s weak session after yesterday’s US holiday with S&P 500 futures trading lower at around the 4,066 level putting US equities into negative territory for the month. Today’s key event is naturally the annual speech from Putin as it could ignite fresh geopolitical risks as described in yesterday’s equity note. In the US session earnings from Walmart and Home Depot can also impact sentiment as both companies are expected to show weak revenue growth. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) The Hang Seng Index slipped 1.3% amid signs that Chinese eCommerce platforms are heating up competition for business. JD.com (09618:xhkg) plunged nearly 8% following launching a subsidy campaign to compete with rivals. Alibaba (09988:xhkg), Tencent (00700:xhkg), and Meituan (03690:xhkg) dropped more than 3%. HSBC (00005:xhgk) pared initial gains from an earnings beat and special dividend and slid 1.6%. Meanwhile, Hang Seng Bank (00011:xhkg) rose 2.9% despite an earnings miss due to a jump in loan loss provision for mainland property loans. In mainland China, the CSI300 is flat. Resource names, such as non-ferrous metal, coal, and steel continued to do well, as did the auto stocks. The consumer and AI generated content space declined. FX: Awaiting USD direction after bearish reversal on Friday and long US weekend As US treasury yields rolled over on Friday, the US dollar did likewise and posted a modest bearish reversal on the same day it was trying to break free of resistance. Given the nervous geopolitical backdrop, headline risk is paramount in coming days as we await further resolution in the USD direction. Overnight, hawkish RBA minutes did little for the Aussie, given downbeat markets in Asia,  while the RBNZ meeting tonight could shake the kiwi in either direction, given the uncertainty of the RBNZ’s stance in the wake of disastrous floods in parts of the country, although NZ yields remain near the highs since early January. Crude oil (CLH3 & LCOJ3) fails to hold onto Monday’s gains Brent crude oil futures dropped back to $83 during Asian hours, thereby reversing Monday’s gain in response to fresh dollar strength and concerns about the near-term direction of US interest rates, and despite sustained hopes of a recovery in China’s activity levels, especially following a fresh liquidity injection by the PBoC last Friday. Geopolitical developments remain a worry but so far, the positive impact on prices have been very limited.  Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere. Copper receives a boost from BHP outlook Despite the hawkish tilt in Fed expectations which left other metals on the defensive, copper has managed a strong recovery as the key $4 area continued to provide support. BHP, the world’s biggest miner reported its half-year result today, and according to its CEO the company expects domestic demand in China and India “to provide stabilizing counterweights to the ongoing slowdown in global trade and in the economies of the US, Japan and Europe,”. Also supporting prices are continued threats to supply in Peru, Panama and Zambia. . Some support also coming through via rising aluminum prices after smelters in China’s Yunnan province cut capacity due to energy shortages following a period of weak hydro generation. Gold (XAUUSD) focus on dollar and interest rate trajectory Gold traded softer overnight in response to fresh dollar and yield strength following Monday’s US closed session. The market remains on the defensive after recent US economic data strength and hawkish comments from Fed policymakers led to market to adjust higher the trajectory of US Fed funds rate. Apart from a very uncertain geopolitical situation, the market will be focusing on minutes from the Fed’s last meeting on Wednesday as well as personal spending on Friday. Holdings in ETF’s meanwhile dropped again on Monday with the 3.1 tons reduction to 2882 tons, a three-year low, bringing this year's net sales to 34 tons or 1.1 million ounces. In other words, gold for now needs continued demand from central banks to provide a floor under the market. Support at $1820 followed by $1790. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) after Friday reversal. 2-year auction today US Treasury yields reversed sharply on Friday after posting new local highs. A heavy schedule of auctions lies ahead this week, starting with an auction of 2-year notes today after the benchmark traded within 10 basis points of the 15-year high of 4.80% posted last November. A 5-year auction will follow tomorrow and 7-year on Thursday.  