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Summary:  US equities were not impressed by the lower inflation expectations in the New York Fed’s consumer survey, and Micron’s revenue warning added to the fears with broad losses seen across the semiconductor space. Equity losses broadened as earnings continued to disappoint, and the yield curve inverted further. The US CPI wait game is unlikely to be much more than just noise, but upside risks to USD are seen on stronger underlying dynamics. On the radar today will also be China’s inflation data will be parsed for hints on demand recovery and Fed speakers who may continue to bring up market expectations of Fed’s rate hike path. Markets latest news     Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  US. Equities traded lower in a quiet session, awaiting today’s CPI data.  Nasdaq 100 fell 1.2% after Micron Technology (MU:xnas), added to investors’ concern over weakening demand for microchips when the company issued a negative revenue warning, just a day after another leading chip maker, Nvidia (NVDA:xnas) similarly announced.  The company said that the current quarter revenue could come in at or below the low end of prior guidance. Share price of Micron fell 3.7%. S&P 500 fell 0.4%. After the close, Coinbase Global, Roblox, and Wynn Resorts reported weaker-than-expected results and declined in after-hours trades. U.S. yield curve inverts further Front-end U.S. treasury yields rose 6bps and caused the 2-10-year yield spread further inverted to -49.5bps. The 10-year treasury note yield edged up by 2bps to 2.78% after the Q2 unit labor costs in the U.S. came in at 10.8%, higher than expected.  The 3-year action showed decent demand from investors after yields had risen ahead of the auction.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Shares of leading Hong Kong property developers surged as much as 5% at one point in the morning session, following newswires, citing Executive Council convener Regina Ip, suggested that Hong Kong is considering to remove the punitive double stamp duty imposed on residential property buyers from the mainland.  The Hang Seng Index rose as much as 1% in the morning but both the Hang Seng Index and Hong Kong developers pared gains after the office of the Financial Secretary refuting the speculation after midday.  Hung Kai Properties (00016:xhkg) and CK Assets (01113:xhkg) finished the day 2% higher and Henderson Land (00012:xhkg) +0.7%. The Hang Seng Index reversed and closed 0.2% lower.  Shares of coal miners surged 2% to 5% across the board following reports that a large Shanxi coal mine had an incident and caused temporary suspension of production.  Chinese EV names traded lower on concerns spurred by a 64% MoM fall of Tesla sales in July despite that the China Passenger Car Association raised EV sales estimate to 6 million, 9% higher from its previous estimate. In A-shares, CSI300 was modestly higher, with coal mining, auto parts, wind and solar power storage, and chiplet concept shares outperformed.   EURUSD and USDJPY stucked The US inflation will be relevant beyond the headline print. Key focus is likely to be on the core measure, as it is evident that lower commodity prices may have helped to cool the headline measure. The US dollar rallied sharply on Friday after a solid jobs print, but has since steadied. The next leg higher could depend on the stickiness of the inflation print, which may raise further the expectations of a 75bps rate hike at the September Fed meeting. EURUSD took another look above 1.0240 overnight but reversed back towards 1.0200 in early Asia. USDJPY is also stuck in the middle of the 130-140 range, awaiting triggers for a breakout one way or another. Oil prices (CLU2 & LCOV2) Oil prices steadied in the Asian morning on Wednesday amid renewed concerns on Russian flows to Europe. WTI futures were seen around the key $90 level, while Brent futures touched $96/barrel. API report also showed another week of strong inventory build, coming in at 2.2 million for week ended August 5 as compared to expectations of 73k. The official government inventory report is due today, and China’s inflation data will also be on watch. Grains eye the USDA report US grain futures led by corn traded higher on Tuesday in response to worsening crop conditions. Just like central Europe, soaring heat and drought have raised concerns about lower production and yields. USDA will publish its monthly supply and demand estimates on Friday. The crop condition report, published every Monday by the USDA throughout the growing season, shows the proportion of the US crop being rated in a good to excellent condition. Silver against Gold. Gold (XAUUSD) looking to test $1800 Gold’s focus remains on the geopolitical tensions, despite the recent rise in US Treasury yields. The US CPI and the $1800 resistance area are now the key tests for Gold ahead, and any pickup in rate hike expectations from the Fed could bring bears of the yellow metal back in force. Silver (XAGUSD) has been outshining Gold and in the process managing to mount a challenge above its 50-day moving average, now support at $20.33 with focus on resistance at $20.85.   What to consider?     US CPI due today will be just noise The highly-watched US inflation data is due to be released today, and the debate on inflation peaking vs. higher-for-longer will be revived. Meanwhile, the Fed has recently stayed away from providing forward guidance, which has now made all the data points ahead of the September 21 FOMC meeting a lot more important to predict the path of Fed rates from here. Bloomberg consensus expects inflation to slow down from 9.1% YoY in June to 8.8% YoY last month, but it will be more important to think about how fast inflation can decelerate from here, and how low it can go. The core print will gather greater attention to assess stickiness and breadth of price pressures. However, any surprise will still just be a noise given that we have another print for August due ahead of the next FOMC meeting. Fed’s Evans will take the hot seat today Chicago President Charles Evans discusses the economy and monetary policy today. Evans is not a voter this year, but he votes in 2023. He said last week a 50bps rate hike is a reasonable assessment for the September meeting, but 75bps is a possibility too if inflation does not improve. He expects 25bps from there on until Q2 2023 and sees a policy rate between 3.75-4% in 2023, which is in line with Fed’s median view of 3.8% for 2023, but above the 3.1% that the market is currently pricing in. US New York Fed survey of inflation expectations show sharp decline Median 1-year ahead and 3-year ahead inflation expectations declined sharply in July, from 6.8%/3.6% in June to 6.2%/3.2% in July. Lower income households showed the greatest shift lower in expectations, possibly linked to the sharp drop in petrol prices (the peak in June in one national measure was over $5.00/gallon, a level that fell to below $4.25/gallon by the end of July. China’s PPI inflation is set to ease while CPI is expected to pick up in July The median forecasts from economists being surveyed by Bloomberg are 4.9% (vs June: 6.1%) for PPI and 2.9% (vs 2.5% for June). The higher CPI forecast is mainly a result of a surge in pork prices by 35% in July from June. On the other hand, PPI is expected to continue its recent trend of deceleration due to a low base and a fall in material prices. The convergence of the gap between PPI and CPI is likely to benefit downstream manufacturing industries. Japan PPI shows continued input price pressures Japan’s July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are waddling high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. The government is also set to announce a cabinet reshuffle today, and households may see increased measures to help relieve the price pressures. That will continue to ease the pressure on the Bank of Japan to tighten policy. Coinbase is still losing but is going to give a fight Coinbase (COIN:xnas) reported la loss of USD1.1 billion in Q2, larger-than-expected. Revenues dropped to USD808 million, sharply lower from last year’s USD2.2 billion. Monthly transaction users fell to 9 million, 2% lower from prior quarter. The company sees average monthly transaction users 7 millions to 9 millions in the current quarter. Coinbase Global is worth watching given the fallout in cryptocurrency trading and the recent partnership with BlackRock to ease access for institutional investors. Chipmaker warnings continue, with Micron warning of ‘challenging’ conditions After Nvidia, now Micron (MU) has issued warning of a possible revenue miss in the current quarter and ‘challenging’ memory conditions. The company officials said that they expect the revenue for the fiscal fourth quarter, which ends in August, “may come in at or below the low end of the revenue guidance range provided in our June 30 earnings call.” The company had called for $6.8-7.6 billion in revenue in its June earnings report. Moreover, they also guided for a tough next quarter as well as shipments could fall on a sequential basis, given the inventory buildup with their customers.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-10-aug-2022-10082022

Summary:  Market sentiment weakened again yesterday, with the US Nasdaq 100 index interacting with the pivotal 13,000 area that was so pivotal on the way up ahead of today’s US July CPI release, which could prove important in either confirming or rejecting the complacent market’s expectations that a slowing economy and peaking inflation will allow the Fed to moderate its rate hike path after the September meeting. A surprisingly strong core CPI reading would likely unsettle the market today.   Our trading focus   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US interest rates are moving higher again and US equities lower with the S&P 500 at 4,124 yesterday with today’s price action testing the 100-day moving average around the 4,110 level. The past week has delivered more negative earnings surprises and weak outlooks impacting sentiment and the geopolitical risk picture is not helping either. In the event of a worse than expected US CPI release today we could take out the recent trading range in S&P 500 futures to the downside and begin the journey back to 4,000. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Tech Index (HSTECH.I) fell 3%. China internet stocks declined across the aboard, losing 2-4%. Shares of EV manufacturers plunged 4-8% despite the China Passenger Car Association raised its 2022 EV sales estimate yesterday to 6mn, 9% higher from its previous estimate. Hang Seng Index plunged 2.4% and CSI300 fell 1.1%. USD decision time The USD remains largely stuck in neutral and may remain so unless or until some incoming input jolts the US treasury market and the complacent view that the US is set to peak its policy rate in December, with the potential to ease by perhaps mid-next year. Technical signs of a broad USD recovery, whether on yields pulling higher or due to a sudden cratering in market sentiment on concerns for the economic outlook or worsening liquidity as the Fed QT schedule is set to continue for now regardless of incoming data, would include USDJPY pulling above 136.00, EURUSD dropping down through 1.0100 and AUDUSD back down below 0.6900. Today’s July US CPI could prove a catalyst for a directional move in the greenback in either direction. Gold (XAUUSD) briefly tested a key area of resistance above $1800 on Tuesday ... before retracing lower as the recent support from rising silver and copper prices faded. With the dollar and yields seeing small gains ahead of today’s US CPI print, and with key resistance levels in all three metals looming, traders decided to book some profit. The market is looking for US inflation to ease from 9.1% to 8.8% and the outcome will have an impact on rate hike expectations from the Fed with a a higher-than-expected number potentially adding some downward pressure on metal prices. Silver (XAGUSD), as highlighted in recent updates, has been outshining Gold and in the process managing to mount a challenge above its 50-day moving average, now support at $20.33 with focus on resistance at $20.85.  Crude oil Crude oil prices rose on Tuesday on news pipeline flows of crude oil from Russia via Ukraine to Europe had been halted over a payment dispute of transit fees. The line, however, is expected to reopen within days but it nevertheless highlights and supports the current price divergence between WTI futures stuck around $90, amid rising US stockpiles and slowing gasoline demand, and Brent which trades above $96. The API reported a 2.2-million-barrel increase in US stockpiles last week with stocks at Cushing, the key storage hub, also rising. The official government inventory report is due today, with surveys pointing to a much smaller build at just 250k barrels. In addition, the market will be paying close attention to implied gasoline demand with recent data showing a slowdown. Also focus on China as lockdowns return, US CPI and Thursday’s Oil Market Reports from OPEC and the IEA. Grains eye Friday’s WASDE report US grain futures led by soybeans and corn trade higher on the week in response to worsening crop conditions. Just like central Europe, soaring heat and drought have raised concerns about lower production and yields. USDA will publish its monthly supply and demand estimates on Friday and given the current conditions a smaller yield could tighten the ending stock situation. The crop condition report, published every Monday by the USDA throughout the growing season, shows the proportion of the US crop being rated in a good to excellent condition. Last week the rating for corn dropped by 3% to 58% versus 64% a year ago. US Treasuries (IEF, TLT) US 10-year yields are poised in an important area ahead of the pivotal 3.00% level that would suggest a more determined attempt for yields to try toward the cycle top at 3.50%. Of late, the yield curve inversion has been the primary focus as long yields remain subdued relative to the front end of the curve, a development that could deepen if inflation remains higher than expected while economic activity slows. The three-year T-note auction yesterday saw solid demand, while today sees an auction of 10-year Treasuries.   Newsfeed   Taiwan officials want Foxconn to withdraw investment in Chinese chip company Foxconn announced a $800 million investment in mainland China’s Tsinghua Unigroup last month, but national security officials want the company to drop the investment, likely in connection with recent US-China confrontation in the wake of the visit to Taiwan from US House Speaker Pelosi and the ensuing Chinese military exercises around Taiwan. US Q2 Unit Labor costs remain high at 10.8%, while productivity weak at –4.6% These number suggest a very tight labor market as companies are beset with rising costs for work and less output per unit of worker effort. This number was down from the Q1 levels, but in many past cycles, rising labor costs and falling productivity often precede a powerful deceleration in the labor market as companies slow hiring (and once the recession hits begin firing employees which registers as lower unit costs and rising productivity). Japan PPI shows continued input price pressures Japan’s July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are waddling high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. The government is also set to announce a cabinet reshuffle today, and households may see increased measures to help relieve the price pressures. That will continue to ease the pressure on the Bank of Japan to tighten policy. Chipmaker warnings continue, with Micron warning of ‘challenging’ conditions After Nvidia, now Micron has issued warning of a possible revenue miss in the current quarter and ‘challenging’ memory conditions. The company officials said that they expect the revenue for the fiscal fourth quarter, which ends in August, “may come in at or below the low end of the revenue guidance range provided in our June 30 earnings call.” The company had called for $6.8-7.6bn in revenue in its June earnings report. Moreover, they also guided for a tough next quarter as well as shipments could fall on a sequential basis, given the inventory build-up with their customers. Vestas Q2 result miss estimates The world’s largest wind turbine maker has posted Q2 revenue of €3.3bn vs est. €3.5bn and EBIT of €-182mn vs est. €-119mn. The company is issuing a fiscal year revenue outlook of €14.5-16bn vs est. €15.2bn. Coinbase misses in revenue issues weak guidance Q2 revenue missed by 5% against estimates and the user metric MTU was lowered to 7-9mn from previously 5-15mn against estimates of 8.7mn. The crypto exchange is saying that retail investors are getting more inactive on cryptocurrencies due to the recent violent selloff. China’s PPI inflation eased while CPI picked up in July China’s PPI came in at 4.2% y/y in July, notably lower from June’s 6.1%).   The decline was mainly a result of lower energy and material prices.  The declines of PPI in the mining and processing sectors were most drastic and those in downstream industries were more moderate.  CPI rose to 2.7% y/y in July from 2.5% in June, less than what the consensus predicted.  Food inflation jumped to 6.3% y/y while the rise in prices of non-food items moderated to 1.9%, core CPI, which excludes food and energy, rose 0.8% y/y in July, down from June’s 1.0%. China issues white paper on its stance on Taiwan Despite extending the military drills near Taiwan beyond the originally schedule, in a less confrontational white paper released today, the Taiwan Affairs office and the Information Office of China’s State Council reiterated China’s commitment to “work with the greatest sincerity” and exert “utmost efforts to achieve peaceful reunification”.  The paper further says that China “will only be forced to take drastic measures” if “separatist elements or external forces” ever cross China’s red lines.    What are we watching next?   US CPI due today: the core in focus The highly watched US inflation data is due to be released today, and the debate on inflation peaking vs. higher-for-longer will be revived. Meanwhile, the Fed has recently stayed away from providing forward guidance, which has now made all the data points ahead of the September 21 FOMC meeting a lot more important to predict the path of Fed rates from here. Bloomberg consensus expects inflation to slow down from 9.1% YoY in June to 8.8% YoY last month. The core print will gather greater attention to assess stickiness and breadth of price pressures. Will any surprise just be noise given that we have another print for August due ahead of the next FOMC meeting, os is this market looking for an excuse to be surprised as it has maintained a rather persistent view that US inflation data will soon roll over and see a Fed set to stop tightening after the December FOMC meeting? Fed’s Evans will take the hot seat today Chicago President Charles Evans discusses the economy and monetary policy today. Evans is not a voter this year, but he votes in 2023. He said last week a 50bps rate hike is a reasonable assessment for the September meeting, but 75bps is a possibility too if inflation does not improve. He expects 25bps from there on until Q2 2023 and sees a policy rate between 3.75-4% in 2023, which is in line with Fed’s median view of 3.8% for 2023, but above the 3.1% that the market is currently pricing in. Earnings to watch Today’s US earnings in focus are marked in bold with the most important earnings release being Walt Disney and Coupang. Disney is expected to deliver revenue growth of 23% y/y with operating margins lower q/q as the company is still facing input cost headwinds. Coupang, which is the largest e-commerce platform in South Korea, is expected to deliver revenue growth of 13% y/y and another operating loss as e-commerce platforms are facing slowing demand and still significant input cost pressures. Today: Commonwealth Bank of Australia, Vestas Wind Systems, Genmab, E.ON, Honda Motor, Prudential, Aviva, Walt Disney, Coupang, Illumina Thursday: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0700 – Czech Jul. CPI 1230 – US Jul. CPI 1430 – US Weekly DoE Crude Oil and Product Inventories 1500 – US Fed’s Evans (non-voter) to speak 1600 – UK Bank of England economist Pill to peak 1700 – US Treasury to auction 10-year notes 1800 – US Fed’s Kashkari (non-voter) to speak 2301 – UK Jul. RICS House Price Balance 0100 – Australia Aug. Consumer Inflation Expectations Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-aug-10-2022-10082022

August 10, 2022  $USD, China, CPI, Currency Movement, Inflation, Italy, UK Overview: The US dollar is trading with a heavier bias ahead of the July CPI report. The intraday momentum indicators are overextended, and this could set the stage for the dollar to recover in North America. Outside of a handful of emerging market currencies, which include the Mexican peso and Hong Kong dollar, most are trading lower. Losses in US equities yesterday and poor news from another chip maker (Micron) weighed on Asia Pacific equities. Europe’s Stoxx 600 is steady and US futures are a little higher. The US 10-year yield is going into the CPI report softly around 2.76%. The US Treasury sells 10-year notes today as the second leg of the quarterly refunding. European benchmark yields are 2-3 bp lower. Gold continues to press against the $1800 cap. It has not closed above it for over a month. September WTI is hovering around $90. It appears stuck for the time being in an $87-$93 range. US natgas is about 1.1% higher after rising 3.2% yesterday. Europe’s benchmark is up 3%. It rose 1.5% yesterday. Iron ore is flat, while September copper is about 0.5% stronger after a small loss yesterday snapped a three-day advance. September wheat is up 1%, as it extends this week’s rise. If sustained, it would be the third consecutive gain, which matches the longest rally since March.   Asia Pacific China's July inflation readings underscore scope for easier monetary policy, but officials have shown a reluctance to use this policy lever. The key one-year medium term lending rate will be set in the coming days, but it is unlikely to be reduced from the 2.85% rate since January. July CPI rose to 2.7% from 2.5%, its highest level in two years, but shy of the 2.9% median forecast in Bloomberg's survey. Food prices were up 6.3% from a year ago, driven by a 20.2% jump in pork prices, the first rise since September 2020. Fresh food prices rose 16.9% and vegetable prices rose almost 13%. However, this seems to be a function of supply, while demand still seems soft. Service prices pressures slowed to 0.7% from June's 1.0% increase. The core rate eased to 0.8%. Meanwhile, producer price increases slowed to 4.2% from 6.1%. The median forecast (Bloomberg's survey) was for a 4.9% increase. Chinese producer prices have slowed for nine consecutive months. It peaked at 13.5% last October. Japan's well-telegraphed cabinet reshuffle was not about policy. Key ministers kept their posts, including the finance minister and chief cabinet secretary. Former Prime Minister Abe's brother, Defense Minister Kishi was replaced by Hamada, but he will stay on as a national security adviser. Trade Minister Hagiuda, an Abe acolyte was replaced by Nishimura, also for the Abe faction, but will become party policy chief. Prime Minister Kishida named his one-time rival Takaichi as minister of economic security. The reshuffle seemed to be about re-balancing power among the key factions and solidifying the government whose support has waned. The next economic policy focus may be on the drafting of a supplemental budget. In terms of monetary policy, BOJ Kuroda's term ends next April, while the term of his two deputies ends in March. The dollar is in narrow range of less than half a yen today, hovering around JPY135.00. It did edge above yesterday's JPY135.20 high but held below Monday's high slightly below JPY135.60. The exchange rate will likely take its cues from the reaction of the US Treasury market to today's CPI report. The US 10-year yield remains within the range set at the end of last week with the stronger than expected employment report (~2.67%-2.87%). The Australian dollar held support near $0.6945 but has stalled near $0.6975 in the European morning, where this week's hourly trendline is found. Intraday momentum indicators are stretched, suggesting that even if there is some penetration, follow-through buying may be capped. There are options for A$400 mln at $0.6985 that expire today. The greenback edged a little higher against the Chinese yuan, but it remains subdued. It is well within recent ranges. The dollar's reference rate was set at CNY6.7612, slightly above expectations (median in Bloomberg's survey) for CNY6.7606. Europe The more potent risk is not that the center-right wins next month's Italian election. That is increasing looking like a foregone conclusion. It is hard difficult to tell how much this reflects the judgment of voters and how much reflects the ineptitude of the center-left parties. The risk is that the center-right secures a two-thirds majority in both chambers, which would make constitutional changes possible. A poll published yesterday by Istituto Cattaneo shows the center-right drawing 46% of the vote and securing 61% of the deputies and 64% of the Senators. Analysis by Istituto Cattaneo suggested that even if the center-right saw its share of the votes go up, it might not be able to increase the number of deputies or senators. Italy's 10-year premium over German has fallen in eight of the past ten sessions, including today. It is around 2.10% today, slightly more than 25 bp off its recent peak, and a little below its 20-day moving average. Italy's 2-year premium fell to 0.73% yesterday, the lowest since mid-July. It peaked above 1.30% in late July.  Ironically as it may sound, but it is not Italy's center-right that is attacking the Bank of Italy or the European Central Bank. It is Truss who is leading Sunak to become the next leader of the Conservatives and Prime Minister. BOE Governor Bailey warned that UK was about to go into a five-quarter contraction (that does not even count the 0.2% contraction that economists expect the UK will announce for Q2 ahead of the weekend). Truss quickly responded that her GBP39 bln tax cuts (~$$7 bln) could avert that scenario. Sunak hiked the payroll tax this past April. She would unwind it. Truss would suspend the green levy on household energy bills and nix Sunak's corporate tax increase that was to be implemented next year. The swaps market is 85% confident of a 50 bp hike at the mid-September MPC meeting, less than a fortnight after the new Tory leaders is chosen. In the last two meetings of the year, the swaps market is pricing another 75 bp in hikes.  The euro is first firm holding above $1.02 so far today, the first time since August 1. However, it remains within last Friday's range (~$1.0140-$1.0250). The 1.2 bln euro options at $1.0210 that expire today likely have been neutralized ahead of today's US CPI report. The session high, slightly above $1.0225 was set in the European morning. This stretched the intraday momentum indicator, and we suspect it will probe lower now. Initial support below $1.02 is seen in the $1.0170-80 area. Sterling is in the same boat. It too is consolidating within the range seen before the weekend (~$1.2000-$1.2170). The push to session highs, a little above $1.21, in Europe has stretched the intraday momentum indicators. The risk is for a return to the $1.2050-60 area. America Today's CPI report is interesting but at the risk of exaggerating, it does not mean much. First, the strength of the employment data, even if flattered by seasonal adjustments or is incongruous with other labor market readings, suggests the labor market slowdown that the Fed wants to see is still in the very early stages. Second, as we have noted, financial conditions have eased recently, and the Fed has pushed back against this. Third, before the FOMC meets again, it will have the August CPI in hand. Fourth, no matter what the data shows today, it will not and cannot meet the Fed's definition of a sustained move toward the 2% target. The median in Bloomberg's survey has converged with the Cleveland Fed's Inflation Nowcast. The median in the survey is for an 8.7% headline rate (down from 9.1%) and a 6.1% core rate (up from 5.9%). The Cleveland's Fed Nowcast has it at 8.8% and 6.1%, respectively. The Fed funds futures market has about an 80% chance of a 75 bp hike next month discounted. It may not change very much after the CPI report.  The US Treasury sold $34 bln 1-year bills yesterday at 3.20%. That represents a 24 bp increase in yield. The bid-cover dipped but was still three-times oversubscribed and the indirect bidders took down almost 63%, a sharp rise from a little less than 51% last time. The US also sold $42 bln 3-year notes, also at 3.20%. This was an 11-bp increase in yield. The bid-cover edged up to 2.5% and the indirect participants took 63.1% of the issue, up from 60.4% previously. Today, Treasury goes back to the well with $30 bln 119-day cash management bill and $35 bln 10-year notes. At the last auction, the 10-year was sold at 2.96%. In the when-issued market, the 10-year yield is about 2.79%. The US dollar traded between around CAD1.2845 and CAD1.2900 yesterday and remains in that range today. There are options for almost 1.15 bln at CAD1.29 that expire today. The greenback slipped to session lows in Europe but as in the other pairs, we look it to recover. A move above the CAD1.2910 area could spur a move toward CAD1.2950. Mexico reported slightly higher than expected inflation yesterday. It underscored expectations for a 75 bp hike by Banxico tomorrow. The US dollar is offered against the peso today and it is pressed near yesterday's low around MXN20.20. The top side is blocked around MXN20.27-MXN20.30. Options for around $765 mln at MXN20.30 expire today. A convincing break of the MXN20.20 area could target the MXN20.05 area    Disclaimer

Summary:  Today we discuss the possible reactivity to today's US July CPI data point, especially if a hotter than expected core reading challenges the market's determined bet that inflation is set to roll over and normalize over the next couple of years. We also look at an equity market that is technically rolling over, a US dollar that needs to choose a direction, and compelling commodity stories and chart points in gold, crude oil and coffee. A semiconductor, EV, deglobalization, and Walt Disney focus on the equity coverage today. 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 this link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-aug-10-2022-10082022

USD/JPY continues to show little movement this week, in sharp contrast to Friday, when the pair jumped a massive 1.55%. In the European session, USD/JPY is trading at 135.02 down 0.09%. The yen had shown some strength against the dollar recently, but took a tumble after the stunning US nonfarm payroll report on Friday. The gain of 528 thousand more was more than double the estimate of 250 thousand, and the dollar responded with sharp gains against the majors. All eyes on US inflation Inflation has been rising in the US and hit 9.1% in June. The July inflation report will be released later today, and the release could have a strong impact on the direction of the US dollar. Headline CPI is expected to fall to 8.7%, down from 9.1%. If the reading does drop to around 8.7%, the markets may start thinking “peak” when it comes to inflation, and the dollar could lose ground. Conversely, if inflation stays around 9% or moves higher, it should be a catalyst for the dollar, as the Fed will have to consider a 75 or even a 100 basis point increase in September. After the inflation release, we’ll hear from Fed members Evans and Kashkari, and it will be interesting to hear their remarks on the heels of today’s inflation release. Last week, the Fed sent out the message that its rate-tightening cycle is not about to end, as the inflation fight is far from over. The spectacular nonfarm payrolls release pointed to continued strong wage growth and the participation rate dropping a notch, from 62.2% to 61.1%. These numbers point to a tighter labour market and stronger inflationary pressures. If today’s inflation report confirms that inflation is still accelerating, I would expect to hear hawkish remarks from Fed officials, which would likely give the US dollar a boost. . USD/JPY Technical USD/JPY is putting pressure on resistance at 134.40, which was tested on Wednesday. 136.30 is the next resistance line There is support at 133.65 and 131.80 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: https://www.marketpulse.com/20220810/yen-drifting-as-us-inflation-looms/

Summary:  Arabica coffee, in a downtrend since February, continues to see a tug of war between traders focusing on demand worries and those looking for higher prices in response to increasingly supportive supply fundamentals. In this update we take a closer look at some those supportive fundamentals while deciphering the potential signals being presented by the current price action. Arabica coffee has spent the past six months drifting lower after reaching an 11-year high back in February. In the months leading up to the peak at $2.60 per pound, the price had more than doubled with adverse weather in Brazil raising concerns about production. In the months that followed, however, the focus switched to the risk of a global economic slowdown, and with that the prospect of softer demand for the more expensive high quality bean.  After finding support at a key level below $2/lb the December futures has risen steadily in recent days with the situation in Brazil once again attracting some attention. This recent article from Bloomberg, titled “World’s Top Coffee Crop Shrinks in a Market Thirsty for Supply” confirms months of worries about supply with Brazil’s Conab now expecting the current on-season crop to be the lowest since 2014. Even their estimate of 35.7 million 60 kilogram bags, may end up being too optimistic according to commentators.  As Bloomberg reports: “Brazil’s drought and cold curbed flowering last season and severe frosts in July 2021 led farmers to cut down coffee trees at a time of high costs for agricultural inputs, notably fertilizer”. In addition, Columbia another top producer has seen its crop being reduced by too much rainfall.               Source: Saxo Group While an economic downturn may negatively impact demand for the more expensive bean, compared with Robusta, key fundamentals paint an overriding bullish picture for Arabica. The futures curve is currently pricing in the highest level of tightness since 2010 with the one-year backwardation, or roll yield achieved by holding a long position for one year, having risen despite recent attempts to sell it down. In addition, stock levels at warehouses monitored by the ICE futures exchange has declined to a 23-year low while speculators have cut their net long by 70% since February.  All developments that may underpin the price over the coming months, but first as per the chart below the price action needs to become more assertive. The first month contract has been trading within a wide declining channel since February, however, after finding support at $1.96/lb the important 38.2% retracement of the 2020 to 2022 rally, the potential for a test of the upper falling trendline, currently at $2.30/lb has risen. First though it needs to break above the 50-day moving average, currently at $2.21/lb. If rejected the medium term downtrend would likely resume with focus on a downward extension towards $1.75/lb. Source: Saxo Group Robusta, the cheaper coffee variety traded in dollars per metric tons may potentially show the way. After also finding support at the 38.2% retracement of the 2020 to 2022 rally it has done better than Arabica by breaking higher through its falling wedge like pattern. A daily close above $2160/tons is needed for confirmation of a bullish reversal that could send prices higher towards the previous peak around $2450/tons.  Source: Saxo Group Source: Supply pinch tilts risk higher for coffee  

Coffee is in a medium-term (corrective?) downtrend in a wide falling channel. Bounced from the 0.382 retracement at around 196 Coffee could be headed for at test of the upper falling trendline. First indication could be RSI breaking above its upper falling trendline and coffee to close above its 55 weekly SMA. Source: Saxo Group The short-term the bounce could have potential to reverse the medium-term downtrend. Daily RSI needs to close above 60 to confirm and indicate further upside. An upside that needs to take out the upper falling trendline. If rejected the medium-term down is likely to resume   Source: Saxo Group   Maybe the Robusta Coffee is an indication of what is coming in Coffee. Robusta coffee has rebounded from its 0.382 retracement of the entire 2020-2021 uptrend and has broken bullish out of its falling wedge like pattern which could be the Forth corrective vawe.If Robusta closes above 2.16 it has confirmed reversal of the downtrend and is likely to trade higher towards previous peak around 2.45. Strong resistance at around 2.30.RSI has broken above its falling trendline supporting the rebound picture. A close above 60 will further confirm an uptrend. Source: Saxo Group Short-term Robust is fast approaching 200 daily SMA. RSI above 60 and no divergence which indicates higher levels are likely. Resistance at around 2.185 and the 200 daily SMA. A minor correction should be expected around that level before uptrend is likely to resume.   Source: Saxo Group Source: Technical Update - Robusta Coffee reversing corrective downtrend. Will Coffee follow same pattern?  

Summary:  The market was happy to adjust US yields higher recently on stronger than expected US data points, but failed to take the USD lower, which in perfect hindsight suggests that the USD was set for a sharp drop on a soft CPI print today. And that’s what we got, with the headline CPI figure flat on month-on-month comparisons and the core rising less than expected. But how far can the market run on a single data print as data reactions have been fickle and fleeting of late. FX Trading focus: USD bears celebrate weak CPI print, but… The US CPI print came in weaker than expected for both the headline and for the ex Food and Energy figure. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category market -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure. Risk sentiment is off to the races as this fits the market’s Goldilocks soft-landing scenario, particularly given recent stronger-than-expected activity data. It’s hard to tell how far the market can take the reaction function to a data point like this when we are trading in an illiquid month and some very volatile categories are behind the surprise inflation number today, and recent data reactions have failed to hold beyond the end of the day. But for now, the USD has triggered lower and taken out some important local support. We suspect it is far too early in the cycle to call the aggressive shift from the Fed that the market has been pricing, as this July CPI data point has seen the market marking the September FOMC decision down close to 50 basis points now and taking more of the tightening out of the meetings beyond. The market’s interpretation of a profound shift in the Fed, the Fed’s own protestations notwithstanding, has driven a strong easing of financial conditions since mid-June. Could this result in the economy showing a heating up in the coming months, also as the shock of higher gasoline price in particular may have eased the pressure on consumer sentiment? The preliminary Aug. University of Michigan Sentiment survey could be an interesting test on that front. For now, USDJPY posted the biggest reaction to the data point today as one would expect on the big move in treasury yields – more on USDJPY below. EURUSD has broken above the local resistance just below 1.0300, but faces a more significant resistance level in the 1.0350 area – one that could lead to a return to 1.0500+ if this move sticks through the Friday close. Again, as mentioned recently, it is too early to call an end of the EURUSD bear – the market’s view will have to play out as currently priced, with all of the Goldilocks implications, etc., for the USD to shift to a sustained and broad bear market here. Elsewhere, AUDUSD has vaulted above 0.7000, the tactical bull/bear line, with a huge zone up into 0.7150-0.7250 the more structural area of note for direction. Gold not holding above 1,800 in reaction to this data point as of this writing is already a weak performance, and I am watching much of the treasury market kneejerk reaction higher seeping out of the US treasury market as well – so some of the reaction is already fading fast – stay tuned! A US treasury auction is up today at 1700 GMT – the longer end of the US yield curve may be the most important coincident indicator for all markets here – if yields pull back higher, for example the US 10-year benchmark moving back above 2.87% and especially toward 3.00%, today’s reaction in the USD and the JPY, etc.. should quickly reverse. Chart: USDJPYThe bottom dropped out of USDJPY on the softer than expected US July CPI data this afternoon, just as it vaulted higher on Friday on the stronger than expected US July jobs report – with US yields the key coincident indicator. On that note, the US Treasury market reaction fading fast in the wake of today’s data point suggests USDJPY bears should be cautious here – if the US 10-year benchmark closes back above 2.75% and especially above 2.87% in coming days, this move may be quickly neutralized, although if we do close down here well south of 133.50, the candlestick looks rather bearish for a test lower. If the pair closes back well above 134.00, the next step would be a move above 136.00 to suggest the bull market is back on (likely as US 10-year treasury yields pull to 3.00% or higher). Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strength.Let’s have a look at how the market behaves after the knee-jerk reaction to the US data point today before drawing conclusions. As noted above, some important coincident indicators for the US dollar are suggesting caution for USD bears here. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Today’s USD moves important if they stick into the close today and the close to the week – data reactions have been fickle and fleeting of late – so some patience may be required. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1600 – UK Bank of England economist Pill to peak 1700 – US Treasury to auction 10-year notes 1800 – US Fed’s Kashkari (non-voter) to speak 2301 – UK Jul. RICS House Price Balance 0100 – Australia Aug. Consumer Inflation Expectations Source: FX Update: : Soft US CPI sparks significant kneejerk USD selling, but...    

Summary:  Risk on mode activated with a softer US CPI print, both on the headline and core measures. Equities rallied but the Treasury market reaction faded amid the hawkish Fedspeak. The market pricing of Fed expectations also tilted more in favor of a 50 basis points rate hike for September immediately after the CPI release, but this will remain volatile with more data and Fed speakers on tap ahead of the next meeting. Commodities, including oil and base metals, surged higher as the dollar weakened and demand outlook brightened but the gains appeared to be fragile. Gold unable to hold gains above the $1800 level. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities surged after the CPI prints that came in at more moderate level than market expectations. Nasdaq 100 jumped 2.9% and S&P500 gained 2.1%. Technology and consumer discretionary stocks led the market higher. Helped by the fall in treasury yields and better-than-feared corporate earnings in the past weeks, the Nasdaq 100 has risen 21% from its intraday low on June 16 this year and may technically be considered in a new bull market. The U.S. IPO market has reportedly become active again this week and more activities in the pipeline. Tesla (TSLA:xnas) climbed nearly 4% on news that Elon Musk sold USD6.9 billion of Tesla shares to avoid fire sale if having to pay for Twitter. Walt Disney (DIS:xnys) jumped 7% in after-hours trading on better-than-expected results. U.S. yields plunged immediately post CPI but recouped most of the decline during the US session The yields of the front-end of the U.S. treasury curve collapsed initially after the weaker-than-expected CPI data, almost immediately after the CPI release, 2-year yields tumbled as much as 20bps to 3.07% and 10-year yield fell as much as 11bps to 2.67%. Treasury yields then spent the day gradually climbing higher. At the close, 2-year yields were only 6bps at 3.21% and the 10-year ended the day at 2.78% unchanged from its previous close. The 2-10 yield curve steepened by 6bps to -44bps. Hawkish Fedspeak contributed to some of the reversal in the front-end from the post-CPI lows. At the close, the market is pricing in 60bps (i.e. 100% chance of at least a 50bps hike and about 40% chance of a 75bps rate hike) for the September FOMC after having come down to pricing in just about 50bps during the initial post-CPI plunge in yields. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Sang Index declined nearly 2% and CSI300 was down 1.1% on Wednesday. Shares of Chinese property developers plunged.  Longfor (00960) collapsed 16.4% as there was a story widely circulated in market speculating that the company had commercial paper being overdue. In addition, UBS downgraded the Longor together with Country Garden, citing negative free cash flows in the first half of 2022.  Country Garden (02007) fell 7.2%.  After market close, the management held a meeting with investors and said that all commercial papers matured had been duly repaid. China High Speed Transmission Equipment (00658) tumbled 19% after releasing negative profit warnings.  The company expects a loss of up to RMB80 million for first half of 2022. Guangzhou Baiyunshan Pharmaceutical (00874) declined 4.1% after the company filed to the Stock Exchange of Hong Kong that the National Healthcare Security Administration was investigating the three subsidiaries of the company for allegedly “obtaining funds by ways of increasing the prices of pharmaceutical products falsely”. Wuxi Biologics (02269) dropped 9.3% as investors worrying its removal from the U.S. unverified list may be delayed in the midst of deterioration of relationship between China and the U.S. Oversized USD reaction on US CPI The US dollar suffered a heavy blow from the softer US CPI print, with the market pricing for September FOMC getting back closer to 50 basis points just after the release. As we noted yesterday, the July CPI print is merely noise with another batch of US job and inflation numbers due ahead of the September meeting. USD took out some key support levels nonetheless, with USDJPY breaking below the 133.50 support to lows of 132.10. Next key support at 131.50 but there possibly needs to be stronger evidence of an economic slowdown to get there. EURUSD broke above 1.0300 to its highest levels since July 5 but remains at risk of reversal given the frothy equity strength. Crude oil prices (CLU2 & LCOV2) Oil prices were relieved amid the risk on tone in the markets as softer US CPI and subsequent weakness in the dollar underpinned. WTI futures rose towards $91.50/barrel while Brent futures were at $97.40. EIA data also suggested improvement in demand. US gasoline inventories fell 4,978kbbl last week, which helped push gasoline supplied (a proxy for demand) up 582kb/d to 9.12mb/d. This was slightly tempered by a strong gain in US crude oil inventories, which rose 5,457kbbl last week. Supply concerns eased after Transneft resumed gas supplies to three central European countries which were earlier cut off due to payment issues. European Dutch TTF natural gas futures (TTFMQ2) European natural gas rallied amid concerns over Russian gas supplies and falling water levels on the key Rhine River which threatens to disrupt energy shipments. Dutch front month futures rose 6.9% to EUR 205.47/MWh as a drought amid extreme temperatures has left the river almost impassable. European countries have been filling up their gas storage, largely by factories cutting back on their usage. Further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter. Gold (XAUUSD) and Copper (HGc1) Gold saw a run higher to $1800+ levels immediately after the US inflation report as Treasury yields plunged. However, the precious metal gave up much of these gains after Fed governors warned that it doesn’t change the US central bank’s path toward higher rates this year and next. With China also ceasing military drills around Taiwan, geopolitical risks remain capped for now easing the upside pressure on Gold. Copper was more buoyant as it extended gains on hopes of a stronger demand amid a fall in price pressures.   What to consider? Softer US CPI alters Fed expectations at the margin The US CPI print came in weaker than expected for both the headline and the core measures. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category market -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex-Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure – again primarily a result of lower energy prices. While this may be an indication that US inflation has peaked, it is still at considerably high levels compared to inflation targets of ~2% and the pace of decline from here matters more than the absolute trend. Shelter costs – the biggest component of services inflation – was up 5.7% y/y, the most since 1991. Fed pricing for the September meeting has tilted towards a 50bps rate hike but that still remains prone to volatility with another set of labor market and inflation prints due ahead of the next meeting. Fed speakers continued to be hawkish Fed speaker Evans and Kashkari were both on the hawkish side despite being some of the most dovish members on the Fed panel. Evans again hinted that tightening will continue into 2023 as inflation remains unacceptably high despite a first sign of cooling prices. The strength of the labor market continued to support the case of a soft landing. Kashkari reaffirmed the view on inflation saying that he is happy to see a downside surprise in inflation, but it remains far from declaring victory. He suggested Fed funds rate will reach 3.9% in 2022 (vs. market pricing of 3.5%) and 4.4% in end 2023 (vs. market pricing of 3.1%). China’s PPI inflation eased while CPI picked up in July China’s PPI came in at 4.2% YoY in July, notably lower from June’s 6.1%).   The decline was mainly a result of lower energy and material prices.  The declines of PPI in the mining and processing sectors were most drastic and those in downstream industries were more moderate.  CPI rose to 2.7% YoY in July from 2.5% in June, less than what the consensus predicted.  Food inflation jumped to 6.3% YoY while the rise in prices of non-food items moderated to 1.9%. Core CPI, which excludes food and energy, rose 0.8% YoY in July, down from June’s 1.0%. In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China expects the CPI to be at around 3% for the full year of 2022 and the recent downtrend of the PPI to continue. China issues white paper on its stance on Taiwan China ended its military drills surrounding Taiwan on Wednesday, which lasted three days longer what had been originally announced. In a less confrontational white paper released, the Taiwan Affairs Office and the Information Office of China’s State Council reiterated China’s commitment to “work with the greatest sincerity” and exert “utmost efforts to achieve peaceful reunification”.  The paper further says that China “will only be forced to take drastic measures” if “separatist elements or external forces” ever cross China’s red lines.  Walt Disney results beat estimates Disney reported solid Q2 results with stronger than expected 152.1 million Disney+ subscribers, up 31% YoY and beating market expectations (148.4 million).  Revenues climbed 26% YoY to USD21.5 billion and adjusted EPS came in at USD1.09 versus consensus estimates (USD0.96). Singapore Q2 GDP revised lower The final print of Singapore’s Q2 GDP was revised lower to 4.4% YoY from an advance estimate of 4.8% earlier, suggesting a q/q contraction of 0.2% as against gains of 0.2% q/q earlier. The forecast for annual 2022 growth was also narrowed to 3-4% from 3-5% earlier amid rising global slowdown risks. Another quarter of negative GDP growth print could now bring a technical recession in Singapore, but the officials have, for now, ruled that out and suggest a mild positive growth in Q3 and Q4. Softbank settled presold Alibaba shares early and Alibaba let go of a large number of employees The news that Softbank expects to post a gain of over USD34 billion from early physical settlement of prepaid forward contracts to unload its stake in Alibaba (09988:xhkg/BABA:xnas) and Alibaba laid off more than 9,000 staff between April and June this year added to the pressures over the share price of Alibaba.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 11, 2022  

What is happening? The CEO of the world's largest electric car company has sold about $8.4 billion worth of Tesla shares over the past week. According to documents provided to regulators, the series of transactions took place between August 5 and 9, 2022, shortly after the August 4 shareholder meeting in Austin. As recently as April of this year, the Tesla and SpaceX CEO wrote that he "has no plans for another stock sale," after divesting a stake worth $8.5 billion to buy Twitter. This is not the first time Elon Musk has confused his public. The businessman seems to frequently abuse his influence, throwing around bold statements and increasing the expectations of his followers. When asked recently if he had stopped selling Tesla, for the time being, he replied "yes. In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock." However, it's hard not to get the impression that the CEO is simply taking advantage of the recent rebound in the share price. It is possible that his goal is not just to finance the deal, but to try to protect his private fortune. Such a major sale of an important shareholder had a significant impact on both Twitter and Tesla's stock price. Elon Musk failure or a smart plan? Twitter rose at the opening by almost 4%, thanks to the increasing likelihood of the deal being finalized, which may have been due to Musk's recent tweet. Most of the news coming out of the courtroom also reinforces analysts' belief that the Tesla CEO will be forced to buy the company. The platform's stock price has gained more than 35% over the past month, with a price target. Tesla, influenced by the news of the sale of a large stake by the most important person in the company, has lost around 7% over the past four sessions. The company itself gained more than 44% from its July 16 bottom to its August 4 peak at the shareholder meeting. Tesla, like many technology companies, has gained significantly from the recent bear market rally. This growth can also be attributed to Tesla's results, in which it beat expectations for earnings per share (EPS) by more than 26%. However, the macroeconomic analysis is rather pessimistic for the electromobility market in the short and midterm. During recessions, companies are usually unable to achieve high expected growth rates by falling consumer demand. More often than not, revenues fall, profits decline, and as a result, stock prices fall as well.   RafaÅ‚ Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Elon Musk sells nearly 8 million Tesla shares, justifying it by the Twitter lawsuit

