Macro events

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)

Following on from weakness in the US and Europe, stocks in Asia fell across the board as oil prices extended gains ahead of today’s key US inflation report. The weakness in US stocks was led by technology companies with Apple dropping almost 2%. The potentially tightest oil market in a decade lifted oil prices while raising fresh inflation concerns saw the 2-year Treasury yield back above 5%, while the dollar traded mixed against its G10 peers after seeing broad gains on Tuesday. US CPI the focus today given the current 50/50 split on whether the FOMC will hike rates one more time. Equities: Nasdaq 100 futures are sliding further this morning to the 15,478 level as Apple’s iPhone event last night failed to muster any excitement, which means that the market is now in a wait-and-see mode ahead of today’s US inflation report. Energy stocks continue to be in focus given the rally in Brent crude on estimated oil supply shortfall due to Saudi Arabia’s oil production cuts. FX: Higher crude oil prices made CAD the G-10 outperformer with USDCAD down to 1.3550 from 1.3590 but EUR attempted to catch up in late NY/early Asian hours on ECB leak that inflation forecasts may be raised higher which are seen to be raising the prospect of a hike this week. EURUSD jumped higher to 1.0770 with EURGBP above the 0.86 hurdle as GBPUSD dipped below 1.25 on not-so-hawkish labor market. USDCNH takes another leg lower below 7.29 but AUDUSD also dipped to 0.64 handle in Asia. Commodities: Saudi Arabia’s ‘stable market’ reason for cutting production rings increasingly hallow after OPEC in their monthly report said the market may experience a shortfall of 3.3m b/d in the fourth quarter. With the EIA meanwhile only predicting a 230k b/d shortfall, OPEC could find themselves being accused of trying to inflate prices to meet big spending plans among its members. IEA’s report will be on watch today ahead of the US CPI print and EIA’s weekly stock report which according to API’s figures may show a rise. Oil’s rally to a fresh 10-month high and the stronger dollar saw gold drop below 200DMA as inflation concerns returned, bringing more fear of rate hikes. Fixed income: European sovereign curves are likely to bear-flatten this morning after Reuters reported that the ECB expects inflation to remain above 3% next year and growth to be downgraded for this and next year. Despite the upcoming forecasts painting the perfect stagflation picture for the eurozone, policymakers will weigh their options carefully and tilt towards a hawkish pause rather than a hike. Yet, they might need to reinforce their message by ending reinvestments under the PEPP facility. That would buy them enough time to wait for rate hikes to feed through the economy instead of adding pressure to the German and Dutch recessions. The focus today is on the US CPI numbers and the 30-year US Treasury auction. Volatility: VIX traded 43 cents higher at 14.23, but more importantly the VIX futures traded 1.31 higher, up to 15.95, indicating there is some uncertainty about the upcoming US inflation report. Adobe, which is scheduled to release its earnings report later this week, closed lower yesterday. Options traders were divided on the stock, with the put/call ratio at 1, indicating that equal amounts of calls and puts were traded. This might suggest that there is no clear consensus on how the earnings report will be received. Macro: ECB’s new 2024 inflation projection could be raised above 3% vs 3% in June, firming case for interest rate hike. ECB also to cut 2023 and 2024 economic growth projections to broadly in line with market expectations. UK labor report was mixed with headline earnings up 8.5% YoY in July vs. 8.2% expected. For more, read our latest Macro/FX Watch. In the news: Europe's high gas prices hit industrial output – full story on Reuters. Apple unveiled four new iPhone models with a muted reaction from investors in extended trading – full story in FT. Technical analysis: S&P 500 rejected at 4,540 resistance level, expect set back, support at 4,340.Nasdaq 100 rejected at 15,561 key resistance level. USDJPY uptrend eyeing 149-150. EURUSD downtrend, support at 1.0685, Expect short-term bounce to 1.08. Brent oil uptrend potential to 98.50 Macro events: UK Industrial Production (Jul) exp. -0.7% m/m vs 1.8% prior (0600 GMT), US CPI (Aug) exp. 0.6% m/m and 0.2% core vs 02% and 0.2% prior (1230 GMT), US 30-year T-bond auction ($20 billion) Commodities events: IEA’s Oil Market Report (0900 GMT), EIA’s Weekly Crude and Fuel Stock Report (1430 GMT) Earnings events: Inditex F424 1H results, which have already reported with EPS at €0.81 vs est. €0.80 and a small positive revenue surprise.