The 10-year benchmark yield tested above the December high of 3.90% on Friday, but trades 3.85% this morning. The US data highlight this week is Friday’s January PCE inflation data. What is going on? The cost of sea freight is back to pre-Covid levels The cost of sea freight is now back to pre-Covid levels, which is positive news on the inflation front. The drop in prices is both explained by cyclical (1) and structural (2) factors. The U.S. consumer is very resilient, as shown by the recent release of the U.S. retail sales. But this is not the case in other countries. The rise in the cost of living is causing a drop in global consumption (1). In addition, the sea freight market is facing a surplus of containers. And this will get worse in the months to come. The number of container ships under construction represents nearly 30 % of the fleet that is currently operational. That’s three times more than normal. Companies in the sector have misjudged the evolution of global demand in the post-Covid period. Wrongly, they anticipated it would remain unchanged or it would even increase. The fall in prices is likely to continue all this year and perhaps partially in 2024. The market consensus expects a drop in transported volumes of around 4 % this year. Downshift in RBNZ’s rate hike trajectory could signal NZD weakness The Reserve Bank of New Zealand meets on Wednesday, 22 February and consensus expects a return to 50bps rate hikes after a 75bps in November when even the possibility of a 100bps was debated. Economic data has been soft since the last meeting, with 2-year inflation expectations easing and unemployment rate seeing a slight uptick. However, Cyclone Gabrielle has brought fresh risks of inflation pressures in the short-term. Calls for no rate hikes have also picked up although Finance Minister Robertson was out calling for the RBNZ to address inflation yesterday. Still, risks of further kiwi weakness loom large after NZD has weakened 1.7% against the USD so far this year. If RBNZ signals that the peak for the current rate hike cycle is near, the 38.2% retracement of NZDUSD uptrend from the October low at 0.6146 could be challenged. AUDNZD broke above 1.1030 and its 200-day moving average yesterday, posting a new 3-month high. BHP guides for a pick up in metals and readies its balance sheet to become a copper giant BHP - the world’s biggest miner saw profits in the six months to December 2022 decline by more than expected but sees the ongoing price recovery extend into the second half year and beyond as it sees demand picking up in China, but also in India - and this offsetting the slowdown in trade with the US, Japan and Europe. All in all, it also guided for mining production costs to be markedly higher than before the Covid-19 pandemic – amid higher energy, labour and other input costs. Its HY results were impacted by lower realised prices in copper, iron ore and coal across the last six months of 2022. Wet weather also impacted on its coal business’ production and pushed up unit costs – and there were difficulties in securing enough staff. This resulted in underlying attributable profit falling to $6.6 billion - vs the $6.96 billion expected by consensus (from continuing operations). BHP’s interim dividend was trimmed to $0.90 per share – down from last year’s record $1.50 per share. Still BHP’s payout ratio is 69% and that’s BHP’s 5th highest dividend on record. We also believe the lower dividend payout reflects that BHP is readying itself for the $9.6 billion takeover of Oz Minerals which, if approved, will occur in May. What are we watching next? Putin speech today. China said to hope broker peace deal over Ukraine after US warns China on lethal aid to Russia Biden made a surprise visit to Ukraine  yesterday and met with President Volodymyr Zelenskiy, declaring "unwavering support" as Russia's invasion nears the one-year mark. China is said to be promoting a peace plan for Ukraine as China’s top diplomat will arrive in Moscow today, but German and US authorities are already declaring themselves sceptical on China’s intentions and accuse it of taking sides. European source familiar with the plan (cited by Bloomberg, the officials asked not to be identified) said it would likely include a call for a cease-fire and the cessation of arms deliveries to Ukraine. Putin is set to make a speech today in Moscow, with added interest given the presence of