Summary:  Equity markets are ebullient in the wake of the softer than expected US July CPI data print yesterday, as a sharp drop in energy prices helped drag the CPI lower than expected for the month. The knee-jerk reaction held well in equities overnight, if to a lesser degree in the weaker US dollar. But US yields are nearly unchanged from the levels prior to the inflation release, creating an interesting tension across markets, also as some Fed members are explicitly pushing back against market anticipation of the Fed easing next year.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The July CPI report showing core inflation rose only 0.3% m/m compared to 0.5% m/m expected was just what the market was hoping for and had priced into the forward curve for next year’s Fed Funds rate. Long duration assets reacted the most with Nasdaq 100 futures climbing 2.9%. However, investors should be careful not to be too optimistic as we had a similar decline in the CPI core back in March before inflation roared back. As Mester recently stated that the Fed is looking for a sustained reduction in the CPI core m/m, which is likely a 6-month average getting back to around 0.2% m/m. Given the current data points it is not realistic to be comfortable with inflation before late Q1 next year. In Nasdaq 100 future the next natural resistance level is around 13,536 and if the index futures can take out this then the next level be around 14,000 where the 200-day average is coming down to. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities climbed, Hang Seng Index +1.8%, CSI300 Index +1.6%. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +16%, Sunny Optical (02382:xhkg) +7%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. Semiconductors gained, SMIC (00981:xhkg) +3%, Hua Hong (01347:xhkg) +4%. After collapsing 16% in share price yesterday, Longfor (00960) only managed to recover around 3% after the company denied market speculation that it failed to repay commercial papers due. UBS’ downgraded Longfor and Country Garden (02007:xhkkg) yesterday citing negative free cash flows for the first half of 2022 highlighted the tight spots even the leading Chinese private enterprise property developers are in. Chinese internet stocks rallied, Alibaba (09988:xhkg) +3%, Tencent (0700:xhkg) +1%, Meituan (03690:xhkkg) +2.7%. China ended its military drills surrounding Taiwan on Wednesday, which lasted three days longer what had been originally announced. USD: Treasuries don’t point to further weakness here The US dollar knee-jerked lower on the softer-than-expected July CPI data, although US yields ended the day unchanged, creating an interesting tension in a pair like USDJPY, which normally takes its lead from longer US yields (unchanged yesterday after a significant dip intraday after the US CPI release). USDJPY dipped almost all the way to 132.00 after trading above 135.00 earlier in the day. What are traders to do – follow the coincident US yield indicator or the negative momentum created by yesterday’s move? Either way, a return above 135.00 would for USDJPY would likely require an extension higher in the US 10-year yield back near 3.00%. EURUSD is another interesting pair technically after local resistance just below 1.0300 gave way, only to see the pair hitting a brick wall in the 1.0350 area (major prior range low from May-June). Was this a break higher or a misleading knee-jerk reaction to the US data? A close below 1.0250 would be needed there to suggest that EURUSD is focusing back lower again. A similar setup can be seen in AUDUSD and the 0.7000 area, with a bit more sensitivity to risk sentiment there. Gold (XAUUSD) did not have a good day on Wednesday Gold was trading lower on the day after failing to build on the break above resistance at $1803 as the dollar weakened following the lower-than-expected CPI print, thereby reducing demand for gold as an inflation hedge. Instead, the prospect for a potential shallower pace of future rate hikes supported a major risk on rally in stocks and another daily reduction in bullion-backed ETF holdings. Yet comments by two Fed officials saying it doesn’t change the central bank’s path toward even higher rates – and with that the risk of a gold supportive economic weakness - did not receive much attention. Gold now needs to hold $1760 in order to avoid a fresh round of long liquidation, while silver, which initially received a boost from higher copper prices before following gold lower needs to hold above its 50-day SMA at $20.26. Crude oil Crude oil futures (CLU2 & LCOV2) traded higher on Wednesday supported by a weaker dollar after the lower US inflation print gave markets a major risk on boost. Also, the weekly EIA report showed a jump in gasoline demand reversing the prior week’s sharp drop. Gasoline inventories dropped 5 million barrels to their lowest seasonal level since 2015 on a combination of strong exports and improved domestic demand while crude oil stocks rose 5.4m barrels primarily supported by a 5.3 million barrels release from SPR. Focus today on monthly Oil Market Reports from OPEC and the IEA. Dutch natural gas The Dutch TTF natural gas benchmark futures (TTFMQ2) rallied amid concerns over Russian gas supplies and falling water levels on the key Rhine River which threatens to disrupt energy shipments of fuel and coal, thereby forcing utilities and industries to consumer more pipelined gas. Dutch front month futures rose 6.9% to EUR 205.47/MWh while the October to March winter contract closed at a fresh cycle high above €200/MWH. European countries have been filling up their gas storage, largely by factories cutting back on their usage and through LNG imports, the flow of the latter likely to be challenged by increased demand from Asia into the autumn. Further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter. US Treasuries (IEF, TLT) shrug off soft July CPI data US yields at first reacted strongly to the softer-than-expected July CPI release (details below), but ended the day mostly unchanged at all points along the curve, suggesting that the market is unwilling to extend its already aggressive view that the Fed is set to reach peak policy by the end of this year and begin cutting rates. Some Fed members are pushing back strongly against that notion as noted below (particularly Kashkari). A stronger sign that yields are headed back higher for the US 10-year benchmark would be on a close above 2.87% and especially 3.00%. Yesterday’s 10-year auction saw strong demand. What is going on? US July CPI lower than expected The US CPI print came in lower than expected for both the headline and the core measures. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category marked -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex-Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure. While this may be an indication that US inflation has peaked, it is still at considerably high levels compared to inflation targets of ~2% and the pace of decline from here matters more than the absolute trend. Shelter costs – the biggest component of services inflation – was up 5.7% y/y, the most since 1991. Fed pricing for the September meeting has tilted towards a 50bps rate hike but that still remains prone to volatility with another set of labor market and inflation prints due ahead of the next meeting. Fed speakers maintain hawkish message Fed speaker Evans and Kashkari were both on the hawkish side in rhetoric yesterday. Evans again hinted that tightening will continue into 2023 as inflation remains unacceptably high despite a first sign of cooling prices. The strength of the labor market continued to support the case of a soft landing. Kashkari reaffirmed the view on inflation saying that he is happy to see a downside surprise in inflation, but it remains far from declaring victory. Long thought of previously as the pre-eminent dove among Fed members, he has waxed far more hawkish of late and said yesterday that nothing has changed his view that the Fed funds rate should be at 3.9% at the end of this year (vs. market pricing of 3.5%) and 4.4% by the end 2023 (vs. market pricing of 3.1%). Siemens cuts outlook Germany’s largest industrial company is cutting its profit outlook on impairment charges related to its energy division. FY22 Q3 results (ending 30 June) show revenue of €17.9bn vs est. €17.4bn and orders are strong at €22bn vs est. €19.5bn. Orsted lifts expectations The largest renewable energy utility company in Europe reports Q2 revenue of DKK 26.3bn vs est. 21.7bn, but EBITDA misses estimates and the fiscal year guidance on EBITDA at DKK 20-22bn is significantly lower than estimates of DKK 30.4bn. However, the new EBITDA guidance range is DKK 1bn above the recently stated guidance, so Orsted is doing better than expected but the market had just become too optimistic. Disney beats on subscribers Disney reported FY22 Q3 (ending 2 July) results showing Disney+ subscribers at 152.1mn vs est. 148.4mn surprising the market as several surveys have recently indicated that Amazon Prime and Netflix are losing subscribers. The entertainment company also reported revenue for the quarter of $21.5bn vs est. $21bn with Parks & Experiences deliver the most to the upside surprise. EPS for the quarter was $1.09 vs est. $0.96. If subscribers for ESPN and Hulu are added, then Disney has surpassed Netflix on streaming subscribers. Shares were up 6% in extended trading. Despite the positive result the company lowered its 2024 target for Disney+ subscriber to 135-165mn range. Coupang lifts fiscal year EBITDA outlook The South Korean e-commerce company missed slightly on revenue in Q2 but lifted its fiscal year adjusted EBITDA from a loss of $400mn to positive which lifted shares 6% in extended trading. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. What are we watching next? Next signals from the Fed at Jackson Hole conference Aug 25-27 There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. Earnings to watch Today’s US earnings in focus are NIO and Rivian with market running hot again on EV-makers despite challenging environment on input costs and increased competition. NIO is expected to grow revenue by 15% y/y in Q2 before seeing growth jumping to 72% y/y in Q3 as pent-up demand is released following Covid restrictions in China in the first half. Rivian, which partly owned by Amazon and makes EV trucks, is expected to deliver its first quarter with meaningful activity with revenue expected at $336mn but free cash flow is expected at $-1.8bn. Today: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0800 – IEA's Monthly Oil Market Report 1230 – US Weekly Initial Jobless Claims 1230 – US Jul. PPI 1430 – US Weekly Natural Gas Storage Change 1700 – US Treasury to auction 30-year T-Bonds 2330 – US Fed’s Daly (Non-voter) to speak During the day: OPEC’s Monthly Oil Market Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 11, 2022  

Summary:  Today we look at the sharp correction in energy prices driving a softer than expected CPI print for the US in July, which saw sentiment responding by piling on to the recent rally and taking equities to new highs for the local cycle since June. Interestingly, the reaction to the CPI data has generated some tension as US treasury yields are trading sideways after erasing the knee-jerk drop in yields in the wake of yesterday's data. With financial conditions easing aggressively, the Fed faces quite a task if it wants to counter this development, with recent protests from individual Fed members failing to make an impression. Perhaps the Jackson Hole Fed forum at the end of this month is shaping up as a key event risk? Crude oil, the USD, metals, earnings 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 found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: Soft CPI revives risk rally, but treasury reaction creates dissonance    

Overview: The US dollar is consolidating yesterday’s losses but is still trading with a heavier bias against the major currencies and most emerging market currencies. The US 10-year yield is soft below 2.77%, while European yields are mostly 2-4 bp higher. The peripheral premium over the core is a little narrower today. Equity markets, following the US lead, are higher today. The Hang Seng and China’s CSI 300 rose by more than 2% today. Among the large bourses, only Japan struggled, pressured by the rebound in the yen. Europe’s Stoxx 600 gained almost 0.9% yesterday and is edging higher today, while US futures are also firmer. Gold popped above $1800 yesterday but could not sustain it and its in a $5 range on both sides of $1788 today. September WTI rebounded yesterday from a low near $87.65 to close near $92.00. It is firmer today near $93.00. US natgas is 1.4%, its third successive advance and is near a two-week high. Europe’s benchmark is also rising for the third session. It is up nearly 8% this week. Iron ore rose 2% today and it is the fourth gain in five sessions. September copper is also edging higher. If sustained, it would be the fifth gain in six sessions. It is at its highest level since late June. September wheat is 1.1% higher. It has risen every session this week for a cumulative gain of around 4.25%.  Asia Pacific In its quarterly report, the People's Bank of China seemed to downplay the likelihood of dramatic rate cuts or reductions in reserve requirements. It warned that CPI could exceed 3% and ruled out massive stimulus, while promising "high-quality" support, which sounds like a targeted measure. It is not tightening policy but signaled little scope to ease. Note that the 10-year Chinese yield is at the lower end of its six-month range near 2.74%. Its two-year yield is a little above 2.15%, slightly below the middle of its six-month range. Separately, Yiwa, a city of two million people, south of Shanghai has been locked down for three days starting today due to Covid. It is a manufacturing export hub. South Korea reported its first drop (0.7%) in technology exports in two years last month. While some read this to a statement about world demand, and there is likely something there given the earnings reports from the chip sector. However, there seems to be something else at work too. South Korea figures show semiconductor equipment exports to China have been more than halved this year (-51.9%) through July. China had accounted for around 60% of South Korea's semiconductor equipment. Reports suggest the main drivers are the US-China rivalry. Semiconductor investment in China has fallen and South Korea has indicated it intensions to join the US Chip 4 semiconductor alliance. Singapore's economy unexpectedly contracted in Q2. Initially, the government estimated the economy stagnated. Instead, it contracted by 0.2%. Given Singapore's role as an entrepot, its economic performance is often seen as a microcosm of the world economy. There was a nearly a 7% decline in retail trade services, while information and communication services output also fell. After the data, the Ministry of Trade and Industry narrowed this year's GDP forecast to 3%-4% from 3%-5%. While the drop in the US 10-year yield saw the dollar tumble against the yen yesterday, the recovery in yields has not fueled a recovery in the greenback. The dollar began yesterday above JPY135- and fell to nearly JPY132.00. Today, it has been confined to a little less than around half a yen on either side of JPY132.85. The cap seen at the end of last week and early this week in the JPY135.50-60 area, and the 20-day moving average (~JPY135.30) now looks like formidable resistance. Recall that the low seen earlier this month was near JPY130.40. The Australian dollar is also consolidating near yesterday's high set slightly below $0.7110. It was the best level in two months. The $0.7050 area may now offer initial support. The next upside target is seen in the $0.7150-70 band, which houses the (50%) retracement objective of the Aussie's slide from the April high (~$0.7660) and the July low (~$0.6680), and the 200-day moving average. The broad greenback sell-off yesterday saw it ease to about CNY6.7235, its lowest level in nearly a month. Despite the less-than-dovish message from the PBOC, it seemed to signal it did not want yuan strength. It set the dollar's reference rate at CNY6.7324, a bit above the median (Bloomberg's survey) of CNY6.7308. Europe Germany's coalition government has begun debating over the contours of the next relief package. The center-left government has implemented two support programs to ease the cost-of-living squeeze for around 30 bln euros. A third package is under construction now. The FDP Finance Minister Linder suggested as one of the components a 10 bln euro program to offset the "bracket creep" of higher inflation putting households into a higher tax bracket. The Greens want a more targeted effort to help lower income families. More work needs to be done, but a package is expected to be ready next month. The International Energy Agency estimates that Russian oil output will fall by around a fifth early next year as the EU import ban is implemented. The IEA warns that Russian output may begin declining as early as this month and estimates 2 mln barrels a day will be shut by early 2023. The EU's ban on most Russian oil will begin in early December, and in early February, oil products shipments will also stop. Now the EU buys around 1 mln barrels a day of oil products and 1.3 mln barrels of crude. Russia boosted output in recent months, to around 10.8 mln barrels a day. The IEA estimates that in June, the PRC overtook the EU to become the top market for Russia's seaborne crude (2.1 mln bpd vs. 1.8 mln bpd). Separately, the IEA lifted its estimate of world consumption by about 380k barrels a day from its previous forecast, concentrated in the Middle East and Europe. The unusually hot weather in the Middle East, where oil is burned for electricity, has seen stronger demand. In Europe, there has been more switched from gas to oil. The euro surged to almost $1.0370 yesterday on the back of the softer than expected US CPI. It settled near $1.03. It is trading firmly in the upper end of that range today. It held above $1.0275, just below the previous high for the month (~$1.0295). Today's high, was set in the European morning, near $1.0340. There is a trendline from the February, March, and June highs found near $1.04 today. It is falling by a little less than half a cent a week. Sterling's rally yesterday stalled in front of this month's high set on August 1 slightly shy of $1.2295. It is straddling the area where it settled yesterday (~$1.2220). We suspect the market may test the lows near $1.2180, and a break could see another half-cent loss ahead of tomorrow's Q2 GDP. The median forecast in Bloomberg's survey is for a 0.2% contraction after a 0.8% expansion in Q1.  America What the jobs data did for expectations for the Fed at next month's meeting were largely reversed by slower the expected CPI readings. On the eve of the employment data, the market was discounting a little better than a 35% chance of another 75 bp hike. It jumped to over a 75% chance after employment report but settled yesterday around a 45% chance. It is still in its early days, and the Fed will see another employment and CPI report before it has to decide. Although the market has downgraded the chances of a 75 bp hike at next month's meeting, it still has the Fed lifting rates 115 bp between now and the end of year. The market recognizes that that Fed is not done tightening no matter what trope is dragged out to use as a strawman. The truth is the market is pushing against some Fed views. Chicago Fed's Evans, who many regard as a dove from earlier cycles, said that Fed funds could finish next year in the 3.75%-4.00% area, which opined would be the terminal rate. The swaps market says that the Fed funds terminal rate is closer to 3.50% and in the next six months. More than that, the Fed funds futures are pricing in a cut late next year. At least a 25 bp cut has been discounted since the end of June. It was the Minneapolis Fed President Kashkari that surprised many with his hawkishness. Many see him as a dove because five years ago, he dissented against rate increases in 2017. However, he has been sounding more hawkish in this context and revealed yesterday that it was his "dot" in June at 3.90% this year and 4.4% next year. These were the most extreme forecasts. Perhaps it is not that he is more dovish or hawkish, labels that seemingly take a life on of their own but more activity. While neither Evans nor Kashkari vote on the FOMC this year, they do next year. San Francisco Fed President Daly seemed more willing to consider moderating the pace of tightening but still sees more work to be done. She does not vote this year or next.  Headline CPI was unchanged last month and the 0.3% rise in the core rate was less than expected. At 8.5%, the headline is rate is still too high for comfort, and the unchanged 5.9% core rate warns significant progress may be slow. Shelter is about a third of the CPI basket and it is rising about 0.5% a month. It is up 5.7% year-over-year. If everything else was unchanged, this would lift CPI to 2%. The US reports July Producer Prices. Both the core and headline readings are expected to have slowed. The headline peaked in March, 11.6% above year ago levels. It was 11.3% in June and is expected to have fallen to 10.4%. The core rate is likely to post its fourth consecutive decline. It peaked at 9.6% in March and fell to 8.2% in June. The median forecast (Bloomberg's survey) is for a 7.7% year-over-year pace, which would be the lowest since last October.  Late in the North American session, Mexico's central bank is expected to deliver its second consecutive 75 bp rate hike. It will lift the overnight target rate to 8.5%. The July CPI reported Tuesday stood at 8.15% and the core 7.65%. The swaps market has a terminal rate near 9.5% in the next six months. The subdued US CPI reading, helped spur a 0.85% rally in the JP Morgan Emerging Market Currency Index yesterday, its largest gain in almost four weeks. The peso, often a liquid and accessible proxy, rose around 1.1%. The greenback briefly traded below MXN20.00 for the first time since late June. The move was so sharp that closed below its lower Bollinger Band (~MXN20.08) for the first time in six months. The US dollar slumped to almost CAD1.2750 yesterday to hold above the 200-day moving average (~CAD1.2745). It is the lowest level in nearly two months, and it has not traded below the 200-day moving average since June 9. Like the other pairs, it is consolidating today near the lower end of yesterday's greenback range. The swaps market downgraded the likelihood that the Bank of Canada follows last month's 100 bp hike with a 75 bp move when it meets on September 7. It is now seen as a 30% chance, less than half of what was projected at the end of last week. We suspect that the US dollar can recover into the CAD1.2800-20 area today.     Disclaimer   Source: US Dollar Soft while Consolidating Yesterday's Drop

Oil treading water after volatile 24 hours Needless to say, it was quite a volatile session in oil markets on Wednesday. A positive surprise on inflation was followed by a huge inventory build reported by EIA and then the highest US output since April 2020. Meanwhile, oil transit via the Druzhba pipeline resumed after a brief pause that jolted the markets. That’s a lot of information to process in the space of a couple of hours and you can see that reflected in the price action. And it keeps coming this morning, with the IEA monthly oil report forecasting stronger oil demand growth as a result of price incentivised gas to oil switching in some countries. It now sees oil demand growth of 2.1 million barrels per day this year, up 380,000. It also reported that Russian exports declined 115,000 bpd last month to 7.4 million from around 8 million at the start of the year. The net effect of all of this is that oil prices rebounded strongly on Wednesday but are pretty flat today. WTI is back above $90 but that could change if we see progress on the Iran nuclear deal. It’s seen plenty of support around $87-88 over the last month though as the tight market continues to keep the price very elevated. Gold performs handbrake turn after breakout It was really interesting to see gold’s reaction to the inflation report on Wednesday. The initial response was very positive but as it turned out, also very brief. Having broken above $1,800, it performed a swift u-turn before ending the day slightly lower. It can be difficult to gauge market reactions at the moment, in part because certain markets seem to portray far too much economic optimism considering the circumstances. With gold, the initial response looked reasonable. Less inflation means potentially less tightening. Perhaps we then saw some profit-taking or maybe some of that economic optimism crept in and rather than safe havens, traders had the appetite for something a little riskier. Either way, gold is off a little again today but I’m not convinced it’s peaked. From a technical perspective, $1,800 represents a reasonable rotation point. Fundamentally, I’m just not convinced the market is currently representative of the true outlook. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Oil stablizes, gold pares gains

Investors are certainly in a more upbeat mood as the relief from the US inflation data ripples through the markets. Positive surprises have been hard to come by on the inflation front this year and yesterday’s report was very much welcomed with open arms. While we shouldn’t get too carried away by the data, with headline inflation still running at 8.5% and core 5.9%, it’s certainly a start and one we’ve waited a long time for. Fed policymakers remain keen to stress that the tightening cycle is far from done and a policy u-turn early next year is highly unlikely. Once again, the markets are at odds with the Fed’s assessment on the outlook for interest rates but this time in such a way that could undermine its efforts so you can understand their concerns. I expect we’ll continue to see policymakers unsuccessfully push back against market expectations in the coming weeks while further driving home the message that data dependency works both ways. That said, the inflation report has further fueled the optimism already apparent in the markets and could set the tone for the rest of the summer. PBOC signals no further easing Unlike many other central banks, the PBOC has the scope to tread more carefully and continue to support the economy as it contends with lockdowns amid spikes in Covid cases. The country’s zero-Covid policy is a huge economic headwind and proving to be a drain on domestic demand. The PBOC has made clear in its quarterly monetary policy report though that it doesn’t want to find itself in the same position as many other countries right now. With inflation close to 3%, further easing via RRR or interest rates looks unlikely for the foreseeable future. Cautious targeted support looks the likely path forward as the central bank guards against inflation risks, despite the data yesterday surprising to the downside. Singapore trims growth forecasts A surprise contraction in the second quarter has forced Singapore to trim its full-year growth forecast range from 3-5% to 3-4% as the economy contends with a global slowdown, to which the country is particularly exposed, and Covid-related uncertainty in China. While the MAS has indicated monetary policy is appropriate after tightenings this year, inflation remains high so further pressures on this front may add to the headwinds for the economy. Where’s the momentum? Bitcoin took the inflation news very well and it continues to do so. Slower tightening needs and improved risk appetite is music to the ears of the crypto community who will be more confident that the worst is behind it than they’ve been at any point this year. Whether that means stellar gains lie ahead is another thing. The price hit a new two-month high today but I’m still not seeing the momentum I would expect and want. That may change of course and a break of $25,000 could bring that but we still appear to be seeing some apprehension that may hold it back in the near term. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Welcome relief

US consumer prices eased in July, and they eased more than expected. US yields pulled lower after the CPI print, the US 10-year yield retreated, the US dollar slipped, gold gained, and the US stock markets rallied. Forex The EURUSD jumped to 1.0370 mark, as Cable made another attempt to 1.2272 but failed to extend gains into the 1.23 mark. And It will likely be hard for the pound sterling to post a meaningful recovery even if the dollar softens more, as there are too much political uncertainties in Britain following Boris Johnson’s resignation.   The sterling is under pressure, but the FTSE100 does just fine, and I will focus on why the British blue-chip companies are in a position to extend gains in this episode. Disney Elsewhere, Disney jumped on strong quarterly results, Tesla rallied despite news that Elon Musk dumped more stocks to prepare for an eventual Twitter purchase. Twitter shares gained.   Watch the full episode to find out more!   0:00 Intro 0:27 Softer-than-expected US CPI boosts appetite… 2:03 … but FOMC members warn that inflation war is far over! 3:39 FX update: USD softens, gold, euro, sterling advance 5:55 Why FTSE 100 is still interesting? 8:06 Disney jumps on strong results, Tesla, Twitter gain Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #inflation #data #Gold #XAU #USD #EUR #GBP #FTSE #Disney #earnings #Tesla #Twitter #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq   Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH Source: Stocks up on soft US CPI, but inflation war is not over! | MarketTalk: What’s up today? | Swissquote

Summary:  Another downside surprise in US inflation in the wake of lower energy prices lifted the equity markets initially overnight. However, sustained hawkishness from Fed speakers brought the yields higher, weighing on equities which closed nearly flat in the US. Crude oil prices made a strong recovery with the IEA boosting the global growth forecast for this year. EURUSD stayed above 1.0300 and will be eying the University of Michigan report today along with UK’s Q2 GDP. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  After rising well over 1% in early trading amid the weaker-than-expected PPI prints, U.S. equities wiped out gains and closed lower, S&P 500 -0.07%, Nasdaq 100 -0.65%. Energy stocks were biggest gainers, benefiting from a 2.6% rally in the price of WTI crude, Devon Energy (DVN:xnys) +7.3%, Marathon Oil (MRO:xnys) +7%, Schlumberger (SLB:xnys) +5.7%.  Consumer discretionary and technology were the biggest decliners on Thursday. Chinese ADRs gained, Nasdaq Golden Dragon Index climbed 2.6%.  U.S. treasuries bear steepened In spite of weaker-than-expected PPI data, U.S. long-end treasury yields soared, 10-year yields +10bps to 2.99%, 30-year yields +14bps to 3.17%. The rise in long-end yields were initially driven by large blocks of selling in the T-bond and Ultra-long contracts and exacerbated in the afternoon after a poor 30-year auction. The yield of 2-year treasury notes was unchanged and the 2-10-year yield curve steepened 10bps to minus 23bps.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese equities surged, Hang Seng Index +2.4%, CSI300 Index +2.0%. Northbound inflows into A shares jumped to a 2-month high of USD1.9 billion. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +17.7%, Sunny Optical (02382:xhkg) +9%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. China internet names rebounded, Alibaba (09988:xhkg) +4.3%, Tencent (00700:xhkg) +2.7%, Meituan (03690:xhkkg) +4.0%, Baidu (09888:xhkg) +5.2%. Power tool and floor care manufacturer, Techtronic Industries (00669:xhkg) soared nearly 11% after reporting  a 10% year-on-year growth in both revenues and net profits in 1H22. The company rolled out a new generation of drill drivers that have embedded with machine learning algorithm. After collapsing 16% in share price yesterday, Longfor (00960) managed to stabilize and recover 5.7% following the company’s refutation of market speculation that it had failed to repay commercial papers due. EURUSD re-tested resistance levels EURUSD reclaimed the key 1.0300 on Thursday amid a softer dollar, and printed highs of 1.0364. While weaker-than-expected inflation prints in the US this week have curtailed dollar strength, it is hard for EURUSD to sustain gains amid the energy crisis and European recession concerns. A break below 1.0250 would be needed for EURUSD to reverse the trend, however. AUDUSD, likewise, trades above 0.7100 amid the risk on tone, but a turn lower in equities could reverse the trend. GBPUSD has been more range-bound around 1.2200 ahead of the Q2 GDP data scheduled to be released today, and EURGBP may be ready to break above 0.8470 resistance if the numbers come out weaker-than-expected. Crude oil prices (CLU2 & LCOV2) Crude oil prices gained further on Thursday amid signs of softer inflation, weaker dollar and improving demand. The International Energy Agency (IEA) lifted its consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch to oil. This could be aided by lower gasoline prices, which have dented demand during the US driving season. Prices fell below USD4/gallon for the first time since March. Meanwhile, OPEC may struggle to raise output in coming months due to limited spare capacity. WTI futures touched $94/barrel while Brent futures rose towards the 100-mark.   What to consider? Another downside surprise in US inflation US July PPI dipped into negative territory to come in at -0.5% MoM, much cooler than 1% last month or the +0.2% expected. But on a YoY basis, PPI remains up a shocking 9.8%. Core PPI rose 0.4% MoM, which means on a YoY basis core producer prices are up 7.6% (lower than June's +8.2% but still near record highs). Goods PPI fell 1.8%, dominated by a 9.0% drop in energy. Meanwhile, services PPI was up 0.1% in July. Despite the slowdown in both PPI and CPI this week, PPI is still 1.3% points above CPI, suggesting margin pressures and a possible earnings recession. Fed’s Daly said she will be open to a 75bps rate hike at the September meeting. US jobless claims rise, University of Michigan ahead US initial jobless claims 262K vs 265K estimate, notably higher than the 248k the prior week and the highest since November 2021. The 4-week moving average of initial jobless claims increased to 252K vs 247.5K last week, but still below 350k levels that can cause an alarm. The modest pickup in claims suggests that turnover at weaker firms is increasing. Key data to watch today is the preliminary University of Michigan survey for August, where expectations are for a modest improvement given lower gasoline prices. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. The PBOC reiterates that it will avoid excessive money printing to spur growth so as to safeguard against inflation.  China’s President Xi is said to be visiting Saudi Arabia next week The Guardian reports that President Xi Jinping is expected to visit Saudi Arabia on an invitation extended from Riyadh in March.  China has been eager to secure its oil supply and explore the possibility of getting its sellers to accept the renminbi to settle oil trade.   While relying on the United States for security in a volatile region and supplies of weapons, Saudi Arabia with Prince Mohammed being in charge is looking for leverage in the kingdom’s relationship with the United States.  UK Q2 GDP likely to show a contraction The Q2 GDP in the UK is likely to show a contraction after April was down 0.2% and May up 0.5%. June GDP is likely to have seen a larger contraction given less working days in the month, as well as constrained household spending as inflation surged to a fresh record high. While there may be a growth recovery in the near-term, the Bank of England clearly outlined a recession scenario from Q4 2022 and that would last for five quarters. Our Macro Strategist Chris Dembik has painted a rather pessimistic picture of the UK economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 12, 2022

US Inflation Yesterday, the US inflation report was released, which came in at 8.5% in July. The market did not expect such a large drop, estimating a level of 8.7% before the data was released. The stock markets reacted positively and the major equity indexes rose significantly. The S&P 500 gained more than 2.1% during yesterday's session and the Nasdaq almost 2.9%. Crypto Cryptocurrencies, however, reacted most noticeably - on the Conotoxia MT5 platform, Bitcoin gained around 3.3% yesterday. And today, it continues its rise, breaking through the local peak of $2,485 on 30 August 2022. At 11.30 am GMT+3, the price of BTC is $24,471. The ETH price has risen even more strongly after a surprisingly low inflation reading. Ethereum gained more than 8.5% yesterday, and at 11.30 GMT+3, it is already up more than 2.3%. The token already costs $1,887 - its highest recorded level since 6 June this year.    What to expect? The market's reaction has a lot to do with expectations of interest rate hikes, which fell after the US inflation reading. However, it is still a long way from calling it a permanent decline. Inflation is still at its highest level in decades and the economy is operating in an environment of negative real interest rates.   According to CME Group data, the Federal Reserve (Fed) is likely to push rates even higher. Currently, the Fed Funds Rate is at just 2.5 pp, the level before the Covid pandemic. The CME Group estimates that we will still reach the 3.25 pp level this year, and peak in 2023 at 3.5 pp. However, as for the 2023 projections. The Federal Open Market Committee (FOMC), which decides them, is already much less unanimous and a lot may still depend on the information coming out of the economy.   Information on its state in the US is not pleasing. Most metrics - such as the yield curve, consumer sentiment, and economic growth - point to a recession. The labour market, which is surprisingly strong at the moment, is reacting last and is likely to become further evidence of a crisis soon.   The cryptocurrency market has never been in such a severe recession, so it is hard to determine exactly how it will behave. For now, the data shows a relatively high level of correlation between it and the stock market. This is not good news, as the latter almost always loses in a crash.   Polygon (MATIC) is an Ethereum token that powers the Polygon network, which is a protocol for building Ethereum-compatible blockchains and decentralised applications (DApps). Polygon is also referred to as a 2nd level (2nd level) solution to help Ethereum to scale faster, by increasing the efficiency of the network.    On Wednesday, Polygon shared data on user growth. Their total number in July was 11,800, gaining 47.5% since March and up 400% year-to-date. Interestingly, according to the project, "74% of teams integrated exclusively on Polygon, while 26% deployed on both Polygon and Ethereum,". This shows a very high level of confidence in the new technology, which can be the new foundation for the development of DApps. Since the local low on 19 July this year. MATIC has risen almost 172%.  Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Crypto soars after the low inflation reading. Polygon grows rapidly, gaining 400% users

Germany's Siemens, a manufacturer of technology to automate and digitalise businesses and households by supplying hydraulic, electrical and electronic equipment and household appliances, today reported revenue growth of 27% (year-on-year) and 1% growth between quarters. What happened? This exceeded analysts' expectations of €17.47 billion, reaching €17.87 billion in Q3 (the financial year starts earlier than the calendar year). This growth was mainly attributed to an increase in orders from the areas of business automation and intelligent infrastructure.   "Demand in the European capital goods sector is holding up," commented Barclays last week, following the publication of results from other companies in the sector, such as ABB and Schneider Electric. This was also confirmed by CEO Roland Busch, who said that demand remained strong in the quarter despite an environment affected by sanctions on Russia, high inflation and the ongoing effects of a pandemic. However, it is worth noting that these companies typically operate on long-term contracts and the decline in demand can be noticed after a long delay.    Siemens has a strongly diversified business, not only in terms of products but also in respect of the countries of origin of its customers. However, this may not protect it from the looming recession, which seems to be a problem not only for Europe or the US but for the whole world.    Alarming are, for example, the data of the German manufacturing PMI (Purchasing Managers' Index), which measures the assessment of the economic situation by managers. This index is currently at almost its lowest level in two years. The results in other countries in Europe and America also look similar. Asian economies also appear to be weakening.   Siemens also incurred a net loss of €1.66 billion charge for the write-down of the value of its stake in Siemens Energy, which operated in Russia. In addition, the company estimates that it has incurred additional losses of €0.6 billion due to the actions of the Russian Federation.   Despite high energy prices, Siemens is struggling to make savings from its 35% stake in the turbine and wind energy company. It has had a difficult two years since the spin-off in 2020, with operational problems and losses in the Siemens Gamesa wind turbine division.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Siemens posted its first loss since 2010, yet shares are gaining

Summary:  US treasury yields at the long end of the curve surged over 15 basis points at one point yesterday in the wake of heavy treasury futures selling and a somewhat soft T-bond auction, which helped to turn sentiment lower in the equity market after the major averages had advanced to new local highs. The jump in US yields checked the US dollar’s descent as traders mull whether a break higher in US treasury yields will offer the currency fresh support after its break lower this week in many USD pairs.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures attempted to run higher above the key 4,200 level but was rejected forcefully, closing a bit lower for the session and just above the 4,200 level. This morning the index futures are again trying to push higher trading around the 4,222 level with yesterday’s high at 4,260 being the natural resistance level in the short-term. Today’s earnings and macro calendar are light except for the Michigan surveys at 1400 GMT on consumer sentiment and expectations for the economy and inflation which could move the market on a surprise print. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities treaded water, fluctuating between small gains and losses. Sportswear and EV names gained. Li Ning (02332:xhkg) climbed more than 4% after reporting better than expected 1H results with sales growth of 22% and net profit growth of 12% from last year. The solid sales growth was led by online sales and wholesale business. China’s EV sales volumes grew 124% YoY (wholesale) and 117% YoY (retail) in July, much faster than the growth of the overall passenger vehicle market and had a penetration rate of 26.7%. XPeng (09868:xhkg) led the charge higher, gaining 4.2%, NIO (09866:xhkg) +3.6%, Li Auto (02015:xhkg) +1.7%. Leading semiconductor names, SMIC (00981:xhkg) and Hua Hong (01347:xhkg) reported inline and better-than expected results respectively. In its earnings call, the management of SMIC noted orders from some of its customers could fall meaningfully in near-term due to high inventories and suggested that recovery could come at around end of 2022 or early 2023. Share prices of SMIC declined 1.8%. USD: jump in long treasury yields checks the greenback’s descent After USDJPY traded to new local lows yesterday below 132.00, the pair snapped back well north of 133.00 in the wake of a surge in long US treasury yields (more below) and the USD sell-off was likewise checked elsewhere as risk sentiment also rolled over by late in the US equity trading session. The USD resilience is not yet technically significant and won’t be on a broad basis until/unless USDJPY surges back above perhaps 136.00, the EURUSD surge above 1.0300 is pushed back below 1.0250, and the aggressive AUDUSD move is pummeled back below 0.7000. The get a broader USD resurgence might require higher US yields and a deepening turn to the negative in risk sentiment, until then. Gold (XAUUSD) is heading for a fourth weekly gain ... supported by a weaker dollar after lower-than-expected CPI and PPI data helped reduce expectations for how high the Fed will allow rates to run. However, rising risk appetite as seen through surging stocks and bond yields trading higher on the week, have so far prevented the yellow metal from making a decisive challenge at key resistance above $1800/oz, and the recent decline in ETF holdings and low open interest in COMEX futures points to a market that is looking for a fresh and decisive trigger. Gold needs to hold $1760 in order to avoid a fresh round of long liquidation, while silver is looking for support at $20.23, its 50-day SMA. Copper and industrial metals in general have seen a strong recovery with COPPERSEP22 now eying resistance at $3.7150, its 50-day SMA. Crude oil (CLU2 & LCOV2) traded higher on Thursday ... before some light profit emerged overnight in Asia. Prices have been supported by signs of softer inflation improving the growth outlook, weaker dollar and improving demand, especially in the US where gasoline prices at the pumps have fallen below $4 per gallon for the first time since March. In addition, the International Energy Agency (IEA) lifted its consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch from expensive gas to fuel based products. Meanwhile, OPEC may struggle to raise output in coming months due to limited spare capacity. WTI futures touched $94/barrel while Brent futures returned to the 100-mark, thereby supporting our view that oil prices have reached a potential through in this correction phase.   US Treasuries (IEF, TLT) see long-end yields surging US yields at the long end of the curve ripped higher with the move aggravated by a somewhat soft 30-year T-bond auction, though the bulk of the move higher in yields unfolded earlier in the day on heavy selling of treasury futures. The 30-year yield rose a chunky 15.5 basis points at one point yesterday and traded to the highest levels in weeks, with the 10-year likewise poking above local highs in the 2.87% yield area. The jump in yields is technically significant if it holds and proceeds to 3.00%, suggesting that the consolidation phase is over. As well, the rise at the long end of the curve has significantly steepened the yield curve from a recent extreme in the 2-10 inversion of –49 basis points to –34 basis points.   What is going on?   US jobless claims rise, University of Michigan ahead US initial jobless claims 262K vs 265K estimate, notably higher than the 248k the prior week and the highest since November 2021. The 4-week moving average of initial jobless claims increased to 252K vs 247.5K last week, but still below 350k levels that can cause an alarm. The modest pickup in claims suggests that turnover at weaker firms is increasing. Key data to watch today is the preliminary University of Michigan survey for August, where expectations are for a modest improvement given lower gasoline prices. The grains sector trades at a five-week high ahead of today’s supply and demand report The Bloomberg Grains Index continues to recover following its 28% June to July correction with gains this past week being led by wheat (WHEATDEC22) and corn (CORNDEC22) in response to a weaker dollar and not least hot and dry weather in the US and another heatwave in Europe raising concerns about yield and production. Hot and dry weather at a critical stage for yield developments ahead of the soon to be harvested crop has given today’s World Agricultural Supply and Demand Estimates report some additional attention with surveys looking for lower yields and with that lower ending stocks. San Francisco Fed President Mary Daly sees 50 basis point hike at September FOMC meeting Daly is not an FOMC voter this year. Unlike her colleague (also a non-voter this year) Neel Kashkari at the Minneapolis Fed, she is satisfied with the median forecast of a 3.4% policy rate by year-end, which would be achieved with a 50 basis point move in September, followed by two 25 basis point hikes in November and December. Kashkari thinks 3.9% is more appropriate for a year-end target policy rate. Daly noted that she is happy to see inflation coming down, but is still open for a larger rate increase in September if necessary. “It really behooves us to stay data dependent and not call it”. The market is currently priced for 60 basis points of hiking at the September 21 FOMC meeting. Illumina shares down 23% on massive earnings miss The DNA-sequencing company slashed its fiscal year outlook last night due to potential penalties in Europe from its acquisition of another company. Its FY EPS forecast is now $2.75-2.90 down from previously $4-4.20.   What are we watching next?   UK Q2 GDP likely to show a contraction ... after April was down 0.2% and May up 0.5%. June GDP is likely to have seen a larger contraction given less working days in the month, as well as constrained household spending as inflation surged to a fresh record high. While there may be a growth recovery in the near-term, the Bank of England clearly outlined a recession scenario from Q4 2022 and that would last for five quarters. Our Macro Strategist Chris Dembik has painted a rather pessimistic picture of the UK economy. Another downside surprise in US inflation US July PPI dipped into negative territory to come in at -0.5% MoM, much cooler than 1% last month or the +0.2% expected. But on a YoY basis, PPI remains up a shocking 9.8%. Core PPI rose 0.4% MoM, which means on a YoY basis core producer prices are up 7.6% (lower than June's +8.2% but still near record highs). Goods PPI fell 1.8%, dominated by a 9.0% drop in energy. Meanwhile, services PPI was up 0.1% in July. Despite the slowdown in both PPI and CPI this week, PPI is still 1.3% points above CPI, suggesting margin pressures and a possible earnings recession. Fed’s Daly said she will be open to a 75bps rate hike at the September meeting. Next signals from the Fed at Jackson Hole conference Aug 25-27 There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. Earnings to watch There are no important earnings today except for Flutter Entertainment which has already reported ahead of the trading start in London. Flutter reports first-half revenue of £3.4bn vs est. £3.2bn. Today: Flutter Entertainment Economic calendar highlights for today (times GMT) 0900 – Eurozone Jun. Industrial Production 1400 – US Fed’s Barkin (non-voter) to speak 1400 – US Aug. Preliminary University of Michigan sentiment 1600 – USDA's World Agriculture Supply and Demand report (WASDE) Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 12, 2022

AUDUSD AUDUSD confirmed short-term uptrend yesterday breaking above 0.7069. RSI back above 60 indicating AUDUSD is likely to move higher towards resistance at 0.7283. AUDUSD could move higher from there after a likely correction. If closing above 0.76 AUDUSD could move toward peak at around 0.7660.To neutralise that scenario AUDUSD must move back below 0.7069. To reverse it AUDUSD must collapse to below 0.6865. Source: Saxo Group Weekly chart shows AUDUSD trading in a wide falling channel. A test of upper falling trendline is not unlikely, given that the above bullish scenario plays out. Source: Saxo Group AUDJPY AUDJPY is slowly crawling higher after the spike down below key support last week. AUDJPY is back above all Simple Moving averages and RSI is still showing positive sentiment indicating a test of the slightly falling upper trendline is likely. If AUDJPY breaks above the trendline and above resistance at 95.75 the pairs is likely to take out the peak in June at around 96.90. Source: Saxo Group GBPAUD GBPAUD is testing support at 1.7173 and seems likely to break bearish out of the range it has been trading in past 6 months. If AUDGBP closes below 1.7173 the pair is set for lower levels Source: Saxo Group Weekly chart shows that 01.7173 is a key support level rejecting GBPAUD several times. If GBPAUD finally breaks below the support a medium- to long-term move towards 1.60 area is in the cards.IF it fails to close below 1.7173 GBPAUD could resume its rangebound behaviour Source: Saxo Group Source: Technical Update - AUD pairs on the move testing or breaking resistance levels. AUDUSD , AUDJPY & GBPAUD

Summary:  Today we note that the big surge in yields at the long end of the US yield curve were likely the critical factor in capping and reversing the extension of the rally in equities yesterday. The US dollar found a bit of resilience on the development as well, if only half-hearted. Elsewhere, we zoom in on global natural gas supply concerns after the latest weekly US storage yesterday, discuss the grains outlook with a key report up late today and look ahead at the fairly busy macro calendar next week, while wondering how the Fed deals with re-establishing its hawkish credibility. 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 found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please!   We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: US yields jump, capping complacency

Summary:  While the growth outlook for Singapore is deteriorating on the back of weaker external demand, we believe exposure to the Singapore market remains a key portfolio diversifier given its safe-haven status. Rising interest rates continue to position banking stocks favourably, while the reopening of the regional and global economies brings likely benefits to retail and hospitality REITs as well as other travel related stocks and sectors. There are also some stocks to consider in-line with our preferred global equity themes of commodities and defence. Macro conditions are deteriorating The final print of Singapore’s Q2 GDP was revised lower to 4.4% y/y from an advance estimate of 4.8% earlier, suggesting a q/q contraction of 0.2% as against gains of 0.2% q/q suggested by the advance estimate or the 0.8% q/q growth seen in the first quarter. The Ministry of Trade and Industry (MTI) has also narrowed the forecast for annual 2022 growth to 3-4% from 3-5% earlier amid rising global slowdown risks. Given Singapore is an export-driven economy, it remains prone to the volatile external environment. Meanwhile, China’s Zero-covid strategy has hampered global supply chains as well as export demand from Singapore. These risks keep the threat of a technical recession – which is defined as two or more consecutive quarters of negative GDP growth – alive. The officials have, however, ruled that out for now and suggest a mild positive growth for Q3 and Q4. Is more monetary policy tightening on the cards? Singapore’s inflation remains high, but with core at 4.4%, it is still below the global inflation levels. We can certainly feel the price pressures biting, especially in rents and transportation. That is likely to remain a key concern for the Monetary Authority of Singapore (MAS), while the gloomier growth picture will only add some caution. Headwinds from external demand will be somewhat offset by a service sector growth picking up as the local and regional economies continue to broaden their reopening measures. This is boosting retail sales and tourism-led spending, while the labor market is also still tight. What could possibly be ruled out is an off-cycle move, or possibly a re-centering of the S$NEER policy band, unless core inflation surprises significantly to the upside. Singapore’s monetary policy has entered a restrictive mode with four tightening moves since October 2021, and further steepening of the S$NEER slope cannot be ruled out. What to consider in the markets? Singapore’s safe-haven status makes it an important stabilizer in the portfolios, especially in the choppy global markets. Singapore equities are riding on services demand recovery and sustained export momentum. The banking stocks such as DBS (D05:xses), UOB (U11:xses) and OCBC (O39:xses) remain well positioned to benefit from the rising interest rates, even as the wealth management income takes a haircut due to the weak market sentiment. Meanwhile, REITs offer a good dividend yield, and therefore inflation protection. Travel related stocks and sectors, such as retail REITs, hospitality REITs, Singapore Airlines (C6L:xses) or SATS (S58:xses) could also benefit from a sustained reopening momentum. Out global equity baskets have shown an outperformance from the Commodities and Defence baskets so far this year. Defence stocks could remain in focus with the increasing geopolitical tensions, and that means Singapore Technologies Engineering (S63:xses) may be worth a look. Green transformation also necessitates a look at Sembcorp Industries (U96:xses), while Singtel (Z77:xses) remains in a position to ride through the economic crisis with its rapid 5G adoption. Wilmar (F34:xses), an agribusiness firm with market cap greater than Singapore Airlines, has gained tremendous attention due to the tight edible oil markets since the Ukraine invasion, and its exposure to consumption in some of the largest emerging markets also makes it a key inflation play. Some of the sectors to remain cautious about would be the technology or manufacturing with exposure to China. REITs with exposure to China’s property market also face further threat. Key risk factors to watch While the external demand outlook remains fragile and dampens the growth prospects of Singapore economy and companies, there are also risks from a global tightening wave which could result in capital outflows. Meanwhile, rising geopolitical tensions in the region could also result in cautious investor sentiment. There remains a risk of US-China trade tensions coming back, and that could be a headwind for Singapore. Lastly, a resurgence of Covid remains a key risk to watch in Singapore and Asia, as the response will likely remain stricter than Europe despite a high level of vaccination.   Source: Singapore Market Pulse: Weaker macro conditions, but safe-haven reputation supports

Summary:  US treasury yields at the long end of the yield curve jumped higher yesterday to multi-week highs, a challenge to widespread complacency across global markets. The USD found a modicum of support on the development, though this was insufficient to reverse the recent weakening trend. It will likely take a more determined rise in US yields and a tightening of financial conditions, possibly on further Fed pushback against market policy expectations, to spark a more significant USD comeback. FX Trading focus: US yields jump, not yet enough to reverse recent USD dip A very interesting shift in the US yield curve yesterday as long yields jumped aggressively higher, with the 30-year yield getting the most focus on a heavy block sale of US “ultra” futures and a softer than expected 30-year T-bond auction from the US treasury. The 30-year benchmark yield jumped as much as 15 basis points from the prior close, with the 10-year move a few basis points smaller. We shouldn’t over-interpret a single day’s action, but it is a technical significant development and if it extends, could be a sign of tightening liquidity as the Fed ups its sales of treasuries and even a sign that market concern is growing that the Fed will fail to get ahead of inflation. As for the market reaction, the USD found some support, but it was modest stuff – somewhat surprisingly in the case of the normally very long-US-yield-sensitive USDJPY. Overnight, a minor shuffle in Japanese PMI Kishida’s cabinet has observers figuring that there is no real determined pushback yet against the Kuroda BoJ’s YCC policy, with focus more on bringing relief to lower income households struggling with price rises for essentials. Indeed, BoJ policy is only likely to come under significant pressure again if global yields pull to new cycle highs and the JPY finds itself under siege again. As for USDJPY, it has likely only peaked if long US yields have also peaked for the cycle. Chart: EURUSD EURUSD caught in limbo here, having pulled up through the resistance in the 1.0275+ area after a long bought of tight range trading, but not yet challenging through the next key layer of resistance into 1.0350+. It wouldn’t take much of a further reversal here to freshen up the bearish interest – perhaps a dip and close below 1.0250 today, together with a bit of follow through higher in US yields and a further correction in risk sentiment. Eventually, we look for the pair to challenge down well through parity if USD yields retest their highs and beyond. Source: Saxo Group Elsewhere – watching sterling here as broader sentiment may be at risk of rolling over and as we wind our way to the conclusion of the battle to replace outgoing Boris Johnson, with Liz Truss all but crowned. Her looser stance on fiscal prudence looks a sterling negative given the risks from UK external deficits. Her instincts seem pro-supply side on taxation, but the populist drag of cost-of-living issues has shown her to be quick to change her stripes – as she has often been, having reversed her position on many issues, including Brexit (was a former remainer). Today’s reminder of the yawning trade deficit (a current run rate of around 10% of GDP) and the energy/power situation together with dire supply side restraints on the UK economy have us looking for sterling weakness – a start would be a dip below 1.2100 in GBPUSD, which would reverse the reaction earlier this week to the US July CPI release. The week ahead features an RBNZ on Wednesday (market nearly fully priced for another two meetings of 50 basis points each). NZDUSD has looked too ambitious off the lows – there is no strong external surplus angle for the kiwi like there is for the Aussie – might be a place to get contrarian to the recent price action if global risk sentiment is set to roll over again finally now that the VIX has pushed all the way to 20 (!).  A Norges Bank meeting on Thursday may see the bank hiking another 50 basis points as it continues to catch up to inflationary outcomes. The US FOMC minutes are up next Wednesday and may be a bit of a fizzle, given that the bulk of the easing financial conditions that the Fed would like to push back against came after the meeting. Table: FX Board of G10 and CNH trend evolution and strength. The US dollar hasn’t gotten much from the latest development in yields – watching the next couple of sessions closely for direction there, while also watching for the risk of more sterling downside, while NZD looks overambitious on the upside. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. The EURGBP turn higher could follow through here – on the lookout for that development while also watching GBPUSD status in coming sessions and whether the EURUSD move higher also follows through as per comments on the chart above. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Fed’s Barkin (non-voter) to speak 1400 – US Aug. Preliminary University of Michigan sentiment Share Source: FX Update: US yield jump brings USD resilience if not a reversal.