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

Asian stocks fell with US futures as yields on 10-year Treasuries reach a 16-year high above 4.54% while China Evergrande Group missed a debt payment adding to fears about the sectors massive debt pile. Broad dollar strength continues with the greenback trading at its highest level since December as another Fed member said another rate hike this year will be needed. Crude oil trades softer amid macroeconomic concerns and a stretched speculative long while gold holds support despite multiple headwinds. The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. Equities: S&P 500 futures are under pressure this morning with the US 10-year yield hitting 4.55% extending its relentless move higher. If the US 10-year yield moves to 4.75% we will most likely begin seeing widening cracks in equities as the prevailing narrative of falling inflation collapses. Yesterday’s session saw no meaningful rotation between defensive and cyclical sectors. Today’s key events are US consumer confidence figures and Costco earnings tonight after the market close. FX: Higher Treasury yields, particularly in the long end, pushed the dollar higher to extend its gains. USDCHF rose to near 4-month highs of 0.9136 with immediate target at 0.9162 which is 0.382 retracement level. EURUSD broke below 1.06 support despite better-than-expected German Ifo. USDJPY attempted a move towards 149 with verbal intervention remaining lacklustre. AUD slipped on China woes while NZD and CAD were relative gainers, and the outperformer was SEK with the Riksbank starting its FX hedging today. Commodities: Crude trades lower for a second day with macroeconomic concerns, a stronger dollar and a stretched speculative long and easing refinery margin weighing on prices. Gold prices continue to defy gravity, holding above $1900 support with demand for stagflation protection offsetting the current yield and dollar surge. LME copper is trading at the widest contango (oversupply) since at least 1994 as inventories expand and China demand concerns persist. Wheat continues to face downward pressure from huge Russian harvest despite weather related downgrades in Australia. Fixed Income. The Federal Reserve’s higher-for-longer message reverberates through higher long-term US Treasury yields. Unless there is a sign that the job market is weakening significantly or that the economy is slowing down quickly, long-term yields will continue to soar. With 10-year yields breaking above 4.5% and selling pressure continuing to mount through an increase in coupon supply, quantitative tightening, and waning foreign investors demand, it’s likely to see yields continue to rise until something breaks. This week, our attention turns to US PCE numbers and Europe CPI data while the US Treasury will sell 2-, 5- and 7-year notes. It will be interesting to see if investors buy the belly of the yield curve as a sign that they are preparing for a bull rather than a bear-steepening. Overall, we continue to favour short-term maturities and quality. Volatility: VIX Index still sits at around the 17 level, but the downward pressure in equity futures this morning could push the VIX much higher. This could be a cycle where the market tests the 20 level. Macro: Fed’s Goolsbee (voter) kept the door open for more rate hikes while emphasizing higher-for-longer. Moody’s warned of a protracted government shutdown saying that it could weigh on consumer confidence and markets. Meanwhile, after PMIs, Germany’s Ifo also showed a slight improvement in business outlook to 85.7 vs. 85.2 expected, while the previous was revised higher to 85.8. There were several ECB speakers once again. Lagarde largely repeated what was said at the ECB Press Conference, noting policy rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to target. Schnabel said there is not yet an all-clear for the inflation problem. In the news: Interest rates will stay high 'as long as necessary,' the European Central Bank's leader says (Quartz), Teetering China Property Giants Undercut Xi’s Revival Push (Bloomberg), Russia dodges G7 price cap sanctions on most of its oil exports (FT), Global trade falls at fastest pace since pandemic (FT), Dimon Warns World Not Ready for 7% Fed Rate: Times of India via Bloomberg Technical analysis: S&P500 downtrend support at 4,328 & 4,200. Nasdaq 100 support at 14,687 &14,254. DAX downtrend support at 14,933. EURUSD below strong support, resuming downtrend to 1.05. GBPUSD downtrend strong support at 1.2175. Gold rangebound 1,900-1,950. Crude oil correction: WTI expect to 87.58. Brent to 80.62. US 10-year T-yields 4.55, uptrend but expect minor correction Macro events: US New Home Sales (Aug) exp 699k vs 714k prior (1400 GMT), US Consumer Confidence (Sep) exp 105.5 vs 106.1 prior. Speeches from Fed’s Bowman (voter) as well as ECB’s Lane, Simkus and Muller. Earnings events: Costco reports FY23 Q4 earnings (aft-mkt) today with estimated revenue growth of 8% y/y and EPS growth of 14% y/y. H&M reports FY23 Q3 earnings (bef-mkt) with estimated revenue growth of 7% y/y and EPS growth of 47% y/y. Micron Technology reports FY23 Q4 earnings (aft-mkt) with estimated revenue growth of -41% y/y and EPS of $-1.18 vs $1.37 a year ago. Accenture reports FY23 Q4 earnings (bef-mkt) with estimated revenue growth of 4% y/y and EPS unchanged from a year ago. Nike reports FY24 Q1 earnings (aft-mkt) with estimated revenue growth of 3% y/y and EPS growth of –20% y/y.