a top Chinese official. In Saxo’s view, the playbook for the week should be risk-off given the possibility of any ugly turns in geopolitics. That would mean long JPY and USD, long commodities, long defense stocks and lowered exposure or hedging of risky assets. Once we are past this week with hopefully no further escalations, focus will shift back to inflation concerns and driving Fed rate cut expectations further into 2024. Earnings to watch Today’s US earnings focus is Walmart and Home Depot with analysts expecting Walmart to report revenue growth of 4.4% y/y and EPS $1.52 down 1% y/y as volume of goods sold is expected to be under pressure. Analysts expect Home Depot to report revenue growth of 0.6% y/y and EPS of $3.27 up 1.8% y/y reflecting lower volume across US home improvement industry. Tuesday: Teck Resources, Gapgemini, Engie, HSBC, Walmart, Home Depot, Medtronic, Palo Alto Networks Wednesday: Rio Tinto, Genmab, Danone, Lloyds Banking Group, Iberdrola, Nvidia, TJX, Stellantis, Baidu, eBay Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Flash Feb. Manufacturing and Services PMI 0930 – UK Flash Feb. Manufacturing and Services PMI 1000 – Germany Feb. ZEW Survey 1330 – Canada Dec. Retail Sales 1330 – Canada Jan. CPI 1445 – US Flash Feb. Manufacturing and Services PMI 1500 – US Jan. Existing Home Sales 1800 – US 2-year Auction 0030 – Australia Q4 Wage Price Index 0100 – RBNZ Official Cash Rate Source: Financial Markets Today: Quick Take – February 21, 2023 | Saxo Group (home.saxo)

Summary:  BHP, the world’s biggest miner handed down its results showing profits declined greater than expected in the six months to December 2022, but BHP’s CFO told Saxo’s Jessica Amir, BHP sees a recovery in pricing in the second half year and into 2024, with the price recovery having already begun. BHP, the world's largest commodity company guides for a stronger outlook underpinned by higher commodity prices ahead - and readies its balance sheet to become a copper giant  The world’s biggest miner, BHP handed down its financial results today  - showing profits declined greater than expected – in the six months to December 2022 – but BHP’s CFO told Saxo’s Jessica Amir - it sees a recovery in metal pricing in the second half year and into next year - and the price recovery has already begun. This is also our view at Saxo - we also believe 2023 is poised for higher commodity prices amid China's economic revival- as we expressed in our Quarterly Outlook. BHP's half year results to 2022 end were impacted by lower realized prices in copper, iron ore and coal across the last six months of 2022. Wet weather also impacted its coal business’ production and pushed up unit costs – plus there were difficulties in securing enough staff. This resulted in underlying attributable profit falling to $6.6 billion - from continuing operations - vs the $6.96 billion expected by consensus.  BHP’s interim dividend was trimmed to $0.90 per share – down from last year’s record $1.50 per share. Still - BHP’s payout ratio is 69% and that’s BHP’s 5th highest dividend on record. At Saxo we also believe the lower dividend payout reflects that BHP is readying itself for the $9.6 billion takeover of Oz Minerals. If approved by Oz Minerals in April, the takeover will occur in May. Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM As for BHP’s positive outlook strengthening – it sees demand picking up in China, but also in India - and this offsetting the slowdown in trade with the US, Japan and Europe.All in all, BHP guided for mining production costs to be markedly higher than before the Covid-19 pandemic – amid higher energy, labour and other input costs. But we believe BHP could offset such higher costs - amid rising commodity demand - which would underpin prices in iron ore, met coal, and copper -  while supply issues remain and the green transformation picks up.BHP’s divestment of its two thermal coal mines should also return capital to the business and allow BHP to focus on iron ore, copper, nickel, potash and coking coal.For more on BHP refer to our Quarterly Outlook. Or refer to Saxo’s Australian Resources equity theme basket or Saxo’s broader Commodity equity theme basket. To listen to our global team's take on markets - tune into our Podcast.   Source: Financial Insights on commodity giant BHP - Disappointing HY to Dec 2022, but it sees a turnaround in 2023 and into 2024 | Saxo Group (home.saxo)