Summary:  The easing inflation narrative has been building strength for six weeks now and the short-term vindication in the US CPI release on Wednesday has bolstered the bulls. However, the structural issues in the supply-side of the economy have been resolved and wages combined with rents will add more pressure on inflation going forward. We also highlight the unfolding scandal around the heartburn drug Zantac as it has erased $40bn in market value from Sanofi and GSK. Finally, we take a look at next week's earnings. It is too early to call inflation is tamed The US July CPI release on Wednesday has bolstered the soft-landing and easing inflation trade catapulting high duration assets higher. S&P 500 futures are attempting to push higher and the 200-day moving average sitting around the 4,325 level is suddenly not an outrageous gravitational point for US equities in the near-term. While the equity market is buying the all good scenario on inflation we would emphasise that it is too early to call. The Fed will like to see the 6-month average on the US CPI core m/m to go back to 0.2% before easing policy and that is simply not possible until at least the end of Q1 next year. Many of the structural issues except maybe for logistics, and this pain could come back again this winter if China gets another big Covid outbreak, are still not solved as capital expenditures in real terms are still not coming up in the global mining and energy industry. Labour markets remain tight with especially the US being the worst hit having lost around 1.5%-point of its labour force due to the pandemic and these people are likely never coming back. Rent dynamics are also heating up in both the US and Europe, and this winter will test the strength of the European population as the energy crisis could get much worse. We encourage investors to watch the US 10-year yield as a break above 3% again should cause a negative reaction in global equities. S&P 500 continuous futures | Source: Saxo Group US CPI core m/m | Source: Bloomberg Potential gigantic Zantac liabilities hit Sanofi, GSK, and Pfizer Health care is typically associated with stability, high valuations, and high predictability in the underlying cash flows, but the industry is being rocked by increasing concerns over the heartburn drug Zantac. Sanofi, GSK, and Pfizer have lost combined market value of $40bn and analysts are estimating that damage liabilities could reach $10-45bn. Zantac was removed from the market in 2019 by the FDA as the drug appears to be producing unacceptably high levels of a cancer-causing chemical. There is case coming up in Illinois on 22 August which will give the first indications of where this is going. There will continue to be short-term headwinds for both Sanofi and GSK where Pfizer seems to have been selling the drug for a much more reduced period than the two others. Weekly share prices of Sanofi, GSK, and Pfizer | Source: Bloomberg Earnings to watch next week The Q2 earnings season is slowly coming to end and what a quarter it has been with earnings jumping to a new all-time high (see chart) driven by a significant increase in profits in the energy sector. The technology sector measure by the Nasdaq 100 had another bad quarter with earnings declining reinforcing the need to cut costs of many of these previously fast growing technology companies. Next week’s most important earnings are highlighted below with the names in bold being those that can move market or industry sentiment. Meituan on Monday is important for gauging consumer spending and behaviour in China. BHP Group is must watch on Monday as the Australian miner is tapped into China’s growth and demand for iron ore. On Tuesday, earnings from Walmart and Home Depot can provide an updated picture on global supply chains and price pressures across a wide range of consumer products. Tencent reports on Wednesday and is an important earnings release for investors watching Chinese technology stocks as the recent amendment to China’s anti-monopoly laws is adding more pressure on the big technology platform companies. In the payments industry, Adyen’s result on Thursday will be highly watched as Adyen is really challenging PayPal on growth and dominance in the industry. Monday: China Construction Bank, Agricultural Bank of China, Meituan, China Life Insurance, China Shenhua Energy, China Petroleum & Chemical, BHP Group, COSCO Shipping, Li Auto, Trip.com Group, DiDi Global Tuesday: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Source: The soft-landing and inflation easing narrative is thriving

Summary:  The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing, driven by recent economic data strength, dollar weakness and signs inflation may have peaked. With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support, especially across the sectors of energy and key agriculture commodities. The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing. According to the Bloomberg commodity sector indices, the correction period triggered peak to bottom moves of 41% in industrial metals, 31% in grains and 27% in energy. The main reason for the dramatic correction following a record run of strong gains was the change in focus from tight supply to worries about demand. Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver has been the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing but recent economic data strength, dollar weakness and signs inflation may have peaked have all helped support markets that have gone through weeks and in some cases months of sharp price declines, and with that an aggressive amount of long liquidation from financial traders as well as selling from macro-focused funds looking for a hedge against an economic downturn.With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support and problems for those who have been selling markets looking for even lower prices in anticipation of recession and lower demand. Backwardation remains elevated despite growth worries The behaviour of spot commodity prices, as seen through first month futures contracts, rarely gives us the full fundamental picture with the price action often being dictated by technical price-driven speculators and funds focusing on macroeconomic developments, as opposed to the individual fundamental situation. The result of this has been a period of aggressive selling on a combination of bullish bets being scaled back but also increased selling from funds looking to hedge an economic slowdown.An economic slowdown, or in a worst-case scenario a recession, would normally trigger a surplus of raw materials as demand falters and production is slow to respond to a downturn in demand. However, during the past three months of selling, the cost of commodities for immediate delivery has maintained a healthy premium above prices for later deliveries. The chart below shows the spread measured in percent between the first futures and the 12-month forward futures contract, and while the tightness has eased a bit, we are still seeing tightness across a majority, especially within energy and agriculture. A sign that the market has sold off on expectations more than reality, and it raises the prospect of a strong recovery once the growth outlook stabilises. Crude oil The downward trending price action in WTI and Brent for the past couple of months is showing signs of reversing on a combination of the market reassessing the demand outlook amid continued worries about supply and who will and can meet demand going forward. The recovery from below $95 in Brent and $90 in WTI this week was supported by signs of softer US inflation reducing the potential peak in the Fed fund rates, thereby improving the growth outlook. In addition, the weaker dollar and improving demand, especially in the US where gasoline prices at the pumps have fallen below $4 per gallon for the first time since March.In addition, the International Energy Agency (IEA) lifted its global consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch from expensive gas to fuel-based products. Meanwhile, OPEC may struggle to raise output in the coming months due to limited spare capacity. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold (XAUUSD) The recently under siege yellow metal was heading for a fourth weekly gain, supported by a weaker dollar after the lower-than-expected US CPI and PPI data helped reduce expectations for how high the Fed will allow rates to run. However, rising risk appetite as seen through surging stocks and bond yields trading higher on the week have so far prevented the yellow metal from making a decisive challenge at key resistance above $1800/oz, and the recent decline in ETF holdings and low open interest in COMEX futures points to a market that is looking for a fresh and decisive trigger. We believe the markets newfound optimism about the extent to which inflation can successfully be brought under control remains too optimistic and together with several geopolitical worries, we see no reason to exit our long-held bullish view on gold as a hedge and diversifier. Gold has found some support at the 50-day moving average line at $1783, and needs to hold $1760 in order to avoid a fresh round of long liquidation the short-term. While some resistance is located just above $1800 gold needs a decisive break above $1829 in order to trigger the momentum needed to attract fresh buying in ETFs and managed money accounts in futures. Source: Saxo Group Industrial metals (Copper)   Copper has rebounded around 18% since hitting a 20-month low last month, thereby supporting a general recovery across industrial metals, the hardest hit sector during the recent correction. Supported by a softer dollar, data showing the US economy remains robust, easing concerns about the demand outlook in China and not least disruptions to producers in Asia, Europe as well as South America potentially curtailing supply at a time when exchange-monitored inventories remain at a decade low. All developments that have forced speculators to cut back recently established short positions.The potential for an improved demand outlook in China and BHP's recent announcement that it has made an offer for OZ Minerals and its nickel and copper-focused assets, is the latest in a series of global acquisitions aimed at shoring up supplies of essential metals for the energy transition. With its high electrical conductivity, copper supports all the electronics we use, from smartphones to medical equipment. It already underpins our existing electricity systems, and it is crucial to the electrification process needed over the coming years in order to reduce demand for energy derived from fossil fuels.Following a temporary recovery in the price of copper around the beginning of June when China began easing lockdown restrictions, the rally quickly ran out of steam and copper went on to tumble below key support before eventually stabilizing after finding support at $3.14/lb., the 61.8% retracement of the 2020 to 2022 rally. Since then, the price has recovered strongly but may temporarily pause after reaching finding resistance in the $3.70/lb area. We maintain a long-term bullish view on copper and prefer buying weakness instead of selling into strength. Source: Saxo Group The grains sector traded at a five-week high ahead of Friday’s supply and demand report from the US Department of Agriculture. The Bloomberg Grains Index continues to recover following its 28% June to July correction with gains this past week being led by wheat and corn in response to a weaker dollar and not least hot and dry weather in the US and another heatwave in Europe raising concerns about yield and production. Hot and dry weather at a critical stage for yield developments ahead of the soon-to-be-harvested crop has given the World Agricultural Supply and Demand Estimates report some additional attention with surveys pointing to price support with the prospect of lower yields lowering expectations for the level of available stocks ahead of the coming winter. Cotton, up 8% this month has seen the focus switch from growth and demand worries, especially in China, to deepening global supply concerns as heatwaves in the US and China hurt production prospects. Friday’s monthly supply and demand report (WASDE) from the US Department of Agriculture was expected to show lower US production driving down ending stocks by around 10% to 2.2 m bales, an 11-year low. Arabica coffee, in a downtrend since February, has also seen a steady rise since bouncing from key support below $2/lb last month. A persistent and underlying support from South American production worries has reasserted itself during the past few weeks as the current on-season crop potentially being the lowest since 2014. Brazil’s drought and cold curbed flowering last season and severe frosts in July 2021 led farmers to cut down coffee trees at a time of high costs for agricultural inputs, notably fertilizer. In addition, Columbia another top producer, has seen its crop being reduced by too much rainfall. Source: WCU: Commodity correction may have exhausted itself

Relevance up to 11:00 2022-08-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. EUR/USD   Higher timeframes Bulls yesterday attempted to go beyond the nearest limit—the weekly short-term trend (1.0285). Their task now is to stay above the level and fix the achievement at the close of the week. In this case, the chances that the weekly upward correction will have development prospects will increase. On the daily timeframe, the nearest reference point for the continuation of the rise is now the Ichimoku cloud, the breakdown of which will form an additional upward reference point—the target for the breakout of the cloud. Among the supports today, we can note the levels of the daily golden cross (1.0246 – 1.0210 – 1.0160 – 1.0111). H4 – H1 The main advantage now belongs to the bulls, as the work is carried out above the key levels, but the pair is in the correction zone. The interests of bulls within the day today are the resistance of the classic pivot points (1.0378 – 1.0457 – 1.0545). The key levels now at 1.0290 (central pivot of the day) and 1.0226 (weekly long-term trend) separate the pair from a reprioritization in favor of a more bearish sentiment. Targets for decline today can be noted at 1.0211 – 1.0123 – 1.0044 (classic pivot points). *** GBP/USD Higher timeframes Bulls yesterday managed to push off the supports, around which the last few days have been consolidating (the main level 1.2082 is a weekly short-term trend), and enter the daily Ichimoku cloud. The breakdown of the cloud (1.2323) and consolidation in the bullish zone are the main tasks for bulls in the near term. When the mood changes, the relevance will return to supports. The support zone is now quite wide and includes 1.2174 (lower boundary of the daily cloud) – 1.2148 – 1.2089 – 1.2026 – 1.1963 (levels of the daily Ichimoku cross), as well as 1.2082 (weekly short-term trend) and 1.2000 (an important psychological level). H4 – H1 In the lower timeframes, the main advantage now belongs to the bulls. Among the bullish reference points during the day today, we can note 1.2303 – 1.2396 – 1.2515 (classic pivot points resistance) and 1.2301–34 (target for the breakdown of the H4 cloud). The balance of power will change if bears consolidate below key levels 1.2184 (central pivot point of the day) – 1.2120 (weekly long-term trend). After that, the reference points will be the support of the classic pivot points (1.2091 – 1.1972 – 1.1879). *** In the technical analysis of the situation, the following are used: higher timeframes – Ichimoku Kinko Hyo (9.26.52) + Fibo Kijun levels H1 - Pivot Points (classic) + Moving Average 120 (weekly long-term trend) Source: Forex Analysis & Reviews: Technical analysis recommendations on EUR/USD and GBP/USD for August 11, 2022

Relevance up to 13:00 2022-08-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Technical analysis: GBP/UISD has been trading flat today at the price of 1.2204 but I see potential for the second downside swing. Trading recommendation: Due to the strong growth yesterday and extreme condition, I see potential for the downside movement. Watch for potential selling opportunities with the downside objective at the price of 1.2135. Stochastic oscillator is showing overbought condition and bear cross, which is sign that sellers are taking control. Key resistance is set at the price of 1.2270 Source: Forex Analysis & Reviews: GBP/USD update for August 11, 2022 - Potential for the second downside swing to develop

Relevance up to 12:00 2022-08-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results.The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Technical analysis: Gold has been trading downside today and I see the breakout of the rising channel, which is sign that sellers are in control. Trading recommendation: Due to the breakout of the rising channel in the background, I see potential for further downside movement. Watch for potential selling opportunities with the downside objectives at the price of $1.783 and $1.770. Stochastic oscillator is showing overbought condition and bear cross, which is sign that sellers are taking control. Key resistance is set at the price of $1.805 Source: Forex Analysis & Reviews: Analysis of Gold for August 11,.2022 - Breakout of the rising channel in the backgorund

Overview: The markets are putting the finishing touches on this week’s activity. Japan, returning from yesterday’s holiday bought equities, and its major indices jumped more than 2%. China, South Korea, and Australia struggled. Europe’s Stoxx 600 is firmer for the third consecutive session. It is up about 1.3% this week. US futures are also firmer after reversing earlier gains yesterday to close lower on the day. The US 10-year yield is flat near 2.88%, while European benchmarks are 4-6 bp higher. The greenback is mixed. The dollar-bloc currencies and Norwegian krone are slightly firmer, while the Swedish krona, sterling, and the yen are off around 0.3%-0.6%. Emerging market currencies are also mixed, though the freely accessible currencies are mostly firmer. The JP Morgan Emerging Market Currency Index is up about 1.15% this week, ahead of the Latam session, which if sustained would be the strongest performance in three months. Gold is consolidating at lower levels having been turned back from $1800 in the middle of the week. Near $1787.50, it is up less than 0.7% for the week. September WTI is edging higher for the third consecutive session, which would match the longest streak since January. US natgas surged 8.2% yesterday but has come back offered today. It is off 2.3%. Europe’s natgas benchmark is snapping a three-day advance of nearly 8% and is off 1.8% today. Iron ore rose 2.2% yesterday and it gave most of its back today, sliding almost 1.7%. September copper is unchanged after rallying more than 3.3% over the past two sessions. September wheat has a four-day rally in tow but is softer ahead of the Department of Agriculture report (World Agricultural Supply and Demand Estimates). Asia Pacific   Japan and China will drop some market sensitive high-frequency economic data as trading begins in the new week.  Japan will release its first estimate of Q2 GDP. The median in Bloomberg's survey and the average of a dozen Japanese think tanks (cited by Jiji Press) project around a 2.7% expansion of the world's third-largest economy, after a 0.5% contraction in Q1. Consumption and business investment likely improved. Some of the demand was probably filled through inventories. They added 0.5% to Q1 growth but may have trimmed Q2 growth. Net exports were a drag on Q1 (-04%) and may be flat. The GDP deflator was -0.5% in Q1 and may have deteriorated further in Q2. Some observers see the cabinet reshuffle that was announced this week strengthening the commitment to ease monetary policy. The deflation in the deflator shows what Governor Kuroda's successor next April must address as well. China reports July consumption (retail sales), industrial output, employment (surveyed jobless rate), and investment (fixed assets and property).  The expected takeaway is that the world's second-largest economy is recovering but slowly. Industrial output and retail sales are expected to have edged up. Of note, the year-to-date retail sales compared with a year ago was negative each month in Q2 but is expected to have turned positive in July. The year-over-year pace of industrial production is expected to rise toward 4.5%, which would be the best since January. The housing market, which acted as a critical engine of growth is in reverse. New home prices (newly build commercial residential building prices in 70 cities) have been falling on a year-over-year basis starting last September, and likely continued to do so in July. Property investment (completed investment in real estate) likely fell for the fourth consecutive month. It has slowed every month beginning March 2021. The pace may have accelerated to -5.6% year-over-year after a 5.4% slide in the 12-months through June. The surveyed unemployed rate was at 4.9% last September and October. It rose to 6.1% in April and has slipped back to 5.5% in June. The median forecast in Bloomberg's survey expects it to have remained there in July. Lastly, there are no fixed dates for the lending figures and the announcement of the one-year medium-term lending facility rate. Lending is expected to have slowed sharply from the surge in June, while the MLF rate is expected to be steady at 2.85%. Over the several weeks, foreign investors have bought a record amount of Japanese bonds.  Over the past six weeks, foreigners snapped up JPY6.44 trillion (~$48 bln). It may partly reflect short-covering after the run-in with the Bank of Japan who bought a record amount to defend the yield-curve control cap of 0.25% on the 10-year bond. There is another consideration. For dollar-based investors, hedging the currency risk, which one is paid to do, a return of more than 4% can be secured. At the same time, for yen-based investors, hedging the currency risk is expensive, which encourages the institutional investors to return to the domestic market. Japanese investors have mostly been selling foreign bonds this year. However, the latest Ministry of Finance data shows that they were net buyers for the third consecutive week, matching the longest streak of the year. Still, the size is small. suggesting it may not be a broad or large force yet. Although the US 10-year yield jumped 10 bp yesterday, extending its recovery from Monday's low near 2.75% for a third session, the dollar barely recovered against the yen.  After falling 1.6% on Wednesday, after the softer than expected US CPI, the greenback rose 0.1% yesterday and is edging a little higher today. Partly what has happened is that the exchange rate correlation with the 10-year yield has slackened while the correlation with the two-year has increased. In fact, the correlation of the change in the two-year and the exchange rate is a little over 0.60 and is the highest since March. The dollar appears to be trading comfortably now between two large set of options that expire today. One set is at JPY132 for $860 mln and the other at JPY134 for $1.3 bln. Around $0.7120, the Australian dollar is up about 3% this week and is near two-month highs. It reached almost $0.7140 yesterday. The next technical target is in the $0.7150-$0.7170 area. Support is seen ahead of $0.7050. Next week's data highlight is the employment data (August 18). The greenback traded in a CNY6.7235-CNY6.7600 on Wednesday and remained in that range yesterday and today. For the second consecutive week, the dollar has alternated daily between up and down sessions for a net change of a little more than 0.1%. The PBOC set the dollar's reference rate at CNY6.7413, tight to expectations (Bloomberg's survey) of CNY6.7415. Europe   The UK's economy shrank by 0.6% in June, ensuring a contraction in Q2.  The 0.1% shrinkage was a bit smaller than expected but the weakness was widespread. Consumption fell by 0.2% in the quarter, worse than expected, while government spending collapsed by 2.9% after a 1.3% pullback in Q1. A decline in Covid testing and slower retail sales were notable drags. The one bright spot was business investment was stronger than expected. The June data itself was miserable, though there was an extra holiday (Queen's jubilee). All three sectors, industrial output, services, and construction, all fell in June and the trade balance deteriorated. The market's expectation for next month's BOE meeting was unaffected by the data. The swaps market has about an 85% chance of another 50 bp hike discounted.  Industrial output in the eurozone rose by 0.7%, well above the 0.2% median forecast in Bloomberg's survey and follows a 2.1% increase in May.  The manufacturing PMI warned that an outright contraction is possible. Of the big four members, only Italy disappointed. The median forecast in Bloomberg's survey anticipated a decline in German, France, and Spain. Instead, they reported gains of 0.4%, 1.4%, and 1.1% respectively. Industrial output was expected to have contracted by 0.1% in Italy and instead it reported a 2.1% drop. In aggregate, the strength of capital goods (2.6% month-over-month) and energy (0.6%) more than offset the declines in consumer goods and intermediate goods. The year-over-year rise of 2.4% is the strongest since last September. The disruption caused by Russia's invasion of Ukraine and the uneven Covid outbreaks and responses are as Rumsfeld might have said known unknowns.  But the disruptive force that may not be fully appreciated is about to get worse. The German Federal Waterways and Shipping Administration is warning that water in the Rhine River will fall below a critical threshold this weekend. At an important waypoint, the level may fall to about 13 inches (33 centimeters). Less than around 16 inches (40 centimeters) and barges cannot navigate. An estimated 400k barrels a day of oil products are sent from the Amsterdam-Rotterdam-Antwerp region to Germany and Switzerland. The International Energy Agency warns that the effects could last until late this year, and hits landlocked countries who rely on the Rhine the hardest. Bloomberg reported that Barge rates from Rotterdam to Basel have risen to around 267 euros a ton, a ten-fold increase in a few months. The strong surge in the euro to almost $1.0370 on Wednesday has stalled.  The euro is consolidating inside yesterday's relatively narrow range (~$1.0275-$1.0365). The momentum traders may be frustrated by the lack of follow-through. We suspect a break of $1.0265 would push more to the sidelines. The downtrend line from the February, March, and June highs comes in slightly above $1.0385 today. The broad dollar selloff in response to the July CPI saw sterling reach above $1.2275, shy of the month's high closer to $1.2295. Similar to the euro, sterling stalled. It has slipped through yesterday's low (~$1.2180). A break of the $1.2140 area could see $1.2100. That said, the $1.20 area could be the neckline of a double top and a convincing break would signal the risk of a return to the lows set a month ago near $1.1760. America   Think about the recent big US economic news.  It began last Friday with a strong employment report, more than twice what economists expected (median, Bloomberg survey) and a new cyclical low in unemployment. The job gains were broadly distributed. That was followed by a softer than expected CPI and PPI. Some observers placed emphasis on the slump in productivity and jump in unit labor costs. Those are derived from GDP figures and are not measured separately, though they are important economic concepts. Typically, when GDP is contracting, productivity contracts and by definition, unit labor costs rise. In effect, the market for goods and services adjusts quicker the labor market, and the market for money, even quicker. If the economy expands as the Atlanta Fed GDPNow tracker or the median in Bloomberg's survey project (2.5% and 2.0%, respectively), productivity will improve, and unit labor costs will fall. Barring a precipitous fall today, the S&P 500 and NASDAQ will advance for the fourth consecutive week.  The 10-year yield fell by almost 45 bp on the last three week of July and has recovered around half here in August. That includes five basis points this week despite the softer inflation readings. The two-year note yield fell almost 25 bp in the last two weeks of July and jumped 34 bp last week. It is virtually flat this week around 3.22%. The odds of a 75 bp rate hike at next month's FOMC meeting fell from about 75% to about 47%. The year-end rate expectation fell to 3.52% from 3.56%. Some pundits claim the market is pricing in a March 2023 cut, but the implied yield of the March 2023 Fed funds futures contract is 18 bp above the December 2022 contract. It matches the most since the end of June. Still, while the Federal Reserve is trying to tighten financial conditions the market is pushing back. The Bloomberg Financial Conditions Index is at least tight reading since late April. The Goldman Sachs Financial Condition index is the least tight in nearly two months.  US import and export prices are the stuff that captures the market's imagination.  However, the preliminary University of Michigan's consumer survey, and especially the inflation expectations can move the markets, especially given that Fed Chair Powell cited it as a factor encouraging the 75 bp hike in June. The Bloomberg survey shows the median expectation is for a tick lower in inflation expectations, with the one-year slipping to 5.1% from 5.2%. The 5-10-year expectation is seen easing to 2.8% from 2.9%. If accurate, it would match the lowest since April 2021. The two-year breakeven (difference between the conventional yield and the inflation-protected security) peaked in March near 5% and this week reached 2.70%, its lowest since last October. It is near 2.80% now. Mexico delivered the widely anticipated 75 bp hike yesterday.  The overnight rate target is now 8.50%. The decision was unanimous. It is the 10th consecutive hike and concerns that AMLO's appointments would be doves has proven groundless. The central bank meets again on September 29. Like other central banks, it did not pre-commit to the size of the next move, preserving some tactical flexibility. If the Fed hikes by 75 bp, it will likely match it. Peru's central bank hiked its reference rate by 50 bp, the 10th consecutive hike of that magnitude after starting the cycle last August with a 25 bp move. It is not done. Lima inflation was near 8.75% last month and the reference rate is at 6.50%. The Peruvian sol is up about 1.2% this month, coming into today. It has appreciated by around 3.25% year-to-date, making it the second-best performer in the region after Brazil's 8.1% rise. Argentina hiked its benchmark Leliq rate by 950 bp yesterday to 69.5%. It had delivered an 800 bp hike two weeks again. Argentina's inflation reached 71% last month. The Argentine peso is off nearly 23.5% so far this year, second only to the Turkish lira (~-26%). The US dollar fell slightly below CAD1.2730 yesterday, its lowest level since mid-June. The slippage in the S&P 500 and NASDAQ helped it recover to around CAD1.2775. It has not risen above that today, encouraged perhaps by the firmer US futures. Although the 200-day moving average (~CAD1.2745) is a good mile marker, the next important chart is CAD1.2700-CAD1.2720. A convincing break would target CAD1.2650 initially and then CAD1.2600. While the Canadian dollar has gained almost 1.4% against the US dollar this week (around CAD1.2755), the Mexican peso is up nearly 2.4%. The greenback is pressing against support in the MXN19.90 area. A break targets the late June lows near MXN19.82. The MXN20.00 area provides the nearby cap.       Disclaimer   Source: Heading into the Weekend, Dollar's Downside Momentum Stalls

Summary:  PetroChina, Sinopec, Sinopec Shanghai Petrochemical, Chalco and China Life Insurance notified the New York Stock Exchange on 12 Aug 2022 of their intended application for voluntary delisting of their American depository shares and terminating the relevant ADR programs. The question now is if this is an example set for mega-cap Chinese internet and platform companies to follow. Five Chinese Central State-Owned Enterprises (“Central SOEs”) apply for delisting from the New York Stock Exchange   On August 12, 2022, after the close of the regular session of the Stock Exchange of Hong Kong, PetroChina (00857:xhkg/PTR:xnys), China Petroleum & Chemical Corporation, also known as Sinopec (00386:xhkg/SNP:xnys), Sinopec Shanghai Petrochemical (00338:xhkg/SHI:xnys), Aluminum Corporation of China, also known as Chalco (02600:xhkg/ACH:xnys), and China Life Insurance (02628:xhkg/LFC:xnys) announced that they had notified the New York Stock Exchange (“NYSE”) that they are will apply for delisting of their American depository shares (“ADSs”) from the NYSE. It is expected that the American Depository Receipt (“ADR”) programs will be terminated between September 1 and October 16, 2022, and the ADSs issued under these ADR programs can be surrendered for their underlying H shares, which will continue to trade in the Stock Exchange of Hong Kong (“SEHK”). PetroChina, Sinopec, Sinopec Shanghai Petrochemical and Chalco are Central SOEs that are owned (80.4%, 68.8%, 32.2%, and 50.4% respectively) and controlled by the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”).  These, together with 93 others that are also owned and controlled by the SASAC are known as Central SOEs or “Yang Qi” in Chinese.  China Life Insurance, not one of those under the SASAC, is not a Central SOE in the strict sense but it is usually considered a Central SOE due to the fact that it is 62.4% owned and controlled by the Ministry of Finance.  All five companies are on the U.S. Securities and Exchange Commission’s (“SEC”) conclusive list of identified entities under the HFCAA    In the U.S., the Sarbanes-Oxley Act enacted in 2002 requires publicly traded companies to give the U.S. Public Company Accounting Oversight Board (“PCAOB”) access to audit work papers. In 2009, the China Securities Regulatory Commission (“CSRC”) issued a rule that forbids overseas regulatory authorities from inspecting Chinese auditing firms without CSRC’s prior approval and audit work papers containing state secretes from being taken outside China.  The PCAOB’s attempt to inspect the China-based affiliates of the “Big”-4” accounting firms in 2010 was rejected by the CSRC.  The SEC subsequently prosecuted these China affiliates of the Big-4 and the cases were subsequently settled. In order to tighten the enforcement of the audit work papers requirement provided in the Sarbanes-Oxley Act, the U.S. enacted the Holding Foreign Companies Accountable Act (“HFCAA”) in 2020 which provides that companies failing to make available audit work papers for inspection by the PCAOB cannot be traded in a U.S. exchange.  Since March 2022, the SEC has put 162 Chinese companies listed in a U.S. bourse first on a provisional list and then 155 of them subsequently on a conclusive list of issuers identified under the HFCAA. After rounds of negotiations, the U.S. and China have so far not been able to come to some resolutions.  While the Chinese authorities have sounded optimistic, especially earlier in April and May, about eventually reaching an agreement with the U.S., SEC Chairman Gary Gensler has expressed doubts about any eventual agreement.PetroChina, Sinopec, Sinopec Shanghai Petrochemical, Chalco, and China Life Insurance are among those on the conclusive list and facing the plausibility of being delisted by the U.S. regulators from the NYSE.  The deadline for delisting is in 2024 but the U.S. Congress is considering passing a bill to bring the deadline forward to 2023.  Actions were seemingly in concert  Each of the five companies notified the NYSE on the same day, August 12, and provided similar reasons for their decisions in their filing with the SEHK, namely relatively small capitalization of H shares being represented by ADSs, small ADS trading volume compared to the turnover of H shares and administrative burden for performing reporting and disclosure. The China Securities Regulatory Commission (“CSRC”) said on Friday that the delisting decision had been made out of these companies’ own business decisions. Nonetheless, given the identical timing, similar reasons provided and status of Central SOEs, one has to wonder if they were acting in concert with coordination from the Chinese authorities.  The other two Central SOEs controlled by the SACAC and on the SEC conclusive list, China Eastern Airlines (00670:xhkg/CEA:xnys) and China Southern Airlines (01055:xhkg/ZNH:xnys) will probably apply for ADS delisting soon as well.  Chinese internet and platform companies are the focus in the coming weeks  While these Central SOEs are thinly traded on the NYSE, the shares of Chinese internet and platform private enterprises, including Alibaba (09988:xhkg/BABA:xnys), Baidu (09888:xhkg/BIDU:xnas), Bilibili (09626:xhkg/BILI:xnas), JD.COM (09618:xhkg/JD:xnas), Pinduoduo (PDD:xnas), Sohu (SOHU:xnas), iQiyi (IQ:xnas), KE Holdings (BEKE:xnys), Weibo (09898:xhkg/WB:xnas), Tencent Music Entertainment (TME:xnys) are widely held and actively traded on the NYSE or Nasdaq.  For examples, Bilibili and Weibo have larger average daily turnover in Nasdaq than in the SEHK and Pinduoduo, iQiyi, KE Holdings, Sohu and are listed only on Nasdaq and Tencent Music on the NYSE.  Alibaba is on the provisional list and the other names above are on the conclusive list of issuers identified under the HFCAA. All of them will be subject to mandatory delisting from the NYSE or Nasdaq if the Chinese and U.S. regulators cannot reach an agreement to resolve the audit work paper inspection issue in the coming months.  Given these internet and platform companies hold a huge amount of potentially sensitive data of hundreds of millions of Chinese individuals as well as numerous private as well as public enterprises and institutions, the plausibility of the Chinese government being willing to make a concession to the SEC and PCAOB regarding the latter’s unfiltered access to audit work papers of these companies is getting increasingly slim in the midst of pervasive Sino-American strategic competition.  Through the voluntary delisting of nstitutional money which is restricted by their investment mandates and retail investors who tend to have a home bias will unload their holdings instead of exchanging their ADSs for H shares.  In the case of those companies that do not yet have a listing in the SEHK, the uncertainty and disruption will be even more significant.  The southbound stock connect flows of money from mainland investors may mitigate somewhat the impact but some turbulence initially can probably be expected.   Source: China Update: State-owned giants seek to delist from the New York Stock Exchange

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 August 9. A relatively quiet week where a continued improvement in risk appetite drove stocks higher while softening the dollar. Some commodity positions, with crude oil the major exceptions, showed signs of having reached a trough following weeks of heavy selling Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 9. A relatively quiet summer holiday impacted week where stocks traded higher ahead of last week’s CPI and PPI print after better than expected economic data helped reduce US recession fears while the market was looking for inflation to roll over. The dollar traded a tad softer, bond yields firmed up while commodities showed signs of having reached a trough following weeks of heavy selling.    Commodities Hedge funds were net buyers for a second week with demand concentrated in metals and agriculture while the energy sector saw continued selling. Overall the net long across 24 major commodity futures rose for a second week after recently hitting a two-year low. Buying was concentrated in gold, platinum, corn and livestock with crude oil and wheat being to most notable contracts seeing net selling. Energy: Speculators responded to continued crude oil weakness by cutting bullish bets in WTI and Brent crude by a combined 14% to a pre-Covid low at 304.5k lots. The reductions were primarily driven by long liquidation in both contracts following a demand fear driven breakdown in prices. Gas oil and gasoline longs were also reduced. Metals: Buying of metals extended to a second week led by gold which saw a 90% jump in the net long to 58.2k lots. Overall, net short positions were maintained in silver, platinum and copper with the latter seing a small amount of fresh selling due to profit taking on recently established longs. Agriculture: Grains were mixed with corn and soybeans seeing continued buying ahead of Friday's WASDE  report while the CBOT corn net short jumped 36% to 20k lotsand the Kansas net long was cut to a two-year low. The total grain long rose for second week having stabilised around 300k lots having collapse from a near record 800k lot on April 22.Soft commodities saw elevated short positions in sugar and cocoa being maintained with price gains in coffee and not least cotton supporting a small increase in their respective net longs. This before Friday's surge in cotton which left it up 13% on the week after the US Department of Agriculture slashed the US crop forecast by 19% to a 12-year low. Driven by a high level of abandonment of fields in the drought-stricken Southwest.      Forex In the week to August 9 when the dollar traded close to unchanged against a basket of major currencies, speculators increased to three the number of weeks of continued dollar selling. The pace of selling even accelerated to the highest since January after the gross long against ten IMM futures and the Dollar Index was slashed by 20% to $17.4 billion, a nine week low. Most notable selling of the greenback was seen against GBP and JPY followed by EUR and CHF. The Japanese yen, under pressure for months as yield differentials to the dollar widened saw its net short being cut by 22% to a 17-month low.     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  Source: COT: Speculators cut oil long to pre-covid low

Summary:  The weaker-than-expected economic data from China caught much of the attention and dragged U.S. bond yields and commodities lower. U.S. equities have been in a 4-week rally. Investors are weighing if the U.S. economy is heading into a soft-landing or a recession and if the Chinese economy can recover in the coming months. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities opened lower on weak economic data prints from China as well as a weaker-than-expected Empire State manufacturing survey but climbed towards midday and finished higher. S&P 500 rose 0.4%. Nine of its 11 sectors gained, with shares of consumer staples and utilities outperforming. Nasdaq 100 rose 0.75%, led by a 3% jump in Tesla (TSLA:xnas).  U.S. treasury yields fell Treasury yields fell across the front end to the belly of the curve after a bunch of weak economic data from China and the Empire State manufacturing survey came in at -31.3, much weaker than 5.0 expected. Two-year yields fell by 7bps to 3.17% and 10-year yields declined 5bps to 2.78%.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese equities tried to move higher in early trading but soon reversed and turned south, Hang Seng -0.7%, CSI300 -0.1%.   The People’s Bank of China cut its policy on Monday but the unexpected move did not stir up much market excitement. The visit of another delegation of US lawmakers to Taiwan within 12 days of Speaker Pelosi’s visit stirred up concerns about the tension in the Sino-American relationship.   Container liner, Orient Overseas (00316:xhkg) plunged nearly 15%.   Stocks that have a dual listing of ADRs, in general, declined on Monday’s trading in Hong Kong following Friday’s decisions for five central SOEs to apply for delisting from the New York Stock Exchange, PetroChina (00857:xhkg/PTR:xnys) -3.4%, Sinopec (00386:xhkg/SNP:xnys) -2.9%, Alibaba (09988:xhkg/BABA:xnys) -1.2, Baidu (09888:xhkg/BIDU:xnas) -1%, Bilibili (09626:xhkg/BILI:xnas) -1%. SMIC (00981:xhkg) dropped more than 6% on analyst downgrades.  Chinese property names dropped as home prices continued to fall in China.  USD broadly firmer against G10 FX, expect JPY The US dollar started the week on the front foot, amid a weaker risk sentiment following a miss in China’s activity data and the disappointing US manufacturing and housing sentiments. The only outlier was the JPY, with USDJPY sliding to lows of 132.56 at one point before reversing the drop. The 131.50 level remains a key area of support for USDJPY and a bigger move in the US yields remains necessary to pierce through that level. The commodity currencies were the hardest hit, with AUDUSD getting in close sight of 0.7000 ahead of the RBA minutes due this morning. NZDUSD also plunged from 0.6450 to 0.6356. The Chinese yuan weakened and bond yields fell after disappointing economic data and surprising rate cuts USDCNH jumped more than 1% from 6.7380 to as high as 6.8200 on Monday following the weak credit data from last Friday, disappointing industrial production, retail sales, and fixed assets investment data released on Monday morning, and unexpected rate cuts by the People’s Bank of China. The 10-year Chinese government bond yield fell 8bps to 2.67%, the lowest level since April 2020, and about 20bps below the yield of 10-year U.S. treasury notes. Crude oil prices (CLU2 & LCOV2) Crude oil prices had a variety of headwinds to deal with both on the demand and the supply side. While demand concerns were aggravated due to the weak China data, and the drop in US Empire State manufacturing – both signaling a global economic slowdown may be in the cards – supply was also seen as being possibly ramped up. There were signs of a potential breakthrough in talks with Iran as Tehran said it sent a reply to the EU's draft nuclear deal and expects a response within two days. Meanwhile, Aramco is also reportedly ramping up production. WTI futures dropped back below $90 while Brent touched $95/barrel. Metals face the biggest brunt of China data weakness Copper led the metals pack lower after China’s domestic activity weakened in July, which has raised the fears of a global economic slowdown as the zero-Covid policy is maintained. Meanwhile, supply side issues in Europe also cannot be ignored with surging power prices putting economic pressure on smelters, and many of them running at a loss. This could see further cuts to capacity over the coming months. Iron ore futures were also down. What to consider? Weak Empire State manufacturing survey and NAHB Index Although a niche measure, the United States NY Empire State Manufacturing Index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic. New orders and shipments plunged, and unfilled orders also declined, albeit less sharply. Other key areas of concern were the rise in inventories and a decline in average hours worked. This further weighed on the sentiment after weak China data had already cast concerns of a global growth slowdown earlier. Meanwhile, the US NAHB housing market index also saw its eighth consecutive monthly decline as it slid 6 points to 49 in August. July housing starts and building permits are scheduled to be reported later today, and these will likely continue to signal a cooling demand amid the rising mortgage rates as well as overbuilding. European power price soared to record high European power prices continue to surge to fresh record highs amid gas flow vagaries, threatening a deeper plunge into recession. Next-year electricity rates in Germany advanced as much as 3.7% to 477.50 euros ($487) a megawatt-hour on the European Energy Exchange AG. That’s almost six times as much as this time last year, with the price doubling in the past two months alone. UK power prices were also seen touching record highs. European Dutch TTF natural gas futures were up over 6%, suggesting more pain ahead for European utility companies. China’s activity data China’s July industrial production (3.8% YoY vs consensus 4.3% & June 3.9%), retail sales (2.7% YoY vs consensus 4.9% & June 3.1%), and fixed asset investments (5.7% YTD vs consensus 6.2% & June 6.1%) released this more were weak across the board.  Property investment growth dropped to -6.4% YTD or -12.3% YoY in July, well below market expectations of -5.7% YTD.  Surprising rate cuts from the PBOC met with muted market reactions The People’s Bank of China cut its policy 1-year Medium-term Lending Facility Rate by 10bps to 2.75% from 2.85% and the 7-day reverse repo rate by 10bps to 2.0% from 2.1%.  Market reactions to the surprising move were muted as credit demand, as reflected in the aggregate financing and loan growth data was weak in China. BHP ‘s FY22 results better than expected The Australian mining giant reported FY22 results beating analyst estimates with strong EBITDA and EBITDA margin. Coal segment performance was ahead of expectations while results from the copper and iron ore segments were slightly below expectations.  The company announced a larger-than-expected dividend payout and a higher capex plan for 2023. RBA minutes due to be released this morning Earlier in the month, the Reserve Bank of Australia (RBA) raised the cash rate by 50bps to 1.85% and the accompanying Statement on Monetary Policy emphasized an uncertain and data-dependent outlook. The RBA releases its minutes from the July meeting today, and the market focus will be on the range of options discussed for the August hike and any hint of future interest rate path.  US retailer earnings eyed After disappointing results last quarter, focus is on Walmart and Home Depot earnings later today. These will put the focus entirely on the US consumer after the jobs data this month highlighted a still-tight labor market while the inflation picture saw price pressures may have peaked. It would also be interesting to look at the inventory situation at these retailers, and any updated reports on the status of the global supply chains.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: APAC Daily Digest: What is happening in markets and what to consider next – August 16, 2022

Summary:  Weak data out of China overnight, together with a surprise rate cut from the PBOC and collapsing energy prices later on Monday saw the Japanese yen surging higher across the board. Indeed, the two key factors behind its descent to multi-decade lows earlier this year, rising yields and surging energy prices, have eased considerably since mid-June with only modest reaction from the yen thus far. Is that about to change? FX Trading focus: JPY finding sudden support on new disinflation narrative Weaker than expected Chinese data overnight brought a surprise rate cut from the Chinese central bank and seems to have sparked a broadening sell-off in commodities, which was boosted later by a crude oil drop of some five dollars per barrel on the news that Iran will decide by midnight tonight on whether to accept a new draft on the nuclear deal forward by the Euro zone. In response, the Chinese yuan has weakened toward the highs for the cycle in USDCNH, trading 6.78+ as of this writing and  (there was a spike high to 6.381 back in May but the exchange rate has been capped by 6.80 since then), but the Japanese yen is stealing the volatility and strength crown, surging sharply across the board and following up on the move lower inspired by the soft US CPI data point. US long yields easing considerably lower after an odd spike last Thursday are a further wind at the JPY’s back here. In the bigger picture, it has been rather remarkable that the firm retreat in global long-date yields since the mid-June peak and the oil price backing down a full 25% and more from the cycle highs didn’t do more to support the yen from the yield-spread angle (Bank of Japan’s YCC policy less toxic as yields fall) and from the current account angle for Japan. Interestingly, while the JPY has surged and taken USDJPY down several notches, the US dollar is rather firm elsewhere, with the focus more on selling pro-cyclical and commodity currencies on the possible implication that China may be content to export deflation by weakening its currency now that commodity prices have come down rather than on selling the US dollar due to any marking down of Fed expectations. Still, while the USD may remain a safe haven should JPY volatility be set to run amok across markets, the focus is far more on the latter as long as USDJPY is falling Chart: EURJPY As the JPY surges here, EURJPY is falling sharply again, largely tracking the trajectory of longer European sovereign yields, which never really rose much from their recent lows from a couple of weeks back, making it tough to understand the solid rally back above 138.00 of late. After peaking above 1.90% briefly in June, the German 10-year Bund, for example, is trading about 100 basis points lower and is not far from the cycle low daily close at 77 basis points. The EURJPY chart features a rather significant pivot area at 133.50, a prior major high back in late 2021 and the recent low and 200-day moving average back at the beginning of the month. After a brief JPY volatility scare in late July and into early August that faded, are we set for a second and bigger round here that takes USDJPY down through 130.00 and EURJPY likewise? A more significant rally in long US treasuries might be required to bring about a real JPY rampage. Source: Saxo Group The focus on weak Chinese data and key commodity prices like copper suddenly losing altitude after their recent rally has the Aussie shifting to the defensive just after it was showing strength late last week in sympathy with strong risk sentiment and those higher commodity prices. Is the AUDUSD break above 0.7000-25 set for a high octane reversal here? AUDJPY is worth a look as well after it managed to surge all the way back toward the top of the range before. The idea that a weak Chine might export deflation from here might be unsettling for Aussie bulls. The US macro data focus for the week is on today’s NAHB homebuilder’s survey, which plunged to a low since 2015 in June (not including the chaotic early 2020 pandemic breakout months), the July Housing Starts and Building Permits and then the July Retail Sales and FOMC minutes on Wednesday. With a massive relief in gasoline prices from the July spike high, it will be interesting to see whether the August US data picks up again on the services side. The preliminary August University of Michigan sentiment survey release on Friday showed expectations rising sharply by over 7 points from the lowest since-1980 lows of June, while the Present Situation measure dropped a few points back toward the cycle (and record) lows from May. Table: FX Board of G10 and CNH trend evolution and strength. The JPY is the real story today, but as our trending measures employ some averaging/smoothing, the move will need to stick what it has achieved today to show more. Watch out for a big shift in the commodity currencies in coming days as well if today’s move is the start of something. Elsewhere, the JPY comeback is merely taking CHF from strength to strength, although even the might franc has dropped against the JPY today. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Big momentum shift afoot today and watching whether this holds and the JPY pairs and pairs like AUDUSD and USDCAD to see if we are witnessing a major momentum shift in themes here. Also note NOK pairs like USDNOK and EURNOK here. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Aug. NAHB Housing Market Index 0130 – Australia RBA Meeting Minutes Source: FX Update: JPY jumps on deflating energy prices, fresh retreat in yields.

