Arm IPO

Tesla surged 10.2% post a major investment bank's upgrade, while Meta gained 3.3% on its powerful AI system news. Oracle, however, tumbled 9% in after-hours trading due to sluggish cloud sales growth. Strong loan and financing data spurred an intraday Hang Seng Index recovery after a morning dip, alongside gains in iron ore and copper. The weaker US dollar boosted G10 currencies, particularly AUD and JPY. The Yuan strengthened against the dollar, influenced by positive credit data and government support. Additionally, the EU Commission lowered the euro zone growth forecast.       US Equities: Tesla surged 10.2% after a major US investment bank upgrading the stock, assigning an additional USD500 billon to the valuation for a supercomputer that Tesla is developing. Meta gained 3.3% on news that the company is developing a powerful AI system (WSJ). The Nasdaq 100 added 1.2% to 15,461 while the S&P 500 climbed 0.7% to 4,487. Fixed income: The 3-year auction tailed by 1bp (i.e. awarded yield 1bp higher than the level at the auction deadline) and kept traders cautious ahead upcoming hefty supply in 10 and 30-year auctions and corporate issuance and CPI data on Wednesday. The 2-year ended unchanged while the 10-year closed at 4.29%, 2bps cheaper from Friday. China/HK Equities: The Hang Seng Index pared much of the sharp loss in the morning and recovered to end the day 0.6% lower at 18,096. The initial nearly 2% decline was driven by an earnings miss by Sun Hung Kai Properties and departure of the head of the cloud division and former CEO Daniel Zhang from Alibaba. The stronger-than-expected bounce in China’s loans and aggregate social financing data, released during the lunch break, triggered a sharp recovery. Southbound flows however registered a large net sale of HKD10.3 billion by mainland investors. In A-shares, the CSI300 added 0.7%. FX: The retreat of the US dollar brought strong gains across the G10 board, led by AUD and JPY. AUDUSD broke above 0.64 to highs of 0.6449 before settling around 0.6430, while Japanese yen saw strong gains on the back of weekend Ueda comments that brought forward expectations of policy normalization. USDJPY dropped to lows of 145.91, coinciding with fresh recent peaks in JGB yields, before a rebound back to 146.50+ levels as US CPI is awaited. Yuan also strengthened with USDCNH taking a look below 7.30 from highs of 7.36 amid verbal warnings from authorities, better-than-expected credit data as well as the continued appreciation bias in PBoC’s daily fixings.   Commodities: Crude oil held onto its gains near the recent highs with Brent still close to $90/barrel despite a small sell-off in Monday’s session. However, Monday’s price action came despite a weaker USD. With focus still on supply tightness concerns, today’s OPEC and EIA monthly reports will be on watch. Strong performance in metals led by iron ore up 3.5% and copper up close to 2.5% with China credit data boosting sentiment and a strong move in the yuan as well. Gold finding is hard to clear $1930 hurdle and the move in yields remains key with hefty corporate supply and US CPI ahead. Macro: China’s new Yuan loans in August surged more than expected to RMB 1,360 billion. This increase is attributed to greater regulatory encouragement for banks to lend and favorable seasonal factors. This, together with the front-loading of local government bond issuance, brought aggregate social financing to RMB 3,120 billion in August, up from July's RMB 528.5 billion. US NY Fed inflation expectations rose higher for one-year to 3.6% from 3.5%, while the long-term five-year also rose 0.1ppt to 3.0% from 2.9%. However, the three-year expectations dipped to 3.8% from 3.9%. Macro events: US NFIB small business survey (Aug), US 10-year T-note auction ($35 billion), UK payrolls (Aug), Germany ZEW survey (Sep) Company Events: Apple's iPhone 15 launch In the news: China’s PBoC asks banks to get approval for dollar purchases over USD50 million (Reuters) EU Commission cuts euro zone growth forecast as Germany in recession (Reuters) Representatives from eight core member institutions of the China National Forex Market Self-regulatory Mechanism met on Monday to discuss about maintaining the stability of the renminbi (Xinhua). Strong demand pushes Arm to close IPO order book early (FT) Qualcomm strikes new Apple deal on 5G chips (FT) US and Vietnam unveil billions in semiconductor and AI deals (FT)    