Summary:  US equity futures as well as most European indices retreated on Monday amid a spike in geopolitical concerns with President Biden in a surprise visit to Ukraine and China’s attempts to stand neutral. The backdrop of inflation concerns in the US is still keeping risks of a tighter than expected monetary policy, and yields remain a key focus as US markets return later today. China demand recovery optimism is however back, providing a bid to crude oil and metals. RBA’s minutes guided hawkish, and focus now on RBNZ meeting tomorrow with potential for volatility amid mixed market expectations.   What’s happening in markets? US markets closed, European indices mostly lower as geopolitical concerns weigh Muted trading overnight with US markets closed for President’s Day but geopolitical tensions at a high with President Biden making a surprise visit to Ukraine to pledge support. Futures for S&P 500 and NASDAQ 100 continue to trade in the red with fears of escalating tensions between US and China, as well as the upcoming anniversary of Russia’s invasion of Ukraine. Geopolitical concerns also spilled over to European markets, with most European indices closing in the red on Monday. EuroStoxx 50 (STOXX50.I) was down 0.09% while France’s CAC 40 (FRA40.I) was down 0.16%. Only UK’s FTSE 100 (UK100.I) closed in a positive territory. China markets led the way on Monday with strong gains of over 2% on potential liquidity injection on Friday and expectations of a recovery in momentum as the earnings season focus shifts to Asia. What to watch ahead? When trade resumes in the US today, focus will be on geopolitics as well as the services and manufacturing read outs - PMIs – expected to show the US economy’s recovery is gathering pace – but with the PMIs still in contractionary phase (to show reads of under 50). FOMC minutes due on Wednesday - will have eagle eyes on them - looking for terminal rate expectation comments – given some members hinted of a potential 50bps rate hike again. Later in the week - Friday’s release of January PCE - the Feds preferred inflation gauge - will be a focus - expected to show core inflation rose 0.4% up from 0.3% in December – with the YoY read expected slow to 4.3% (from 4.4%) - according to Bloomberg consensus. BHP’s numbers disappoint, shares slide 2%. Its 50 day simple moving average offers support Softer commodity prices in the half year drove a decline in BHP profits –greater than expected - with underlying attributable profit falling to $6.6 billion in the six months to December 2022, vs the $6.96 billion expected by consensus. The world’s biggest miner declared an interim dividend of $0.90 per share – marking a drop from last year’s record $1.50 per share - meaning its pay-out ratio dropped to 69% from 78%. We think that’s because the board is taking the proposed Oz Minerals takeover into account. As for production - significant wet weather of its coal business impacted production and unit costs - as did challenges in securing enough staff. As BHP’s outlook - it’s aiming to lift iron ore production to 330 mt/yr. Overall it reinforced its positive demand forecast in the second half of FY23 and into FY24 - with strengthening activity in China. BHP sees China and India demand offsetting the slowdown in trade with the US, Japan and Europe. Mining production costs are expected to be markedly higher than before the Covid-19 pandemic – due higher energy, labor and other input costs. Meanwhile we think BHP should benefit from higher-than-expected iron ore, met coal, and copper prices amid supply issues and the green transformation push. Also note, it started the process of divesting its two coal mines- as the business wants to focus on future facing commodities – copper, nickel and potash. Rio Tinto is expected to highlight similar issues  - slimmer profits and higher costs when it reports results tomorrow. For more, refer to Saxo’s Australian Resources equity theme basket. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) rallied with A-shares leading A-shares rallied strongly on Monday with the benchmark CSI300 rising 2.3%. Although the 1-year and 5-year loan prime rates remained unchanged at the monthly fixing this morning, the average mortgage interest in the largest 100 cities fell 6bps M/M to 4.04% in February, or 143bps Y/Y for first-home mortgages and 84bps for second-home mortgages.  