After two-quarters of contraction, many still do not accept that the US economy is in a recession  Federal Reserve officials have pushed against it, as has Treasury Secretary Yellen. The nearly 530k rise in July nonfarm rolls, more than twice the median forecast in Bloomberg's survey, and a new cyclical low in unemployment (3.5%) lent credibility to their arguments. If Q3 data point to a growing economy, additional support will likely be found.   While the interest rate-sensitive housing sector may still feel the squeeze, we note that activity is at historically strong levels  Housing starts are expected to have fallen for the third consecutive month in July. That would be the longest decline since the last four months of 2018. However, around 1.5 mln annualized pace, starts are still elevated. Permits, which are leading indicators, are holding up even better. They peaked at the end of last year a little below 1.9 mln and may have fallen to around 1.65 mln in July. Since the Great Financial Crisis, they were above 1.5 mln only once (October 2019). before the surge began in mid-2020. Existing home sales have come off a bit more  They are expected to have fallen for the sixth consecutive month in July. It is the worst streak since 2013. Indeed, they are likely to fall below the 5 mln annualized mark for the first time since January 2019. Elevated mortgage rates are the highest since 2008 and have squeezed buyers while rising inventories have sparked some anecdotes about price cuts. The number of houses for sale rose for the first time in three years, around three months at the current pace of sales. Below five months of inventory is regarded as tight by realtors. Of interest, first-time buyers accounted for almost a third of the sales in June. Cash sales accounted for a quarter of all transactions in June. Houses were on the market for an average of two weeks last month, the shortest for more than a decade. Recall that new home sales are recorded on contract signings, while the existing home sales are counted on closes.   While the housing market is softening, consumption and output appear to have begun Q3 on solid footing  Retail sales, which account for around 40% of consumption, are expected to have edged by 0.1%-0.2% after a 1.0% rise in June. The drop in gasoline prices will likely be seen here and weigh on the retail sales, which are reported in nominal terms. Core retail sales, which excludes auto, gasoline, building materials, and food services, are expected to have risen 0.6% after 0.8% in June. More people working and earning a little bit more (on average), i.e., the income effect should help underpin consumption.   Manufacturers added 30k people to their payrolls in July, the most in three months and matching last year's average pace  The US has added more manufacturing jobs through July than it did in the same period a year ago (273k vs. 161k). Manufacturing output has disappointed. It fell by 0.5% in both May and June. The decline in vehicle and parts output may have been partially reversed in July amid a recovery in auto sales. Higher commodity prices encouraged mining output in May and June (1.2% and 1.7%, respectively). It may have slowed as commodity prices fell in July. The scorching summer and demand for air conditioning likely boosted utility output, which had fallen in June (-1.4%).  On a year-over-year basis, industrial output often contracts into a recession but not always before the start of the recession  Through June, it has risen by almost 4.2%. The capacity utilization rate is expected to have above 80.0% for the fourth consecutive month. That would match the last cyclical peak in 2018, the longest since the Great Financial Crisis. Utilization rates fall sharply during a recession. In two of the last three recessions, capacity usage fell before the downturn was dated. In the Financial Crisis, the peak coincided with the start of the recession. The US also reports the capital flow data for June (TIC on August 15) While a favorite of reporters and analysts, it is not a market mover. Through May, net long-term foreign capital inflows have been a little more than $465 bln., which is about an 8.5% increase from a year ago. Finally, the Empire State Survey August 15) and the Philadelphia Fed surveys (August 18), the first look into August aside for the weekly jobs claims and mortgage applications. The market appears to put more weight on some components of the Philly survey.   Three economic releases from Japan will draw attention  Japan reports its first estimate of Q2 GDP to kick off the week. The world's third-largest economy contracted at an annualized rate of  0.5% in Q1 but is expected to have rebounded to 2.7% in Q2. That translates into a 0.7% quarterly expansion (seasonally adjusted) after shrinking by 0.1% in Q1. Consumption and business investment rebounded. Inventories were likely unwound. After rising 0.5% in Q1, the median forecast in Bloomberg's survey looks for a 0.3% decline. The GDP deflator has been negative for the past five quarters. It was at -0.5% in Q1, but economists (Bloomberg survey) project a decline to -0.8%.  Despite the GDP deflator still showing deflation's grip, the July CPI (August 19) is likely to show inflation continues to rise above the BOJ's target  It targets the CPI, excluding fresh food, at 2.0%. It stood at 2.2% in June and is likely to have ticked up a little in July. The Tokyo CPI has already been reported. The core measure rose to 2.3% from 2.1%. Tokyo's headline rate increased to 2.5% from 2.3%, and the measure excluding food and energy crept up to 1.2% from 1.0%.  July trade figures will be reported on August 17 Japan is experiencing a  massive terms-of-trade shock. In the first half of this year, Japan reported a JPY7.94 trillion (~$59 bln) deficit. In H1 21,  it had a trade surplus of about JPY810 bln (~$6 bln). The problem is not with merchandise exports. In June, they were up almost a fifth from last year, when they were by nearly 50% over 2020. Imports have surged with food and energy prices. Merchandise imports had risen 46% above the year-ago level in June, and that is after an increase by a third from June 2020.   The UK and Canada report July retail sales and CPI  The UK also publishes its latest employment report, while Canada updates housing starts and portfolio flows. The data poses headline risk, but the macroeconomic backdrop is unlikely to change significantly. The Bank of England warns that the economy will enter a protracted recession that will carry into 2024. The Bloomberg survey found that the median forecast assessed a 45% probability of a recession over the next 12 months.   UK's labor market is fairly strong, and the unemployment rate is at 3.8%, having bottomed at 3.7% in March, the lowest level since 1974. Inflation is rising, and the base effect underscores the upside risk. Last July, CPI was unchanged on the month.   While wage growth may be strong, it is insufficient to cover the rising cost of living and this squeezing consumption June was the first month since October 2021 that retail sales, excluding gasoline, rose. However, UK retail sales, reported in volume terms, have fallen an average of 0.5% a month over the past 12 months. If there is going to be relief for the UK household, it will have to come from the new government. The Bank of England has one objective. Bring down inflation. The swaps market has discounted almost an 85% chance of another 50 bp increase to 2.25% at the September 15 meeting. It sees a year-end rate of around 2.80%, implying nearly 75 bp hikes in Q4.   Canada's labor market improvement is stalling, and it looks like the economy is too The monthly GDP downshifted from 0.7-0.8% in February and March to 0.3% in April and flat in May. Retail sales have been strong, flattered by rising prices. Through May, they have increased by an average of 1.5% a month. The average in the first five months of 2021 was 0.6. Canadian inflation accelerated to 8.1% in June and may have slowed in July for the first time since June 2021. Underlying core measures are expected to have stayed firm. Last month, the Bank of Canada surprised the market with a 100 bp hike in the overnight lending rate to 2.50%. The swaps market briefly took the possibility of a 75 bp hike at the September 7 meeting very seriously but now has slightly better than a 40% chance.  In Australia, the labor market is in focus  It added 60k full-time positions on average a month in Q2 after a 50.5k average in Q1. The pace is likely to moderate. The participation rate of 66.8% set in June was a record high. The unemployment rate of 3.5% was also a record low. There are some signs that the overall economy may be losing some momentum. Still, with CPI accelerating from 5.1% in Q1 to 6.1% in Q2, the Reserve Bank of Australia is tightening policy. After delivering the first hike in May of 25 bp, it lifted the cash target rate in 50 bp clips in June through August. Speculation of another 50 bp hike at the September 6 meeting is seen as slightly better than even money.  The Reserve Bank of New Zealand meets on August 17  It will most likely deliver the seventh hike in the cycle that began last October. After three quarter-point moves, it delivered three 50 bp hikes. The cash target rate now stands at 2.50%. With Q2 inflation rising faster than expected (7.3% year-over-year), unemployment low (3.3% in Q2; record low set last December at 3.2%), more forceful action is possible. However, the swaps market judges it unlikely and has about a 90% chance of a 50 bp hike reflected in current prices. The New Zealand dollar is strong, at its best level in two months, but maybe too strong. Although it closed firmly ahead for the weekend, it looks stretched from a technical perspective, perhaps signaling a "buy the rumor, sell the fact" type of activity.  Norway's central bank, Norges Bank, meets on August 18  A few hours after Norway reports Q2 GDP, Norges Bank makes its rate announcement. Typically, it prefers to adjust policy when it updates its economic assessment, similar in this regard to the European Central Bank. However, last week's CPI shock heightens the risk it breaks from the pattern. Headline CPI jumped 1.3% in July, lifting the year-over-year rate to 6.8%. The median forecast (Bloomberg's survey) was for an unchanged 6.3% pace. The underlying rate, which excludes energy and adjusts for tax changes, surged by 1.5%, nearly twice as much as expected. As a result, the year-over-year change was boosted to 4.5% from 3.6%.   The deposit rate stands at 1.25%  Norges Bank began the tightening cycle last September but has raised it by a cumulative 125 bp. However, among the high-income countries in Europe, only the UK's policy rate is higher. Sweden's inflation is higher at 8.5% (July from 8.7% in June), and its policy rate is 50 bp less than Norway. Since June 16, the day after the FOMC meeting that results in the first 75 bp rate hike, the Norwegian krone has been the strongest major currency, gaining 3.9% against the US dollar and 6.8% against the euro. Look for the dollar to correct higher, even if a 50 bp hike is delivered.    Disclaimer   Source: Week Ahead: More Evidence US Consumption and Output are Expanding, and RBNZ and Norges Bank to Hike

The bullish dollar narrative was fairly straightforward  Yes, the US main challengers, China and Russia, have been hobbled in different ways by self-inflicted injuries. Still, the driver of the dollar was the expected aggressive tightening by the Federal Reserve. The market accepted that after being a bit slower than ideal (though faster and before many other large central banks), the Fed would move forcefully against inflation, even if it diminished the chances of an economic soft-landing.   However, now the market seems to have a different reaction function  The euro was impressively resilient after the job growth of more than twice expectations. However, the softer than expected US CPI sent the dollar broadly lower, inflicting some apparent technical damage to the charts.  We are reluctant to chase the dollar lower and impressed in a week that the US reported a decline in CPI and PPI that the 10-year bond yield closed a few basis points higher and the first back-to-back weekly increase in two months Technically, it seems that the dollar's pullback, nearly a month-old, move is getting maybe getting stretched. We will try to identify levels that could confirm another leg lower and what would suggest the US dollar may snap back.   Dollar Index:   After reaching almost 107.00 after the stronger than expected jobs data, the Dollar Index fell to almost 104.65 in response to the softer than expected CPI. It was the lowest level since the end of June. The MACD is still falling but oversold. The Slow Stochastic looks poised to turn lower from the middle of the range. Nevertheless, we like it higher in the coming days. We target 106.30 and then 107.00. A move above 107.50 could signal a return to the highs near 109.30 from mid-July. That said, a close below 105.00 would boost the risk of another leg lower.  Euro:  The euro rallied strongly after the softer US CPI, but a key trendline drawn off the February, March, and June highs begins the new week near $1.0375 remains unchallenged. Although the momentum indicators allow for additional gains, we look for the euro to push lower in the coming days. Only a move above the trendline would give it new life. We think the greater likelihood is for the single currency to initially ease toward $1.0180-$1.0200. It may take a break of $1.01 to signal a return to the 20-year low set in mid-July near $0.9950. The US two-year premium over Germany narrowed every day last week for a cumulative 11 bp to near 2.66%. Italy's premium over Germany was trimmed by six basis points. It was the third week of convergence, but at 0.75%, it is still nearly twice what it was in June. Japanese Yen:  The greenback was pushed away from JPY135 by the decline in US rates after the CPI figures. It was sold to about JPY131.75, holding above the month's low set on August 2 near JPY130.40. However, US rates closed firmer on the week despite three softer-than-expected price reports (CPI, PPI, and import/export prices). As a result, the greenback looks poised to test the JPY135.00-50 ceiling. A move above JPY136 would target the JPY137.50 area. We have emphasized the strong correlation between changes in the exchange rate and the US 10-year yield. That correlation is off its highs though still above 0.50, while the correlation with the US two-year yield has risen toward 0.65, the highest in five months.  British Pound:   Sterling rose to $1.2275 in the broad US dollar sell-off in the middle of last week. It stalled in front of the high set on August 2, a little shy of $1.23. This sets up a potential double top formation with a neckline at $1.20. A break would re-target the two-year low set in July near $1.1760. The MACD is set to turn down. The Slow Stochastic is going sideways in the middle of the range after pulling back earlier this month. Sentiment seems poor, and in the week ahead, the UK is expected to report some easing in the labor market, accelerating consumer prices, and another decline in retail sales. Canadian Dollar:   The US dollar fell to near a two-month low last week slightly below CAD1.2730, and slipped through the 200-day moving average on an intraday basis for the first time since June 9. The test of the (61.8%) retracement of this year's rally (early April low ~CAD1.2400 and the mid-July high ~CAD1.3225) found near CAD1.2715 was successful. The US dollar recovered ahead of the weekend back to the CAD1.2800 area. Although the momentum indicators give room for further US dollar losses, we suspect a near-term low is in place and look for an upside correction toward CAD1.2850-CAD1.2900. The Canadian dollar remains sensitive to the immediate risk environment reflected in the change in the S&P 500. The correlation over the past 30 sessions is a little better than 0.60. The correlation reached a two-year high in June near 0.80. The exchange rate's correlation (30 sessions) with oil prices (WTI) set this year's high in early August near 0.60. It is now slightly below 0.50.  Australian Dollar:   Although our bias is for the US dollar to correct higher, the Aussie does not line up quite as well. It broke above the high set at the start of the month near $0.7050 and has held above it. However, its surge stalled slightly above $0.7135, and it consolidated in a narrow range around $0.7100 ahead of the weekend. The momentum indicators are constructive. The main hurdle is the 200-day moving average near $0.7150 and the (50%) retracement of this year's decline (~$0.7660 in early April and ~$6680 in mid-July) found near $0.7170. A break of this area could see a return to the June high by $0.7285.   Mexican Peso:   Latin American currencies had a good week, except for the Argentine peso, which fell by more than 1%, for the dubious honor of being the poorest performer in the emerging markets. Led by Chile (+3.9%) and the Colombian peso (3.8%), Latam currencies accounted for half of the top five performers last week. The peso's 2.7% gain was its best in five months, and the dollar was sold a little through MXN19.85, its lowest level since late June when it reached almost MXN19.82.There seems little to prevent a move toward MXN19.50. Any worries that AMLO's appointments to the central bank would block aggressive tightening of monetary policy must have evaporated as Banxico demonstrated a resolve to hike rates and shadow the US.  Chinese Yuan:   The yuan took a step lower from mid-April until mid-May. Since then, it has been trading within the range more or less seen in the second half of May. That dollar range is roughly CNY6.650 to CNY6.77. For the past month, the dollar has traded between CNY6.72 and CNY6.78, fraying the upper end of the broader range after the greenback surged broadly after the US employment data. Policymakers have signaled concern about inflation and its reluctance to ease monetary policy. It would seem the domestic policy efforts might favor a firm yuan.     Disclaimer   Source: Is the Dollar's Month-Long Pullback Over?

TL;DR Lisk is an open-source blockchain application platform that improves Web3 accessibility for developers and users. It offers a simple-to-use software development kit (SDK) that enables developers to build blockchain applications using JavaScript, one of the most widely used programming languages. Lisk is designed to eventually allow developers to deploy sidechains onto their network, so that their blockchain applications can scale while staying connected to the wider Lisk ecosystem.   Introduction One of the major challenges blockchain technology faces in the Web3 era is the lack of accessibility. Different blockchains use a variety of programming languages, which makes it difficult for developers to build applications that can be flexibly used across multiple platforms. What is Lisk? Lisk is an open-source, layer-1 blockchain application platform that aims to help projects onboard users into the crypto and Web3 space. Through its easy-to-use SDK, developers can build scalable blockchain applications easily. The metaverse projects, DAOs, NFT marketplaces, and many other applications they create can also offer faster transaction speed at lower fees for users.   How does Lisk work? Lisk was founded in 2016 by Max Kordek and Oliver Beddows. It focuses on improving Web3 accessibility for developers and users. Some of Lisk’s main features include:  Delegated Proof of Stake (DPoS) Lisk uses the Delegated Proof of Stake (DPoS) consensus algorithm to secure the blockchain. DPoS is considered a more efficient and democratic version of the popular Proof of Stake (PoS) mechanism. It allows validators to outsource the block validation through a voting system. On the Lisk blockchain, voters can use their LSK tokens to vote for a maximum of 10 delegators to secure the network on their behalf and share the LSK rewards among them. Generally, a delegator with more votes is more likely to be selected to generate the subsequent blocks. Since the process is distributed among 100+ delegated validators, Lisk can operate in a fairly decentralized manner. It also enables the network to achieve scalability and increase its transactions per second (TPS) rate.  The Lisk SDK A unique feature of Lisk is its software development kit based on JavaScript, one of the world’s most widely-used programming languages. Popular blockchain networks often rely on different languages. For example, Bitcoin (BTC) uses C++, while Ethereum is built on Solidity. Unless they have a strong command of several languages, it can be challenging for developers to interact with different blockchains.  Lisk’s solution to this is an open-source and modular SDK on JavaScript to make blockchain and Web3 universally accessible to a broader range of developers. Using a very common programming language removes the hurdle for those new to building blockchain applications. Newcomers can start building using JavaScript and TypeScript immediately, without having to invest time and effort in learning blockchain-specific languages.  Furthermore, after the launch of the prospective Lisk Platform, developers will be able to leverage the Lisk SDK to implement their applications on sidechains instead of smart contracts. The sidechains’ interoperability will enhance scaling and keep transaction fees minimal. The Lisk SDK is also expected to support the development of NFTs, P2P, and Proof-of-Authority (PoA) modules. Scalable sidechains To facilitate interoperability between all application-specific blockchains in the network, Lisk is building the Lisk Platform, which is designed to allow developers to build scalable applications with greater autonomy and flexibility on sidechains. Sidechains are separate blockchains that connect to the main chain. On Lisk, developers will be able to deploy their own sidechains to scale their blockchain applications and offer lower transaction fees and greater TPS. Sidechains will communicate with one another directly through cross-chain messages. This interoperability is expected to ensure smooth asset exchange between sidechains and the main Lisk blockchain.  The Lisk team is working on expanding its ecosystem by facilitating interoperability with other layer-1 blockchains and protocols, such as Ethereum (ETH), Polkadot (DOT), and Cosmos (ATOM). The vision is for users to benefit from a growing ecosystem of apps interconnected through Lisk bridges.   What is LSK? Lisk (LSK) is the native cryptocurrency and utility token of Lisk. It is used to pay transaction fees and reward delegators on the network. LSK holders can also use the token to secure the Lisk network through DPoS. They can stake their LSK tokens in the Lisk Desktop wallet to vote or delegate, and the tokens will be locked for as long as the user is performing either of these roles.  LSK’s utility is expected to grow, with more use cases emerging as the Lisk network achieves interoperability with other blockchains. For example, LSK could be used for registering blockchain applications or transferring messages between different applications.    How to buy LSK on Binance? You can buy the Lisk token (LSK) on cryptocurrency exchanges like Binance.  1. Log in to your Binance account and click [Trade] - [Spot]. 2. Search “LSK” to see the available trading pairs. We’ll use LSK/BUSD as an example. 3. Go to the [Spot] box and enter the amount of LSK to buy. In this example, we will use a Market Order. Click [Buy LSK] and the purchased tokens will be credited to your Spot Wallet. Closing thoughts Many believe that one of the key components to achieving the mass adoption of Web3 is to make blockchain technology more widely accessible. With projects like Lisk, more developers can build blockchain applications easily using coding languages they’re already familiar with. At the same time, users can benefit from a growing ecosystem of interconnected applications with faster transactions at lower fees. Source: What Is Lisk (LSK)?

Overview: After retreating most of last week, the US dollar has extended yesterday’s gains today. The Canadian dollar is the most resilient, while the New Zealand dollar is leading the decline with a nearly 0.75% drop ahead of the central bank decision first thing tomorrow. The RBNZ is expected to deliver its fourth consecutive 50 bp hike. Most emerging market currencies are lower as well, led by central Europe. Equities in Asia Pacific and Europe are mostly higher today. Japan and Hong Kong were exceptions, and China was mixed with small gains in Shanghai and Shenzhen composites, but the CSI 300 slipped. Europe’s Stoxx 600 is stretching its advance for the fifth consecutive session. It is at two-month highs. US futures are softer. The US 10-year yield is slightly firmer near 2.80%, while European benchmark yields are mostly 2-4 bp higher, but Italian bonds are under more pressure and the yield is back above the 3% threshold. Gold is softer after being repulsed from the $1800 area to test $1773-$1775. A break could signal a test on the 20-day moving average near $1761. October WTI tested last week’s lows yesterday near $86 a barrel on the back of the poor Chinese data. It is straddling the 200-day moving average (~$87.95). The market is also watching what seems like the final negotiations with Iran, where a deal could also boost supply. US natgas prices are more than recouping the past two days of losses and looks set to challenge the $9 level. Europe’s benchmark leapt 11.7% yesterday and is up another 0.5% today. Iron ore has yet to a base after falling more than 5.5% in the past two sessions. It fell almost 0.65% today. September copper has fallen by almost 2.5% over the past two sessions and is steady today. Lastly, September wheat is slipping back below $8 a bushel and is trading heavily for the third consecutive session. Asia Pacific Japan's 2.2% annualized growth in Q2 does not stand in the way of a new government support package  Prime Minister Kishida has been reportedly planning new measures and has instructed the cabinet to pull it together by early next month. He wants to cushion the blow of higher energy and food prices. An extension of the subsidy to wholesalers to keep down the gasoline and kerosene prices looks likely. Kishida wants to head off a surge in wheat prices. Without a commitment to maintain current import prices of wheat that is sold to millers, the price could jump 20% in October, according to reports. Separately, and more controversially, Kishida is pushing for the re-opening of nine nuclear plants that have passed their safety protocols, which have been shut since the 2011 Fukushima accident.  The minutes from the Reserve Bank of Australia's meeting earlier this month signaled additional rate hikes will be forthcoming  After three half--point hikes, it says that the pace going forward will be determined by inflation expectations and the evolving economic conditions. The minutes noted that consumer spending is an element of uncertainty given the higher inflation and interest rates. Earlier today, the CBA's household spending report shows a 1.1% jump month-over-month in July and a 0.6% increase in June. The RBA wants to bring the cash target rate to neutral (~2.50%). The target rate is currently at 1.85% and the cash rate futures is pricing in about a 40% chance of a 50 bp hike at the next RBA meeting on September 6. It peaked near 60% last week. On Thursday, Australia reports July employment. Australia grew 88.4k jobs in June, of which almost 53k were full-time positions. The median forecast in Bloomberg's survey envisions a 25k increase of jobs in July.  The offshore yuan slumped 1.15% yesterday  It was the biggest drop since August 2019 and was sparked by the unexpected cut in rates after a series of disappointing economic data. The US dollar reached almost CNH6.82 yesterday, its highest level in three months. It has steadied today but remains firm in the CNH6.7925-CNH6.8190 range. China's 10-year yield is still under pressure. It finished last week quietly near 2.74% and yesterday fell to 2.66% and today 2.63%. It is the lowest since May 2020. As we have noted, the dollar-yen exchange rate seems to be more sensitive to the US 2-year yield (more anchored to Fed policy) than the 10-year yield (more about growth and inflation)  The dollar is trading near four-day highs against the yen as the two-year yield trades firmer near 3.20%. Initial resistance has been encountered in Europe near JPY134.00. Above there, the JPY134.60 may offer the next cap. Support now is seen around JPY133.20-40. The Australian dollar extended yesterday's decline and slipped through the $0.7000-level where A$440 mln in options expire today. It also corresponds with a (50%) retracement of the run-up form the mid-July low (~$0.6680). The next area of support is seen in the $0.6970-80 area. The greenback rose 0.45% against the onshore yuan yesterday after gapping higher. Today it gapped higher again and rose to almost CNY6.7975, its highest level since mid-May. It reached a high then near CNY6.8125. The PBOC set the dollar's reference rate at CNY6.7730, slightly less than the median in Bloomberg's survey (CNY6.7736). The takeaway is the central bank did not seem to protest the weakness of the yuan. Europe The euro has been sold to a new seven-year low against the euro near CHF0.9600 The euro has been sold in eight of the nine weeks since the Swiss National Bank hiked its policy rate by 50 bp on June 16. Half of those weekly decline were 1% or larger. The euro has fallen around 7.4% against the franc since the hike. Swiss domestic sight deposit fell for 10 of 11 weeks through the end of July as the SNB did not appear to be intervening. However, in the last two weeks, as the franc continued to strengthen, the Swiss sight deposits have risen, and recorded their first back-to-back increase in four months. This is consistent with modest intervention. The UK added 160k jobs in Q2, almost half of the jobs gain in the three months through May, illustrating the fading momentum  Still, some 73k were added to the payrolls in July, well above expectations. In the three months through July, job vacancies in the UK fell (~19.8k) for the first time in nearly two years. Average weekly earnings, including bonuses, rose 5.1% in Q2. The median forecast was for a 4.5% increase. Yet, real pay, excluding bonuses and adjusted for inflation slid 3% in the April-June period, the most since at least 2001. The ILO measure of unemployment in Q2 was unchanged at 3.8%. The Bank of England warns it will rise to over 6%. The market still favors a 50 bp hike next month. The swaps market has it at a little better than an 80% probability. The euro is extending its retreat  It peaked last week, near $1.0365 and tested this month's low near $1.0125 in the European morning. The intraday momentum indicators are stretched, and that market does not appear to have the drive to challenge the 1.2 bln euros in options struck at $1.0075 that expire today. With yesterday's loss, the euro met the (50%) retracement objective of the bounce off the mid-July 22-year low (~$0.9950). The next retracement objective (61.8%) is near $1.0110. Nearby resistance may be met near $1.0160-70. Sterling has been sold for the fourth consecutive session. It approached the $1.20-level, which may be the neckline of a double top. If violated it could signal a return to the low seen in mid-July around $1.1760. Sterling is holding in better than the euro now. The cross peaked before the weekend in front of GBP0.8500 and is approaching GBP0.8400 today. A break would look ominous and could spur a return to the GBP0.8340 area. America The Empire State manufacturing survey and the manufacturing PMI line up well  Both bottomed in April 2020 and peaked in July 2021. The outsized decline in the August Empire State survey points to the downside risks of next week's preliminary August manufacturing PMI. Recall that the July manufacturing PMI fell to 52.2, its third consecutive decline and the lowest reading since July 2020. There was little good in the Empire survey. Orders and shipments fell dramatically. Employment was also soft. Prices paid softened to the lowest this year, but prices received edged higher. The US reports housing start and permits and industrial output today The housing market continues to slow from elevated levels. Housing starts are expected to have fallen 2% in July, matching the June decline. It would be the third consecutive decline, and the longest declining streak since 2018. Still, in terms of the absolute level of activity, anything above 1.5 mln units must still be regarded as strong. They stood at almost 1.56 mln in June. Permits fell by 10% in April-May before stabilizing in June. The median forecast in Bloomberg's survey projects a 3.3% decline. Permits were running at 1.685 mln in June. From April 2007 through September 2019, permits held below 1.5 mln. The industrial production report may attract more attention Output fell in June (-0.2%) for the first time this year, and even with it, industrial product has risen on average by 0.4% a month in H1 22, slightly above the pace seen in H1 21. Helped by manufacturing and utility output, industrial production is expected to rise by around 0.3%. In the last cycle, capacity use spent four months (August-November 2018) above 80%. It had not been above 80% since the run-up to the Great Financial Crisis when it spent December 2006 through March 2008 above the threshold and peaked slightly above 81.0%. Last month was likely the fourth month in this cycle above the 80% capacity use rate. Note that the Atlanta Fed's GDPNow tracker will be updated later today. The update from August 10 put Q3 GDP at 2.5%. Housing starts in Canada likely slow last month, which would be the first back-to-back decline this year  The median forecast (Bloomberg's survey) calls for a 3.6% decline after an 8.4% fall in June. Still, the expected pace of 264k is still 10% higher since the end of last year. On Monday, Canada reported that July existing home sales fell by 5.3%, the fifth consecutive decline. They have fallen by more than a third since February. Canada also reports its monthly portfolios. Through May, Canada has experienced C$98.5 bln net portfolio inflows, almost double the pace seen in the first five months last year. However, the most important report today is the July CPI. A 0.1% increase, which is the median forecast in Bloomberg's survey would be the smallest of the year and the year-over-year pace to eased to 7.6% from 8.1%. If so, it is the first decline since June 2021. Similar with what the US reported, the core measures are likely to prove sticky. After the employment data on August 5, the swaps market was still leaning in favor a 75 bp hike at the September 7 meeting (64%). However, since the US CPI report, it has been hovering around a 40% chance. While the US S&P 500 rose reached almost four-month highs yesterday, the Canadian dollar found little consolation  It held in better than the other dollar-bloc currencies and Scandis, but it still suffered its biggest decline in about a month yesterday. The greenback reached almost CAD1.2935 yesterday and is consolidating in a narrow range today above CAD1.2890. The next important chart point is near CAD1.2975-85 and the CAD1.3050. After testing the MXN20.00 level yesterday, the US dollar was sold marginally through last week's low (~MXN19.8150). It is consolidating today and has not been above MXN19.8850. It has come a long way from the month's high set on August 3 near MXN20.8335. The greenback's downside momentum seems to have eased as it stalls in front of MXN19.81 for the third consecutive session.     Disclaimer   Source: Greenback Remains Firm

Summary:  Equities traded higher still yesterday as treasury yields fell further back into the recent range and on hopes that an Iran nuclear deal will cement yesterday’s steep drop in oil prices. The latest data out of the US was certainly nothing to celebrate as the July US Homebuilder survey showed a further sharp drop in new housing interest and a collapse in the first regional US manufacturing survey for August, the New York Fed’s Empire Manufacturing.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended their gains yesterday getting closer to the 200-day moving average sitting around the 4,322 level. The US 10-year yield seems well anchored below 3% and financial conditions indicate that S&P 500 futures could in theory trade around 4,350. The news flow is light but earnings from Walmart later today could impact US equities should the largest US retailer lower their outlook for the US consumer. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities were mixed. CSI300 was flat, with electric equipment, wind power, solar and auto names gained. Hang Seng Index declined 0.5%. Energy stocks fell on lower oil price. Technology names were weak overall, Hang Seng TECH Index (HSTECH.I) declined 0.9%. Sunny Optical (02382:xhkg) reported worse than expected 1H22 results, revenues -14.4% YoY, net profits -49.5%, citing weakening component demand from the smartphone industry globally. The company’s gross margin plunged to 20.8% from 24.9%. Li Auto’s (02015:xhkg/LI:xnas) Q2 results were in line with expectations but Q3 guidance disappointed. The launch L9 seems cannibalizing Li ONE sales. USD: strength despite weak US data and falling treasury yields and strong risk sentiment Yesterday, the JPY tried to make hay on China cutting rates and as global yields eased back lower, with crude oil marked several dollars lower on hopes for an Iran nuclear deal. But the move didn’t stick well in USDJPY, which shrugged off these developments as the USD firmed further across the board, despite treasury yields easing lower, weak data and still strong risk sentiment/easy financial conditions. A strong US dollar is in and of itself is a tightening of financial conditions, however, and yesterday’s action has cemented a bullish reversal in some pairs, especially EURUSD and GBPUSD, where the next important levels pointing to a test of the cycle lows are 1.0100 and 1.2000, respectively. Elsewhere, USDJPY remains in limbo (strong surge above 135.00 needed to suggest upside threat), USDCAD has posted a bullish reversal but needs 1.3000 for confirmation, and AUDUSD is teetering, but needs a close back below 0.7000 to suggest a resurgent US dollar and perhaps widening concerns that a Chinese recession will temper interest in the Aussie. Crude oil Crude oil (CLU2 & LCOV2) trades lower following Monday’s sharp drop that was driven by a combination softer economic data from China and the US, the world’s top consumers of oil, and after Iran signaled a nuclear deal could be reached soon, raising the prospect of more Iranian crude reaching the market. The latest developments potentially reducing demand while adding supply forced recently established longs to bail and short sellers are once again in control. Brent needs to hold support at $93 in order to avoid further weakness towards $90. Focus on Iran news. Copper Copper (COPPERUSSEP22) led the metals pack lower, without breaking any key technical levels to the downside, after China’s domestic activity weakened in July. Meanwhile, supply side issues in Europe also cannot be ignored with surging power prices putting economic pressure on smelters, and many of them running at a loss. HG copper jumped 19% during the past month and yesterday’s setback did not challenge any key support level with the first being around $3.50/lb. BHP, the world’s top miner meanwhile hit record profits while saying that China is likely to offer a “tail wind” to global growth (see below). EU power prices hit record high on continued surge in gas prices ... threatening a deeper plunge into recession. The latest surge being driven by low water levels on Europe’s rivers obstructing the normal passage for diesel, coal, and other fuel products, thereby forcing utilities to use more gas European Dutch TTF benchmark gas futures (TTFMU2) has opened 5% higher at €231/MWh, around 15 times higher than the long-term average, suggesting more pain ahead for European utility companies. Next-year electricity rates in Germany (DEBYF3) closed 3.7% higher to 477.50 euros ($487) a megawatt-hour on the European Energy Exchange AG. That is almost six times as much as this time last year, with the price doubling in the past two months alone. UK power prices were also seen touching record highs. US Treasuries (IEF, TLT) see long-end yields surging. Yields dipped back lower on weak US economic data, including a very weak Empire Manufacturing Survey (more below) and another sharp plunge in the NAHB survey of US home builders, suggesting a rapid slowdown in the housing market. The survey has historically proven a leading indicator on prices as well. The 10-year benchmark dipped back further into the range after threatening to break up higher last week. The choppy range extends down to 2.50% before a drop in yields becomes a more notable development, but tomorrow’s US Retail Sales and FOMC minutes offer the next test of sentiment. What is going on? Weak Empire State manufacturing survey and NAHB Index Although a niche and volatile measure, the United States NY Empire State Manufacturing Index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic. New orders and shipments plunged, and unfilled orders also declined, albeit less sharply. Other key areas of concern were the rise in inventories and a decline in average hours worked. This further weighed on the sentiment after weak China data had already cast concerns of a global growth slowdown earlier. Meanwhile, the US NAHB housing market index also saw its eighth consecutive monthly decline as it slid 6 points to 49 in August. July housing starts and building permits are scheduled to be reported later today, and these will likely continue to signal a cooling demand amid the rising mortgage rates as well as overbuilding. China's CATL plans to build its second battery factory in Europe CATL unveiled plans to build a renewable energy-powered factory for car battery cells and modules in Hungary. It will invest EUR 7.34 billion (USD 7.5bn) on the 100-GWh facility, which will be its second one in Europe. To power the facility CATL will use electricity from renewable energy source, such as solar power. At present, CATL is in the process of commissioning its German battery production plant, which is expected to roll out its first cells and modules by the end of 2022. Disney (DIS) shares rise on activist investor interest Daniel Loeb of Third Point announced a significant new stake in Disney yesterday, helping to send the shares some 2.2% higher in yesterday’s session. The activist investor recommended that the company spin off its ESPN business to reduce debt and take full ownership of the Hulu streaming service, among other moves. Elliott exits SoftBank Group The US activist fund sold its stake in SoftBank earlier this year in a sign that large investors are scaling back on their investments in technology growth companies with long time to break-even. In a recent comment, SoftBank’s founder Masayoshi Son used more cautious words regarding the investment company’s future investments in growth companies. BHP reports its highest ever profit, bolstered by coal BHP posted a record profit of $21.3bn supported by considerable gains in coal, nickel and copper prices during the fiscal year ending 30 June 2022. Profits jumped 26% compared to last year’s result. The biggest driver was a 271% jump in the thermal coal price, and a 43% spike in the nickel price. The world’s biggest miner sees commodity demand improving in 2023, while it also sees China emerging as a source of stable commodity demand in the year ahead. BHP sees supply covering demand in the near-term for copper and nickel. According to the company iron ore will likely remain in surplus through 2023. In an interview Chief Executive Officer Mike Henry said: Long-term outlook for copper, nickel and potash is really strong because of “unstoppable global trends: decarbonization, electrification, population growth, increasing standards of living,” What are we watching next? Australia Q2 Wage Index tonight to determine future RBA rate hike size? The RBA Minutes out overnight showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, tonight sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35 bps move. RBNZ set to decelerate its guidance after another 50 basis point move tonight? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 44 bps for the October meeting after tonight’s 50 bps hike and another 36 bps for the November meeting. US retailer earnings eyed After disappointing results last quarter, focus is on Walmart and Home Depot earnings later today. These will put the focus entirely on the US consumer after the jobs data this month highlighted a still-tight labor market while the inflation picture saw price pressures may have peaked. It would also be interesting to look at the inventory situation at these retailers, and any updated reports on the status of the global supply chains.   Earnings to watch Today’s US earnings focus is Walmart and Home Depot with analysts expecting Walmart to report 7% revenue growth y/y and 8% decline y/y in EPS as the US retailer is facing difficulties passing on rising input costs. Home Depot is expected to report 6% growth y/y in revenue and 10% growth y/y in EPS as the US housing market is still robust driving demand for home improvement products. Sea Ltd, the fast-growing e-commerce and gaming company, is expected to report revenue growth of 30% y/y in Q2 but worsening EBITDA margin at -16.2%. The previous winning company is facing headwinds in its gaming division and cash flow from operations have gone from positive $318mn in Q1 2021 to negative $724mn in Q1 2022. Today: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0900 – Germany Aug. ZEW Survey 0900 – Eurozone Jun. Trade Balance 1200 – Poland Jul. Core CPI 1215 – Canada Jul. Housing Starts 1230 – US Jul. Housing Starts and Building Permits 1230 – Canada Jul. CPI 2030 – API Weekly Report on US Oil Inventories 2350 – Japan Jul. Trade Balance 0130 – Australia Q2 Wage Index 0200 – New Zealand RBNZ Official Cash Rate announcement 0300 – New Zealand RBNZ Governor Orr Press Conference  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 16, 2022

Summary:  Today we look at a confusing market backdrop as the US dollar rose across the board despite weak US data and US treasury yields easing lower again. While measures of risk sentiment and financial conditions look very strong here, we need to remember that the US dollar is a financial condition unto itself and one of the most import exchange rates, the USDCNH rate should be on every trader's radar. As well, the US S&P 500 index is pushing up against a major resistance level. Crude oil, copper, earnings reports ahead and more on today pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast  Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: The US dollar is a financial condition, too

The price of WTI crude oil remained below $90 per barrel at the beginning of the week, the level before Russia's attack on Ukraine. Oil today is the cheapest in six months. It seems that the topic of a global economic slowdown or recession and how long it may last may be important for the oil market. Chinese and U.S. economic data seem to show a weaker condition in both economies and thus could affect the decline in oil demand. This, in turn, could put downward pressure on prices. According to published data, factory activity in China declined enough in July to force the central bank to cut lending rates to keep demand from collapsing. In the United States, on the other hand, the market may have been taken by surprise by the second-largest drop in the history of the New York Empire State Manufacturing Index. The above indicators may affect the market from the demand side, but this is only one part of the puzzle. On the supply side, long-awaited changes may be brewing. Once the embargo is lifted, oil from Iran may start flowing into the market again. Iran has responded to the European Union's proposal. It may seek to re-implement the 2015 nuclear agreement. The EU is also calling on the US to show more flexibility in implementing the agreement. Saudi Arabia may also be preparing to increase its oil supply. The chairman of Saudi Aramco, the state-owned oil giant, stated over the weekend that his company is ready to increase production to 12 million barrels per day, the company's current production capacity limit. Only a decision by the Saudi Arabian government is needed to increase production. According to the EIA agency's forecast, the United States can also increase its production. US oil production in the August forecast averages 11.9 million barrels per day (b/d) in 2022. It could rise to 12.7 million b/d in 2023. If this forecast comes true, the US could set a production record next year. The current one is 12.3 million b/d and was set in 2019.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Oil near six-month lows

Overview: Equities were mostly higher in the Asia Pacific region, though Chinese and Hong Kong markets eased, and South Korea and India were closed for national holidays. Despite new Chinese exercises off the coast of Taiwan following another US congressional visit, Taiwan’s Taiex gained almost 0.85%. Europe’s Stoxx 600 is advancing for the fourth consecutive session, while US futures are paring the pre-weekend rally. Following disappointing data and a surprise cut in the one-year medium-term lending facility, China’s 10-year yield fell to 2.66%, its lowest in two years. The US 10-year is soft near 2.83%, while European yields are mostly 2-4 bp lower. Italian bonds are bucking the trend and the 10-year yield is a little higher. The Antipodeans and Norwegian krone are off more than 1%, but all the major currencies are weaker against the greenback, but the Japanese yen, which is practically flat. Most emerging market currencies are lower too. The Hong Kong Dollar, which has been supported by the HKMA, strengthened before the weekend, and is consolidating those gains today. Gold tested the $1800 level again but has been sold in the wake of the stronger dollar and is at a five-day low near $1778. The poor data from China raises questions about demand, and September WTI is off 3.6% after falling 2.4% before the weekend. It is near $88.60, while last week’s five-month lows were set near $87.00. US natgas is almost 2% lower, while Europe’s benchmark is up 2.7% to easily recoup the slippage of the past two sessions. China’s disappointment is weighing on industrial metal prices. Iron ore tumbled 4% and September copper is off nearly 3%. September wheat snapped a four-day advance before the weekend and is off 2.3% today.  Asia Pacific With a set of disappointing of data, China surprised with a 10-bp reduction in the benchmark one-year lending facility rate to 2.75%  It is the first cut since January. It also cut the yield on the seven-day repo rate to 2.0% from 2.1%. The string of poor news began before the weekend with a larger-than-expect in July lending figures. However, those lending figures probably need to be put in the context of the surge seen in June as lenders scramble to meet quota. Today's July data was simply weak. Industrial output and retail sales slowed sequentially year-over-year, whereas economists had projected modest increases. New home prices eased by 0.11%, and residential property sales fell 31.4% year-over-year after 31.8% decline in June. Property investment fell 6.4% year-over-year, year-to-date measures following a 5.4% drop in June. Fix asset investment also slowed. The one exception to the string of disappointment was small slippage in the surveyed unemployment rate to 5.4% from 5.5%. Incongruous, though on the other hand, the jobless rate for 16–24-year-olds rose to a record 19.9%. Japan reported a Q2 GDP that missed estimates, but the revisions lifted Q1 GDP out of contraction  The world's second-largest economy grew by 2.2% at an annualized pace in Q2. While this was a bit disappointing, Q1 was revised from a 0.5% fall in output to a 0.1% expansion. Consumption (1.1%) rebounded (Q1 revised to 0.3% from 0.1%) as did business spending (1.4% vs. -0.3% in Q1, which was originally reported as -0.7%). Net exports were flat after taking 0.5% off Q1 GDP. Inventories, as expected, were unwound. After contributing 0.5% to Q1 GDP, they took 0.4% off Q2 growth. Deflationary forces were ironically still evident. The GDP deflator fell 0.4% year-over-year, almost the same as in Q1 (-0.5%). Separately, Japan reported industrial surged by 9.2% in June, up from the preliminary estimate of 8.9%. It follows a two-month slide (-7.5% in May and -1.5% in April) that seemed to reflect the delayed impact of the lockdowns in China. The US dollar is little changed against the Japanese yen and is trading within the pre-weekend range (~JPY132.90-JPY133.90). It finished last week slightly above JPY133.40 and a higher closer today would be the third gain in a row, the longest advance in over a month. The weakness of Chinese data seemed to take a toll on the Australian dollar, which has been sold to three-day lows in the European morning near $0.7045. It stalled last week near $0.7140 and in front of the 200-day moving average (~$0.7150). A break of $0.7035 could signal a return to $0.7000, and possibly $0.6970. The greenback gapped higher against the Chinese yuan and reached almost CNY6.7690, nearly a two-week high. The pre-weekend high was about CNY6.7465 and today's low is around CNY6.7495. The PBOC set the dollar's reference rate at CNY6.7410, a little above the Bloomberg survey median of CNY6.7399. Note that a new US congressional delegation is visiting Taiwan and China has renewed drills around the island. The Taiwan dollar softened a little and traded at a three-day low. Europe Turkey's sovereign debt rating was cut a notch by Moody's to B3 from B2  That is equivalent to B-, a step below Fitch (B) and two below S&P (B+). Moody's did change its outlook to stable from negative. The rating agency cited the deterioration of the current account, which it now sees around 6% of GDP, three times larger than projected before Russia invaded Ukraine. The Turkish lira is the worst performing currency this year, with a 27.5% decline after last year's 45% depreciation. Turkey's two-year yield fell below 20% today for the first time in nine months, helped ostensibly by Russia's recent cash transfer. The dollar is firm against the lira, bumping against TRY17.97. The water level at an important junction on the Rhine River has fallen below the key 30-centimeter threshold (~12 inches) and could remain low through most of the week, according to reports of the latest German government estimate  Separately, Germany announced that its gas storage facility is 75% full, two weeks ahead of plan. The next target is 85% by October 1 and 95% on November 1. Reports from France show its nuclear reactors were operating at 48% of capacity, down from 50% before the weekend. A couple of reactors were shut down for scheduled maintenance on Saturday.  Ahead of Norway' rate decision on Thursday, the government reported a record trade surplus last month  The NOK229 bln (~$23.8 bln). The volume of natural gas exports surged more than four-times from a year earlier. Mainland exports, led by fish and electricity, rose by more than 20%. The value of Norway's electricity exports increased three-fold from a year ago. With rising price pressures (headline CPI rose to 6.8% in July and the underlying rate stands at 4.5%) and strong demand, the central bank is expected to hike the deposit rate by 50 bp to 1.75%. The euro stalled near $1.0370 last week after the softer than expected US CPI  It was pushed through the lows set that day in the European morning to trade below $1.02 for the first time since last Tuesday. There appears to be little support ahead of $1.0160. However, the retreat has extended the intraday momentum indicators. The $1.0220 area may now offer initial resistance. Sterling peaked last week near $1.2275 and eased for the past two sessions before breaking down to $1.2050 today. The intraday momentum indicators are stretched here too. The $1.2100 area may offer a sufficient cap on a bounce. A break of $1.20 could confirm a double top that would project back to the lows. America The Congressional Budget Office estimates that the Inflation Reduction Act reduces the budget deficit but will have a negligible effect on inflation  Yet, starting with the ISM gauge of prices paid for services, followed by the CPI, PPI, and import/export prices, the last string of data points came in consistently softer than expected. In addition, anecdotal reports suggest the Big Box stores are cutting prices to reduce inventories. Energy is important for the medium-term trajectory of measured inflation, but the core rate will prove sticky unless shelter cost increases begin to slow. While the Democrats scored two legislative victories with the approval of the Chips and Science Act and the Inflation Reduction Act, the impact on the poll ahead of the November midterm election seems minor at best. Even before the search-and-seizure of documents still in former President Trump's residence, PredictIt.Org "wagers" had turned to favor the Democratic Party holding the Senate but losing the House of Representatives. In terms of the Republican nomination for 2024, it has been back-and-forth over the last few months, and recently Florida Governor DeSantis narrowly pulled ahead of Trump. The two new laws may face international pushback aside from the domestic impact  The EU warned last week that the domestic content requirement to earn subsidies for electric vehicles appears to discriminate against European producers. The Inflation Reduction Act offers $7500 for the purchases of electric cars if the battery is built in North America or if the minerals are mined or recycled there. The EU electric vehicle subsidies are available for domestic and foreign producers alike. On the other hand, the Chips and Science Act offers billions of dollars to attract chip production and design to the US. However, it requires that companies drawing the subsidies could help upgrade China's capacity for a decade. Japan and Taiwan will likely go along. It fits into their domestic political agenda. However, South Korea may be a different kettle of fish. Hong Kong and China together accounted for around 60% of South Korea's chip exports last year. Samsung has one overseas memory chip facility. It is in China and produces about 40% of the Galaxy phones' NAND flash output. Pelosi's apparent farewell trip to Asia, including Taiwan, was not well received in South Korea. President Yoon Suk Yeol did not interrupt his staycation in Seoul to meet the US Speaker. Nor was the foreign minister sent. This is not to cast aspersions on South Korea's commitment to regional security, simply that it is not without limits. Today's economic calendar features the August Empire State manufacturing survey  A small decline is expected. The June TIC data is out as the markets close today. Today is also the anniversary of the US ending Bretton Woods by severing the last links between gold and the dollar in 1971. Canada reports manufacturing sales and wholesale trade, but the most market-sensitive data point may be the existing home sales, which are expected to have declined for the fifth consecutive month. Canada reports July CPI tomorrow (Bloomberg survey median forecast sees headline CPI slowing to 7.6% from 8.1% in June).  The Canadian dollar is under pressure  The US dollar has jumped above CAD1.2900 in Europe after finishing last week near CAD1.2780. Last week's high was set near CAD1.2950, where a $655 mln option is set to expire today. A move above CAD1.2920 could target CAD1.2975-CAD1.3000 over the next day or day. A combination of weaker equities, thin markets, and a short-term market leaning the wrong way after the likely drivers today. The greenback posted its lowest close in two months against the Mexican peso before the weekend near MXN19.85. However, it is rebounding today and testing the MXN20.00 area Initial resistance may be encountered around MXN20.05, but we are looking for a move toward MXN20.20 in the coming days. Mexico's economic calendar is light this week, and the highlight is the June retail sales report at the end of the week.    Disclaimer Source: China Disappoints and Surprises with Rate Cut