US inflation remained firm both on headline and core, suggesting Fed will continue to push for higher-for-longer at next week’s meeting. Markets however shrugged off the report and USD also was largely unchanged. The yuan extended gains, and focus today will be on whether ECB can surprise hawkish, as well as the US retail sales. Oil prices saw another run higher before settling lower on inventory builds.     US Equities: The S&P500 ticked up 0.1% while the Nasdaq 100 added 0.4%. The CPI prints released were generally considered as not having an impact on a probable pause at the FOMC next week. Nvidia and Microsoft gained around 1.3% as the chipmaker’s chief scientist and the software giant’s President testified in Senate hearings about AI.     Fixed income: Treasuries sold off briefly following a higher-than-expected core CPI print but quickly reversed as buy-the-dip trades emerged. The 2-year yield ended the choppy session 5bps lower at 4.97% while the 10-year yield finished 3bps richer at 4.25%, near the day-low in yields in spite of a relatively weak 30-year auction.     China/HK Equities: Weaknesses in healthcare and technology stocks weighed on the benchmark indices, offsetting gains in China properties and financials. China properties were supported by news that Zhengzhou, a major city in eastern-central China, lifted restrictions on home purchases and lowered minimum down payment requirements. EV stocks sold off on EU anti-subsidy investigation news. The Hang Seng Index slid by 0.1% while the CSI300 dropped by 0.7%. Northbound net selling reached RMB6.6 billion.     FX: The US dollar wobbled on the CPI release but could not close the day higher with Treasury yields slipping. EUR in the spotlight today as ECB decision is due, and EURUSD has found support at 1.07 for now with a rate hike priced in with over 65% probability. USDJPY spiked to 147.73 but that remained short-lived and pair was back below 147.40 into Asian open. Yuan strengthened further with authorities increasing bill sales in Hong Kong to soak up yuan liquidity making it more expensive to short the currency. This could likely continue into the month-end National Day holiday, and USDCNH is seen testing 7.27 handle.     Commodities: Crude oil prices rose further with IEA estimates also looking at a supply deficit in Q4, although less so than the OPEC estimates. But gains were short-lived and prices fell after inventory data showing a crude build following weeks of drawdowns. US commercial inventories of crude oil rose 4 million barrels last week, according to EIA data. Gasoline inventories also rose by 5.6mn barrels. Meanwhile, Gold is back to threatening the $1900 handle with firmer US CPI.   Macro: US CPI surprised to the upside, but markets were not spooked as it did little to change the thinking around the Fed. Core CPI rose 0.3% MoM, or +0.278% unrounded, above the prior/expected +0.2%, with core YoY printing 4.3%, down from July's 4.7%, and in line with expectations. Headline print was in line with expectations at 0.6% MoM, up from +0.2% on account of energy price increases, with YoY lifting to 3.7% from 3.2%, above the expected 3.6%. The PBoC announced plans to issue RMB15 billion Central Bank Bills in Hong Kong on September 19, which is going to tighten CNH (offshore renminbi) liquidity. This issuance includes RMB5 rollover and RMB10 billion net issuance. According to PBOC's Financial Times, the PBoC will continue to issue bills in the offshore market to maintain ongoing control over offshore renminbi liquidity. The CNH HIBOR in Hong Kong reached 5.6% on Wednesday, marking its highest level since April 2022.   Macro events: US retail sales (Aug) exp 0.1% MoM (prev 0.7%), US PPI (Aug) exp 0.4% MoM and 1.3% YoY (prev 0.3% MoM, 0.8% YoY), US jobless claims exp 225k (prev 21k), ECB policy meeting exp 4.25% (prev 4.25%), Australia employment change exp 25k (prev -14.6k)   Adobe is scheduled to report Q3 results on Thursday after market close. Analysts' median forecast anticipates a 9.8% revenue increase and a 17% growth in adjusted EPS, reaching USD3.979. While Adobe has experienced steady revenue growth due to its shift to a cloud-based subscription model, recent trends indicate a plateau. Analysts remain skeptical about whether generative AI features in Adobe's content creation software will significantly contribute to growth.     In the news: EU launched an anti-subsidy investigation Wednesday against import of Chinese electric cars into the EU (Politico). Arm prices IPO at $51 per share, valuing company at over $54 billion (CNBC) Citigroup CEO shook up the management team (WSJ). For    