China Securities Regulatory Commission (CSRC)’s announcement on Friday of rules to regulate and effectively revive overseas IPOs of mainland companies added fuel to the optimism. Construction materials, electronic appliances, telco, and brokerage names led the charge higher in A-shares. In Hong Kong, the Hang Seng Index opened lower but managed to finish the Monday session 0.9% higher, led by industrials and financials. . Aluminum Corp of China (02600:xhkg) surged 7.6% and China Hongqiao (01378:xhkg) jumped 9.9% following the Yunnan provincial government told local aluminum smelters to cut production due to power shortage. EV makers gained, led by Nio (09866:xhkg) and XPeng (09868:xhkg). The latest rise in tension between the U.S. and China over alleged Chinese support for Russia’s invasion of Ukraine, China’s increasing role in the day-to-day running of Hong Kong, and the issue of Taiwan are taking a backseat for the time being as investors are shifting their eyes to additional policy stimuli being rolled out at the upcoming two-session meetings to be held from March 4, 2023. FX: RBA’s hawkish minutes, RBNZ meeting keeps kiwi in check After extensive speeches last week from RBA Governor Lowe, focus turned back to AUD today with RBA minutes on tap. Th February meeting saw a 25bps rate hike but the statement had tilted more hawkish. AUDUSD took a brief look below 0.69 ahead of the minutes, but reversed higher as the minutes revealed that a pause was not an option at the February meeting. Focus more so on the RBNZ meeting tomorrow morning in Asia (9am SGT/HKT) with some calls for no rate hikes amid the recent flooding damages. NZDUSD slid below 0.6250 in early trading after being somewhat resilient overnight. USDJPY attempting another move to 134.50 with BOJ Governor Kuroda scheduled to appear in the parliament. Crude oil (CLH3 & LCOJ3) gains momentum on China demand and geopolitics Crude oil prices rebounded on sustained hopes of a recovery in China’s activity levels, especially after PBOC’s liquidity injection on Friday. State-owned enterprises have started ramping up purchases, such as Unipec which has purchased about 10mbbl from the UAE for loading in April. WTI futures traded above $77/barrel while Brent was above $84. The geopolitical backdrop added some worries, with fresh risks of sanctions on Russia that could continue to tighten the oil market. Signs of a commodity recovery gather pace: production ramps up in anticipation of demand picking up Fitch Ratings put out a report on China’s reopening driving a modest recovery in oil - this positive sentiment flowed to other commodities. Secondly – as Ole mentioned on Saxo Market Call Podcast, copper inventory has started to roll over in London, Shanghai, and New York - indicating demand for copper and other commodities would theoretically need to pick up. Copper prices (HGA) gained 1.3% on Monday to $4.18 – taking copper back over its 100-day moving average – to its highest levels since January and June last year. Iron ore (SCOA) prices moved up 1.9% to $130.85 – which is its highest level since June last year on supply concerns - with Brazil heading to peak rainy season at month end. Aluminium prices meanwhile are underpinned by a province in China - the Yunnan province – cutting smelter capacity as ordered by the local power grid amid an energy supply shortfall. Lastly - consider keeping an eye on Wheat prices - as the conflict in Ukraine will raise questions about farmers ability to plant wheat int the coming season, meanwhile France - also a key wheat producer – is suffering drought.  Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM What to consider? President Biden makes a surprise visit to Ukraine – playbook for geopolitical risks Biden made a surprise visit to Ukraine and met with Volodymyr Zelenskiy, declaring "unwavering support" as Russia's invasion nears the one-year mark. These visits come after Blinken’s rhetoric that the US has information that China is supplying arms to Russia, and VP Kamala Harris’ claim to charge Russia with war crimes against humanity. China is however trying to convince that it remains neutral, and State Councilor Wang Yi is set to visit Moscow in the coming days after floating fresh peace proposal to end the conflict. In Saxo’s view, the playbook for the week should be risk-off given the possibility of any ugly turns in geopolitics. That would mean long JPY, long commodities, long Defense stocks and short risky assets. Once we are past this week with hopefully no further escalations, focus will shift back to inflation concerns and driving Fed rate cut expectations further into 2024. Consider