Summary:  S&P500 index broke above the key 4,300 resistance level while the NASDAQ pushed lower amid mixed economic data and better-than-feared earnings from Walmart and Home Depot. US housing data continues to worsen, but the focus now turns to FOMC minutes due later today, as well as the US retail sales which will be next test of the strength of the US consumer. Asia session may have trouble finding a clear direction, but Australia’s wage price index and RBNZ’s rate hike may help to provide some bounce. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities were mixed. Tech names had an initial pullback, followed by short-coverings that narrowed the loss of the Nasdaq 100 to 0.23% at the close. S&P500 edged up 0.19% to 4,305 on better-than-feared results from retailers, moving towards its 200-day moving average (4,326). Walmart (WMT:xnys) and Home Depot (HD:xnys) reported Q2 results beating analyst estimates. Walmart gained 5% on strong same-store sales growth and a deceleration in inventory growth. Home Depot climbed 4% after reporting better than expected EPS and same-store sales but with an acceleration in inventory buildup. The declines in housing starts and building permits released on Monday and the downbeat comments about the U.S. housing market from the management of Compass (COMP:xnys), an online real estate brokerage, highlighted the challenges faced in the housing sector.  Short-end U.S. treasury yields rose as the long-end little changed The bigger than expected increases in July industrial production (+0.6% MoM), manufacturing production (+0.7% MoM), and business equipment production (+0.6%) triggered some selling in the short-end of U.S. treasury curve, pushing the 2-year yield 8 bps higher to 3.25% as 10-year yield edged up 1bp.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) China internet stocks were sold off on Tuesday afternoon after Reuters ran a story suggesting that Tencent (00700:xhkg) plans to divest its 17% stake (USD24 billion) in Meituan (03690:xhkg).  The shares of Meituan collapsed 9% while Tencent gained 0.9%.  After the close of the Hong Kong market, Chinese media, citing sources “close to the matter” suggested that the divesture story is not true. However, the ADRs of Meituan managed to recover only 1.7% in New York trading. The newswire story also triggered selling on Kuaishou (01024:xhkg), -4.4%, which has Tencent as a major investor. The decline in internet stocks dragged the Hang Seng Index 1% lower. On the other hand, Chinese developers soared on another newswire report that state-owned China Bond Insurance is going to provide guarantees to new onshore debts issued by several “high quality” developers, including Country Garden (02007:xhkg) +9%, Longfor (00960:xhkg) +12%, CIFI (00884:xhkg) +12.9%, and Seazen (01030:xhkg) +7.6%.  Shares of Chinese property management services also surged higher.  GBPUSD bounced off the 1.2000 support, NZD eyeing RBNZ A mixed overnight session for FX as the US yields wobbled. Risk sentiment held up with the mixed US data accompanied by a less bad outcome in the US retailer earnings than what was expected. This made the safe-haven yen a clear underperformer, and USDJPY rose back above 134. But a clear trend in the pair is still missing and a break above 135 is needed to reverse the downtrend. Cable got lower to remain in close sight of the 1.2000 big figure, but rose above 1.2100 subsequently. UK CPI report due today may confirm the need for further BOE action after labor data showed wage pressures. NZDUSD remains near lows of 0.6320 but may see a knee-jerk higher if RBNZ surprises on the hawkish side. Crude oil prices (CLU2 & LCOV2) Crude oil prices remain under pressure due to the prospect of Iran nuclear deal, and printed fresh lows since the Ukraine invasion. Some respite was seen in early Asian session, and WTI futures were last seen at $87/barrel and Brent is below $93. The EU submitted a final proposal to salvage the Iran nuclear deal, and prospects of more energy supply are dampening the price momentum. It has been reported that Iran’s response was constructive, and they are now consulting with the US on a way ahead for the protracted talks. The API reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels. Government data is due later Wednesday. European Dutch TTF benchmark gas futures (TTFMU2) touched €250/MWh, but has cooled off slightly recently, but still signals the heavy price that Europe is paying for the dependence on Russian gas. Copper holding up well despite China slowdown concerns Despite reports of weaker financing and activity data from China earlier this week, Copper remains well supported and registered only modest declines. BHP’s results provided some offset, as did the supply side issues in Europe. Only a break below the key 350 support will turn the focus lower. Meanwhile, zinc rallied amid concerns of smelter closures in Europe. What to consider? US housing scare broadens, industrial production upbeat Housing starts fell 9.6% in July to 1.446 mn, well beneath the prior 1.599 mn and the expected 1.537 mn. Housing starts are now down for five consecutive months, and suggest a cooling housing market in the wake of higher borrowing costs and higher inflation. Meanwhile, building permits declined 1.3% in July to 1.674 mn from 1.696 mn, but printed above the expected 1.65 mn. There will be potentially more scaling back in construction activity as demand weakens and inventory levels rise. On the other hand, industrial production was better than expected at 0.6% m/m (prev: -0.2%) possibly underpinned by holiday demand but the outlook is still murky amid persistent inflation and supply chain issues. US retailer earnings come in better than feared Walmart (WMT:xnys) and Home Depot (HD:xnys) reported better-than-feared results on Tuesday. Walmart’s Q2 revenues came in at USD152.9 billion (+8.4% YoY, consensus USD150.5bn). Same-store sales increased 8.4% YoY (vs consensus +6.0% YoY).  EPS of USD1.77, down 0.8% from a year ago quarter but better than the consensus estimate of USD1.63. While inventories increased 25.5% in Q2, the rate of increase has moderated from the prior quarter’s +32.0%. The company cited falls in gas prices, market share gain in grocery, and back-to-school shopping key reasons behind the strength in sales.  Home Depot reported Q2 revenues of USD43.9 billion (vs consensus USD43.4bn), +6.5% YoY.  Same-store sales grew 5.8%, beating analyst estimates (+4.9%).  EPS rose 11.5% to $5.05, ahead of analyst estimates (USD4.95). However, inventories grew 38% YoY in Q2, which was an acceleration from the prior quarter. The management cited inflation and pulling forward inventory purchases given supply chain challenges as reasons for the larger inventory build-up. Target (TGT:xnys) is scheduled to report on Wednesday. Eyes on US retail sales US retail sales will be next test of the US consumer after less bad retailer earnings last night. Retail sales should have been more resilient given the lower prices at pump improved the spending power of the average American household, and Amazon Prime Day in the month possibly attracted bargain hunters as well. However, consensus expectations are modest at 0.1% m/m compared to last month’s 1.0%. A cooling labor market in the UK UK labor market showed signs of cooling as job vacancies fell for the first time since August 2020 and real wages dropped at the fastest pace in history. Unemployment rate was steady at 3.8%, and the number of people in employment grew by 160,000 in the April-June period as against 256,000 expected. There was also a sprinkle of good news, with the number of employees on payrolls rising 73,000 in July, almost triple the pace expected. Also, wage growth was strong at 4.7% in the June quarter from 4.4% in the three months to May, which may be key for the BOE amid persistent wage pressures. Australia Q2 Wage Index to determine future RBA rate hike size? The RBA Minutes out on Tuesday showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, today sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35bps move. RBNZ set to decelerate its guidance after another 50 basis point move today? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 45bps for the October meeting after today’s 50bps hike and another 37bps for the November meeting. FOMC minutes to be parsed for hints on future Fed moves The Federal Reserve had lifted rates by 75bps to bring the Fed Funds rate at the level that they consider is neutral at the July meeting, but stayed away from providing any forward guidance. Meeting minutes will be out today, and member comments will be watched closely for any hints on the expectation for September rate hike or the terminal Fed rate. The hot jobs report and the cooling inflation number has further confused the markets since the Fed meeting, even as Fed speakers continue to push against any expectations of rate cuts at least in ‘early’ 2023. We only have Kansas City Fed President Esther George (voter in 2022) and Minneapolis Fed President Kashkari (non-voter in 2022) speaking this week at separate events on Thursday, so the bigger focus will remain on Jackson Hole next week for any updated Fed views.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 17, 2022

Home Depot (HD) and Walmart (WMT) are among the largest US retailers whose results seem to show the attitude of the average American consumer towards spending money. HD is a chain of large-format home improvement shops, very similar to Europe's Leroy Merlin. WMT, on the other hand, is the largest US retail chain. Last month, Walmart spooked markets by lowering its profit forecasts and warned of a rapid decline in demand. However, the results announced today said sales were up more than 8% year-on-year to $152.9 billion against expectations of $150.8 billion. Online sales alone rose by as much as 12%. The company is struggling with a gigantic inventory problem (worth $61 billion at the end of Q1), prominent among the backlog of products is apparel, for example. To deal with this, discounts have been introduced on many products, thereby boosting sales by stimulating demand. At present, the value of stock amounts to USD 59.9 billion. However, the increased sales do not translate directly into profits. "The actions we’ve taken to improve inventory levels in the US, along with a heavier mix of sales in grocery, put pressure on the profit margin for Q2 and our outlook for the year," - CEO Doug McMillon said. Walmart's second-quarter net income rose to $5.15bn, or $1.77 per share (EPS) against Wall Street analysts' estimates of $1.62. In the same period a year ago, net income was $4.28bn, or $1.52 per share (EPS). Walmart maintained its forecast for the second half of the year. It expects US shop sales to grow by about 3% (excluding fuel), in the second half of the year, or about 4 per cent for the full year. It expects adjusted earnings per share to decline 9% for the year. Home Depot also announced a 5.8% increase in sales, to 43.8 billion against expectations of $43.36 billion. Net sales were up 6.5% year-over-year, marking the highest quarterly sales in the company's history. "Our team has done a fantastic job serving our customers while continuing to navigate a challenging and dynamic environment," - CEO Ted Decker said, commenting on the company's results. Net income increased to $5.17 billion, up 7.6% year-over-year. EPS was $5.05 against analysts' forecasts of $4.94. Walmart and Home Depot gain 4.7% and 1.9%, respectively, on the market open. The retailers' results show that, despite the looming recession, consumers are spending money and the situation could be not that bad in the short term. However, at the same time, the figures for financing this spending are alarming. A large proportion of Americans are covering higher prices with credit cards, which must eventually be repaid, according to data published by Bloomberg. The worsening outlook for economic health, alarming PMI levels and the bond yield curve all translate into possible future deterioration in consumer health.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.  Source: Retailers announce strong results - shares rise

The Reserve Bank of New Zealand today raised its main interest rate by 0.5 percentage points, to 3 percent, a level last seen seven years ago. It was the fourth 50-basis point hike in the current cycle, which may make the RBNZ one of the stronger monetary tightening central banks to bring down inflation.   Today's hike was in line with market expectations. Some policymakers believe that inflation may soon begin to stabilize or even start to decline through lower fuel prices and transportation prices. However, inflation may not return to the New Zealand central bank's target until mid-2024. Thus, further monetary tightening may be required, with its end expected in the first quarter of 2023 - according to a statement issued to today's decision. As a result, the RBNZ may raise the main interest rate by about 3.75 percentage points throughout the cycle, to 4 percent, from the record low of 0.25 percent that occurred in 2021. Inflation in New Zealand rose to 7.3 percent y/y in the second quarter of 2022, up from 6.9 percent in the previous period. This was the highest figure since the second quarter of 1990.   The NZD/USD exchange rate seemed to react relatively calmly to the above decision, as it was in line with the market consensus. At 07:30 GMT+3 on the Conotoxia MT5 platform, the NZD/USD exchange rate rose by 0.25 percent, to 0.6360. As a result, at this hour, of the major currencies against the US dollar, it is the NZD that seems to have gained the most. Since the beginning of the month, the NZD has gained 1.10 percent to the USD, which may make New Zealand's currency the strongest of the world's major currencies.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Bank of New Zealand with another rate hike

  Summary:  The US equity market rally extended modestly yesterday, but turned tail upon the cash S&P 500 Index touching the key 200-day moving average at 4,325. Market today will eye the latest US Retail Sales report from July, which saw peak gasoline prices in the US mid-month, while the FOMC Minutes may prove a bit stale, given they were created before three weeks of the market rallying sharply and financial conditions easing aggressively, likely not the Fed’s intention.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures broke above the 200-day moving average yesterday and then got rejected. Momentum in US equities got a bit more fuel from two good earnings releases from Home Depot and Walmart rising 4% and 5% respectively. S&P 500 futures are pushing higher again this morning and will likely attempt once more to break above the 200-day moving average. Long-term US interest rates are still well-behaved trading around the 2.8% level and the VIX Index has stabilised just below the 20 level. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index rallied 1% today, reversing yesterday’s loss. Meituan (03690:xhkg) bounced nearly 5% after its 9% drop yesterday due to a Reuters story suggesting that Tencent (00700:xhkg) plans to divest its 17% stake (USD24 billion) in Meituan.  Tencent denied such a divesture plan last night.  Power drills and floor care equipment maker and a supplier to Home Depot (HD:xnys), Techtronic Industries (00669:xhkg) jumped more than 7% after better-than-expected results from Home Depot overnight.  On Tuesday, China’s Premier Li Keqiang held a video conference with provincial chiefs from Jiangsu, Zhejiang, Shandong, Henan, and Sichuan to reiterate the central government’s push for full use of policies to stabilize the economy.  CSI300 gained 0.6%. USD pairs, including GBPUSD, which bounced strongly off 1.2000 support  A mixed overnight session for FX as the US yields wobbled. Risk sentiment held up with the mixed US data accompanied by a less bad outcome in the US retailer earnings than expected. This made the safe-haven yen a clear underperformer, and USDJPY rose back above 134. But a clear trend in the pair is still missing and a break above 135 is needed to reverse the downtrend. Cable teased key psychological support at 1.2000 yesterday before rising later in the day above 1.2100 ahead of today’s UK CPI report, which may confirm the need for further BOE action after labor data showed wage pressures. EURUSD bounced from session lows at 1.0123 but has posted a recent bearish reversal that keeps the focus lower, particularly on any breakdown through 1.0100, the multi-week range low. USD traders will focus on today’s US Retail Sales and FOMC minutes. USDCNH – there was a brief spike higher in USDCNH earlier this week as China moved to stimulate with a small 10-basis point rate cut of the key lending rate – no drama yet, but traders should keep an eye on this very important exchange rate for larger volatility and significant break above 6.80, as Chines exchange rate policy shifts can provoke significant moves across markets. Crude oil (CLU2 & LCOV2) touched a fresh six-month low on Tuesday with Brent trading lower, in anticipation of the Iran nuclear deal being revived, before bouncing in response to the API reporting a draw in crude oil and especially gasoline stocks. While a deal with Iran could see it raise production by around one million barrels per day, Goldmans talks about a mutually beneficial stalemate for both sides with Iran wanting to avoid sanctions while the US wants to avoid higher oil prices but also the political backlash from a potential deal. EIA’s weekly crude and fuel stocks report on tap later with the market also focusing on gasoline demand and the levels of exports. Over in Europe meanwhile the Dutch TTF benchmark gas trades near an eye-popping $400 per barrel crude oil equivalent, a level that will continue to attract demand for oil-based products due to switching. Copper (COPPERUSSEP22) continues to trade within its established upward trending range after China’s Premier Li Keqiang asked local officials from six provinces to bolster pro-growth measures after weaker financing and activity data were reported earlier this week. In addition, copper is also enjoying some tailwind from rising zinc and aluminum prices after Europe's largest smelters said it would halt production and after producers in China were told to curb production in order to preserve electricity supply during the current heatwave. HG copper’s trading range has narrowed to between $3.585, the uptrend from the July low and $3.663 the 50-day moving average.   What is going on?   US housing scare broadens, industrial production upbeat US Housing starts fell 9.6% in July to an annualized 1,446k, well beneath the prior 1,599 and the expected 1,537k. Housing starts are now down for five consecutive months, and suggest a cooling housing market in the wake of higher borrowing costs and higher inflation. Meanwhile, building permits declined 1.3% in July to 1,674k from 1,696, but printed above the expected 1,650k. There will be potentially more scaling back in construction activity as demand weakens and inventory levels rise. On the other hand, industrial production was better than expected at 0.6% m/m (prev: -0.2%) in July, possibly underpinned by holiday demand but the outlook is still murky amid persistent inflation and supply chain issues. UK headline inflation hits 10.1% The highest in decades and above the 9.8% expected and for the month-on-month reading of +0.6%, higher than the +0.4% expected. Core inflation hit 6.2% vs. 5.9% expected and 5.8% in Jun. That matched the cycle high from back in April. Retail inflation rose +0.9% MoM and +12.3% YoY vs. +0.6%/+12.0% expected, respectively. The Bank of England has forecast that inflation will peak out this fall at above 13%. Reserve Bank of New Zealand hikes 50 basis points to 3.00%, forecasts 4% policy rate peak The RBNZ both increased and brought forward its peak rate forecast to 4.00%, a move that was actually interpreted rather neutrally – more hawkish for now, but suggesting that the RBNZ would like to pause after achieveing 4.00%. 2-year NZ rates were unchanged later in the session after a brife poke higher. RBNZ Governor warned in a press conference that New Zealand home prices will continue to fall. This is actually a desired outcome after a huge spike in housing speculation and prices due to low rates from the pandemic response and massive pressure from a Labor-led government that had promised lower housing costs were behind the RBNZ’s quick pivot and more aggressive hiking cycle in 2021. Walmart shares rally on improved outlook The largest US retailer surprised on both revenue and earnings in its Q2 report with most of the revenue growth coming from higher prices and not volume. The retailer now sees an EPS decline of 9-11% this fiscal year compared to previously 11-13% suggesting input cost pressures are easing somewhat. Walmart is seeing more middle and high-income customers and the retailer has also cancelled orders for billions of dollars to lower inventory levels suggesting global supply chains are improving. Walmart shares were up 5%. Home Depot still sees robust market The largest US home improvement retailer beat on revenue and earnings yesterday in its Q2 results with Q2 comparative sales up 5.8% vs est. 4.6% highlighting that volumes are falling as revenue growth is below inflation rates. The US housing market figures on housing starts and permits cemented that the US housing market is slowing down due to the recent rally in mortgage rates. Home Depot is taking a conservative approach to guidance, but the market nevertheless pushed shares 4% higher. Apple supplier Foxconn suspends its factory in Chengdu due to a power crunch Foxconn’s Chengdu factory is suspending operations for six days from August 15 to 20 due to a regional power shortage. The suspension is affecting Foxconn’s supply of iPad to Apple. The company says the impact “has been limited at the moment” but it may affect shipments if the power outage persists. The Chengdu government is imposing power curbs on industrial users to ensure electricity supply for the city’s residents. At the same time, Foxconn has started test production of the Apple watch in its factories in Vietnam. With the passage of CHIPS and Science Act earlier this month in the U.S., there have been speculations that Taiwanese and Korean chipmakers and their customers may be accelerating the building up of production capacity away from China. Big European aluminium plant to halt production Norsk Hydro’s aluminium plant in Slovakia is halting primary production by end of September due adverse conditions such as elevated electricity prices. The aluminium company would incur significant financial losses should it continue its operations.   What are we watching next?   Eyes on US retail sales today  US retail sales will be next test of the US consumer after less bad retailer earnings last night. Retail sales should have been more resilient given the lower prices at pump improved the spending power of the average American household, and Amazon Prime Day in the month possibly attracted bargain hunters as well. However, consensus expectations are modest at 0.1% m/m compared to last month’s 1.0%. FOMC minutes to be parsed for hints on future Fed moves The Federal Reserve had lifted rates by 75bps at the late July meeting to bring the Fed Funds rate to a level they have previously considered neutral, but stayed away from providing any forward guidance. The minutes of that July meeting are to be released later today, and member comments will be watched closely for any hints on the expectation for September rate hike or the terminal Fed rate. The hot July US jobs report and the cooling July inflation number, as well as a blistering three week rally in equity markets have further confused the markets since the Fed meeting, even as Fed speakers continue to push against any expectations of rate cuts as soon as ‘early’ 2023. The next chief focus for Fed guidance will remain on the Fed’s Jackson Hole, Wyoming symposium next week. Earnings to watch Today’s European earnings focus is Carlsberg and Coloplast with the former reporting strong first-half organic growth of 20.7% vs est. 15.5% suggesting breweries are seeing healthy volume and price gains. Tencent is the key focus in Asia and especially given the recent developments in China on anti-monopoly laws and its decision to divest its $24bn stake in Meituan. In the US the focus will be on Cisco which saw its growth grinding to a halt in the previous quarter. Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0900 – Eurozone Q2 GDP Estimate 1230 – US Jul. Retail Sales 1430 – US Weekly Crude Oil and Product Inventories 1800 – US FOMC Minutes 1820 – US Fed’s Bowman (Voter) to speak 2110 – New Zealand RBNZ Governor Orr before parliamentary committee 0130 – Australia Jul. Employment Change (Unemployment Rate)   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Has The Best Main Interest Rate In 7 Years

Summary:  Today we look at the US equity market rolling over a bit after hitting a key resistance point in the form of the S&P 500's 200-day moving average. We continue to note the resilient US dollar and the risk of USDCNH suddenly commanding the market's attention again if China moves to devalue its currency. We also zero in on weak Antipodean currencies as AUDUSD struggles and NZD can't get a boost from the RBNZ overnight. Crude oil, industrial metals, the latest on the dire power emergency in the EU, danger of meme stocks, earnings ahead and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Watching for signs of altitude sickness

Overview: The biggest development today in the capital markets is the jump in benchmark interest rates.  The US 10-year yield is up five basis points to 2.86%, which is about 10 bp above Monday’s low.  European yields are up 9-10 bp.  The 10-year German Bund yield was near 0.88% on Monday and is now near 1.07%.  Italy’s premium over German is near 2.18%, the most in nearly three weeks.  Although Asia Pacific equities rallied, led by Japan’s 1.2% gain, but did not include South Korea, European equities are lower as are US futures.  The Stoxx 600 is struggled to extend a five-day rally.  The Antipodeans are the weakest of the majors, but most of the major currencies are softer. The euro and sterling are straddling unchanged levels near midday in Europe.  Gold is soft in yesterday’s range, near its lowest level since August 5.  While $1750 offers support, ahead of it there may be bids around $1765. October WTI is pinned near its lows around $85.50-$86.00.  The drop in Chinese demand is a major weight, while the market is closely monitoring developments with the Iranian negotiations.  US natgas is edging higher after yesterday 6.9% surge to approach last month’s peak.  Europe’s benchmark is 4.5% stronger today after yesterday’s 2.7% pullback.  Iron ore fell (3.9%) for the fourth consecutive decline. The September contract that trades in Singapore is at its lowest level since July 22.  September copper is a little heavier but is still inside Monday’s range.  September wheat is extending its pullback for the fourth consecutive session.  It had risen in the first four sessions last week. It is moving sideways in the trough carved over the past month.    Asia Pacific   The Reserve Bank of New Zealand delivered the anticipated 50 bp rate hike and signaled it would continue to tighten policy    It did not help the New Zealand dollar, which is posting an outside day by trading on both sides of yesterday's range.  The close is the key and below yesterday's low (~$0.6315) would be a bearish technical development that could spur another cent decline.  It is the RBNZ's fourth consecutive half-point hike, which followed three quarter-point moves.  The cash target rate is at 3.0%.  Inflation (Q2) was stronger than expected rising 7.3% year-over-year.  The central bank does not meet again until October 5, and the swaps market has a little more than a 90% chance of another 50 bp discounted.    Japan's July trade balance deteriorated more than expected    The shortfall of JPY1.44 trillion (~$10.7 bln) form JPY1.40 trillion in June.  Exports slowed to a still impressive 19% year-over-year from 19.3% previously, while imports rose 47.2% from 46.1% in June.  The terms-of-trade shock is significant in both Japan and Europe.  Japan's ran an average monthly trade deficit of about JPY1.32 trillion in H1 22 compared with an average monthly surplus of JPY130 bln in H1 21.  The eurozone reported an average shortfall of 23.4 bln euros in H1 22 compared with a 16.8 bln average monthly surplus in H1 21.  The two US rivals, China, and Russia, have been hobbled by their own actions, while the two main US economic competitors, the eurozone and Japan are experiencing a dramatic deterioration of their external balance,     The 11 bp rise in the US two-year yield between yesterday and today has helped lift the US dollar to almost JPY135.00, a five-day high   It has met the (50%) retracement target of the downtrend since the multiyear peak in mid-July near JPY139.40.  The next target is the high from earlier this month around JPY135.60.  and then JPY136.00.  Initial support now is seen near JPY134.40.  After recovering a bit in the North American session yesterday, the Australian dollar has come under renewed selling pressure and is trading at five-day lows below the 20-day moving average (~$0.6990).  It has broken support in the $0.6970-80 area to test the trendline off the mid-July low found near $0.6965.  A break could signal a move toward $0.6900-10.  The gap created by yesterday's high US dollar opening against the Chinese yuan was closed today as yuan recovered for the first day in three sessions.  Monday's high was CNY6.775 and yesterday's low was CNY6.7825.  Today's low is about CNY6.7690.  For the second consecutive session, the PBOC set the dollar's reference rate a little lower than the market (median in Bloomberg's survey) expected (CNY6.7863 vs. CNY6.7877).  The dollar has risen to almost CNH6.82 in the past two sessions and still trading a little above CNH6.80 today but was sold to nearly CNH6.7755 where is has found new bids.      Europe   The UK's headline CPI accelerated to 10.1% last month from 9.4% in June    It was above market expectations and the Bank of England's forecast for a 9.9% increase.  Although the rise in food prices (2.3% on the month and 12.7% year-over-year) lifted the headline, the core rate, which excludes food, energy, alcohol, and tobacco rose to 6.2% from 5.8% and was also above expectations (median forecast in Bloomberg's survey was for 5.9%).  Producer input prices slowed, posting a 0.1% gain last month for a 22.6% year-over-year pace (24.1% in June).  However, output prices jumped 1.6% after a 1.4% gain in June.  This puts the year-over-year pace at 17.1%, up from 16.4% previously.  The bottom line is that although the UK economy contracted in Q2 and the BOE sees a sustained contraction beginning soon, the market recognize that the monetary policy will continue to tighten.  The market swaps market is fully pricing in a 50 bp hike at the mid-September meeting and is toying with the idea of a larger move (53 bp of tightening is discounted).    What a year of reversals for Germany    After years of pressure from the United States and some allies in Europe, Germany finally nixed the Nord Stream 2 pipeline with Russia.  Putin also got Germany to do something that several American presidents failed to achieve and that is boost is defense sending in line with NATO commitments. The energy crunch manufactured by Russia is forcing Germany to abandon is previous strategy of reducing coal and closing down its nuclear plants.  Ironically, the Greens ae in the coalition government and recognize little choice.  A formal decision on three nuclear plants that were to be shuttered before the end of the year has yet to be made, but reports confirm it is being discussed at the highest levels.     Germany's one-year forward electricity rose by 11% to 530.50 euros a megawatt-hour in the futures market years, a gain of more than 500%     France, whose nuclear plants are key to the regional power grid, is set to be the lowest in decades, according to reports.  France has become a net importer of electricity, while the extreme weather has cut hydropower output and wind generation is below seasonal norms.  The low level of the Rhine also disrupts this important conduit for barges of coal and oil. Starting in October, German households will have a new gas tax (2.4-euro cents per kilowatt hour for natural gas) until 1 April 2024. Economic Minister Habeck estimated that for the average single household the gas tax could be almost 100 euros a month, while a couple would pay around 195 euros.  Also, starting in October, utilities will be able to through to consumers the higher costs associated with the reduction of gas supply from Russia.  This poses upside risk to German inflation.     The euro held technical support near $1.0110 yesterday and is trading quietly today in a narrow (~$1.0150-$1.0185) range today    Yesterday was the first session since July 15 that the euro did not trade above $1.02.  The decline since peaking last week a little shy of $1.0370 has seen the five- and 20-day moving averages converge and could cross today or tomorrow for the first time since late July. We note that the US 2-year premium over German is testing the 2.60% area.  It has not closed below there since July 22.  Sterling held key support at $1.20 yesterday and traded to almost $1.2145 today, which met the (50%) retracement objective of the fall from last week's $1.2275 high.  The next retracement (61.8%) is closer to $1.2175.  The UK reported employment yesterday, CPI today, and retail sales ahead of the weekend.  Retail sales, excluding gasoline have fallen consistently since last July with the exception of October 2021 and June 2022.  Retail sales are expected to have slipped by around 0.3% last month.     America   The Empire State manufacturing August survey on Monday and yesterday's July housing starts pick up a thread first picked up in the July composite PMI, which fell from 52.3 to 47.7 of some abrupt slowing of economic activity  The Empire State survey imploded from 11.1 to -31.3.  Housing starts fell 9.6%, more than four-times the pace expected (median Bloomberg survey -2.1%).  It was small comfort that the June series was revised up 2.4% from initially a 2.0% decline.  The 1.45 mln unit pace is the weakest since February 2021 and is about 9% lower than July 2021.  However, offsetting this has been the strong July jobs report and yesterday' industrial production figures.  The 0.6% was twice the median forecast (Bloomberg's survey) and the June decline (-0.2%) was revised away. The auto sector continues to recover from supply chain disruptions, and this may be distorting typically seasonal patterns.  Sales are rose in June and July, the first back-to-back gain in over a year. To some extent, supply is limiting sales, which would seem to encourage production.  Outside of autos, output slowed (year-over-year) for the third consecutive month in July.     Today's highlights include July retail sales and the FOMC minutes     Retail sales are reported in nominal terms, which means that the 13% drop in the average retail price of gasoline will weigh on the broadest of measures.  However, excluding auto, gasoline, building materials, and food services, the core retail sales will likely rise by around 0.6% after a 0.8% gain in June.  The most important thing than many want to know from the FOMC minutes is where the is bar to another 75 bp rate hike.  The Fed funds futures market has it nearly 50/50.     Canada's July CPI was spot on forecasts for a 0.1% month-over-month increase and a 7.6% year-over-year pace (down from 8.1%)     However, the core rates were firm than average increased.  The market quickly concluded that this increases the likelihood that the central bank that surprised the market with a 100 bp hike last month will lift the target rate by another 75 bp when it meets on September 7.  In fact, the swaps market sees it as a an almost 65% probability, the most since July 20.  Canada reports June retail sales at the end of the week.  The median forecast in Bloomberg's survey is for a 0.4% gain, but even if it is weaker, it is unlikely to offset the firm core inflation readings.     The dollar-bloc currencies are under pressure today, but the Canadian dollar is faring best, off about 0.25% in late morning trading in Europe     The Aussie is off closer to 0.75% and the Kiwi is down around 0.5%.  US equities are softer. The greenback found support near CAD1.2830 and is near CAD1.2880.  Monday and Tuesday's highs were in the CAD1.2930-5 area and a break above there would target CAD1.2985-CAD1.3000.  However, the intraday momentum indicators are overextended, and initial support is seen in the CAD1.2840-60 area. The greenback has forged a shelf near MXN19.81 in recent days.  It has been sold from the MXN20.83 area seen earlier this month.  It has not been above MXN20.05 for the past five sessions.  A move above there, initially targets around MXN20.20.  The JP Morgan Emerging Market Currency Index is off for the third consecutive session. If sustained, it would be the longest losing streak since July 20-22.     Disclaimer   Source: Markets Look for Direction

Dutch TTF Gas is resuming uptrend taking out July peak testing the 0.618 Fibonacci retracement at around €242.75.RSI has broken its falling trend and is likely to trade out/cancel the divergence since mid-July. If Dutch gas closes above the 0.618 retracement the 0.764 retracement at around 281.82 is next level likely to be reached. The upper rising trend line is likely to be reached and possibly broken in a gas price that seems to accelerate.To reverse the uptrend a close below 187.50 is needed.However, a correction over the next couple of days is not unlikely given the Spinning Top Candle formed yesterday. IT is often a top and reversal indicator but needs to be confirmed by a bearish candle the following day. IF Dutch Gas closes above its peak the potential top and reversal is demolished. Source: Saxo Group Henry Hub Gas has taken out resistance at the 0.618 retracement at around $8.90 and now also 0.764 retracement indicating previous highs at $9.66-9.75 are likely to be tested. If Henry Hub Gas closes above previous highs new price targets Source: Saxo Group Brent Crude oil continue its downtrend closing in on support at around $90. RSI is testing previous lows. There is divergence indicating a weakening of the downtrend but if RSI makes a new low the $90 support could be broken. Next support would be at around the 0.764 retracement at 85.76To set the downtrend on pause a close above 100.38. That will most likely not reverse the trend but merely just put it on pause. Source: Saxo Group WTI Crude oil was rejected at the short-term falling trendline and is now back below the 0.618 retracement. Next support at 81.90. There is divergence on RSI indication the downtrend is weakening. However, if RSI closes below If WTI closes back above the 200 SMA i.e. above $95 thereby also breaking above the short-term falling trendline, a larger correction to around 105-110 is likely. Source: Saxo Group Carbon Emissions broke its falling trendline last week and has now also broken above resistance at 92.75 closing in on its all-time high just below €100. RSI is entering over-bought territory but there is no divergence indicating higher levels (above 100) is likely. However, do expect a correction from just below previous highs.            Source: Saxo Group   Source: Technical Update - Natural Gas powers higher. Oil downtrend weakening, close to and end? Carbon Emission close to all-time highs

Summary:  We are used to not think about the energy sector, but the galloping global energy crisis has illuminated our deficits in primary energy due to years of underinvestment in fossil fuels and renewable energy sources inability to scale fast enough with the green transformation and electrification of our economy. It seems more likely now that the non-renewable and the renewable energy sector will both provide attractive returns as we will need both to overcome our short-term energy crisis and long-term aspirations of a greener energy future. The energy crisis keeps getting worse Electricity prices in Europe are nine times higher than the historical average since 2007 as lack of investments and cutting the ties to Russia’s energy supplies are severely constraining available energy in society. Since before the pandemic we have written many equity notes on the green transformation which involves building out renewable energy sources and electrifying everything in the economy to reduce the carbon emissions involved with our current living standard. Switching a large part of the transportation sector to electricity or green fuels, switching the heating source from natural gas to renewable energy through electrification (air-to-water heat pumps) etc. is very difficult as our rising wealth (measured by GDP) is finely mapped to carbon emissions over the past 300 years. We described this in our note The inconvenient truth on energy and GDP. Decoupling our wealth generating function from that of carbon emissions is probably the greatest task humans has ever set out to do. German baseload electricity 1 year forward | Source: Bloomberg There is not ‘one solution’ that fixes our energy crisis As BP’s 2022 Statistical Review of World Energy pictures primary energy demand in 2021 eclipsed 2019 suggesting the world’s demand for energy is now higher than before the pandemic and the usage of fossil fuels (82%) is only slightly down compared to five years ago (85%). We very much still live in a fossil fuel based economy. Things will change over time and the share of fossil fuels will likely decline, but the idea that the world can do the green transformation by electrifying everything based on renewable energy sources is naïve. Investors should also remember that the change in primary energy demand is mostly driven by the non-OECD countries. Renewable energy does not scale fast enough for a complete transition due to the speed on electrification and recently the CEOs of Orsted and Vestas complained about bureaucracy related to get new offshore wind power projects approved. The recent Climate & Tax Bill is acknowledging that we will need oil and gas for longer than expected just three years ago and thus our current energy crisis will allow both renewable energy and fossil fuel energy to be good investments in parallel. Renewable energy is the third best theme basket this year while the commodities basket (which includes oil & gas and mining companies) is the best performer. Our view of the future of energy is that there is no ‘one solution’ to our energy problem. We must move to a mindset of energy diversification. We will need many different sources of energy and never rely too much on one source. Germany’s reliance on natural gas for its economic model has proved fragile. Even France’s concentrated bet on nuclear power has proved to be fragile due to corrosion and now too hot rivers. The world must invest in all types of energy and thus our view is that investors mut get broad exposure to energy going forward. The non-renewable energy sector at a glance In this equity note we will focus on the non-renewable energy because this is the part of the energy sector which has changed the most relative to market pricing and expectations and where there is more room for valuations changing. Despite high oil and gas prices the energy sector is still relatively cheap as we described already back in May in our note Global energy stocks are the cheapest in 27 years where we measured valuation on the free cash flow yield. The high oil and gas prices have also led to record profits for refiners and recently the highest quarterly profit ever recorded in the global energy sector which we described in our note Earnings hit new all-time high as inflation lifts all boats. The global energy sector (defined by GICS and being the non-renewable energy sector) is still cheap relative to the global equity market with the 12-month EV/EBITDA being two standard deviations below the average valuation spread since 2005. In terms of total return the global energy sector has delivered a higher return than the global equity market since 1995 (see chart). It is also worth noting that measured on the 12-month forward EV/EBITDA the renewable energy sector has twice the valuation level compared to the non-renewable energy sector reflecting the different in expectations for the future priced in the market. As we described in our Q1 Outlook the current dividend yield and expected dividend growth suggest that the global energy sector has an expected long-term return of 10% annualised subject of course to a large degree of uncertainty related to equity valuation compression in the industry or lower dividend growth in the future than expected today. Global energy vs global equities | Source: Bloomberg The easiest way to invest in the energy sector is through ETFs tracking the sector and most investors should do that. A different approach is investing in specific parts of the non-renewable energy sector. The tables below show the top five company on market value in each of the GICS industries in the GICS energy sector. As the five-year total returns in USD column show, the industries related only to drilling and providing equipment for drilling activities have done the worst because the decline in capital expenditures since 2015 has dried up activity for this industry. The integrated oil and gas majors have done better due to refining and trading businesses. Over the past five years, the best performing industries in the energy sector have been refining and marketing due to the crack spreads (the difference between crude oil and refined products) have expanded during the pandemic. The global coal industry has also done very well which in terms of climate change and reducing carbon emissions is a sad observation but we should be aware of that the primary fuel source for power generation globally is still coal. GICS industries in the energy sector | Source: Bloomberg and Saxo Group Source: How to invest in energy and the unfolding energy crisis?

Summary:  The stronger US dollar is beginning to dominate across FX, and we haven’t even seen risk sentiment roll over badly yet, although this time it could be the US dollar itself that defines and drives financial conditions across markets. Elsewhere, we have seen an interesting fundamental test of sterling over the last couple of sessions, as sterling has begun rolling over today, even as a ripping increase in rate tightening bets in the wake of another hot CPI print out of the UK this morning. FX Trading focus: USD dominating again, GBP rate spike impact fading fast and indicating danger ahead for sterling. RBNZ hawkishness fails to impress the kiwi. The US dollar rally is broadening and intensifying, and US long yields are threatening back higher, which is finally pushing back against the recent melt-up in financial conditions/risk sentiment. The US July Retail Sales report looks solid, given the +0.7% advance in “ex Autos and Gas” sales after the June spike in average nationwide gasoline price to the unprecedented 5 dollar/gallon level. Yes, July gasoline prices were lower than June’s, but there wasn’t a huge delta on the average price for the month, and the impact of lower gas prices will likely be more in the August full month of vastly lower prices – presumably averaging closer to 4/gallon, together with the psychological relief that the spike seems in the rear view mirror, even if we can’t know whether a fresh spike awaits in the fall, after the draw on strategic reserves is halted. A strong US dollar, higher US yields and a fresh unease in risk sentiment are a potential triple whammy in which the US dollar itself is the lead character, as USDJPY has reversed back above 135.00 even before the US data, suggesting a threat back toward the cycle highs. AUDUSD has entirely reversed its upside sprint above 0.7000, refreshing its bearish trend after a squeeze nearly to the 200-day moving average there. Elsewhere, EURUSD and GBPUSD are a bit stuck in the mud, watching 1.0100 and 1.2000 respectively. The most important additional aggravator of this USD volatility in coming sessions would be a significant break higher in USDCNH if China decides it is tiring again of allowing the CNH to track USD direction at these levels. The pressure has to be building there after the PBOC’s rate cut at the start of the week. The UK July CPI release this morning raised eyebrows with another beat of expectations across the board, the day after strong earnings data. The 10.1% headline figure represents a new cycle and the month-on-month figure failed to moderate much, showing +0.6% vs. +0.4% expected. Core inflation also rose more than expected, posting a gain of 6.2% YoY and thus matching the cycle high from  April. The Retail Price Index rose 12.3% vs. 12.1% expected. The market reaction was easily the most interesting, as we have seek UK yields flying higher but failing to impress sterling much after a bit of a surge yesterday and into this morning. Now, sterling is rolling over despite a 40 basis point advance(!) in the 2-year swap rate from yesterday’ open, much of that unfolding in the wake of the CPI release today. Chart: GBPUSD Not that much drama at the moment in the GBPUSD chart, but that is remarkable in and of itself, as the soaring UK yields of yesterday and particularly today in the wake of a higher than expected CPI release are not doing much to support sterling. When rate moves don’t support a currency, it is starting to behave somewhat like an emerging market currency, a dangerous signal for the sterling, where we watch for a break of 1.2000 to usher in a test of the cycle lows below 1.1800, but possibly even the pandemic panic lows closer to 1.1500. The Bank of England hikes will only a accelerate the erosion of demand and slowdown in the UK economy that will lead to a harsh recession that the Bank of England itself knows is coming, but may have to prove slow to react to due to still elevated inflation levels, in part on a weak currency. Source: Saxo Group The RBNZ hiked fifty basis points as expected overnight and raised forward guidance for the Official Cash Rate path to indicate the expectation that the OCR will peak near 4%, a raising and bringing forward of the expected rate peak for the cycle. In the press conference, RBNZ Governor Orr spelled out the specific guidance that he would like to get the rate to 4% and take a significant pause to see if that is enough. “Our view is that sitting around that 4% official cash rate level buys the monetary policy committee right now significant comfort that we would have done enough to see inflation back to our remit.” NZ short rates were volatile, but hardly changed by the end of the day, meaning that NZD direction defaulted to risk sentiment, with a fresh dip in AUDNZD erased despite a weak AUD, and NZDUSD confirming a bearish reversal. Table: FX Board of G10 and CNH trend evolution and strength. Note the big shift in USD momentum, the most notable on the chart, although the absolute value of the SEK negative shift has been even larger over the last few days as EU woes and the growth outlook weigh even more heavily on SEK, which is often leveraged to the EU outlook, also as EURSEK has now failed to progress lower after a notable break below the 200-day moving average. Note the AUD negative shift as well, with sluggish wage growth data overnight for Q2 offering no helping hand. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. USDJPY looks to flip back to a positive trend on a higher close today or tomorrow, the recent flip negative in GBPUSD looks confirmed on a hold below 1.2000, and AUDUSD looks a matter of time before flipping negative as well, while USDCAD has beaten it to the punch – although a more forceful upside trend signal there would be a close above 1.3000 again. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1800 – US FOMC Minutes 1820 – US Fed’s Bowman (Voter) to speak 2110 – New Zealand RBNZ Governor Orr before parliamentary committee 0130 – Australia Jul. Employment Change (Unemployment Rate)   Source: FX Update: GBP in danger as rate spike fails to support. USD dominating.