US and European equity futures markets trade higher with Asian markets also climbing on cautious optimism the Federal Reserve may decide to pause rate hikes after US core inflation advanced the least in two years. The dollar and Treasury yield both trade softer ahead of US retail sales with the euro ticking higher as traders' price in a two-third chance of a rate hike from the European Central Bank later today. Crude trades near a ten-month high on concerns about a supply shortfall, copper higher on yuan strength while gold prices have steadied following a two-day decline.   Equities: S&P 500 futures are holding up well against recent weakness trading around the 4,530 level despite yesterday’s higher-than-expected US inflation opening the door for the Fed to hike interest rates one more time in December. Arm IPO was priced at the top end of the range at $51 per share with trading set to being today. Adobe earnings after the US market close could be a key event for the AI-related cluster of stocks. FX: The US dollar wobbled on the CPI release but could not close the day higher with Treasury yields slipping. EUR in the spotlight today as ECB decision is due, and EURUSD has found support at 1.07 for now with a rate hike priced in with over 65% probability. USDJPY trades softer after government minister talked about the need for strong economic measures. Yuan strengthened further with authorities increasing bill sales in Hong Kong to soak up yuan liquidity making it more expensive to short the currency. Commodities: Brent holds above $92 and WTI near $90 after the IEA joined OPEC’s warnings of a supply shortfall in the coming months, thereby supporting a rally that started back in June when Saudi Arabia curbed supply to boost prices. Softening the rally was a weekly US stock report showing rising stocks and production near the 2020 record. Near-term the market looks overbought and in need of a pullback. Gold looking for support ahead of $1900 with a hawkish FOMC pause back on the agenda while copper trades firmer with a stronger yuan offsetting a rise in LME stocks to a two-year high Fixed income: The US yield curve bull-steepened yesterday despite higher-than-expected CPI numbers, indicating that the Federal Reserve might be approaching the end of the hiking cycle. Yet, long-term yields remained flat as the 30-year auction showed a drop in indirect demand and tailed by 1bps despite pricing at the highest yield since 2011. Overall, we remain cautious, favouring the front part of the yield curve over a long duration. Bonds will gain as the economy starts to show signs of deceleration. Still, larger coupon auction sizes and a hawkish BOJ will support long-term yields unless a tail event materializes. We still see 10-year yields rising further to test strong resistance at 4.5%. Today, the focus will be on the ECB, which markets expect to hike. Due to a recession in Germany and in Netherlands, we believe that the ECB will deliver a hawkish pause today, which might result in a short-lived bond rally. Macro: US CPI surprised to the upside, but it did not alter the markets thinking around the Fed. Core CPI rose 0.3% MoM, or +0.278% unrounded, above the prior/expected +0.2%, with core YoY printing 4.3%, down from July's 4.7%, and in line with expectations. Headline print was in line with expectations at 0.6% MoM, up from +0.2% on account of energy price increases, with YoY lifting to 3.7% from 3.2%, above the expected 3.6%. The PBoC announced plans to issue RMB15 billion Central Bank Bills in Hong Kong on September 19, which is going to tighten CNH (offshore renminbi) liquidity further In the news: Asset managers BlackRock and Amundi are warning that US recession risks are rising – full story in the FT. Germany is facing big structural problems in its manufacturing sector with gloom taking over among workers – full story in the FT. The EU is weighing tariffs against China over flooding the market with cheap electric vehicles – full story on Reuters. Technical analysis: S&P 500. Key at resistance at 4,540. Key Support at 4,340. Nasdaq 100 15,561 is key resistance. EURUSD downtrend, support at 1.0685, Expect short-term bounce to 1.08. AUDJPY testing resistance at 95.00. Crude oil uptrend stretched, expect a correction lower Macro events: ECB Main Refinancing Rate exp. unchanged at 4.25% (1215 GMT), US Retail Sales (Aug) exp. 0.1% vs 0.7% prior (1230 GMT), US Initial Jobless Claims exp. 225k vs 216k prior (1230 GMT), US PPI (Aug) exp. 0.4% vs 0.3% prior (1230 GMT), Commodities events:  EIA’s Weekly Natural Gas Storage Change (1430 GMT) Earnings events: Adobe reports FY23 Q3 earnings (ending 31 August) after the US market close with analyst expecting revenue growth of 10% y/y and EPS of $3.98 up 63% y/y. Read our earnings preview here.  