watching the US dollar strength, and Saxo’s Défense basket amid geopolitical tensions rising Amid the geopolitical risks rising - consider watching likely US dollar strength play out in key currency pairs. In equities – consider watching Saxo’s Defence basket. Over the last two days we’ve seen geopolitical tensions escalate. Biden made a surprise visit to Ukraine declaring ‘unwavering support’ and pledging $500 million in new aid. Meanwhile, EU diplomats are looking at pooling 4 billion Euros of ammunition purchases for Ukraine as early as next month, with EU states pushing to ramp up their ability to hit back against those helping Russia circumvent sanctions. Also – today Putin is also expected to give a state of the nation address - potentially focusing on escalations - he also may note that 500k Russian troops have been mobilised. Meanwhile China threw cold water on allegations that it is going to help arm Russia. And finally, the White House is reportedly mulling over increasing sanctions on Russia. We continue to watch this closely - and encourage investors and traders to exercise caution. Food security issues pick up; with fertilizers being used as a weapon A Russian cargo ship held back in the Dutch port of Rotterdam for months- has been escorted out by the United Nations’ World Food Program chartered ship. The Russian cargo, bound for Malawi – contains 20,000 metric tons of Russian fertilizer. And the fact that Russia was allegedly holding back fertilizers - meant the nations food security was at risk, with fertilizers essential in growing crops. About 20% of Malawi’s population is already expected to face acute food insecurity during the “lean season” to March. Moreover it’s not just the lack of supply that’s the issue- costs are too. Malawi is one of 48 nations in Africa, Asia and Latin America identified by the IMF as being most at risk of higher food and fertilizer costs after Russia invaded Ukraine. China and Russia have a foothold of the industry - being the world’s largest producers of fertilizers - including nitrogen, phosphates and potash. These issues in Rotterdam highlight that food security can be used as weapon - and we are concerned should geopolitical tensions escalate - which would pressure food prices higher. Large fertilizer companies to watch include CF industries, Mosaic, Nutrien. Refer to Saxo’s Commodity basket for more. Downshift in RBNZ’s rate hike trajectory could signal NZD weakness The Reserve Bank of New Zealand meets on Wednesday, 22 February and consensus expects a return to 50bps rate hikes after a 75bps in November when even the possibility of a 100bps was debated. Economic data has been soft since the last meeting, with 2-year inflation expectations easing and unemployment rate seeing a slight uptick. However, Cyclone Gabrielle has brought fresh risks of inflation pressures in the short-term. Calls for no rate hikes have also picked up although finmin Robertson was out calling for RBNZ having a responsibility to address inflation yesterday. Still, risks of further kiwi weakness loom large after NZD has weakened 1.7% against the USD so far this year. If RBNZ signals that the peak for the current rate hike cycle is near, the 38.2% retracement of NZDUSD uptrend from the October low at 0.6146 could be challenged. The cost of sea freight is back to pre-Covid levels This is positive news on the inflation front. The cost of sea freight is now back to pre-Covid levels. The drop in prices is both explained by cyclical (1) and structural (2) factors. The U.S. consumer is very resilient, as shown by the recent release of the U.S. retail sales. But this is not the case in other countries. The rise in the cost of living is causing a drop in global consumption (1). In addition, the sea freight market is facing a surplus of containers. And this will get worse in the months to come. The number of container ships under construction represents nearly 30 % of the fleet that is currently operational. That’s three times more than normal. Companies in the sector have misjudged the evolution of global demand in the post-Covid period. Wrongly, they anticipated it will remain unchanged or it will even increase. The fall in prices is likely to continue all this year and perhaps partially in 2024. The market consensus expects a drop in transported volumes of around 4 % this year.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Geopolitical risks front and centre – 21 February 2023 | Saxo Group (home.saxo)