Summary:  US equities traded a bit lower yesterday after the S&P 500 challenged the 200-day moving average from below the prior day for the first time since April in the steep comeback from the June lows. Sentiment was not buoyed by the FOMC minutes of the July meeting suggesting the Fed would like to slow the pace of tightening at some point. Crude oil rose from a six-month low on bullish news from the US and OPEC.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rolled over yesterday wiping out the gains from the two previous sessions and the index futures are continuing lower this morning trading around the 4,270 level. US retail sales for July were weak and added to worries of the economic slowdown in real terms in the US. The 10-year yield is slowing crawling back towards the 3% level sitting at 2.87% this morning. A move to 3% and potentially beyond would be negative for equities. The next levels to watch on the downside in S&P 500 futures are 4,249 and then 4,200 Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Shares in the Hong Kong and mainland China markets declined. China internet stocks were weak across the board with Tencent (00700:xhkg) +2.7% and Meituan (03690:xhkg) +1%, being the positive outliers. Tencent reported a revenue decline of 3% y/y in Q2, weak, but in line with market expectations. Non-GAAP operating profit was down 14% y/y to RMB 36.7bn, and EPS fell 17% y/y to RMB 2.90 but beating analyst estimates. Revenues from advertising at -18% y/y were better than expected. In the game segment, weaker mobile game revenues were offset by stronger PC game revenues. Beer makers outperformed China Resources Beer (00291:xhkg) +3.8%, Tsingtao Brewery (00168:xhkg) +1.7%. COSCO Shipping Energy Transportation (01138:xhkg) made a new high at the open on strong crude oil tanker freight rates before giving back some gains. USD pairs as the USD rally intensifies The US dollar rally broadened out yesterday, as USDJPY retook the 135.00 area, but needs to follow through above 135.50-136.00 to take the momentum back higher. Elsewhere, AUDUSD has broken down again on the move down through 0.7000 and USDCAD has posted a bullish reversal, needing 1.3000 for more upside confirmation. The GBPUSD pair looks heavy despite a massive reset higher in UK rates in the wake of recent UK inflation data, with a close below 1.2000 indicating a possible run on the sub-1.1800 lows, while EURUSD is rather stuck tactically, as price has remained bottled up above the 1.0100 range low. USDCNH, as discussed below, may be a key pair for whether the USD rally broadens out even more aggressively, and long US treasury yields and risk sentiment are other factors in the mix that could support the greenback, should the 10-year US treasury benchmark move higher toward 3.00% again or sentiment roll over for whatever reason. Certainly, tightening USD liquidity could prove a concern for sentiment as the Fed turns up the pace of quantitative tightening – something it seems behind schedule in doing if we look at the latest weekly Fed balance sheet data.  USDCNH The exchange rate edged higher again to above 6.80 overnight after a brief spike higher earlier this week as China’s PBOC moved to stimulate with a small 10-basis point rate cut of the key lending rate. There is no real drama in the exchange rate yet after the significant rally this spring from below 6.40 to 6.80+, but traders should keep an eye on this very important exchange rate for larger volatility and significant break above 6.83, as China’s exchange rate policy shifts can provoke significant volatility across markets. Crude oil Crude oil (CLU2 & LCOV2) bounced from a six-month low on Wednesday in response to a bullish US inventory report that saw big declines in gasoline and crude oil stocks as demand from US motorist climbed to the highest this year while crude exports reached a record $5 million barrels per day. The prospect for an Iran nuclear deal continues to weigh while OPEC’s new Secretary-General said spare capacity was becoming scarce. US strategic reserves are now at the lowest level since 1985 and the government has by now sold around 90% of what was initially offered in order to bring down prices. While demand concerns remain a key driver for macroeconomic focused funds selling crude oil as a hedge we notice a renewed surge in refinery margins, especially diesel, supported by increased demand from gas-to-fuel switching Gold and silver Gold has so far managed to find support at $1759, the 38.2% retracement of the July to August bounce, after trading weaker in response to a stronger dollar and rising yields. Silver (XAGUSD) meanwhile has almost retraced half of its recent strong gains with focus now on support at $19.50. The latest driver being the FOMC minutes which signaled ongoing interest-rate hikes and eventually at a slower pace than the current. The short-term direction has been driven by speculators reducing bullish bets following a two-week buying spree in the weeks to August 9 which lifted the net by 63k lots, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication investor, for now, trusts the FOMC’s ability to bring down inflation within a relatively short timeframe   What is going on? Financial conditions are tightening, if modestly. Recent days have brough a rise in short US treasury yields, but more importantly it looks as though some of the risk indicators like corporate credit spreads may have bottomed out here after a sharp retreat from early July highs – one Bloomberg high yield credit spreads to US treasuries peaked out above 5.75% and was as low as 4.08% earlier this week before rising to 4.19% yesterday, with high yield bond ETFs like HYG and JNK suffering a sharp mark-down yesterday of over a percent. Factors that could further aggravate financial conditions include a significant CNH weakening, higher US long treasury yields (10-year yield moving back toward 3.00%, for example) or further USD strength. Adyen sees margin squeeze. One of Europe’s largest payment companies reports first-half revenue of €609mn vs est. €615mn despite processed volume came significantly above estimates at €346bn suggesting the payments industry is experiencing pricing pressures. Cisco outlook surprises. The US manufacturer of networking equipment surprised to the upside on both revenue and earnings in its fiscal Q4 (ending 30 July), but more importantly, the company is guiding revenue growth in the current fiscal quarter of 2-4% vs est. -0.2% and revenue growth for the current fiscal year of 4-6% vs est. 3.3%. Cisco said that supply constraints are beginning to ease and that customer cancellations are running below pre-pandemic levels, and that the company’s growth will be a function of availability. Stale FOMC minutes hint at sustained restrictive policy, but caution on pace of tightening. Fed’s meeting minutes from the July meeting were released last night, and officials agreed to move to restrictive policy, with some noting that restrictive rates will have to be maintained for some time to bring inflation back to the 2% target. Still, there was also talk of slowing the pace of rate hikes ‘at some point’, despite pushing back against easing expectations for next year. The minutes were broadly in-line with the market’s thinking, and lacked fresh impetus needed to bring up the pricing of Fed’s rate hikes. Chairman Powell’s speech at the Jackson Hole Symposium next week will be keenly watched for further inputs. US retail sales were a mixed bag. July US retail sales were a little softer at the headline level than the market expected (0% growth versus the +0.1% consensus) but the ex-auto came in stronger at 0.4% (vs. -0.1% expected). June’s growth was revised down to 0.8% from 1%. The mixed data confirmed that the US consumers are feeling the pinch from higher prices, but have remained resilient so far and that could give the Fed more room to continue with its aggressive rate hikes. Lower pump prices and further improvements in supply chain could further lift up retail spending in August. The iron ore miners are resilient despite price pressures Despite China planning more fiscal stimulus to fund infrastructure investment, the iron ore (SCOA, SCOU2) price paired back 8% this week, retreating to its lowest equal level in five weeks at $101.65, a level the iron ore price was last at in December 2021. Since March, the iron ore price has retreated 37%, with the most recent pull back being fueled by concerns China’s Covid cases are surging again with cases at a three-month high, as the outbreak worsens in the tropical Hainan province. Despite iron ore pulling back, shares in iron ore majors like BHP, remain elevated, up off their lows, with BHP’s shares trading 14% up of its July low, and moving further above its 200-day moving average, on hopes of commodity demand picking up. What are we watching next? Norway’s central bank guidance on further tightening. The Norges Bank is expected to hike 50 basis points today to take the policy rate to 1.75% despite an indication from the bank in June that the bank would prefer to shift back to hiking rates by 25 basis points, as a tight labour market and soaring inflation weigh. The path of tightening for the central bank has been an odd one, as it was the first G10 bank to actually hike rates in 2021, but finds itself with a far lower policy rate than the US, for example, which started much later with a faster pace of hikes. But NOK may react more to the direction in risk sentiment rather than guidance from the Norges Bank from here, assuming no major surprises. The EURNOK downtrend has slowed of late – focusing on 10.00 if the price action continues to back up. Japan’s inflation will surge further. Japan’s nationwide CPI for July is due on Friday. July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are grappling with high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. More government relief measures are likely to be announced, while signs of any Bank of Japan pivot away from its low rates and yield-curve-control policy are lacking. Bloomberg consensus estimates are calling for Japan’s CPI to accelerate to 2.6% y/y from 2.4% previously, with the ex-fresh food number seen at 2.4% y/y vs. 2.2% earlier.   Earnings to watch In Europe this morning, the key earnings focus is Adyen which has already reported (see review above) and Estee Lauder which is deliver a significant slowdown in figures and increased margin pressure due to rising input costs. Today’s US earnings to watch are Applied Materials and NetEase, with the former potentially delivering an upside surprise like Cisco yesterday on improved supply chains. NetEase, one of China’s largest gaming companies, is expected to deliver Q2 revenue growth of 12% y/y as growth continues to slow down for companies in China. Today: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0800 – Norway Deposit Rates 0900 – Eurozone Final Jul. CPI 1100 – Turkey Rate Announcement 1230 – US Weekly Initial Jobless Claims 1230 – Canada Jul. Teranet/National Bank Home Price Index 1230 – US Philadelphia Fed Survey 1400 – US Jul. Existing Home Sales 1430 – EIAs Weekly Natural Gas Storage Change 1720 – US Fed’s George (Voter) to speak 1745 – US Fed’s Kashkari (Non-voter) to speak 2301 – UK Aug. GfK Consumer Confidence 2330 – Japan Jul. National CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 18, 2022

Summary:  Today we note a further softening in sentiment, in part on a pick up in yields, but that story has yet to really trigger as long US treasury yields remain rangebound, if teasing important levels. We note important supports for the crude oil outlook, the crack spread picture in the energy complex, the still very low valuation of energy stocks relative to the broader market, stocks and earnings on our radar, FX developments as we keep the USDCNH chart front and center as a potential aggravator of weakening risk sentiment 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 found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: As risk sentiment rolls over, is crude oil set to rally?

Last night's publication of the minutes of the last Fed meeting, which took place at the end of July, may have affected the US dollar's trading. The policymakers touched on the regulation of the digital asset market for the first time at such a meeting. According to the published minutes, Fed officials remain very attentive to inflation risks and are committed to lowering price growth and keeping inflation expectations under control. A commitment to tightening monetary policy can take place, even if it comes at the expense of economic growth, the FOMC minutes show. The July discussion touched on the possible risks of too many and too large interest rate hikes. There was also talk that the Fed may be pursuing too much restrictive monetary policy than is necessary to restore price stability in the economy. The Fed, for the moment, seems unconcerned about GDP data and the risk of a sustained slowdown or official recession, as officials said the economy is stable for now, pointing to strong job growth, a low unemployment rate and elevated wage growth. Moreover, there was also discussion of the possibility of a later upward revision of earlier GDP readings, which are revised over time. There was also a statement regarding possible further action by the Federal Reserve. Policymakers discussed the possibility of slowing the pace of interest rate hikes at some point, but this will require data readings that can be considered satisfactory in terms of the impact of current hikes on slowing inflation. Meanwhile, for the moment, it may be crucial to maintain a restrictive stance to avoid a loosening of inflation expectations. Initially, after the release of the minutes, the EUR/USD exchange rate rose to 1.0200, before retreating to the region of 1.0150 this morning. The reaction thus appears to be mixed, without leading to a major impulse, and the exchange rate of the main currency pair has remained in consolidation since the morning of August 16. On Wall Street, on the other hand, indexes were down after the publication. The S&P500 fell 0.3 percent and the Nasdaq 100 fell 0.6 percent. The committee also turned its attention to the world of digital assets. Participants recognized the growing importance of digital assets and their increasing interconnectedness with other segments of the financial system, underscoring the need to establish a robust supervisory and regulatory framework for the sector to adequately mitigate potential systemic risks. Several participants mentioned the need to strengthen supervision and regulation of certain types of non-bank financial institutions, according to published minutes. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Highlights from the Fed minutes

Overview: The sell-off in European bonds continues today. The 10-year German Bund yield is around four basis points higher to bring three-day increase to about 22 bp. The Italian premium over Germany has risen by almost 18 bp over these three sessions. Its two-year premium is widening for the fifth consecutive session and is above 90 bp for the first time in almost three weeks. The 10-year US Treasury yield is a little softer near 2.88%. Most of the large Asia Pacific equity markets fell, with India a notable exception. Europe’s Stoxx 600 snapped a five-day rally yesterday with a 0.9% loss. It is slightly firmer today, while US futures are hovering around yesterday’s closing levels. The greenback is firm against most of the major currencies. The Australian and Canadian dollars  and Norwegian krone and sterling are the most resilient today. The Philippines, like Norway hiked 50 bp but unlike Norway, the currency has not been bought. Most emerging market currencies are softer today. Gold is trying to break a three-day slide after approaching $1760. It settled last week at $1802. October WTI found a base a little below $85.50 and is around $88.50 near midday in Europe. The week’s high was set Monday by $91.50. US natgas is up 1.1% to recoup yesterday’s loss in full. Europe’s benchmark is extended this week’s run. It finished last week near 205.85 and now is around 232.00, a 12.7% gain after 6% last week. Iron ore ended a four-day 8% slide. September copper is recovering from the early drop to near two-week lows ($354.20) and is now near 362.00. A move above yesterday’s high (~$365) would be constructive. The sell-ff in September wheat has accelerated. It is off for the fifth consecutive session and is at its lowest level since January. After falling around 3% in three days from last Friday, it is off more than 5% between yesterday and today. Asia Pacific For good reasons, Beijing and Washington suspect the other of trying to change that status quo over Taiwan  The visits by US legislators may be only the initial efforts by Congress to force a more aggressive US position. It could come to a head in the fall when a bill that wants to recognize Taiwan as a major non-NATO ally and to foster Taiwan's membership in international forums will draw more attention. Meanwhile, US-Taiwan trade talks will begin later this year that was first aired a couple of months ago. At the same time, the Biden administration has been considering lifting some of the tariffs levied by the previous administration, but China's militaristic response to the visits makes it more difficult. Biden wants to lift the tariffs not to reward Beijing but to ease the costs to Americans. The Consumer Technology Association, an industry group, estimated that the tariffs have boosted the bill for American consumer technology companies by around $32 bln. The tariffs are paid to the US government. It seems that in lieu of lifting the tariffs, a broad exclusion process is possible. Related but separately, the Nikkei Asia reported that Apple is in talks to produce its watches and computers in Vietnam for the first time  Two suppliers have been producing Apple Watches in northern Vietnam. A couple of months ago, reports indicated that Apple would more some production of its tablets to Vietnam. Apple's ecosystem is establishing a presence in Vietnam, with nearly two dozen suppliers have factories now, almost doubling since 2018. As a result of these forces and the movement of capacity outside of China, Vietnam's trade surplus with the US is exploding. The $33 bln surplus in 2016 ballooned to $91 bln last year and was nearly $58 bln in the first half. For the past five years, the dollar has traded in a roughly 2% band around VND23000. The greenback is near the upper end of the range. Australia's July jobs report was disappointing  It lost almost 87k full-time positions after gaining nearly 53k in June. Part-time positions increased (46k), leading to a 40.9k loss of overall jobs. The median forecast (Bloomberg survey) was for a gain of 25k jobs. The unemployment rate slipped to a new record low of 3.4% (from 3.5%) but this was due to a sharp drop in the participation rate (66.4% from 66.8%). Ostensibly, this could give the central bank space to be more flexible at its September 6 meeting. However, the futures market as taken it in stride that has left the odds of a 50 bp hike next month essentially unchanged around 57%. This is essentially where it was at the end of last week and the week before. Many are now familiar with China's rolling lockdowns to combat Covid and the implosion of property market, a key engine of growth and accumulation  A new threat has emerged. The extreme weather has seen water levels in Sichuan's hydropower reserves as much as 50% this month, according to report, prompting the shuttering of factories (hub for solar panels, cement, and urea). Dazhou, a city of nearly 3.5 mln people, imposed a 2 1/2-hour power cuts this week that were expanded to three hours yesterday. Office buildings in Chengdu, the provincial capital, were barred from using air conditioning. Many areas in central and northern China imposed emergency measures to ensure the availability of drinking water. The heat and drought threaten summer crops and risk greater food-driven inflation. At the same time, Shanxi, which provides about a quarter of China's coal is worried about floods, it has suspended the operation of more than 100 mines since June. The government-imposed measures to boost output and Shanxi coal output rose by around 16% in H1.  The dollar is confined to a narrow range, straddling the JPY135 area  It has held `below last week's high around JPY135.60 and above the JPY134.55, where options for $700 mln expire today. The Australian dollar has been sold aggressively this week. It began near $0.7115 and tested $0.6900 today, meeting the (50%) retracement objective of the rally from the mid-July low (~$0.6880). It was only able to make a marginal new low today, suggesting that the selling pressure has abated. The next retracement (61.8%) is closer to $0.6855. Initial resistance is seen around $0.6950. After slipping a little yesterday, the greenback returned to its recent highs against the Chinese yuan around CNY6.7960. This year's high was set in May near CNY6.8125. Between Covid lockdowns, the weather disruptions, and the continued unwinding of the property bubble, a weaker yuan may the path of least resistance. The PBOC set the dollar's reference rate at CNY6.7802 compared with expectations from Bloomberg's survey of CNY6.7806. The yuan is falling for the sixth consecutive month against the dollar. Europe The eurozone may not have completed its banking and monetary union, but the ECB said that it would harmonize how banks offer crypto assets and have sufficient capital and expertise  Crypto companies have negotiated with national authorities in several EMU member countries, but common EU licensing rules are unlikely any time soon. There is a patchwork of differing national rules, and in some countries, some types of crypto activity may require a banking license, for example. Norway's central bank hiked its deposit rate by 50 bp and indicated it would "most likely" lift rates again next month What makes today's move somewhat more aggressive that it may appear is that the hike took place at a meeting that did not include an economic update and projections for the future path of policy. Norges Bank acknowledged that the policy rate trajectory would be faster than projected in June and the inflation risks being higher for longer. The deposit rate now sits at 1.75%. Another 50 bp hike next month (September 22) seems likely followed by a 25 bp move in November, the last meeting of the year. The euro briefly popped a little above $1.02 on what was initially seen as dovish FOMC minutes in the North American afternoon yesterday  However, it returned to yesterday's lows low near $1.0145 before finding a bid. The week's low was set Tuesday slightly below $1.0125, which is ahead of the retracement objective we identified near $1.0110. The euro is consolidating as the US two-year premium over Germany falls to its lowest level in a nearly a month (2.54%), and almost 25 bp below the peak seen after the US jobs data on August 5. Labor disputes are crippling UK trains, buses, subways, and a key container port today. Sterling slipped to $1.1995, its lowest level since July 26. The nicking of the neckline of a possible double top was not a convincing violation and sterling has recovered to the $1.2060 area in the London morning. If this is not the peak in sterling, it seems close. Tomorrow, the UK is expected to report a decline in July retail sales, excluding gasoline. This measure of retail sales rose by 0.4% in June, the first increase since last October. The median forecast (Bloomberg survey) is for a 0.3% fall. The swaps market is pricing in a 50 bp hike at the mid-September BOE meeting and about a 1-in-5 chance of a 75 bp move. America US interest rates softened and dragged the dollar lower following the release of the FOMC minutes  The market seems to have focused on the concern of "many" members that it could over-tighten but there was no sign that this was going to prevent them for raising rates further. Indeed, it suggest that the risk of inflation expectations becoming embedded was greater. More hikes were appropriate, the minutes said, and a restrictive stance may be required for "some time". The minutes also played the recent pullback in commodity prices as an indicator of lower inflation, which it still says the evidence is lacking. When everything was said and done the September Fed funds futures were unchanged for the fourth consecutive session. Autos and gasoline held by retail sales in July, but excluding them, retail sales rose by 0.7%, matching the June increase  The core measure, which also excludes building materials and food services rose a solid 0.8%. Retail sales account for around 40% of personal consumption expenditures. The July PCE is due next week (August 26) and picks up service consumption too. The early call is for it to rise by 0.5%. However, it too is a nominal report, and in real terms, a 0.3%-0.4% gain would be a strong showing. The retail sales report lent credence to anecdotal stories about department stores discounting prices to move inventory. Amazon's Prime Day (July 12-13) was claimed to be the biggest so far. Online sales overall surged 2.7%. Today's data includes weekly jobless claims, the Philadelphia Fed survey, existing home sale, and the index of Leading Economic Indicators  Th four-week average of weekly jobless claims rose to 252k in the week ending August 5. Recall the four-week moving average, used to smooth out some of the noise bottomed in the week ending April 1 at 170.5k. They averaged around 238k in December 2019, which was the highest since the first half of January 2018. Continuing claims have edged higher in recent weeks, but at 1.428 mln, they are roughly 20% below the peak at the start of this year. The Philadelphia Fed survey is particularly interesting today because of the disastrous Empire State survey. The median forecast in Bloomberg's survey is for a -5 reading after -12.3 in July. Meanwhile, existing home sales have fallen for five months through June. In fact, new home sales have been fallen every quarter since the end of 2020, with the exception of Q3 21. They fell by an average of 1.7% in Q1 22 and 3.8% in Q2 22. The median forecast is for a nearly 5% decline in July. The market tends not to get excited about the leading economic index series. Economists expected the fifth consecutive decline. The only month it rose this year was February. The US dollar extended its recovery against the Canadian dollar to reach almost CAD1.2950, its highest level since August 8 today  It was pressed lower by new offers in the European morning that drove it back to almost CAD1.2900. The market may take its cues from the S&P 500 and the general risk appetites in the North American session. With the intraday momentum indicators stretched, yesterday's post-FOMC minutes low near CAD1.2880 may offer sufficient support. The greenback rose to a five-day high against the Mexican peso yesterday around MXN20.09. It is consolidating and straddling the MXN20.00 area. Our reading of the technical condition favors the dollar's upside, and the first important target is near MXN20.20. The US dollar gapped higher against the Brazilian real yesterday and approached the BRL5.22 area, where the 20-day and 200-day moving averages converge. The opening gap was closed late on the pullback spurred by the reading of FOMC minute headlines. The price action is similar to the peso, where the dollar has traded heavily since last month but appears to have found a bottom. A break above BRL5.22 would target the month's high near BRL5.3150.       Disclaimer   Source: Fed Minutes were Not as Dovish as Initially Read

The equity rally in the US didn’t pick up momentum after the Federal Reserve (Fed) released its latest meeting minutes, which sounded more hawkish-than-expected, or more hawkish-than-what-was-needed-to-give-another-boost to the US stock markets. The biggest take was that the Fed will continue tightening its policy until it sees that inflation is ‘firmly on path back to 2%’. The S&P500 fell 0.72% as Nasdaq gave back 1.20%, although the jump in the US 2-year yield was relatively soft, and the Fed funds futures scaled back the expectation of a 75 bp hike in the next meeting. Crude price completed an ABCD pattern, and it is more likely than not we see the price rebound to the $100 level in the medium run. In China, Tencent announced its first ever revenue drop as government crackdown continued taking a toll on its sales, and the pound couldn’t gain even after the above 10% inflation data boosted the Bank of England (BoE) hawks and the call fall steeper rate hikes to tame inflation in the UK. Watch the full episode to find out more! 0:00 Intro 0:28 As expected, Fed minutes were more hawkish-than-expected 3:39 Crude oil has more chance to rebound than to fall 6:02 Tencent posts first-ever revenue drop 7:14 Apple extends gains, but technicals warn of correction 8:38 Pound unable to extend gains despite rising Fed hawks’ voices Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #minutes #USD #GBP #inflation #Tencent #Alibaba #earnings #crude #oil #natural #gas #coal #futures #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel. The result being an increased gas-to-fuel switching supporting the demand outlook for crude oil. Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driving by China’s troubled handling of Covid outbreaks, and its property sector problems as well as rapidly rising interest rates, were the main drivers behind the selling seen across commodities in recent months. Crude oil with its strong underlying fundamentals, with tight supply driven by Russia sanctions and OPEC struggling to lift production, was the last shoe to drop and since the mid-June peak, speculators and macroeconomic focused funds have been net sellers of both WTI and Brent crude oil futures. With most of these market participants using the front of the futures curve, the selling has seen the forward curve flatten, a development that is normally viewed as price negative as it signals reduced tightness in the market. However, for that to ring true we should see inventory levels of crude oil and fuel products rise while refinery margins should ease. None of these developments have occurred and it strengthens our belief that the weakness sign has more to do with position adjustments and short positions being implemented by traders focusing on macro instead of micro.  In the week to August 9, the combined net long in Brent and WTI slumped to 304k lots a level last seen in April 2020, and 209k lots below the mid-June peak.  While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel. The result being surging gas prices as utilities are forced to buy more gas to keep the turbines running. This week the cost of Dutch TTF benchmark gas reached $400 per barrel of crude oil equivalent. Such a wide gap between oil and gas has and will continue to attract increased demand for fuel-based product at the expense of gas and this switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published the incentive to switch has increased even more, adding more upward pressure on refinery margins, so called crack spreads (EU diesel crack shown below as an example) As mentioned, the recent selling pressure together with a deteriorating macro-economic backdrop have been the main drivers behind crude oils near 40-dollar slump since mid-June. The WTI chart below points to support at $85.50, a level almost reached on Tuesday. The price action is currently confined within a declining wedge and a break to the upside could trigger a strong buying response. For that to happen the price first needs to go back above $92 and the 21-day simple moving average, currently at $92.85. Source: Saxo Bank   How to invest in energy and the unfolding energy crisis? By Peter Garnry, Head of Equity StrategySummary:  We are used to not think about the energy sector, but the galloping global energy crisis has illuminated our deficits in primary energy due to years of underinvestment in fossil fuels and renewable energy sources inability to scale fast enough with the green transformation and electrification of our economy. It seems more likely now that the non-renewable and the renewable energy sector will both provide attractive returns as we will need both to overcome our short-term energy crisis and long-term aspirations of a greener energy future.   Source: Refinery margin jump lends fresh support to crude

NetEase is a Chinese technology company that operates in three segments - online games, search engine (Youdao) and online music (Cloud Music). The company operates both in China and internationally. It is famous for games such as 'The Lord of the Rings: Rise to War', 'Vikingard', 'Lifeafter' and 'Knives Out'. Its shares have fallen more than 10% since the beginning of the year, along with other companies in the Chinese technology sector, by the Chinese government's ambiguous action in the area of interference in their operations, fears of delisting in the US and deteriorating economic indicators in China. However, it is fair to say that its price has still proved to be far more resilient to the issues mentioned above than those of Tencent, Alibaba and Baidu. The company's revenue was 23.2 billion renminbi (US$3.5 billion) in the second quarter, growing 12.8 % year-on-year, slightly beating Wall Street analysts' expectations. Cloud Music revenue grew the most to 2.2 billion renminbi ($327.2 million), rising 29.5% year on year. Online gaming remains the most important revenue stream, with Q2 revenue of 18.1 billion renminbi ($2.7 billion). This increased by 15% compared to the same period a year ago. This was mainly due to the debut of Diablo Immortal, co-developed by NetEase with Blizzard Entertainment. According to the company's report, it became the most downloaded game on the IOS platform in some regions. Major franchise titles had their longevity extended, including the fantasy series Westward Journey and Westward Journey Online, as well as Identity V and Infinite Lagrange. "Players continued to gravitate to our longstanding games in the second quarter, highlighting our strength in game operations longevity. Moreover, the launch of Diablo® Immortal™ attracted the attention of gamers around the world, showcasing our exceptional mobile game development capabilities" - stated CEO William Ding. Revenue fell sharply in the Youdao area, down 29.5% year on year. However, this is the smallest source of revenue and only amounted to 956.2 million renminbi ($142.8 million) in the quarter. Q2 saw a net profit of $790 million, due to lower costs of player retention costs compared to new player acquisitions. Earnings per share (EPS) for those listed in New York were $1.22 on an adjusted basis, beating analysts' estimates by 17 cents. NetEase shares gained almost 3% before the market opened. Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: NetEase increases profits despite declining revenues

Summary:  The simplest way to reduce your market risk is by being less invested in the market. Going all out, this means that you sell all your holdings for cash. But there are important nuances that you need to be aware of if you consider 'going cash'. Exposure possibilities When you buy stocks, bonds or any other financial instrument, you have exposed yourself to market risk. You have probably done this with the goal of being rewarded for this exposure in the form of a return. Below you see a visual representation of different types of exposure you can have to the market. If you are fully invested (all your capital is on the table), you have created maximum exposure. High rewards are possible but there is also significant risk. In the middle of the graph you will see a blue mark, where your portfolio only consists of cash. Here you have no market risk but needless to say, you won’t have any chance to make money in the markets either. You can read more about the third position, short, here     Reasons to go cash Over time, markets tend to go up. But there might be times where you feel uncomfortable with how the markets are moving. You might for example feel that the valuations are too high given the economic outlook. This could be a reason to reduce your exposure by selling all or parts of your portfolio. Another reason to go cash is flexibility. Having cash at hand means that you can act on opportunities that arise along the way. Thirdly, a cash position will enable you to absorb rising margin requirements if you invest in more complex products such as options. Lastly, a decent cash position will increase your level of comfort and confidence generally speaking. Put another way: the stronger you believe markets will go up, the more you tend to be invested. Following that line of thinking you should decrease your exposure if your conviction declines.  How to go cash If you are at a point in time where you think going cash will be the right thing for you to do for a while, let’s look at how you actually do it. The easiest answer is that you can close all your positions, i.e., sell all your financial instruments. That is the most radical solution that would leave you with a cash only position. But there are other means to reach that result. One way to remove your market risk could be to use the account value shield protection mechanism. Using this you will close all your positions if the value of your account reaches a certain (lower) level. For instance, if you have a portfolio currently worth EUR 44.307 and you want the trigger to sell everything to be EUR 42.500. This means that if your portfolio falls to EUR 42.500 the system will automatically close out and sell your positions. If you have a lower threshold you want to protect your portfolio from falling, this leaves room for a further rise of the markets, which you wouldn’t get if you sold everything. See it as a kind of stop loss under your whole portfolio. Cut your position in half. This approach leans on the saying: “If you are not sure, halve your positions”. This results in a few things. Firstly, you reduced your exposure to 50%. So, if the markets go down, your loss will also be half. Secondly, if the market goes up, you can still generate a return. Whether you reduce your current positions with 50% or 90% (or 15%), totally depends on your conviction, or worries, about the current market. Apply tight (trailing) stops to your positions. This leaves the upside intact, but it will protect you from a sharp fall in the markets. A stop loss sell order will be triggered if a lower price level is reached. In case of a trailing stop, the stop level will increase if the market goes up. As you can see, there are several ways to reduce your market risk – going all cash isn’t the only opportunity. The method you choose depends entirely on your view of the markets. If you are completely convinced that everything will fall, you might opt to sell everything. But if you are not so sure that we are on the edge of very strong market decline, other approaches might suit you better. Cash in your account One way or the other, the amount of cash has increased on your account. And that leaves the question of what to do with it. Of course, you can just leave it there. Then you will have no market exposure and you can start investing again once you are convinced that 'the only way is up'. But be aware that inflation is eating away the purchasing power of your cash! Another possibility is to invest your cash in a money market fund that gives (some) return on your investment, although these can also face negative returns depending on the financial outlook and the currency it is denoted in. Wrap up Going cash is one of the easiest ways to reduce your market risk. And although that simple, this method of reducing market risk is often overlooked. There are several ways to reduce market risk which don’t necessarily involve going all cash. Still, the most radical solution is to sell everything now. But other options exist depending on your viewpoint of the current market environment. Once you have a (maybe even 100%) cash position, it is clever to weigh the possibilities that exist to put that cash position to work in the lowest risk environment possible via e.g., a money market fund.   Source: Cashing out - the ultimate risk-off move?

EURUSD was rejected at key resistance at around 1.0360 and the falling upper trendline and is now close to test key support at around 1.01. If EURUSD closes below the support, parity is likely to be tested shortly after.RSI is still showing negative sentiment after failing to break above 60 threshold supporting the bearish picture. If RSI closes below 40 threshold combined with a EURUSD close below 1.01 down trend is confirmed., At the time of writing Bollinger bands are expanding indicating the initial stage of a (down)trend. IF EURUSD closes outside of the lower Bollinger band it is further a strong indication of a down trend.   Source: Saxo Group GBPUSD has formed a Double Top like pattern on the very short term. If GBPUSD closes below 1.20 it is confirmed and GBPUSD is likely to test July lows at around 1.1760 . If GBPUSD is to move the same distance as the difference between the peak and low of the Double Top formation after breaking 1.20 it could reach 1.1729 illustrated by the two vertical arrows. However, there could be more downside in store for GBPUSD. If it takes out 1.1760 there is not support before around 1.14. See weekly chart Source: Saxo Group     Source: Saxo Group Source: Technical Update - EURUSD and GBPUSD testing key supports. Will they hold or will EURUSD test parity again and GBPUSD drop to 1.14?

Summary:  Better than expected economic data continued to support sentiment in US in contrast to Europe, where ECB’s Schnabel's warning on the growth/inflation picture aggravated concerns. Fed speakers meanwhile continued to push for more rate hikes this year, aiding dollar strength despite lack of a clear direction in long end yields. EUR and GBP broke below key support levels, but oil prices climbed higher amid improving demand outlook but sustained supply issues. Focus now on Jackson Hole next week. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  In its second lightest volume session of the year, U.S. equities edged modestly higher, S&P 500 +0.23%, Nasdaq 100 +0.26%. As WTI crude climbed 2.7%, rebounding back above $90, the energy space was a top gainer aside from technology. Exxon Mobil (XOM:xnys) gained 2.4%.  Cisco (CSCO:xnas) surged 5.8% after reporting better-than-expected revenues. Nvidia (NVDA:xnas), +2.4% was another top contributor to the gain of the S&P 500 on Wednesday.  95% of S&P 500 companies have reported Q2 results, with about three-quarters of them managing to beat analyst estimates. On Friday there is a large number of options set to expire.  The U.S. treasury yield curve bull steepened on goldilocks hope The U.S. 2-10-year curve steepened 7bps to -32bps, driven by a 9bp decline in the 2-year yield.  In spite of hawkish Fed official comments and the August Philadelphia Fed Index bouncing back to positive territory, the market took note of the falls in the prices paid diffusion index and the prices received index from the survey and sent the short-end yields lower.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Both Hang Seng Index and CSI300 declined about 0.8%.  Tencent (00700:xhkg) rose 3.1% after reporting results that beat estimates as a result of better cost control and adverting revenues. Other China internet stocks traded lower, Bilibili (09626:xhkg) -4.2%, Baidu (09888:xhkg) -4.5%, Alibaba (09988:xhkg) -2.1%, JD.COM (09618:xhkg) -2.5%. The surge of Covid cases in China to a three-month high and the Hainan outbreak unabated after a 2-week lockdown, pressured consumer stocks.  Great Wall Motor (02333:xhkg) led the charge lower in autos, plunging near 6%.  Other automakers fell 2% to 4%.  Geely (00175:xhkg) fell 3.1% after reporting 1H earnings missing estimates.  A share Chinese liquor names declined, Kweichow Moutai (600519:xssc) -1.2%, Wuliangye Yibin (000858:xsec) -1.6%. Chinese brewers were outliner gainers in the consumer space, China Resources Beer (00291:xhkg) +4.8%, Tsingtao Brewery (00168:xhkg) +1.9%. Chinese property developers traded lower with Country Garden (02007:xhkg) losing the most, -5.2% , after warning that 1H earnings may have been down as much as 70%. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios at some financial institutions.  EURUSD and GBPUSD break through key support levels Dollar strength prevailed into the end of the week with upbeat US economic data and a continued hawkish Fedspeak which continued to suggest more Fed rate hikes remain in the pipeline compared to what the market is currently pricing in. EUR and GBP were the biggest loser, with both of them breaking below key support levels. EURUSD slid below 1.0100 handle while GBPUSD broke below 1.2000 despite a selling in EGBs and Gilts. USDJPY also broke above 136 in early Asian trading hours despite lack of a clear direction in US 10-year yields and a slide in 2-year yields. AUDUSD testing a break below 0.6900 as NZDUSD drops below 0.6240. Crude oil prices (CLU2 & LCOV2) Oil prices reversed their drop with WTI futures back above $90/barrel and Brent futures above $96. Upbeat US economic data has supported the demand side sentiment in recent days. Moreover, President Xi’s comment that China will continue to open up the domestic economy also aided the demand equation. Supply concerns, meanwhile, were aggravated by geopolitical tension around a potential incident at the Zaporizhzhia nuclear plant in Ukraine. Meanwhile, Shell hinted at reducing the capacity of Rhineland oil refinery due to the lower water level on the Rhine river and said the situation regarding supply is challenging but carefully managed. Gold (XAUUSD) still facing mixed signals The fate of gold has been turned lower again this week with the yellow metal facing decline of 2.5% so far in the week and breaking below the $1759 support, the 38.2% retracement of the July to August bounce. Stronger dollar, along with Fed’s continued hawkish rhetoric, weighed. Silver (XAGUSD) is also below the key support at $19.50, retracing half of its recent gains. The short-term direction has been driven by speculators reducing bullish bets, but with inflation remaining higher-for-longer, the precious metals can continue to see upside in the long run. What to consider? Existing home sales flags another red for the US housing market US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. US economic data continues to be upbeat The Philly Fed survey outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). new orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously. While this may be a good signal, survey data tends to be volatile and a long-term trend is key to make any reasonable conclusions. Jobless claims also slid to 250k still suggesting that the labor market remains tight. Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard flagged another 75 basis point rate hike at the September meeting and hinted at 3.75-4% Fed funds rate by the end of the year with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kahskari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 25. Japan’s inflation came in as-expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside. Cisco’s revenues came in flat, beating a previously feared decline Cisco Systems reports July 2022 quarter revenues of USD13.1 billion, down 0.2% YoY but better than the consensus of a 3% decline.  Net income came in at USD3.4 billion, -3.2% YoY but more than 1 percentage point above consensus.  The fall in product order was also smaller than feared.  The company guided the fiscal year 2023 revenue growth of +4% to +6%, ahead of the 3% expected and FY23 EPS of USD3.49 to USD3.56, in line with expectations as gross margin pressures are expected to offset the impact of higher sales.  NetEase’s Q2 results beat NetEase (09999:xhkg/NTES:xnas) reported above-consensus Q2 revenues, +13% YoY, and net profit from continuing operations, +28%.  PC online game revenues were above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version.  Mobile game segment performance was in line.  Geely Automobile 1H earnings missed estimates on higher costs Chinese automaker Geely reported higher-than-expected revenue growth of 29%YoY in 1H22 but a 35% YoY decline in net profit which was worse than analyst estimates.  The weakness in profit was mainly a result of a 2.6 percentage point compression of gross margin to 14.6% due to higher material costs and production disruption, higher research and development costs, and the initial ramping-up of production of the Zeekr model.  The company maintains its sales volume target of 1.65 million units, an growth of 24% YoY, for the full year of 2022.    For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 19, 2022

Summary:  Equity markets managed a quiet session yesterday, a day when the focus is elsewhere, especially on the surging US dollar as EURUSD is on its way to threatening parity once again, GBPUSD plunged well below 1.2000 and the Chinese renminbi is perched at its weakest levels against the US dollar for the cycle. Also in play are the range highs in longer US treasury yields, with any significant pull to the upside in yields likely to spell the end to the recent extended bout of market complacency.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures bounced back a bit yesterday potentially impacted by the July US retail sales showing that the consumer is holding up in nominal terms. The key market to watch for equity investors is the US Treasury market as the US 10-year yield seems to be on a trajectory to hit 3%. In this case we would expect a drop in S&P 500 futures to test the 4,200 level and if we get pushed higher in VIX above the 20 level then US equities could accelerate to the downside. Fed’s Bullard comments that he is leaning towards a 75 basis point rate hike at the September meeting should also negatively equities here relative to the expectations. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index edged up by 0.4% and CSI300 was little changed. As WTI Crude bounced back above $90/brl, energy stocks outperformed, rising 2-4%. Technology names in Hong Kong gained with Hang Seng Tech Index (HSTECH.I) up 0.6%. Investors are expecting Chinese banks to cut loan prime rates on Monday, following the central bank’s rate cut earlier this week. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios and reviewing lending practices at some Chinese banks. The shares of NetEase (09999:xhkg/NTES:xnas) dropped more than 3% despite reporting above-consensus Q2 revenue up 13% y/y, and net profit from continuing operations up 28%.  PC online game revenue was above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version. Mobile game segment performance was in line. USD pairs as the USD rally intensifies The US dollar rally is finding its legs after follow up action yesterday that took EURUSD below the key range low of 1.0100, setting up a run at the psychologically pivotal parity, while GBPUSD slipped well south of the key 1.2000 and USDJPY ripped up through 135.50 resistance. An accelerator of that move may be applied if US long treasury yields pull come further unmoored from the recent range and pull toward 3.00%+. A complete sweep of USD strength would arrive with a significant USDCNH move as discussed below, and the US dollar “wrecking ball” will likely become a key focus and driver of risk sentiment as it is the premiere measure of global liquidity. The next key event risk for the US dollar arrives with next Friday’s Jackson Hole symposium speech from Fed Chair Powell. USDCNH The exchange rate is trading at the highs of the cycle this morning, and all traders should keep an eye out here for whether China allows a significant move in the exchange rate toward 7.00, and particularly whether CNH weakness more than mirrors USD strength (in other words, if CNH is trading lower versus a basket of currencies), which would point to a more determined devaluation move that could spook risk sentiment globally, something we have seen in the past when China shows signs of shifting its exchange rate regime from passive management versus the USD. Crude oil Crude oil (CLU2 & LCOV2) remains on track for a weekly loss with talks of an Iran nuclear deal and global demand concerns being partly offset by signs of robust demand for fuel products. Not least diesel which is seeing increasing demand from energy consumers switching from punitively expensive gas. Earlier in the week Dutch TTF benchmark gas at one point traded above $400 per barrel crude oil equivalent. So far this month the EU diesel crack spread, the margin refineries achieve when turning crude into diesel, has jumped by more than 40% while stateside, the equivalent spread is up around 25%, both pointing to a crude-supportive strength in demand. US natural gas US natural gas (NGU2) ended a touch lower on Thursday after trading within a 7% range. It almost reached a fresh multi-year high at $9.66/MMBtu after spiking on a lower-than-expected stock build before attention turned to production which is currently up 4.8% y/y and cooler temperatures across the country lowering what until recently had driven very strong demand from utilities. LNG shipments out of Freeport, the stricken export plant may suffer further delays, thereby keeping more gas at home. Stockpiles trail the 5-yr avg. by 13%. US Treasuries (TLT, IEF) The focus on US Treasury yields may be set to intensify if the 10-year treasury benchmark yield, trading near 2.90% this morning, comes unmoored from its recent range and trades toward 3.00%, possibly on the Fed’s increase in the pace of its quantitative tightening and/or on US economic data in the coming week(s). Yesterday’s US jobless claims data was better than expected and the August Philadelphia Fed’s business survey was far more positive than expected, suggesting expansion after the volatile Empire Fed survey a few days earlier posted a negative reading.   What is going on?   Global wheat prices continue to tumble ... with a record Russian crop, continued flows of Ukrainian grain and the stronger dollar pushing down prices. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat (ZWZ2) futures contract touch a January on Thursday after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. Existing home sales flags another red for the US housing market while other US economic data continues to be upbeat US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. The Philly Fed survey meanwhile outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). New orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard 2.6% with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kashkari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 26, next Friday.  Japan’s inflation came in as expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside.   What are we watching next?   Strong US dollar to unsettle markets – and Jackson Hole Fed conference next week? The US dollar continues to pull higher here, threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher.  The focus on the strong US dollar will intensify should the USDCNH exchange rate, which has pulled to the highs of the cycle above 6.80, lurch toward 7.00 in coming sessions as it would indicate that China is unwilling to allow its currency to track USD direction. As well, the Fed seems bent on pushing back against market expectations for Fed rate cuts next year and may have to spell this out a bit more forcefully at next week’s Jackson Hole conference starting on Thursday (Fed Chair Powell to speak Friday). Earnings to watch The two earnings releases to watch today are from Xiaomi and Deere. The Chinese consumer is challenged over falling real estate prices and input cost pressures on food and energy, and as a result consumer stocks have been doing bad this year. Xiaomi is one the biggest sellers of smartphones in China and is expected to report a 20% drop in revenue compared to last year. Deere sits in the booming agricultural sector, being one of the biggest manufacturers of farming equipment, and analysts expect a 12% gain in revenue in FY22 Q3 (ending 31 July).   Today: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 19, 2022

Summary:  Today we note the strengthening headwinds against the melt-up in financial conditions as the US dollar continues to rise, having now broken higher against the Euro, sterling and yen, and as a new surge in US 10-year yields threatens. Elsewhere, US Natural Gas prices ease despite a weak storage build yesterday and wheat prices are retreating rapidly. In equities, focus on Applied Materials after their earning report, Canadian Solar and a look ahead at Deere. 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 found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: USD and treasury yields pushing back against the melt-up