Equities closed higher with VIX at the 12 handle after ECB’s dovish rate hike and US economic data still being resilient. ARM IPO had a positive start although Adobe slid in post-market after reporting earnings. EURUSD broke below key support at 1.0635 but closed just above, while CAD and AUD outperformed. China’s RRR cut boosted oil further and could set a positive tone for today, but activity data and MLF announcement on watch ahead of Quad Witching option expiries in the US session.     US Equities In a broad-based rally, both the S&P500 and the Nasdaq 100 added 0.8% while small-cap stocks outperformed with a 1.4% gain in the Russell 2000 Index. Chip designer ARM soared 13.4% to USD63.59 on the first day of trading after the IPO. Moderna gained 3.9% after releasing a statement guiding higher revenue through 2028 on new drugs. Cruise liners and energy stocks were some of the top performers for the session. Adobe slid nearly 2% in extended-hour trading on a softer-than-anticipated AI boost to revenue outlook.   Fixed income Treasuries had a volatile session. The market was initially supported by the decline in yields across the pond in Europe following a 25bp ECB hike but signaling a pause in the statement. The hotter-than-expected US retail sales and PPI brought sellers back to the market. The Treasury announced USD13 billion 20-year bond and USD15 billion 10-year TIP auctions for next week. The 2-year yield climbed back above 5% to settle at 5.01%, up 4bps. The 10-year yield rose 4bps to 4.29%.   China/HK Equities The Hang Seng Index managed to close 0.2% higher, thanks to gains in coal miners and oil producers, while the CSI300 was flat in a choppy but subdued session. A surprise reduction in the Reserve Requirement Ratio (RRR) by the People's Bank of China (PBoC) after the market closed in the evening led to higher futures trading overnight and may set a more positive tone for today's trading.   FX The US dollar rose to fresh 6-month highs with EURUSD breaking below 1.07 and the May lows of 1.0635 after ECB’s dovish rate hike. A close below 1.0635 will  expose the 1.05 handle. GBPUSD also slumped to test the 1.24 handle. USDCNH rose slightly to 7.29 as PBoC cut RRR but AUDUSD attempted to break above 0.6450 after a hot labor report. CAD was the G10 outperformer as oil prices continued to surge, and EURCAD – as hinted in the FX Watch – slumped below 1.44.   Commodities Fresh highs in crude oil with WTI jumping over $90/barrel and Brent approaching $94. ECB signaling a pause, hot US economic data as well as China RRR cut supported the demand outlook while supply constraints linger. China’s activity data will be a key focus in the day ahead, and whether the RRR cut is followed by another MLF cut. Iron ore continued to climb higher breaking above $120, the highest in five months on the back of strong production from China steel mills with a seasonal pickup in construction. Meanwhile, uranium futures are surging higher driven by supply tensions as nuclear reactor capacity growth increases.   Macro: The ECB raised interest rates 25bp, taking the deposit rate to 4.0%, however the hike was dovish as it came with hints of the end of tightening cycle even though President Lagarde stayed short of saying that ECB is at peak rates. 2023 inflation was upgraded to 5.6% from 5.4%, 2024 (in-fitting with source reporting by Reuters) raised to 3.2% from 3.0% and 2025 lowered to 2.1% from 2.2%, but still ultimately seen just above target. Growth projections for 2023-25 were lowered across the board. The PBoC cut the reserve requirement ratio (RRR) by 25bps effective Friday, September 15, 2023, bringing the weighted average RRR across banks to 7.4% and increasing loanable funds by over RMB500 billion. There is RMB400 billion in medium-term lending facility loans maturing today. US retail sales for August came in firmer than expected although July’s print was revised lower. Headline up 0.6% MoM (exp 0.2%, prev 0.5%) as gasoline station sales surged to 5.2% from 0.1% in July. The control metric also posted a surprise gain of 0.1% despite expectations for a 0.1% decline, although the prior was revised down to 0.7% from 1.0%. US PPI meanwhile rose 0.7% MoM in August, above the expected and prior 0.4%, marking the largest increase since June 2022 and heavily driven by a 10.5% increase in the energy component. Weekly jobless claims rose to 220k from 217k, suggesting a still tight labor market.   Macro events Among the Chinese activity data scheduled for release today, the consensus forecasts a 3.9% increase in industrial production in August, up from 3.7% in July, reflecting stronger manufacturing PMI data. Retail sales are expected to grow by 3.0% Y/Y, boosted by auto sales and catering, surpassing July's 2.5%. While the front-loading of local government bond issuance in August would have supported infrastructure construction, a combination of a high base from the previous year and continued weakness in property construction may limit fixed asset investment growth for August. This likely contributed to the Bloomberg consensus projection of a year-to-date fixed asset investment slowdown to 3.3% Y/Y from 3.4%. Other key events scheduled include US industrial production (Aug) exp 0.1% MoM vs. 1.0% prev, UoM sentiment (Sep P) exp 69.0 vs. 69.5 prev.   Company events Adobe reported Q3 of USD4.89 billion, in line with street consensus and adjusted EPS of USD4.09 beating estimates slightly. Q4 profit guidance of USD4.10 to 4.15 per share surpassed consensus USD4.06 while sale guidance of USD4.98 billion to 5.03 billion was in line. The initial reaction was mild disappointment on the tepid sales outlook.