US and European equity futures trade mixed following Tuesday's US technology stocks led weakness after consumer confidence dropped to a four-month low and the expectations index fell below a level that in the past has signaled an incoming recession. The S&P 500 dropped to a June low as the Fed’s higher for long message drove US 10-year yields to a fresh 16-year high while the Dollar index reached a fresh year-to-date high. Overnight equities in Hong Kong gained with those on the mainland cooling after sharp gains earlier as China reported improved industrial profits Crude oil prices remain elevated adding to inflation concerns while gold trades soft near $1900. The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. Equities: The relentless rise in long-end US Treasury yields saw selling accelerate across US stocks on Tuesday with the S&P 500 dropping 1.5% to hit the lowest level since June 7. Technology stocks, which led the rally earlier this year, has been challenged all month on concerns the Fed’s higher for longer message is starting to hurt consumer confidence. A message that was strengthened after the Consumer Expectations Index declined below 80, the level that historically signals a recession within the next year. The S&P 500 will be looking for support around 4,200, the 50% correction of the March to July rally and the 200-day moving average. FX: The DXY dollar index broke higher to fresh YTD highs, having taken out the 105.80 resistance, as long-end Treasury yields continued to rise. Data remained soft, helping keep the short-end yields capped but Fed member Kashkari, who is usually a dove, noted he puts a 40% probability on a scenario where Fed will have to raise rates significantly higher to beat inflation and a 60% probability of a soft landing. USDCAD rose to 1.3528 while GBPUSD slid below 1.2150 and next target at 1.20. EURUSD plunged further to lows of 1.0556 while USDJPY is hovering close to the 150-mark as verbal jawboning continues to have little effect. Commodities: Crude oil remains rangebound with tight market conditions, as seen through the highest premium for near-term barrels in more than a year, being offset by a stronger dollar and the general risk-off tone. API inventory data showed a crude build of 1.6m barrels vs expectations of a 1.7m drop. Gold trades below $1900 on continued dollar and yield strength with focus on $1885 support while China property market concerns sees copper traded near a four-month low. Meanwhile in agriculture, El Nino has been confirmed, and it could be a strong one, potentially impacting food inflation from rising risks of droughts in Southeast Asia, Australia and Brazil-Columbia. Fixed Income. The Federal Reserve’s higher-for-longer message reverberates through higher long-term US Treasury yields. Unless there is a sign that the job market is weakening significantly, or that the economy is slowing down quickly, long-term yields will continue to soar. With 10-year yields breaking above 4.5% and selling pressure continuing to mount through an increase in coupon supply, quantitative tightening and less foreign investors demand, it’s not unlikely to see yields to continue to rise towards 5% until something breaks. This week, our attention turns to US PCE numbers and Europe CPI data and US Treasury auctions. Yesterday’s 2-year notes auction received good demand while offering the highest auction yield for that tenor since 2006. Yet, our focus is on the belly of the yield curve with the Treasury selling 5- and 7-year notes today and tomorrow. If demand is poor, it might mean that the yield curve is poised to bear-steepen further. Overall, we continue to favour short-term maturities and quality. Volatility: The CBOE Volatility Index jumped 2 on Tuesday to close at 18.94%, a four-month high after the underlying SPX index lost 1.5% to settle at the lowest level since June Macro: US consumer confidence fell for a second consecutive month to 103.0 from 108.7 (upwardly revised from 106.1) and beneath the expected 105.5. Present Situation Index marginally rose to 147.1 (prev. 146.7), while the Expectations Index declined further to 73.7 (prev. 83.3), falling back below 80 - the level that historically signals a recession within the next year. Inflation expectations for the 12 months ahead were unchanged at 5.7% in September. New home sales in the US fell 8.7% to 675k from 739k (upwardly revised from 714k), shy of the consensus 700k. Fed's Kashkari has published an essay where he says there is a 60% chance of a soft landing with a 40% chance the Fed will have to hike 'significantly higher'. In the news: FTC Sues Amazon, Alleging Illegal Online-Marketplace Monopoly (WSJ), Foreign brands including Tesla to face scrutiny as part of EU probe into China car subsidies (FT), Senate leaders agree on a short-term spending bill, aiming to avert a shutdown, extending government funding until November 17, pending House approval (CNN). What ‘peak oil’ will mean for China (FT), Americans finally start to feel the sting from the Fed’s rate hikes (WSJ), Exclusive: German economic institutes forecast 0.6% GDP contraction this year – sources (Reuters) Technical analysis: S&P 500 downtrend support at 4,200. Nasdaq 100 support at 14,254. DAX downtrend support at 14,933. EURUSD downtrend support at 1.05. GBPUSD below support at 1.2175, oversold, next support 1.2012. USDJPY uptrend stretched but could reach 150. Gold bearish could drop to 1,870. Brent and WTI Crude oil resuming uptrend. US 10-year T-yields uptrend expect minor correction Macro events: US Durable Goods Orders (Aug) est –0.5% vs –5.2% prior (1230 GMT), Feds Kashkari Speaks on CNBC (1200 GMT), EIA’s Weekly Crude and Fuel Stock Report (1430 GMT)

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