Summary:  The USD is breaking higher still, with important levels falling versus the Euro and yen yesterday. But the pain in sterling is most intense as presaged by the lack of a response to surging UK rates. Can the Bank of England do anything but continue to chase inflation from behind, caught between the Scylla of inflation and the Charybdis of a vicious recession? Also, USDCNH lurks at the top of the range ahead of another PBOC rate announcement on Monday. FX Trading focus: USD wrecking ball swinging again. UK faced with classic ugly choice between taking the pain via inflation or a severe recession The US dollar strength has picked up further after yesterday saw the breakdown in EURUSD below 1.0100 and a shot through 135.50 in USDJPY as longer US yields pushed to local highs. GBPUSD has been a bigger move on sterling weakness as discussed below.  A bit of resilient US data (especially the lower jobless claims than expected and a sharp revision lower of the prior week’s data taking the momentum out of the rising trend) has helped support the USD higher as longer US yields rose a bit further, taking the 10-year US treasury yield benchmark to new local highs, although we really need to see 3.00% achieved there after a few recent teases higher with no follow through higher. Looking forward to next week, the market will have to mull whether it has been too aggressive in pricing the Fed to pivot policy next year on disinflation and an easy-landing for the economy. The steady drumbeat of Fed pushback against the market’s complacency, together with a few of the recent data points (ISM Services, nonfarm payrolls, yesterday’s claims, etc.) has seen some of the conviction easing. But the key test will come next Friday, when Fed Chair Powell is set to speak on the same day we get the July PCE inflation data. Keep USDCNH on the radar through the end of today on the risk of an upside break above the range and Monday as the PBOC is set for a rate announcement (consensus expectations or another 10 bps of easing).   Chart: GBPUSD Lots at stake for sterling as discussed below, as it is a bit scary to see a currency weaken sharply despite a massive ratcheting higher in rate expectations from the central bank. The fall of 1.2000 has set in motion a focus on the 1.1760 cycle low, with an aggravated USD rise here and tightening of global financial conditions possibly quickly bringing the spike low toward 1.1500 from the early 2020 pandemic outbreak panic into focus. It is worth noting that the lowest monthly closing level for GBPUSD since the mid-1980’s is 1.2156. Without something dramatic to push back against USD strength next week from Jackson Hole, it is hard to see how this month may set the new low water mark for monthly closes. Source: Saxo Group GBPUSD slipped below 1.1900 this morning after breaking below the psychologically important 1.2000 level yesterday. As noted in the prior update, it’s remarkable to see the marked weakness in sterling despite the marking taking UK short rates sharply higher – with 2-year UK swaps over 100 basis points higher from the lows early this month. The Bank of England has expressed a determination to get ahead of the inflation spike and the market has priced in a bit more than a 50-basis-points-per-meeting pace for the three remaining BoE meetings of 2022. But is that sufficient given the UK’s structural short-comings and external deficits? Currency weakness risks adding further to spike in inflation this year. The BoE can take a couple of approaches in response: continue with the 50 bps hikes while bemoaning the backdrop and trotting out the expectation that eventually, economic weakness and easing commodity prices will feed through to drop inflation back into the range. Or, the BoE can actually get serious and super-size hikes even beyond the acceleration the market has priced, at the risk of bringing forward and increasing the severity of the coming recession. Until this week, the BoE’s anticipated tightening trajectory had prevented an aggravated weakness in sterling in broader terms, but the currency’s weakness despite a massive mark-up of BoE expectations has ratcheted the pressure on sterling and the BoE’s response to an entirely new level. Turkey shocked with a fresh rate cut yesterday of 100 basis points to take the policy rate to 13.00%. This with year-on-year inflation in Turkey at 79.6% and PPI at 144.6%, and housing measured at 160.6%. The move took USDTRY above 18.00, though it was a modest move relative to the size of the surprise. Turkish central bank chief Kavcioglu said that the bank would also look to “further strengthen macroprudential policy” by addressing the yawning difference between the policy rate and the rate commercial banks are charging for loans (more than double the official policy rate), as the push is to continue a credit-stimulated approach, inflation-be-darned.   Table: FX Board of G10 and CNH trend evolution and strength Note: a new color scheme for the FX Board! Besides changing the green for positive readings to a more pleasant blue, I have altered the settings such that trend readings don’t receive a more intense red or blue coloring until they have reached more significant levels – starting at an absolute value of 4 or higher. So far, most of the drama in sterling is the lack of a response to shifts in the UK yield curve, the broad negative momentum has only shifted a bit here, but watching for the risk of more. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs AUDNZD is crossing back higher, AUDCAD back lower, so NZDCAD….yep. Note the CNHJPY – if CNH is to make more waves, need to see more CNH weakness in an isolated sense, not just v. a strong USD. And speaking of a strong USD, the last holdouts in reversing, USDNOK and USDCHF, are on the cusp of a reversal. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak   Source: FX Update: USD surging again, GBP spinning into abyss

Overview:  The dollar is on fire. It is rising against all the major currencies and cutting through key technical levels like a hot knife in butter. The Canadian dollar is the strongest of the majors this week, which often outperforms on the crosses in a strong US dollar environment. It is off 1.5% this week. The New Zealand dollar, where the RBNZ hiked rates this week by 50 bp, is off the most with a 3.5% drop. Emerging market currencies are mostly lower on the day and week as well. The JP Morgan Emerging Market Currency Index is off for the fifth consecutive session, and ahead of the Latam open, it is off 2.1% this week. Asia Pacific equities were mostly lower, and Europe’s is off around 0.4%. It was flat for the week coming into today. US futures are lower, and the S&P and NASDAQ look poised to snap its four-week advance. Gold, which began the week near $1800 is testing support near $1750 now. Next support is seen around $1744.50. October WTI is consolidating in the upper end of yesterday’s range, which briefly poked above $91. Initial support is pegged near $88. US natgas is softer for the third successive session, but near $9.04 is up about 3.2% for the week. Europe’s benchmark is up 1.7% and brings this week’s gain to almost 20%. Demand concerns weigh on iron ore. It was off marginally today, its fifth loss in six sessions. It tumbled 8.8% this week after a 1.15% gain last week. Copper is up fractionally after rising 1.3% yesterday. September wheat is trying to stabilize. It fell more than 4% yesterday, its fifth loss in a row. It is off around 8.5% this week. Asia Pacific Japan's July CPI continued to rise  Th headline now stands at 2.6%, up from 2.4% in June, up from 0.8% at the start of the year and -0.3% a year ago. The core measure that excludes fresh food accelerated from 2.2% to 2.4%. It is the fourth consecutive month above the 2% target. Excluding both fresh food and energy, Japan's inflation is less than half the headline rate at 1.2%. It was at -0.7% at the end of last year and did not turn positive until April. The BOJ's next meeting is September 22, and despite the uptick in inflation, Governor Kuroda is unlikely to be impressed. Without wage growth, he argues, inflation will prove transitory. With global bond yields rising again, the 10-year, the market may be gearing up to re-challenge the BOJ's 0.25% cap. The yield is finishing the week near 0.20%, its highest since late July. Separately, we note that after divesting foreign bonds in recent months, Japanese investors have returned to the buy side. They have bought foreign bonds for the past four weeks, according to Ministry of Finance data. Last week's JPY1.15 trillion purchases (~$8.5 bln) were the most since last September.  China surprised the markets to begin the week with a 10 bp reduction in the benchmark 1-year medium-term lending facility rate  It now stands at 2.75%. It was the first cut since January, which itself was the first reduction since April 2020. Before markets open Monday, China is expected to announce a 10 bp decline in the 1- and 5-year loan prime rates. That would bring them to 3.60% and 4.35%, respectively. These rates are seen closer to market rates, but the large banks that contribute the quotes are state-owned. There is some speculation that a larger cut in the 5-year rate. The one-year rate was cut in January, but the 5-year rate was cut by 15 bp in May. The dollar is rising against the yen for the fourth consecutive session  It has now surpassed the JPY137.00 area that marks the (61.8%) retracement of the decline from the 24-year high set-in mid-July near JPY139.40. There may be some resistance in the JPY137.00-25 area, but a retest on the previous high looks likely in the period ahead. The Australian dollar is off for the fifth consecutive session and this week's loss of 3% offset last week's gain of as similar magnitude and, if sustained, would be the largest weekly decline since September 2020. The Aussie began the week near $0.7125 and recorded a low today slightly below $0.6890. The $0.6855-70 area is seen as the next that may offer technical support. The PBOC set the dollar's reference rate at CNY6.8065 (median in Bloomberg's survey was CNY6.9856). The fix was the lowest for the yuan (strongest for the dollar) since September 2020. Yesterday's high was almost CNY6.7960 and today's low was a little above CNY6.8030. To put the price action in perspective, note that the dollar is approaching the (61.8%) retracement of the yuan's rise from mid-2020 (~CNY7.1780) to this year's low set in March (~CNY6.3065). The retracement is found around CNY6.8250. Europe UK retail sales surprised to the upside but are offering sterling little support  Retail sales including gasoline rose by 0.3% in July. It is the second gain of the year and the most since last October. Excluding auto fuel, retail sales rose by 0.4%, following a 0.2% gain in June. It is the first back-to-back gain since March and April 2021. Sales online surged 4.8% as discounts and promotions drew demand, and internet retailers accounted for 26.3% of all retail sales. Separately, consumer confidence, measured by GfK, slipped lower (-44 from -41), a new record low. Sterling is lower for the third consecutive session and six of the past seven sessions. The swaps market continues to price in a 50 bp rate hike next month and about a 1-in-5 chance of a 75 bp move. Nearly every press report discussing next month's Italian elections cited the fascist roots of the Brothers of Italy, which looks likely to lead the next government  Meloni, who heads up the Brothers of Italy and has outmaneuvered many of her rivals, and may be Italy's next prime minister, plays the roots down. She compares the Brothers of Italy to the Tory Party in the UK, the Likud in Israel, and the Republican Party in the US. The party has evolved, and the center-right alliance she leads no longer wants to leave the EU, it is pro-NATO, and condemns Russia's invasion of Ukraine. The center-right alliance may come close to having a sufficient majority in both chambers to make possible constitutional reform. High on that agenda appears to transform the presidency into a directly elected office. The Italian presidency has limited power under the current configuration, but it has been an important stabilizing factor in crisis. Ironically, the president, picked by parliament, stepped in during the European debt crisis and gave Monti the opportunity to form a technocrat government after Berlusconi was forced to resign in 2011. Fast-forward a decade, a government led by the Conte and the Five Star Movement collapsed and a different Italian president gave Draghi a chance to put together a government. It almost last a year-and-half. Its collapse set the stage for next month's election. The center-left is in disarray and its inability to forge a broad coalition greases the path for Meloni and Co. Italy's 10-year premium over German is at 2.25%, a new high for the month. Last month, it peaked near 2.40%. The two-year premium is wider for the sixth consecutive session. It is near 0.93%, more than twice what it was before the Draghi government collapsed. Some critics argue against the social sciences being science because of the difficulty in conducting experiments  Still an experiment is unfolding front of us. What happens when a central bank completely loses its independence and follows dubious economic logic?  With inflation at more than two decades highs and the currency near record lows, Turkey's central bank surprised everyone by cutting its benchmark rate 100 bp to 13% yesterday. Governor Kavcioglu hinted this was a one-off as it was preempting a possible slowdown in manufacturing. Even though President Erdogan promised in June rates would fall, some observers link the rate cut to the increase in reserves (~$15 bln) recently from Russia, who is building a nuclear plant in Turkey. The decline in oil prices may also help ease pressure on Turkey's inflation and trade deficit. The lira fell to new record-lows against the dollar. The lira is off about 7.5% this quarter and about 26.4% year-to-date. Significant technical damage has been inflicted on the euro and sterling  The euro was sold through the (61.8%) retracement objective of the runup since the mid-July two-decade low near $0.9950. That retracement area (~$1.0110) now offers resistance, and the single currency has not been above $1.01 today. We had suspected the upside correction was over, but the pace of the euro's retreat surprises. There is little from a technical perspective preventing a test on the previous lows. Yesterday, sterling took out the neckline of a potential double top we have been monitoring at $1.20. It is being sold in the European morning and has clipped the $1.1870 area. The low set-in mid-July was near $1.1760, and this is the next obvious target and roughly corresponds to the measuring objective of the double top.  America With no dissents at the Fed to last month's 75 bp hike, one might be forgiven for thinking that there are no more doves  Yet, as we argued even before Minneapolis Fed President Kashkari, once regarded as a leading dove, admitted that his dot in June was the most aggressive at 3.90% for year-end, hawk and dove are more meaningful within a context. Kashkari may be more an activist that either a hawk or dove. Daly, the San Francisco Fed President does not vote this year, suggested that a Fed funds target "a little" over 3% this year would be appropriate. She said she favored a 50 bp or a 75 bp move. The current target range is 2.25%-2.50%. and the median dot in June saw a 3.25%-3.50% year-end target. St. Louis Fed President Bullard says he favors another 75 bp hike next month. No surprise there. George, the Kansas, Fed President, dissented against the 75 bp hike in June seemingly because of the messaging around it, but it's tough to call her vote for a 50 bp hike dovish. She voted for the 75 bp move in July. She recognizes the need for additional hikes, and the issue is about the pace. George did not rule out a 75 bp hike while cautioning that policy operates on a lag. Barkin, the Richmond Fed President, also does not vote this year. He is the only scheduled Fed speaker today.  The odds of a 75 bp in September is virtually unchanged from the end of last week around a 50/50 proposition.  The October Fed funds implies a 2.945% average effective Fed funds rate. The actual effective rate has been rocksteady this month at 2.33%. So, the October contract is pricing in 61 bp, which is the 50 bp (done deal) and 11 of the next 25 bp or 44% chance of a 75 hike instead of a half-point move. Next week's Jackson Hole conference will give Fed officials, and especially Chair Powell an opportunity to push back against the premature easing of financial conditions  The better-than-expected Philadelphia Fed survey helps neutralize the dismal Empire State manufacturing survey. The median from Bloomberg's survey looked for improvement to -5 from -12.3. Instead, it was reported at 6.2. Orders jumped almost 20 points to -5.1 and the improvement in delivery times points to the continued normalization of supply chains. Disappointingly, however, the measure of six-month expectations remained negative for the third consecutive month. Still, the plans for hiring and capex improved and the news on prices were encouraging. Prices paid fell to their lowest since the end of 2020 (energy?) and prices received were the lowest since February 2021. The Fed also asked about the CPI outlook. The median sees it at 6% next year down from 6.5% in May. The projected rate over the next 10-years slipped to 3%. Canada and Mexico report June retail sales today  Lift by rising prices, Canada's retail sales have posted an average monthly gain this year of 1.5%. However, after a dramatic 2.2% increase in May, Canadian retail sales are expected (median in Bloomberg' survey) to rise by a modest 0.4%. Excluding autos, retail sales may have held up better. Economists look for a 0.9% increase after a 1.9% rise in May. Through the first five months of the year, Mexico's retail sales have risen by a little more than 0.5% a month. They have risen by a 5.2% year-over-year. Economists expected retail sales to have slowed to a crawl in June and see the year-over-year pace easing to 5.0%. The greenback rose the CAD1.2935 area that had capped it in the first half of the week. It settled near CAD1.2950 yesterday and is pushing closer to CAD 1.2980 now. Above here, immediate potential extends toward CAD1.3035. The US dollar is gaining for the third consecutive session against the Canadian dollar, the longest advancing streak in a couple of months. Support is seen in the CAD1.2940-50 area. The Mexican peso is on its backfoot, and is falling for the fourth session, which ended a six-day rally. The dollar has met out first target near MXN20.20 and is approaching the 20-day moving average (~MXN20.2375). Above there, the next technical target is MXN20.32. The broader dollar gains suggest it may rise above the 200-day moving average against the Brazilian real (~BRL5.2040) and the (38.2%) of the slide since the late July high (~BRL5.5140) that is found near BRL5.2185.    Disclaimer   Source: The Dollar is on Fire

Summary:  Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. Overall, however, we do not alter our long-term views about commodities and their ability to move higher over time, with some of the main reasons being underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. The dollar found renewed strength and bond yields rose while the month-long bear-market bounce across US stocks showed signs of running out of steam.The trigger being comments from Federal Reserve officials reiterating their resolve to continue hiking rates until inflation eases back to their yet-to-be revised higher long-term target of around 2%. Those comments put to rest expectations that a string of recent weak economic data would encourage the Fed to reduce the projected pace of future rate hikes.The result of these developments being an elevated risk of a global economic slowdown gathering pace as the battle against inflation remains far from won, not least considering the risk of persistent high energy prices, from gasoline and diesel to coal and especially gas. A clear sign that the battle between macro and micro developments continues, the result of which is likely to be a prolonged period of uncertainty with regards to the short- and medium-term outlook.Overall, however, these developments do not alter our long-term views about commodities and their ability to move higher over time. In my quarterly webinar, held earlier this week, I highlighted some of the reasons why we see the so-called old economy, or tangible assets, performing well over the coming years, driven by underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Returning to this past week’s performance, we find the 2.3% drop in the Bloomberg Commodity Index, seen above, being in line with the rise in the dollar where gains were recorded against all the ten currencies, including the Chinese renminbi, represented in the index. It is worth noting that EU TTF gas and power prices, which jumped around 23% and 20% respectively, and Paris Milling wheat, which slumped, are not members of the mentioned commodity index.Overall gains in energy led by the refined products of diesel and US natural gas were more than offset by losses across the other sectors, most notably grains led by the slump in global wheat prices and precious metals which took a hit from the mentioned dollar and yield rise. Combating inflation and its impact on growth remains top of mind Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver for commodities recently has been the macro-economic outlook currently being dictated by the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing and the longer the process takes to succeed, the bigger the risk of an economic fallout. US inflation expectations in a year have already seen a dramatic slump but despite this the medium- and long-term expectations remain anchored around 3%, still well above the Fed’s 2% target.Even reaching the 3% level at this point looks challenging, not least considering elevated input costs from energy. Failure to achieve the target remains the biggest short-term risk to commodity prices with higher rates killing growth, while eroding risk appetite as stock markets resume their decline. These developments, however, remain one of the reasons why we find gold and eventually also silver attractive as hedges against a so-called policy mistake. Global wheat prices tumble The prospect for a record Russian crop and continued flows of Ukrainian grain together with the stronger dollar helped push prices lower in Paris and Chicago. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace, it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat futures contract touched a January low after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. With most of the uncertainties driving panic buying back in March now removed, calmer conditions should return with the biggest unknown still the war in Ukraine and with that the country’s ability to produce and export key food commodities from corn and wheat to sunflower oil. EU gas reaches $73/MMBtu or $415 per barrel of oil equivalent Natural gas in Europe headed for the longest run of weekly gains this year, intensifying the pain for industries and households, while at the same time increasingly threatening to push economies across the region into recession. The recent jump on top of already elevated prices of gas and power, due to low supplies from Russia, has been driven by an August heatwave raising demand while lowering water levels on the river Rhine. This development has increasingly prevented the safe passage of barges transporting coal, diesel and other essentials, while refineries such as Shell’s Rhineland oil refinery in Germany have been forced to cut production. In addition, half of Europe’s zinc and aluminum smelting capacity has been shut, thereby adding support to these metals at a time the market is worried about the demand outlook.An abundance of rain and lower temperatures may in the short term remove some of the recent price strength but overall, the coming winter months remain a major worry from a supply perspective. Not least considering the risk of increased competition from Asia for LNG shipments. Refinery margin jump lends fresh support to crude oil Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driven by China’s troubled handling of Covid outbreaks and its property sector problems as well as rapidly rising interest rates were the main drivers behind the selling since March across other commodity sectors before eventually also catching up with crude oil around the middle of June. Since then, the price of Brent has gone through a $28 dollar top to bottom correction. While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The mentioned energy crisis in Europe continues to strengthen, the result being surging gas prices making fuel-based products increasingly attractive. This gas-to-fuel switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published, the incentive to switch has increased even more, adding more upward pressure on refinery margins. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. In addition, the previously mentioned increased demand for fuel-based products to replace expensive gas. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold and silver struggle amid rising dollar and yields Both metals, especially silver, were heading for a weekly loss after hawkish sounding comments from several FOMC members helped boost the dollar while sending US ten-year bond yields higher towards 3%. It was the lull in both that helped trigger the recovery in recent weeks, and with stock markets having rallied as well during the same time, the demand for gold has mostly been driven by momentum following speculators in the futures market. The turnaround this past week has, as a result of speculators' positioning, been driven by the need to reduce bullish bets following a two-week buying spree which lifted the net futures long by 63k lots or 6.3 million ounces, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication that investors, for now, trust the FOMC’s ability to bring down inflation within a relatively short timeframe. An investor having doubts about this should maintain a long position as a hedge against a policy mistake. Some investors may feel hard done by gold’s negative year-to-date performance in dollars, but taking into account it had to deal with the biggest jump in real yields since 2013 and a surging dollar, its performance, especially for non-dollar investors relative to the losses in bonds and stocks, remains acceptable. In other words, a hedge in gold against a policy mistake or other unforeseen geopolitical events has so far been almost cost free.   Source: WCU: Bearish macro, bullish micro regime persists

Bed Bath & Beyond (BBBY) shares have gained 300% since the beginning of August after many previously opened short positions were closed. According to Seeking Alpha data, the short interest on BBBY currently stands at a whopping 41.9% (nearly half of the shares available for trading are sold short). At its peak, BBBY shares reached a price of $30. Today, however, they appear to be down almost 45% ahead of the market opening at 14:00 GMT+3 - this could be the company's worst day since its IPO in 1992. BBBY shares were already down almost 20% yesterday, as investors began to realise potential gains. One of those investors is celebrity billionaire investor Ryan Cohen. He sold his shares, earning $68.1 million (56% on invested capital). According to a report filed with the SEC, Cohen's RC Ventures sold millions of shares on Tuesday and Wednesday in a price range of $18.68 to $29.21. Since then, according to Bloomberg data, the activist investor has asked the company to consider selling the business, reached an agreement to add three independent directors to the board and pushed for the departure of CEO Mark Tritton. Shares also peaked in March 2022, when Cohen first disclosed a 9.8% stake in the company. "The ailing retailer’s share price rise of late has defied logic," - said Danni Hewson, an analyst at AJ Bell. The company has hired the law firm, Kirkland & Ellis, to help it deal with its hard-to-manage debt, media reports said yesterday. Kirkland & Ellis is a well-known advisory firm that plans to help its client by raising new funds and refinancing debt. Other so-called 'meme stocks' also fell on Friday before the open. GameStop (GME) lost 6.5% and AMC Entertainment Holdings (AMC) 4.7% at 14:00 GMT+3. Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Bed Bath & Beyond loses more than 45% before the open - the end of the short squeeze?

For many, this will be the last week of the summer. However, in an unusual twist of the calendar, the US August employment report will be released on September 2, the end of the following week, rather than after the US Labor Day holiday (September 5).   The main economic report of the week ahead will be the preliminary estimate of the August PMI  The policy implications are not as obvious as they may seem. For example, in July, the eurozone composite PMI slipped below the 50 boom/bust level for the first time since February 2021. It was the third consecutive decline. Bloomberg's monthly survey of economists picked up a cut in Q3 GDP forecasts to 0.1% from 0.2% and a contraction of 0.2% in Q4 (previously 0.2% growth). Over the past week, the swaps market has moved from around 80% sure of a 50 bp hike next month to a nearly 20% chance it will lift the deposit rate by 75 bp.  The UK's composite PMI fell in three of the four months through July  However, at 52.1, it remains above the boom/bust level, though it is the weakest since February 2021. The Bank of England's latest forecasts are more pessimistic than the market. It projects the economy will contract by 1.5% next year and another 0.3% in 2024. It has CPI peaking later this year at around 13% before falling to 5.5% in 2023 and 1.5% in 2024. Market expectations have turned more hawkish for the BOE too. A week ago, the swap market was pricing in a nearly 90% chance of another 50 bp hike. After the CPI jump reported in the middle of last week, the market fully priced in the 50 bp move and a nearly 30% chance of a 75 bp hike.   Japanese officials have successfully turned back market pressure that had driven the benchmark three-month implied volatility to 14% in mid-June, more than twice as high as it was at the start of the year  It slipped below 10% in recent days. The BOJ was forced to vigorously defend its 0.25% cap on the 10-year bond. It has spent the better part of the past three weeks below 0.20%. The BOJ has not had to spend a single yen on its defense since the end of June. However, with the jump in global yields (US 10-year yield rose 20 bp last week, the German Bund 33 bp, and the 10-year UK Gilt nearly 40 bp) and the weakness of the yen, the BOJ is likely to be challenged again.   The economy remains challenging  The composite PMI fell to 50.2 in July from 53.2 in June. It is the weakest reading since February. It has averaged 50.4 through July this year. The average for the first seven months last year was 49.0. The government is working on some support measures aimed at extending the efforts to cushion the blow of higher energy and food prices. Japan's Q2 GDP deflator was minus 0.4%, which was half of the median forecast in Bloomberg's survey, but it shows the tough bind of policy. Consider that the July CPI rose to 2.6%, and the core measure, which the BOJ targets, excludes fresh food, rose to 2.4% from 2.2%. The target is 2%, and it was the third month above it. Tokyo will report its August CPI figures at the end of the week.   Australia's flash PMI may be more influential as the futures market is nearly evenly split between a 25 bp hike and a 50 bp move at the September 6 central bank meeting  The minutes from the RBA's meeting earlier this month underscored its data dependency. However, this is about the pace of the move. The target rate is currently at 1.85%, and the futures market is near 3.15% for the end of the year, well beyond the 2.5% that the central bank sees as neutral. The weakness of China's economy may dent the positive terms-of-trade shock. The Melbourne Institute measure of consumer inflation expectations fell in August for the second month but at 5.9%, is still too high.  Through the statistical quirkiness of GDP-math, the US economy contracted in the first two quarters of the year  A larger trade deficit did not help, but the real problem was inventories. In fairness, more of the nominal growth resulted from higher prices than economists expected rather than underlying activity. Still, it does appear that the US economy is expanding this quarter, and the high-frequency data will help investors and economists assess the magnitude. While surveys are helpful, the upcoming real sector data include durable goods orders (and shipments, which feed into GDP models), July personal income and consumption figures, the July goods trade balance, and wholesale and retail inventories.   Consumption still drives more than 2/3 of the economy, and like retail sales, personal consumption expenditures are reported in nominal terms, which means that they are inflated by rising prices  However, the PCE deflator is expected to slow dramatically. After jumping 1% in June, the headline deflator is expected to increase by 0.1%. This will allow the year-over-year rate to slow slightly (~6.5% from 6.8%). The core deflator is forecast (median, Bloomberg's survey) to rise by 0.4%, which given the base effect, could see the smallest of declines in the year-over-year rate that stood at 4.8% in June. Given the Fed's revealed preferences when it cited the CPI rise in the decision in June to hike by 75 bp instead of 50 bp, the CPI has stolen the PCE deflator's thunder, even though the Fed targets the PCE deflator. Real consumption was flat in Q2, and Q3 is likely to have begun on firmer footing.   The softer than expected CPI, PPI, and import/export prices spurred the market into downgrading the chances of a 75 bp hike by the Fed next month  After the stronger than expected jobs growth, the Fed funds futures priced in a little better than a 75% chance of a 75 bp hike. It has been mostly hovering in the 40%-45% range most of last week but finished near 55%. It is becoming a habit for the market to read the Fed dovishly even though it is engaged in a more aggressive course than the markets anticipated. This market bias warns of the risk of a market reversal after Powell speaks on August 26.   At the end of last year, the Fed funds futures anticipated a target rate of about 0.80% at the end of this year. Now it says 3.50%. The pace of quantitative tightening is more than expected and will double starting next month. There is also the tightening provided by the dollar's appreciation. For example, at the end of 2021, the median forecast in Bloomberg's survey saw the euro finishing this year at $1.15. Now the median sees the euro at $1.04 at the end of December. And even this may prove too high.    The FOMC minutes from last month's meeting recognized two risks. The first was that the Fed would tighten too much. Monetary policy impacts with a lag, which also acknowledges that soft-landing is difficult to achieve. The market initially focused on this risk as is its wont. However, the Fed also recognized the risk of inflation becoming entrenched and characterized this risk as "significant." The Jackson Hole confab (August 25-27) will allow the Fed to help steer investors and businesses between Scylla and Charybdis.  Critics jumped all over Fed Chair Powell's claim that the Fed funds target is now in the area the officials regard as neutral. This was not a forecast by the Chair, but merely a description of the long-term target rate understood as neither stimulating nor restricting the economy. In June, all but three Fed officials saw the long-term rate between 2.25% and 2.50%. To put that in perspective, recall that in December 2019, the median view of the long-term target was 2.50%. Eleven of the 18 Fed officials put their "dot" between 2.25% and 2.50%. The FOMC minutes were clear that a restrictive stance is necessary, and the Fed clearly signaled additional rate hikes are required. The discussions at Jackson Hole may clarify what the neutral rate means.  Barring a significant downside surprise, we expect the Fed will deliver its third consecutive 75 bp increase next month. The strength and breadth of the jobs growth while price pressures remain too high and financial conditions have eased encourages the Fed to move as fast as the market allows. However, before it meets, several important high-frequency data points will be revealed, including a few employment measures, the August nonfarm payroll report, and CPI.   The market is also having second thoughts about a rate cut next year  At the end of July, the implied yield of the December 2023 Fed funds futures was 50 bp below the implied yield of the December 2022 contract. It settled last week at near an 8 bp discount. This reflects a growing belief that the Fed will hike rates in Q1 23. The March 2023 contract's implied yield has risen from less than five basis points more than the December 2022 contract to more than  20 bp above it at the end of last week.   Let's turn to the individual currency pairs, put last week's price action into the larger context, and assess the dollar's technical condition  We correctly anticipated the end of the dollar's pullback that began in mid-July, but the power for the bounce surprises. Key technical levels have been surpassed, warning that the greenback will likely retest the July highs.   Dollar Index: DXY surged by more than 2.3% last week, its biggest weekly advance since March 2020. The momentum indicators are constructive and not over-extended. However, it closed well above the upper Bollinger Band (two standard deviations above the 20-day moving average), found near 107.70. Little stands in the way of a test on the mid-July high set around 109.30. Above there, the 110-111.30 area beckons. While the 107.50 area may offer some support now, a stronger floor may be found closer to 107.00.   Euro:  The euro was turned back from the $1.0365-70 area on August 10-11 and put in a low near $1.0030 ahead of the weekend. The five-day moving average slipped below the 20-day moving average for the first time in around 3.5 weeks. The MACD is trending lower, while the Slow Stochastic did not confirm the recent high, leaving a bearish divergence in its wake. The only caution comes from the euro's push through the lower Bollinger Band (~$1.0070). Initially, parity may hold, but the risk is a retest on the mid-July $0.9950 low. A convincing break could target the $0.96-$0.97 area. As the euro has retreated, the US two-year premium over Germany has trended lower. It has fallen more than 30 bp since peaking on August 5. We find that the rate differential often peaks before the dollar.   Japanese Yen: The dollar will begin the new week with a four-day advance against the yen in tow. It has surpassed the (61.8%) retracement objective of the pullback since the mid-July high (~JPY139.40) found near JPY136.00. The momentum indicators are constructive, and the five-day moving average has crossed above the 20-day for the first time since late July. It tested the lower band of the next resistance bans seen in the JPY137.25-50 area at the end of last week. But it appears poised to re-challenge the highs. As volatility increases and yields rise, Japanese officials return to their first line of defense: verbal intervention.  British Pound: Sterling took out the neckline of a possible double top we have been monitoring that came in at $1.20. It projects toward the two-year lows set in mid-July near $1.1760, dipping below $1.18 ahead of the weekend. As one would expect, the momentum indicators are headed lower, and the five-day moving average has fallen below the 20-day moving average for the first time in four weeks. It has closed below its lower Bollinger Band (~$1.1910) in the last two sessions. A convincing break of the $1.1760 low clears the way to the March 2020 low, about 3.5-cents lower. Initial resistance is now seen around $1.1860 and, if paid, could signal scope for another 3/4 to a full-cent squeeze.  Canadian Dollar:  The Canadian dollar was no match for the greenback, which moved above CAD1.30 ahead of the weekend for the first time in a month. The momentum indicators suggest the US dollar has more scope to advance, and the next target is the CAD1.3035 area. Above there, the CAD1.3100-35 band is next. The high since November 2020 was recorded in the middle of July around CAD1.3225. After whipsawing in Q1, the five- and 20-day moving averages have caught the big moves. The shorter average crossed above the longer moving average last week for the first time since July 21. Initial support will likely be encountered near CAD1.2935.   Australian Dollar:  The Aussie was sold every day last week. It is the first time in a year, and its 3.4% drop is the largest since September 2020.   The rally from the mid-July low (~$0.6680) to the recent high (~$0.7135) looks corrective in nature. Before the weekend, it tested the rally's (61.8%) retracement objective. The momentum indicators are falling, and the Slow Stochastic did not confirm this month's high, creating a bearish divergence. A break of the $0.6850-60 area may signal follow-through selling into the $0.6790-$0.6800 band, but a retest on the July low is looking increasingly likely. Initial resistance is now seen near $0.6920.   Mexican Peso:  The peso's four-day slide ended a six-day run. The peso lost about 1.6% last week, slightly better than the 2.25% slide of the JP Morgan Emerging Market Currency Index. This month, the US dollar peaked around MXN20.8335 and proceeded to fall and forged a base near MXN19.81. It has met the (38.2%) retracement objective around MXN20.20 before the weekend. The next (50%) retracement is near MXN20.3230. The 200-day moving average is closer to MXN20.41. The dollar is probing the 20-day moving average seen a little below MXN20.24. The momentum indicators have only just turned up for the greenback. We suspect there may be potential to around MXN20.50 in the coming days.   Chinese Yuan:  The yuan was tagged with more than a 1% loss against the dollar last week, its biggest decline in three months. A combination of poor Chinese data, its small rate cut, and a resurgent US dollar spurred the exchange rate adjustment. At the end of July, China's 10-year yield was about 11 bp on top of the US. However, it switched to a discount after the US jobs data (August 5), and the discount grew every day last week, reaching 35 bp, the most since late June. After gapping higher before the weekend, the greenback reached nearly CNY6.8190, its highest level since September 2020. The next target is around CNY6.85, but given the divergence of policy, a move back toward CNY7.00, last seen in July 2020, maybe a reasonable medium-term target. The PBOC's dollar fix ahead of the weekend showed no protest of the weaker exchange rate.     Disclaimer   Source: Flash PMI, Jackson Hole, and the Price Action

Summary:  The dollar story will face a fresh test this week as the central bankers gather for the Jackson Hole symposium from August 25 to 27. We can expect some more push back on the 2023 easing expectations, and this could also mean some upside in US Treasury yields. July PCE due at the end of the week will likely be side-lined by the event, and any gasoline-driven easing should have little relevance. In Europe, the gas situation remains on watch and the July PMIs will likely spell more caution. China’s LPR cuts this morning have signalled a stronger support to the property markets, but the Covid situation and the power curbs continue to cloud the outlook. Earnings pipeline remains robust, key ones being Palo Alto, Nvidia and Intuit, followed by a few discount retailers like Dollar General and Dollar Tree in the U.S., and China Internet companies, JD.COM, and Meituan.   US dollar awaiting its next signals from the Jackson Hole There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. This will have further implications for the US dollar, which is threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher. Europe and UK PMIs may spell further caution The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. More price pressures to come to Asia Singapore's inflation likely nudged higher in July, coming in close proximity to 7% levels from 6.7% y/y in June. While both food and fuel costs continue to create upside pressures on inflation, demand-side pressures are also increasing as the region moves away from virus curbs. House rentals are also running high due to high demand and delayed construction limiting supplies. The Monetary Authority of Singapore has tightened monetary policy but more tightening moves can be expected in H2 even as the growth outlook has been downwardly revised. We also get Japan's Tokyo CPI for August, which is likely to suggest further gains above the Bank of Japan's 2% target. Consensus expectations point toward another higher print of 2.7% y/y for the headline measure and 2.5% y/y on the core measure, signalling inflationary pressures will continue to question the Bank of Japan's resolve on the ultra-easy policy stance. Malaysia’s July inflation is also due at the end of the week, and likely to go above the 4%-mark from 3.4% previously. Softer July US PCE print would not derail Fed’s tightening After a softer CPI report in July, focus will turn to the PCE measure – the version of the CPI that is tracked by the Fed to gauge price pressures. Lower gasoline prices mean that PCE prints could also see some relief, although we still upside pressures to inflation given that energy shortages will likely persist and easing financial conditions mean that inflation could return. We would suggest not to read too much into a softer PCE print this week, as the stickier shelter and services prices mean that the 2% inflation target of the Fed remains unachievable into then next year. This suggests that the aggressive tightening by the Fed will likely continue, despite any likely softness in the PCE this week. Housing markets, Covid-19 cases, and power curbs are key things to watch in China this week The data calendar is light in China this week with only July industrial profits data scheduled to release on Saturday.  This morning, China’s National Interbank Fund Center, based on quotes from banks and under the supervision of the PBoC, fixed the 1-year loan prime rate (“LPR”) 5 bps lower at 3.60% and the 5-year loan prime rates (“LPR”) 15 basis points lower at 4.30%.  The larger reduction in the 5-year LPR, which is the benchmark against which mortgage loan rates in China are set, may signal stronger support from the PBoC to the housing market.  Last Friday the Housing Ministry, the Ministry of Finance, and the PBoC, according to Xinhua News, jointly rolled out a program to make special loans through policy banks to support the delivery of presold residential housing projects which are facing difficulties in completion due to lack of funding.  Investors will monitor closely this week to gauge if there is additional information about the size of the program and if the PBoC will print money to fund it.  As daily locally transmitted new cases of Covid-19 in China persistently surged and stayed above 2,000 since August 12, 2022, the market will watch the development closely and how it will affect the economy.   In addition to the pandemic, power shortage in the Sichuan province and some other areas in China due to unusually high temperature (higher power consumption for air-conditioning) and drought (which affects hydropower output), investors are assessing the impact of the government-imposed power rationing for industrial users on production, in particular the auto industry and consumer electronics industry in the affected areas. Key earnings this week On Monday, investors will scrutinize the results from Palo Alto Networks (PANW:xnas) in the U.S. to gauge the latest business development in the security software industry, which has drawn much attention this year as cybersecurity has become a focus. Intuit (INTU:xnas) is scheduled to report on Tuesday and its results may provide information about the small and medium-sized businesses that the company focuses in it business.  After a disappointing preannouncement earlier in the month, the bar for Nvidia (NVDA:xnas)’s earnings release this Wednesday may be low.  In HK/China, the results from the Postal Savings Bank of China may provide the market with some insights into the state of the Chinese banking system, especially situations outside the top-tier cities. JD.COM (09618:xhkg/JD:xnas) on Tuesday and Meituan (03690:xhkg) on Friday will be the focus of investors monitoring the business trend of eCommerce and delivery platforms in China.  Key economic releases & central bank meetings this week Monday, Aug 22 South Korea: Exports (Aug, first 20 days)Hong Kong: CPI (Jul)   Tuesday, Aug 23 United States: S&P Global US Manufacturing PMI (Aug, preliminary)United States: S&P Global US Services PMI (Aug, preliminary)Eurozone: PMI Manufacturing (Aug)Eurozone: Consumer Confidence (Aug)United Kingdom: PMI Manufacturing (Aug), PMI Services (Aug)Japan: PMI Manufacturing (Aug)Singapore: CPI (Jul) Wednesday, Aug 24 United States: Durable Goods Orders (Jul, preliminary)United States: Pending Home Sales (Jul) Thursday, Aug 25 United States: GDP (Q2, second)United States: Initial Jobless Claims (Aug)United States: Kansas City Fed Manufacturing Activity (Aug)United States: Jackson Hole Symposium (Aug 25 to 27)Germany: IFO Survey (Aug)France: Business Confidence (Aug)South Korea: Bank of Korea Policy Meeting Friday, Aug 26 United States: Personal Income, Personal Spending, PCE Deflator & PCE Core Deflator (Jul)United States: U of Michigan Sentiment Survey (Aug, final)United States: Fed Chair Powell’s speech at the Jackson Hole SymposiumFrance: Consumer Confidence (Aug)Eurozone: M3 (Jul)Italy: Consumer Confidence (Aug)Italy: Economic Sentiment (Aug)Tokyo: Tokyo-area CPI (Aug)Singapore: Industrial Production (Jul) Saturday, Aug 27 China: Industrial Profits (Jul) Key earnings releases this week Monday: Postal Savings Bank of China (01658:xhkg), Palo Alto Networks (PANW:xnas) Tuesday: Medtronic (MDT:xnys), Intuit (INTU:xnas), JD.COM (09618:xhkg/JD:xnas), JD Logistics (02615:xhkg), Kingsoft (03888:xhkg), Kuaishou (01024:xhkg) Wednesday: PetroChina (00857:xhkg), Ping An Insurance (02318:xhkg), Nongfu Spring (09633:xhkg), LONGi Green Energy Technology (601012:xssc), Pinduooduo (PDD:xnas), Nvidia (NVDA:xnas), Salesforce (CRM:xnys), JD Health (06618:xhkg) Thursday: AIA (01299:hkgs), Wulinagye Yibin (000858:xsec), China Life Insurance (02628:xhkg), CNOOC (00883:xhkg), Dollar General (DG:xnys), NIO (09866:xhkg/NIO:xnas) Friday: Meituan (03690:xhkg), China Shenhua (01088:xhkg), Sinopec (00386:xhkg)    Source: Saxo Spotlight: What’s on investors and traders radars this week?

Summary:  Equities closed last week on the defensive as a rising US dollar and especially US treasuries weighed. The US 10-year yield is threatening the 3.00% level for the first time in a month ahead of the important US July PCE inflation data and Fed Chair Powell’s speech on Friday. How forcefully will Powell push back against the virtual melt-up in financial conditions after the market felt the Fed pivoted to less tightening at the July meeting?   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are still rolling over as the US 10-year yield zoomed to 3% on Friday with the index futures trading just above the 4,200 level this morning. The next levels on the downside sit around the 4,100 to 4,170 range, but in the longer term the 4,000 level is the big level to watch. Energy markets are still sending inflationary signals which is key to watch for sentiment this week. In terms of earnings, Palo Alto Networks and Zoom Video will report earnings. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index and CSI300 were moderately higher, +0.2% and +0.8% respectively. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and last Friday’s report that the PBoC, jointly with the Housing Ministry and the Ministry of Finance to roll out a program to make special loans through policy banks to support the delivery of stalled residential housing projects. Great Wall Motor (02333:xhkg) soared 11%. In A-shares, auto names were among stocks that outperformed. Xiaomi (01810:xhkg) dropped 3% after reporting Q2 revenues -20% YoY and net profit -67% YoY, largely in line with expectations.  US dollar dominates focus in forex this week The US dollar rally picked up speed last week, with key levels falling in a number of USD pairs last week that now serve as resistance, including 1.0100 in EURUSD and 1.2000 in GBPUSD, both of which now serve as resistance/USD support. A significant break of EURUSD parity will likely add further psychological impact, and more practically, an upside break in yields at the longer end of the US yield curve is playing a supportive roll, one that will intensify its driving roll if the benchmark 10-year US Treasury yield follows through higher above the 3.00% level it touched in trading overnight. A complete sweep of USD strength also threatens on any significant follow through higher in USDCNH as it threatens an upside break here (more below). The next key event risk for the US dollar arrives with this Friday’s Jackson Hole symposium speech from Fed Chair Powell (preview below). USDCNH Broad USD strength is helping to drive a move to new cycle highs above 6.84 as the week gets underway, but CNH is not weak in other pairings with G10 currencies, quite the contrary. Still, a move in this critical exchange rate will remain a focus, and the contrast between an easing PBOC (moving once again overnight) and tightening central banks nearly everywhere else is stark. The USDCNH moving higher will receive considerable additional focus if the 7.00 level. Crude oil prices (CLU2 & LCOV2) Crude oil turned lower in the Asian overnight after modest gains last week as the focus continues to alter between demand destruction fears and persistent supply shortages. Fears of an economic slowdown reducing demand remains invisible in the physical market but it has nevertheless seen crude oil give up all the post Russia invasion gains while speculators or hedge funds have cut bullish bets on WTI and Brent to the lowest since April 2020. WTI futures trades back below $90/barrel while Brent futures dipped below $96. Still, the gas-to-fuel switch led by record gas prices in Europe has seen refinery margins strengthen again lately and it now adds to the fundamental price-supportive factors. Focus may turn back to Iranian supply early in the week though, with reports that a deal is ‘imminent’. Cryptocurrencies The crypto market took a major hit on Friday with the total crypto market cap diving by more than 9 %, but prices have stabilized over the weekend. The total market cap is now close to the psychological $1 trillion level. US Treasuries (TLT, IEF) Rising US Treasury yields are pushing back against the strong improvement in financial conditions of recent weeks after the US 10-year Treasury yield benchmark jumped to new highs on Friday, well clear of the prior range after a few teases higher earlier in the week and bumping up against the psychologically key 3.00% level. Any follow through higher toward the 3.50% area highs of the cycle would likely add further pressure to financial conditions and risk sentiment more broadly. What is going on? German PPI shocks on the upside Germany’s July PPI smashed expectations to come in at 5.3% MoM, the biggest single gain since the Federal Republic started compiling its data in 1949 and above the consensus estimate of 0.7%. The data suggests potentially a lot more room on the upside to Eurozone inflation, and a lot more pain for German industries. European PMIs due this week will gather attention, as will Germany’s IFO numbers. Berkshire Hathaway wins approval to acquire Occidental Petroleum Warren Buffett’s industrial conglomerate that recently increased its stake in Occidental Petroleum to over 20% following the US Climate & Tax bill which adds more runway for oil and gas companies has now won regulatory approval for acquiring more than 50% the oil and gas company. This means that Berkshire Hathaway is warming up to its biggest acquisition since its Burlington acquisition. The power shortage in China China is currently being hit by a heatwave with a large part of the country experiencing -degree Celsius temperatures since the beginning of August. The surge in air conditioning caused electricity consumption to soar. To make things worse, drought has reduced hydropower output.  Some provinces and municipalities, especially Sichuan, are curbing electricity supply to industrial users in order to ensure electricity supply for residential use. This has caused disruptions to manufacturing production and added to the headwinds faced by the Chinese economy. China cut its 5-year loan prime rate loan prime more than expected China’s National Interbank Fund Center, based on quotes from banks and under the supervision of the PBoC, fixed the 1-year loan prime rate (“LPR”) 5 bps lower at 3.60% and the 5-year loan prime rates (“LPR”) 15 basis points lower at 4.30%. The larger-than-expected reduction in the 5-year LPR, which is the benchmark against which mortgage loan rates in China are set at a spread, may signal stronger support from the PBoC to the housing market.  The Chinese authorities are coming to the developers’ aid in delivering pre-sold homes Last Friday the Housing Ministry, the Ministry of Finance, and the PBoC, according to Xinhua News, jointly rolled out a program to make special loans through policy banks to support the delivery of presold residential housing projects which are facing difficulties in completion due to lack of funding.  Investors will monitor closely this week to gauge if there is additional information about the size of the program and if the PBoC will print money to fund it.  The resurgence of Covid cases in China Daily locally transmitted new cases of Covid-19 in China persistently stated above 2,000 since August 12, 2022, with Hainan, Tibet, and Xinjiang being the regions most impacted. The constituent companies of the Hang Seng Index will increase to 73 from 69 Hang Seng Indexes Company announced last Friday to add China Shenhua Energy (01088:xhkg), Chow Tai Fook Jewellery (01929:xhkg), Hansoh Pharmaceutical (03693:xhkg), and Baidu (09888:xhkg) to the Hang Seng Index, bringing the latter’s number of constituent companies to 73 from 69. The changes will take effect on September 5, 2022. In addition, SenseTime (00020:xhkg) will replace China Pacific Insurance (02601:xhkg) as a constituent company of the Hang Seng China Enterprises Index.  Australian share market at a pivotal point After rising for five straight weeks including last week's 1.2% lift, many market participants hold their breath this rally will continue. However, standing in the way are profit results from a quarter of the ASX200 companies to be released this week. For the final week of profit results, we hear from Qantas (Australia's largest airline), Whitehaven Coal (Australia's largest coal company), as well as other stocks that are typically held in Australian superannuation funds; including Coles, Woolworths, Wesfarmers, Endeavour. And lastly about 20 companies trade ex-dividend this week, however they are not expected to move the market's needle. Money managers increased their commodity exposure for a third week to August 16 The Commitment of Traders (COT) Report covering positions and changes made by money managers in commodities to the week ending August 16 showed a third week of net buying with funds adding 123k lots to 988k lots, a seven-week high. The buying was broad led by natural gas, sugar, cattle and grains with most of the selling concentrated in crude oil and gold. More in our weekly update out later. Prior to the latest recovery in price and positions hedge funds had been net sellers for months after holding 2.6 million lots at the start of the year. What are we watching next? USD and US Treasury yields as Jackson Hole Fed conference is the macro event risk of the week Friday The US dollar strengthened sharply, with EURUSD challenging near parity, USDCNH breaking higher today after another PBOC rate cut, and USDJPY not far from cycle highs. US Treasury yields have supported the move with the entire curve lifting over the last couple of weeks and longer yields pulling to new local highs last week. The Fed has pushed back consistently against the market’s pricing of a Fed turnaround to easing rates next year with partial success, as expectations for rate cuts have shifted farther out the curve and from higher levels. This week, the key test for markets is up on Friday as the US reports the Fed’s preferred measure of inflation, the July PCE inflation data, while Fed Chair Powell will also speak on Friday, offering the most important guidance on how the Fed feels about how it feels the market understands its intentions.   Earnings to watch Plenty of important earnings releases this week with the largest ones listed below. Today’s key focus is Palo Alto Networks, Zoom Video, and XPeng. Cyber security stocks have done reasonably well over the past year despite valuations coming down as demand is still red hot, Analysts expect Palo Alto Networks to report revenue growth of 27% y/y. Zoom Video, which was the pandemic superstar, is also reporting today with estimates looking for 9% revenue growth, down considerably from 54% y/y growth just a year ago. Monday: Palo Alto Networks, Zoom Video, XPeng Tuesday: CATL, Intuit, Medtronic, JD.com Wednesday: LONGi Green Energy, Royal Bank of Canada, PetroChina, Ping An Insurance Group, Nongfu Spring, Mowi, Nvidia, Salesforce, Pinduoduo, Snowflake, Autodesk Thursday: South32, Toronto-Dominion Bank, Fortum, Delivery Hero, AIA Group, China Life Insurance, CNOOC, CRH, Dollar General, Vmware, Marvell Technology, Workday, Dollar Tree, Dell Technologies, NIO Friday: Meituan, China Shenhua Energy, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 0800 – Switzerland SNB weekly sight deposits 1230 – US Jul. Chicago Fed National Activity Index 2300 – Australia Aug. Flash Manufacturing/Services PMI 0030 – Japan Aug. Flash Manufacturing/Services PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 22, 2022

Summary:  The US dollar wrecking ball is in full swing, taking even USDCNH to new highs for the cycle after another rate cut in China overnight. Longer US treasury yields are also pressuring financial conditions and risk sentiment as the 10-year benchmark yield threatens 3.00% again. The chief event risk for the week will be the Jackson Hole, Wyoming speech from Fed Chair Powell. We also discuss the latest natural gas developments in Europe, speculative positioning in the commodities markets, the long term perspective for tangible vs. intangible stock returns over the last couple of decades, upcoming earnings, & 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 found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: USD and US yields brewing up trouble ahead of Jackson Hole

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 August 16. A week that potentially saw a cycle peak in US stocks and where the dollar and treasury yields both traded calmly before pushing higher. Commodities meanwhile continued their recent recovery with funds being net buyers of most contracts, the major exceptions being gold and crude oil Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 16. A week that potentially saw a cycle peak in US stocks with the S&P 500 reversing lower after reaching a four-month high, and where the dollar and treasury yields both traded calm before pushing higher. Commodities meanwhile continued their recent recovery with all sectors, except precious metals and grains recording gains. Commodities Hedge funds were net buyers for a third week with the total net long across the 24 major commodity futures tracked in this update rising by 14% to reach a seven week high at 988k lots. Some 56% below the recent peak reached in late February before Russia’s attack on Ukraine drove an across-the-board volatility spike which forced funds to reduce their exposure. Since then and up until early July, worries about a global economic slowdown, caused by a succession of rapid rate hikes in order to kill inflation, was one of the key reasons for the slump in speculative length.Returning to last week, the 123k lot increase was split equally between new longs being added and short positions being scaled back, and overall the net increase was broad led by natural gas, sugar, cattle and grains with most of the selling being concentrated in crude oil and gold. Energy: Weeks of crude oil selling continued with the combined net long in WTI and Brent falling by 26k lots to 278k lots, the lowest belief in rising prices since April 2020. Back then the market had only just began recovering the Covid related energy shock which briefly sent prices spiraling lower. While funds continued to sell crude oil in anticipation of an economic slowdown the refined product market was sending another signal with refinery margins on the rise again, partly due surging gas prices making refined alternatives, such as diesel, look cheap. As a result, the net long in ICE gas oil was lifted by 24% to 62k lots while RBOB gasoline and to a lesser extent ULSD also saw net buying. The net short in Henry Hub natural gas futures was cut by 55% as the price jumped by 19%. Metals: Renewed weakness across investment metals triggered a mixed response from traders with gold seeing a small reduction in recently established longs while continued short covering reduced bearish bets in silver, platinum and palladium. With gold resuming its down move after failing to find support above $1800, the metal has been left exposed to long liquidation from funds which in the previous two weeks had bought 63.3k lots. Copper’s small 1% gain on the week supported some additional short covering, but overall the net short has stayed relatively stable around 16k lots for the past six weeks. Agriculture: Speculators were net buyers of grains despite continued price weakness following the latest supply and demand report from the US Department of Agriculture on August 12, and after shipments of grains from Ukraine continued to pick up speed. From a near record high above 800k lots on April 19, the net long across six major crop futures went on to slump by 64% before buyers began dipping their toes back in to the market some three weeks ago. Buying was concentrated in bean oil and corn while the wheat sector remained challenged with the net long in Kansas wheat falling to a 2-year low. The four major softs contract saw strong buying led by sugar after funds flipped their position back to a 13.4k lots net long. The cocoa short was reduced by 10% while the coffee long received a 25% boost. Cotton’s 18% surge during the week helped lift the long by 35% to 44.7k lots.     Forex A mixed week in forex left the speculative dollar long close to unchanged against ten IMM futures and the DXY. Selling of euro saw the net short reach a fresh 2-1/2-year high at 42.8k lots or €5.3 billion equivalent while renewed selling of JPY, despite trading higher during the reporting week, made up most of the increase in dollar length. Against these we saw short covering reduce CHF, GBP and MXN short while CAD net long reached a 14-month high.    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   Source: COT: Gold and oil left out as funds return to commodities

Overview: The euro traded below parity for the second time this year and sterling extended last week’s 2.5% slide. While the dollar is higher against nearly all the emerging market currencies, it is more mixed against the majors. The European currencies have suffered the most, except the Norwegian krone. The dollar-bloc and yen are also slightly firmer. The week has begun off with a risk-off bias. Nearly all the large Asia Pacific equity markets were sold. Chinese indices were a notable exception following a cut in the loan prime rates. Europe’s Stoxx 600 is off by around 1.20%, the most in a month. US futures are more than 1% lower. The Asia Pacific yield rose partly in catch-up to the pre-weekend advance in US yields, while today, US and European benchmark 10-year yields are slightly lower. The UK Gilt stands out with a small gain. Gold is being sold for the sixth consecutive session and has approached the (61.8%) retracement of the rally from last month’s low (~$1680) that is found near $1730. October WTI is soft below $90, but still inside the previous session’s range. US natgas is up 2.4% to build on the 1.6% gain seen before the weekend. It could set a new closing high for the year. Gazprom’s announcement of another shutdown of its Nord Stream 1 for maintenance sent the European benchmark up over 15% today. It rose almost 20.3% last week. Iron ore rose for the first time in six sessions, while September copper is giving back most of the gains scored over the past two sessions. September wheat rallied almost 3% before the weekend and is off almost 1% now.  Asia Pacific Following the 10 bp reduction in benchmark one-year Medium-Term Lending Facility Rate at the start of last week, most observers expected Chinese banks to follow-up with a cut in the loan prime rates today  They delivered but in a way that was still surprising. The one-year loan prime rate was shaved by five basis points to 3.65%, not even matching the MLF reduction. On the other hand, the five-year loan prime rate was cut 15 bp to 4.30%. This seems to signal the emphasis on the property market, as mortgages are tied to the five-year rate, while short-term corporate loans are linked to the shorter tenor. The five-year rate was last cut in May and also by 15 bp. Still, these are small moves, and given continued pressures on the property sector, further action is likely, even if not immediately. In addition to the challenges from the property market and the ongoing zero-Covid policy, the extreme weather is a new headwind to the economy. The focus is on Sichuan, one of the most populous provinces and a key hub for manufacturing, especially EV batteries and solar panels. It appears that the aluminum smelters (one million tons of capacity) have been completed halted. The drought is exacerbating a local power shortage. Rainfall along the Yangtze River is nearly half of what is normally expected. Hydropower accounts for a little more than 80% of Sichuan power generation and the output has been halved. Officials have extended the power cuts that were to have ended on August 20 to August 25. Factories in Jiangsu and Chongqing are also facing outages. According to reports, Shanghai's Bund District turned off its light along the waterfront. Japan's Prime Minister Kishida tested positive for Covid over the weekend  He will stay in quarantine until the end of the month. In addition to his physical health, Kishida's political health may become an issue. Support for his government has plunged around 16 percentage points from a month ago to slightly more than 35% according to a Mainchi newspaper poll conducted over the weekend. The drag appears not to be coming from the economy but from the LDP's ties with the Unification Church. Meanwhile, Covid cases remain near record-highs in Japan, with almost 24.8k case found in Tokyo alone yesterday. Others are also wrestling with a surge in Covid cases. Hong Kong's infections reached a new five-month high, for example. The dollar reached nearly JPY137.45 in Tokyo before pulling back to JPY136.70 in early European turnover  It is the fifth session of higher highs and lows for the greenback. The upper Bollinger Band (two standard deviations above the 20-day moving average) is near JPY137.55 today. We suspect the dollar can re-challenge the session high in North America today. The Australian dollar is proving resilient today after plunging 3.45% last week. It is inside the pre-weekend range (~$0.6860-$0.6920). Still, we like it lower. Initial support is now seen around $0.6880, and a break could spur another test on the lows. That pre-weekend low coincides with the (61.8%) retracement of the rally from last month's low (~$0.6680) to the high on August 11 (~$0.7135). The Chinese yuan slumped to new lows for the year today. For the second consecutive session, the dollar gapped higher and pushed through CNY6.84. The PBOC set the dollar's reference rate at CNY6.8198. While this was lower than the CNY6.8213, it is not seen as much as a protest as an at attempt to keep the adjustment orderly. Europe Gazprom gave notice at the end of last week that gas shipments through the Nord Stream 1 pipeline would be stopped for three days (August 31-September 2) for maintenance  The European benchmark rose nearly 20.3% last week and 27% this month. It rose 35.2% last month and 65.5% in June. The year-to-date surge has been almost 380%. The energy shock seems sure to drive Europe into a recession. The flash August PMI out tomorrow is expected to see the composite falling further below the 50 boom/bust level. Bundesbank President Nagel, who will be attending the Jackson Hole symposium at the end of this week recognized the risk of recession but still argued for the ECB rate increases to anchor inflation expectations. The record from last month's ECB meeting will be published on Thursday. There are two keys here. First, is the color than can be gleaned from the threshold for using the new Transmission Protection Instrument. Second, the ECB lifted its forward guidance, which we argue is itself a type of forward guidance. Is there any insight into how it is leaning? The swaps market prices in another 50 bp hike, but a slight chance of a 75 bp move. The German 10-year breakeven (difference between the yield of the inflation linked bond and the conventional security) has been rising since last July and approached 2.50% last week  It has peaked in early May near 3% before dropping to almost 2% by the end of June. It is notable that Italy's 10-year breakeven, which has begun rising again since the third week of July, is almost 25 bp less than Germany. Several European countries, including Germany and Italy, have offered subsidies or VAT tax cut on gasoline that have offset some of the inflation pressures. Nagel, like Fed Chair Powell, BOE Governor Bailey, and BOJ Governor Kuroda place much emphasis on lowering wages to bring inflation down. Yet wages are rising less than inflation, and the cost-of-living squeeze is serious. They take for granted that business are simply passing on rising input costs, including labor costs, but if that were true, corporate earnings would not be rising, which they have. Costs are being passed through. Later this week, the UK regulator will announce the new gas cap for three months starting in October  Some reports warn of as much as an 80% increase. It is behind the Bank of England's warning that CPI could hit 13% then. The UK's wholesale benchmark has soared 47.5% this month after an 83.7% surge last month. Gas prices in the UK have nearly tripled this year. The UK's 10-year breakeven rose by 38 bp last week to 4.29%, a new three-month high. Although the UK economy shrank slightly in Q2 (0.1%), the BOE warned earlier this month that a five-quarter recession will likely begin in the fourth quarter. Unlike the eurozone, the UK's composite PMI has held above the 50 boom/bust level. Still, it is expected to have slowed for the fourth month in the past five when the August preliminary figures are presented tomorrow. The euro and sterling extended their pre-weekend declines  The euro slipped below parity to $0.9990. The multiyear low set last month was near $0.9950. The break of parity came in the early European turnover. Only a recovery of the $1.0050-60 area helps stabilizes the tone. Speculators in the futures market extended their next short euro position in the week through August 16 to a new two-year extreme and this was before the euro's breakdown in the second half of last week. The eurozone's preliminary August composite PMI due tomorrow is expected to show the contraction in output deepened while the market is expecting the Fed's Powell to reinforce a hawkish message on US rates. After falling to almost $1.1790 before the weekend, sterling made a marginal new low today, closer to $1.1780. The two-year low set last month was near $1.1760. The $1.1850-60 area offers an initial cap. Strike activity that hobbled the trains and underground spread to the UK's largest container port, Felixstowe, which handles about half of the country's containers. An eight-day strike began yesterday. Industrial activity is poised to spread, and this is prompting Truss and Sunak who are locked in a leadership challenge, to toughen their rhetoric against labor. America This is a busy week for the US  First, there is supply. Today features $96 bln in bills. Tomorrow sees a $60 bln three-week cash management bill and $44 bln 2-year notes. On Wednesday, the government sell another $22 bln of an existing two-year floating rate note, and $45 bln five-year note. Thursdays sale includes four- and eight-week bills and $37 bln seven-year notes. There are no long maturities being sold until mid-September. The economic data highlights include the preliminary PMI, where the estimate for services is forecast (median in Bloomberg's survey) to recover from the drop below the 50 boom/bust level. In the middle of the week, the preliminary estimate of July durable goods is expected. Shipments, which feed into GDP models is expected to rise by 0.3%. The revision of Q2 GDP the following day tends not to be a `big market movers. Friday is the big day. July merchandise trade and personal income and consumption measures are featured. Like we saw with the CPI, the headline PCE deflator is likely to ease while the core measure proves a bit stickier. Shortly after they are released, Powell addresses the Jackson Hole gathering.  Canada has a light economic diary this week, but Mexico's a bit busier  The highlight for Mexico will be the biweekly CPI on Wednesday. Price pressures are likely to have increased and this will encourage views that Banxico will likely hike by another 75 bp when it meets late next month (September 29). The July trade balance is due at the end of the week. It has been deteriorating sharply since February and likely continued.    The US dollar rose more than 1% against the Canadian dollar over the past three sessions. It edged a little higher today but stopped shy of the CAD1.3035 retracement objective. Initial support is seen near CAD1.2975-80. With sharp opening losses expected for US equities, it may discourage buying of the Canadian dollar in the early North American activity. The greenback is rising against the Mexican peso for the fifth consecutive session. However, it has not taken out the pre-weekend high near MXN20.2670. Still, the next important upside technical target is closer to MXN20.3230, which corresponds to the middle of this month's range. Support is now seen near MXN20.12.    Disclaimer   Source: No Relief for the Euro or Sterling

The average bitcoin payment fee recently fell below $1 for the first time in years. Transaction fees are needed to enable crypto intermediaries to operate, but they are hampering the adoption of payment solutions, affecting small payments in particular. Because the network is expensive to maintain due to its energy-intensive nature, commissions have been able to shoot up many times, for example, Ethereum commissions during the NFT hype. This is even more painful for transfers of small sums. This is why new technological solutions are so important. Here comes ethereum's Merge and payment solutions for bitcoin (Lightning Network and Taproot overlays), which are already revolutionising the world of crypto payments. They allow settlements to be faster, less energy-intensive and less expensive. The current average transaction fee for BTC payments has fallen below $0.825 - the lowest since 13 June 2020, ETH below $0.64, and is likely to be even cheaper. Their decline is not only a reason for the ever-improving technology, but also the recent crash of tokens, NFTs and an increase in the ease of mining in the long term. However, current energy and cryptocurrency prices may cause a short-term decline in mining activity. Many have already suspended operations or exited the crypto world. This can be seen in particular through the massive sale of mining rigs and used computer hardware (especially graphics cards). ETH, BTC and most tokens seemed to continue their declines. ETH and BTC prices are below the price channel and in the absence of a return above its bottom line, we can probably already speak of a short-term trend reversal. ETH has found its support on the 50-day moving average for now, while BTC has already crossed it. Moreover, the technical indicators (RSI, MACD and ADX) do not indicate a reversal of the short-term trend either. Declines in the major stock market indexes, hawkish announcements from the FED and further pessimistic data from the economy seem to be putting a lot of pressure on crypto. RafaÅ‚ Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: BTC and ETH payments getting cheaper. Will Cryptocurrencies experience further declines?

Summary:  On Friday, crypto long positions worth north of $500mn were liquidated, as fatigue spread in the crypto market. Not helping was speculation that exchanges may be forced to censor certain transactions on Ethereum in the future. Speaking of transactions, the demand for them on Bitcoin and Ethereum has decreased significantly, weakening the fundamentals of particularly Ethereum. Traders standing in line to be liquidated The crypto market, notably Ethereum, recovered partially in July and August until last week. From a low of 17,600 (BTCUSD) and 880 (ETHUSD) in June, Bitcoin and Ethereum surged to a local high of 25,200 and 2,030 on the 15th and 14th of August, respectively. Following new local highs, the market was seemingly becoming exhausted last week. Since then, Bitcoin has plunged by 15.6% to 21,270, whereas the Ethereum price has declined by 23.3% to 1,565. On mainly Friday, crypto derivative exchanges saw red. On this day, long positions were liquidated worth a combined $562mn in 24 hours. This is almost as much as the day in June, when Celsius halted withdrawals, even though the market movement to the downside was larger in June. This means that the crypto market has been extremely leveraged to ride the uptrend the past month and that party came to a halt on Friday. It seems that traders have particularly leveraged Ethereum trades going into the merge. Can exchanges censor certain Ethereum transactions? Two weeks ago, the US sanctioned the most used mixer on the Ethereum network called Tornado Cash. The latter has often been linked to money laundering; however, it was frequently used by private individuals to engage with the Ethereum network privately. The Tornado Cash protocol cannot by default be shut down, since it is a smart contract, so the sanctions involve that no US person or entity is allowed to engage with transactions originating from Tornado Cash. Afterward, speculation arose about what could possibly be next in line to be sanctioned. The ultimate sanction could be to censor certain Ethereum transactions, thus possibly shutting down the Tornado Cash protocol for good. At the moment, it would not be possible for governments to directly censor such transactions, however, it might be possible for them, as soon as Ethereum adopts proof-of-stake instead of a proof-of-work framework in the middle of September, known as the merge. This is because the majority of the Ether staked, hence Ether used to verify transactions, is done through exchanges or other intermediaries by clients handing over their Ether to these companies for them to verify transactions on Ethereum. For instance, Coinbase handles close to 15% of the total amount of Ether staked. Governments can technically make Coinbase adhere to such sanctions by ensuring it does not verify transactions related to Tornado Cash on a network level. Without going into too many details, in our opinion, it is very unlikely that this will occur, both from a societal and technical point of view. Yet, if it in reality occurs, then everything in the industry is at risk since the main selling proposition is full decentralization without intermediaries. In case certain transactions are ruled out from the network, we need to look ourselves in the mirror and ask if this industry has then anything to offer at all. The speculation in this matter did arguably contribute negatively to the price development of Ethereum in the last week. Brian Armstrong, Coinbase’s co-founder and CEO, commented on this on Twitter last week. Here, he said that Coinbase would possibly exit its staking operations if governments came to enforce the sanction of transactions on-chain, as Armstrong stated, “to focus on the bigger picture” by keeping Ethereum decentralized. If all staking providers do this, then it will presumably not be a problem, as the network will be kept online by solo stakers. When prices drop, fees follow suit For the majority of the year, the crypto prices have been on a downward trajectory. Transaction fees paid on particularly Bitcoin and Ethereum have followed suit. In November last year, Bitcoin generated around $500,000 - $1mn in fees daily, while Ethereum set at around $50mn - $80mn in transaction fees daily. Now, Bitcoin averages around $150,000 - $300,000 daily, while Ethereum sits at around $2mn - $3mn daily. This emphasizes that most activity on Bitcoin but primarily Ethereum is highly speculative and strictly linked to the prices of cryptocurrencies. Source: Token Terminal For Bitcoin, there are no direct consequences of lower total transaction fees in the near term. However, it might have consequences in the next decades, since the network might not be able to sufficiently compensate miners. For Ethereum, the lower transaction fees result in less Ether burned, effectively meaning less is removed from the supply. This makes the fundamentals of Ethereum weaker. For instance, Ethereum has for the past year burned 4.71 Ether per minute from transaction fees, whereas it has only managed to burn 0.89 Ether per minute in the past 30 days. Bitcoin/USD - Source: Saxo Group Ethereum/USD - Source: Saxo Group   Source: Crypto Weekly: Leverage is the language of crypto

Company does not offer investment advice and the analysis performed does not guarantee results. Asian stock markets were mixed on Monday. The Shanghai Composite and the Shenzhen Composite gained 0.57% and 0.64% respectively, while the Hang Seng Index went up by 0.12%. The Nikkei 225 decreased by 0.55%, the S&P/ASX 200 fell by 0.96%, and the KOSPI lost 1.15%. Investors are awaiting new information from Fed chairman Jerome Powell regarding the further monetary policy course of the US central bank. Powell is set to give a speech this week. Furthermore, market players took note of the Chinese central bank decreasing two of its key interest rates. The People's Bank of China cut its one-year loan prime rate to 3.65% from 3.7%. The five-year rate was cut to 4.3% from 4.45%. The move was not unexpected – earlier, the PBoC decreased its medium-term lending facility loan rate by 10 basis points to 2.75%. The Chinese central bank's rate cuts are aimed at boosting the country's economic growth, which has slowed down due to rising energy prices, weak property market, and COVID-19 lockdowns. On the Hang Seng Index, the biggest movers were Agile Group Holdings, Ltd. (+6%), CIFI Holdings (Group), Co. (+7%), Country Garden Holdings, Co., Ltd. (+3%), and China Resources Land, Ltd. (+2%) Shares of Sinopec Engineering (Group), Co. gained 4% after the company reported that its net profit increased by 0.6% in the first half of 2022. In Japan, the worst-performing stocks on the Nikkei 225 were Hino Motors, Ltd. (-3.5%), CyberAgent, Inc. (-3.1%), and Nippon Sheet Glass Co., Ltd. (-2,9%). The share price of Ai Holdings, Corp. advanced by 5%, thanks to the company's net profit jumping by 32% in the previous fiscal year. In South Korea, Samsung Electronics, Co. and Hyundai Motor, Co. lost 1.6% and 0.5% respectively. In Australia, BHP shed 0.2%, while Rio Tinto declined by 0.53%. Shares of NIB, Ltd. gained 6.6% thanks to the company's operating profit exceeding market expectations. Source: Forex Analysis & Reviews: Asian markets close mixed on Monday

Summary:  Equities were sold off on Monday, continuing a slide from their summer rally high, in the midst of position adjustments ahead of the Jackson Hole central banker event later this week. U.S. 10-year yields returned to above 3%. China cut its 5-year loan prime rates and plans to extend special loans to boost the ailing property markets. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities lost ground and continued to retrace from the high of the latest rally since mid-June.  The market sentiment has become more cautious ahead of Fed Chair Powell’s speech this Friday at the Jackson Hole symposium and a heavy economic data calendar, S&P 500 – 2.1%, Nasdaq 100 -2.7%.  The rise of U.S. 10-year bond yield back to above 3% added to the selling pressures in equities.  Zoom Video (ZM:xnas) fell 8% in after-hours trading as the company reported Q2 revenues and earnings missing estimates and cut its full year revenues guidance. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Bonds were sold off as traders adjusted positions ahead of the Jackson Hole.  The treasury yield curve bear flattened with 2-year yields surging 8bps to 3.30% and 10-year yields climbing 4bps to 3.01%, above the closely watched 3% handle.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Seng fell 0.6% while CSI300 climbed 0.7% on Monday. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and the Chinese authorities plan to provide special loans through policy banks to support the delivery of stalled residential housing projects, CIFI (00883:xhkg) +11.5%, Country Garden (02007:xhkg) +3.2%.  China extended EV waivers from vehicle purchase tax and other fees to the end of 2023, but the share price reactions of Chinese EV makers traded in Hong Kong were mixed.  Great Wall Motor (02333:xhkg) soared 11%, benefiting from launching a new model that has a 1,000km per charge battery while Nio (09866:xhkg) and Li Auto(02015:xhkg) fell 4.2% and 1.4% respectively. Xiaomi (01810:xhkg) dropped 3.3% after Q2 revenues -20% YoY and net profit -67% YoY, on lower smartphone shipments (-26% YoY).  Smartphone parts suppliers, AAC Technologies (02018:xhkg) and Sunny Optical (02382:xhkg) declined 5.6% and 4.2% respectively.  The share price performance of the four companies that will be added to the Hang Seng Index was mixed, Baidu (09888:xhkg) +0.9%, China Shenhua Energy (01088:xhkg) +2.1%, Hansoh Pharmaceutical (03692:xhkg) +3.2% but Chow Tai Fook Jewellery (01929:xhkg) -0.6%.  SenseTime (00020:xhkg) gained 4.2% as the company will replace China Pacific Insurance (02601:xhkg) -2.8% as a constituent company of the Hang Seng China Enterprises Index.  ENN Energy (02688:xhkg) plunged more than 14% after reporting H1 results below market expectations.  China retailer Gome (00493) collapsed 20% after resuming trading from suspension and a plan t buy from the controlling shareholder a stake in China property assets.  EURUSD falls below parity, eyes on 0.9500 The latest concerns on the European energy crisis weighed on the Euro which was seen sipping below parity to the US dollar. Higher US yields and gains in the US dollar also underpinned, taking EURUSD to lows of 0.9926. The European recession is coming hard and fast, and the PMIs today will likely signal increasing pressure on the region. Also on the radar will be Fed Chair Powell’s speech at the Jackson Hole later this week, with a fresh selloff in the pair likely to target 0.9500 next. USDCNH heading to further highs After PBOC’s easing measures on Monday, the scope for further yuan weakness has increased. USDCNH broke above 6.8600 overnight and potentially more US dollar strength this week on the back of a pushback from Fed officials on easing expectations for next year could mean a test of 7.00 for USDCNH. Still, the move in yuan is isolated, coming from China moving to prevent the yuan from tracking aggravated USD strength rather than showing signs of desiring a broader weakening. EURCNH has plunged to over 1-month lows of 6.8216 on the back of broader EUR weakness. Crude oil prices (CLU2 & LCOV2) Crude oil prices made a recovery overnight despite the strength in the US dollar. A global shift from gas to oil, from Europe to Asia, has taken a deeper hold amid gas shortage fears accelerating in the wake of another upcoming maintenance of the Nordstream pipeline. Diesel and refinery margins have also been supported as a result, with Asia diesel crack rising to its previous high of $63 amid low inventory levels. WTI futures reversed back to the $90/barrel levels and Brent were back above $96. Comments from Saudi Energy Minister threatening to dial back supply also lifted prices, but these were mis-read and in fact, focused more on the mismatch between the tightness in the futures and the physical market. Gold (XAUUSD) and Silver (XAGUSD) Gold broke below the key $1744 support and is now eying $1729, the 61.8% retracement of the July to August bounce. Dollar strength and a run higher in US yields weighed on the shine of the yellow metal, which has seen downside pressures since last week after touching the critical $1800-level. Hawkish Fed talk this week could further weigh on the short-term prospects for Gold. Silver also dipped below the key 19 handle, erasing most of the gains seen since late July.   What to consider?   German year-ahead power prices hit a fresh record high German year-ahead power prices surged to EUR 700/MWh with Dutch TTF gas prices close to EUR 300/MWh. The surge came on the back of another leg higher in natural gas prices which rose over 8% in Europe amid concerns around the next scheduled 3-day maintenance of the Nordstream pipeline. It appears that demand destruction remains the most obvious but painful cure right now, along with a longer-term focus on ensuring a broad-based supply of energy from coal, gas, nuclear, solar, hydrogen, and more.  Australia and Japan services PMIs plunged into contraction Australia saw its services PMI drop to 49.6 in August in a flash print, from 50.9 in July. Manufacturing PMI, however, held up at 54.5, just weakening slightly from last month’s 55.7. The spate of rate hikes seen from Reserve Bank of Australia is likely taking its toll on demand and manufacturing. Meanwhile, prices remain elevated amid the persistent supply chain issues, and more rate hikes are still on the cards. Japan’s flash manufacturing PMI for August came in lower at 51.0 from 52.1 previously, nut stayed in expansion territory. Services PMI however plunged into the contraction zone below 50, coming in at 49.2 for a flash August print from 50.3 in July. The fresh COVID wave in Japan, although comes without any broad-based new restrictions, is impeding the services demand and will likely weigh on Q3 GDP growth. Europe and UK PMIs may spell further caution The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. China’s plan to provide loans to ensure delivery of presold residential projects is said to be of the size of RMB 200 billion Last Friday, Xinhua News reported that the PBoC, jointly with the Housing Ministry and the Ministry of Finance rolled out a program to make special loans through policy banks to support the delivery of stalled residential housing projects but the size of the program was not mentioned.   A Bloomberg report yesterday, citing “people familiar with the matter”, suggested the size of the support lending program could be as large as RMB 200 billion.  Beijing municipal government rolled out initiatives to promote hydrogen vehicles The municipal government of Beijing announced support for the construction of hydrogen vehicle refueling stations with RMB500 million for each station, aiming at building 37 new stations by 2023 and bringing the adoption of fuel-cell cars to over 10,000 units in the capital. Earlier in the month, the Guangdong province released a plan to build 200 hydrogen vehicle refueling stations by 2025. Since last year, there have been 13 provinces and municipalities rolling out policies to promote the development of the hydrogen vehicle industry.  Earnings on tap Reportedly there have been shorts being built up in Dollar Tree (DLTR:xnys) as traders are expecting that discount retailer missing when reporting this Thursday.   On the other hand, investors are expecting Dollar General (DG:xnys) results to come in more favourably, , which also reports this Thursday.  Key earnings scheduled to release today including Medtronic (MDT:xnys), Intuit (INTU:xnas), JD.COM (09618.xhkg/JD.xnas), JD Logistics (02615:xhkg), Kingsoft (02888:xhkg), and Kuishaou (01023:xhkg). Singapore reports July inflation figures today Singapore's inflation likely nudged higher in July, coming in close proximity to 7% levels from 6.7% y/y in June. While both food and fuel costs continue to create upside pressures on inflation, demand-side pressures are also increasing as the region moves away from virus curbs. House rentals are also running high due to high demand and delayed construction limiting supplies. The Monetary Authority of Singapore has tightened monetary policy but more tightening moves can be expected in H2 even as the growth outlook has been downwardly revised.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 23, 2022

Summary:  Financial conditions loosening over the past six weeks were a natural evolution of the US economy improving in July, but the Fed is poised to hike potentially 75 basis points at the September meeting to tighten financial conditions even more as the nominal economy is still running too hot to get inflation meaningfully lower. The most likely scenario is weaker equities as winter approaching as the energy crisis will hurt. Financial conditions will soon begin tightening again S&P 500 futures are trading 3.4% lower from their high last week touching the 200-day moving average before rolling over again. Sentiment has shifted as the market is slowly pricing less rate cuts for next year with Fed Funds futures curve on Friday (the blue line) has shifted lower compared to a week ago (the purple line) as inflationary pressures are expected to ease as much as betted on by the market over the past month. Fed member Bullard recently said that he was leaning towards 75 basis points rate cut at the September FOMC meeting to cool the economy further. If the Fed goes with 75 basis points while the real economy is seeing lower activity it will mean that financial conditions will begin tightening more relative to the economic backdrop. Financial conditions have been loosening since June but expectation is that we will see another leg of tightening to levels eclipsing the prior high and with that US equities will likely roll over. S&P 500 futures are now well below the 4,200 level and currently in the congestion zone from before the last leg higher. The next gravitational point to the downside is the 4,100 and below that just above 4,000. December put options on the S&P 500 are currently bid around $208 which roughly a 5% premium for getting three-month downside protection at-the-money. S&P 500 futures | Source: Saxo Group   Fed Funds futures forward curve | Source: Bloomberg   US financial conditions | Source: Bloomberg The US is headed for a recession, but when? US financial conditions eased in July lifting equities and with good reasons we can see. The Chicago Fed National Activity Index (the broadest measure of economic activity) rose to 0.27 in July from -0.25 in June suggesting a significant rebound in economic activity. The rebound was broad-based across all the four major sub categories in the index with the production index rising the most. The three-month average is still -0.09 with -0.7 being the statistical threshold for when this indicator suggests that the US economy is in a recession. The probability is therefore still elevated for a recession but the slowdown in the US economy has eased which is positive factor for US equity markets. Predicting the economy is difficult but our thesis going into the winter months on the Northern hemisphere is that it is very difficult to avoid a recession, at least in real terms, when the economy is facing an energy crisis. The most likely scenario is that the US economy will slide into a nominal recession but continue at a fast clip in nominal terms.          China is facing a 2008-style rescue of its real estate sector We have written earlier this year about the downfall of Evergrande and the other Chinese real estate developers. The stress in China’s real estate sector was a big theme earlier this year but has since faded, but recently the Chinese central bank has eased rates and today the government is planning a $29bn rescue package of special loans for troubled developers. Tensions in Chinese real estate are weighing down on the economy through lower consumer confidence and investors are increasingly reducing exposure to China has we have highlighted in our daily podcast. The PBoC (central bank) is urging banks to maintain steady growth of lending, but with the market value of banks relative to assets having declined for many years the market is no longer viewing the credit extension as driven by sound credit analysis, but more as an extended policy tool of the government with unknown but likely less good credit quality.   Source: Equities are rolling over as conditions are set to tighten

Summary:  Nvidia, Salesforce, and Snowflake report earnings tomorrow providing more clarity on technology spending and the outlook for the overall technology sector. Nvidia is expected to report a big drop in its growth rate due to weakening demand in gaming and more importantly crypto mining. Salesforce is expected to show solid growth and here investors will focus on the Slack integration and what it means for growth ahead. Snowflake's growth rate is coming down and thus investors will demand improvements in the operating income. Nvidia: turbulence to continue Earlier this month Nvidia cut its outlook, which we covered in an equity update, driving by excess inventory of GPUs leading to price pressures in GPUs. Lower demand for GPUs, which we believe is mainly driven by less favourable dynamics for crypto mining, is forcing Nvidia to lower its sales outlook, cutting prices, and writing down its existing inventory. Nvidia has gone to great length explaining off the weakness as due to a slowdown in gaming, but the companies in gaming are not showing the decline in demand consistent with the slowdown Nvidia is experiencing. Because Nvidia does not know very well the end-use cases of their GPUs it is difficult for them to segment revenue, but in our view the economics of crypto mining tied to the Bitcoin price is the best explanation for the historical variance in revenue. Nvidia’s slowdown is tied to cryptocurrencies and thus higher interest rates is not only a key risk to Nvidia’s equity valuation, but it is also a risk to their demand as higher interest rates could lower cryptocurrency prices substantially from current levels. Nvidia is expected on Wednesday to report only 3% y/y revenue growth in FY23 Q2 (ending 31 July) down from 46% y/y in FY23 Q1 (ending 1 May) which is an abrupt slowdown in growth. It also highlights Nvidia’s biggest business risk. The chipmaker does not fully understand its demand function which can lead to a mismatch in supply and demand. The key question for investors is to what extent Nvidia expects growth to come back but more importantly whether they will change their outlook for operating margins. Nvidia financials | Source: Bloomberg Salesforce: can Slack sustain the growth? Salesforce is reporting FY23 Q2 (ending 31 July) results on Wednesday with analysts estimating revenue growth of 21% y/y which is in line with the long-term growth rate the company has enjoyed for 10 years. The Slack acquisition which has now been fully integrated is one of the key drivers for future growth and an acquisition that has expanded the company’s addressable market and market position in cloud business application software. Salesforce is competing against Microsoft, Oracle, and SAP, and has shown over the years that it gain market share plowing back a lot of its profits back into growth. With rising interest rates the pressure is on Salesforce to lift its operating margin and investors are likely demanding a surprise on operating margin rather than revenue in tomorrow’s earnings release. Salesforce financials | Source: Bloomberg Snowflake: consumption model vs economic uncertainty It is rare for Berkshire Hathaway to engage in technology companies let alone IPOs, but that is exactly what the investment firm did with Snowflake back in 2020. The company sits in the data analytics and cloud intersection providing a novel approach to data warehousing on the cloud at a low costs. The company has grown revenue from $97mn in 2018 to around $1.2bn in 2021 and revenue growth is expected at 72% y/y in FY23 Q2 (ending 31 July) but down from 104% y/y a year ago, but this should be expected as all high growth companies always see their growth rate coming down. The question is to what degree the growth rate is decaying over time. The company has recently disappointed analysts and there might be a downside risk to Snowflake’s results as the business model is centered around consumption which means that if technology spending is slowing down then it will hit Snowflake’s growth rate immediately. Secondly, the company’s high equity valuation relative to revenue means that investors will want to see a big improvement in operating income. Snowflake financials | Source: Bloomberg Source: Earnings preview: Nvidia, Salesforce, and Snowflake

 Summary:  The world and the global equity market can be divided into two parts; the tangible and the intangible. Since 2008 the tangibles driven industry groups have severely underperformed the intangibles driven industry groups due falling interest rates and an explosion in profits by companies utilising a lot of intangibles in their business model. However, since the Covid vaccine was announced the world came roaring back causing demand to outstrip supply and thus fueling inflation. The lack of supply of physical goods in the world and deglobalisation will be a theme going forward and our bet is that the tangible world will stage a comeback against the intangible world. The Great Financial Crisis proved to be the end of the tangible world The SaxoStrats team has been talking a lot about how intangibles took over the world and now the time has come for the tangible world to win back some terrain as years of underinvestment has created enormous supply deficits in energy, food, metals, construction materials etc. We have finally created two indices capturing the market performance of intangibles and tangibles driven industry groups. These indices will make it easier to observe performance in these two parts of the economy and will enable us to quantify whether our “tangibles are coming back” thesis is correct. When we look at intangibles vs tangibles over the period 1998-2022 it is clear we two distinct periods. From 1998-2008 the tangible part of the economy delivered the best total return to investors driven by a booming financial sector, rising real estate prices, and a commodities super cycle. Since 2008, the separation of the two parts of the economy becomes very clear. Lower and lower interest rates are inflating equity valuations of growth assets and intangibles driven industry groups are seeing an unprecedented acceleration in profits due to software business models maturing and e-commerce penetrating all consumer markets fueling the outperformance. If we look at the relative performance the tangible world peaked in April 2008 and was more or less in a continuous decline relative to the intangible world until October 2020. In November 2020, the revelation of the Covid vaccine reopened the economy so fast that demand come roaring back to a degree in which the physical supply of goods could not keep up. Prices began to accelerate causing the current run-away inflation and headache for central banks. The tangible world has since done better relative to intangibles and if we are right in our main theme of an ongoing energy and food crisis combined a multi-decade long deglobalisation then tangibles should continue to do well. Intangibles are still ahead despite rising interest and the current energy crisis During the pandemic the intangibles driven industry groups did better than the physical world because the whole world went into lockdown. Intangibles driven industries were suddenly necessary for making the world go around when we could not operate in the physical world. Government stimulated the economy in extraordinary amounts across monetary and fiscal measures and the demand outcome from this stimulus has caused global demand to outstrip available supply and especially of things in the physical world. The outcome of this has been inflation and also a comeback to the tangible world, but the tangibles driven industry groups are still behind the intangibles measured from the starting point of December 2019. It is our expectations that as interest rates are lifted to cool demand and inflation in the short-term the tangible world will gain more relative to intangibles. What has been the best performing industry group since 1998? One thing is to look at the aggregated indices of the tangibles and intangibles driven industry group, but another interesting observation is to look at the best performing industry. There were three close industry groups, but by a small amount the performing industry group has actually been the retailing industry. The industry group was not creating a lot of shareholder value until after the Great Financial Crisis when the e-commerce, automation, and digitalization combined with expansion of manufacturing in China lifted profitability and market value of retailing companies. The largest retailing companies in the industry group today are Amazon.com, Home Depot, Alibaba, Lowe’s, Meituan, and JD.com. Our definition of tangible and intangible industry groups Tangible assets are loosely defined as physical assets one can touch and feel, and which can be collateralised for loans. This definition is too broad and not meaningful, because in the consumer services industry group, which we have defined as driven by intangibles, you find companies such as Starbucks and McDonald’s which both employ a lot of physical assets in their business. The way we have defined intangibles and tangibles driven industry groups was going back to 1998 and calculate the market value to assets for all the active companies at that point in time. We need calculated the average ratio for each of the 24 industry groups. All the industry groups with a ratio above the average of all groups we put into the intangibles. If the market value is substantially above the book value of assets on the balance sheet it must mean that the market is putting a value on something that is not there, or at least in accounting terms, and this is clearly the intangibles. So for McDonald’s they do employ a lot of physical assets but it is the branding, store network, product etc. that derives the meaningful value creation and thus the market is valuing the company way above the book value of its assets. One could argue that McDonald’s is a hybrid company but for our purposes we define it as being mostly intangibles driven. The full list is presented below. Banks are interesting because many think they are driven by intangibles because it employs a lot of people, but the thing is that banks are essentially deriving their profits from the spread between loans and deposits. The majority of bank loans are tied to physical assets and thus banks are tightly connected to the physical world. Tangibles driven industry groups Automobiles & Components Banks Capital Goods Commercial & Professional Services Consumer Durables & Apparel Diversified Financials Energy Food & Staples Retailing Insurance Materials Real Estate Telecommunication Services Transportation Utilities Intangibles driven industry groups Consumer Services Food, Beverage & Tobacco Health Care Equipment & Services Household & Personal Products Media & Entertainment Pharmaceuticals, Biotechnology & Life Sciences Retailing Semiconductors & Semiconductor Equipment Software & Services Technology Hardware & Equipment Source: The tangible world is fighting back

During the recent earnings season investors' were especially focused on consumer staples companies. Their sales figures are potentially a good indicator of the consumer situation - they can show how the average shopper is seeking savings and how much they are buying. How did the consumer staples companies perform? Thanks to the strong return of demand after lockdowns and the uncertainty of supply chains, stores have accumulated a lot of inventory, which, with the current drop in demand, could pose a significant problem. Most stores have been forced to cut prices or write off products.  Walmart (WMT), Costco (COST) and Target (TGT) are among the largest U.S. retailers. Unlike Whole Foods and Trader Joe's, they tend to have lower prices, especially Walmart. Walmart initially spooked markets by lowering its profit forecasts and warned of a rapid rate of decline in demand. However, announced second-quarter results show that WMT and COST sales rose 8.4% and 16.2%, respectively. For Walmart, they totalled $152.9 billion and Costco reported $52.6 billion in revenue. In addition, Walmart's online sales jumped as much as 12%. Despite the improved sales, the companies are struggling with the problem of giant inventories. Walmart alone had $61 billion worth of inventory at the end of Q1. Prominent among the inventory is apparel. Most likely, the introduction of a series of discounts has boosted sales levels by stimulating demand. The news reported inventory value for Walmart remains high, at $59.9 billion.  Walmart and Costco's second-quarter net income rose to $5.15 billion ($1.77 EPS) and $1.35 billion ($3.04 EPS), respectively, marginally exceeding Wall Street analysts forecasts.  The black sheep was Target (TGT), whose profits fell a staggering 51.9%, despite revenue growth. Net profit margin slipped 53.8% to 4.01%, driven by the write-down of gigantic amounts of inventory. "If we hadn’t dealt with our excess inventory head on, we could have avoided some short-term pain on the profit line, but that would have hampered our longer-term potential," - said the Target chain's CFO. Executives noted that sales of lower-priced and low-margin products are on the rise, which may indicate a consumer search for savings. This was naturally reflected in a decline in net profit margins. In general, the performance of companies in the consumer staples sector proved to be good. Consumers, taking advantage of discounts and avoiding the more expensive stores (ex. Whole Foods and Trader Joe's), are contributing to the revenue growth of the cheaper ones, which include Walmart. Profits despite the losses from excess inventory in the case of Walmart and Costco appear to be strong. Target, adopted a more drastic strategy and preferred to write off much more merchandise and suffered gigantic losses.    Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Summary of consumer staples' earnings - What is the consumer's situation?

Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Red lines - bearish channel Black lines - Fibonacci retracements Gold price is bouncing towards $1,750. Gold price made a low right at the 61.8% Fibonacci retracement and is now bouncing. This is positive news for bulls. Respecting the 61.8% Fibonacci level is very important for bulls. At this retracement level we usually see trend reversals. Gold's decline from above $1,800 is now complete. Price has formed a higher low at $1,727. Price remains inside the bearish medium-term channel. Is Gold price starting a new upward move from current levels that will eventually push out of the medium-term bearish channel towards $1,850-$1,900? In order for this scenario to come true we need to see a) a new sequence of higher highs and higher lows b) bulls must defend $1,727 area and not let price fall below it c) break above $1,790 upper channel boundary. On the other hand bears would want to see price form a lower high and get rejected at the bounce towards $1,790. Bears want to see a lower high being formed and then price break below $1,727. Conclusion, as long as price remains inside the bearish medium-term channel, we favor the bearish scenario.   Source: Forex Analysis & Reviews: Technical analysis on Gold for August 23rd, 2022.  

Relevance up to 13:00 2022-08-24 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. The EUR/USD pair is trying to consolidate below the parity level. Looking ahead, it should be noted that this is a rather risky game, given the fact that the dollar is strengthening its positions rather on emotions, on bursts of anti-risk sentiment in the market, as well as on the strengthening of hawkish expectations. Such fundamental factors are a priori transient. Also, the downward dynamics of EUR/USD is due to the weakening of the euro, which is under pressure from the aggravating energy crisis. But the psychological factor also played its role here: September futures for delivery on the Dutch TTF hub yesterday jumped to $3,086 per thousand cubic meters. Of course, the August downward breakthrough under the parity level is different from the July one. Figuratively speaking, a month ago, the EUR/USD bears carried out reconnaissance in force, undertaking short-term raids in the area of the 99th figure. At that time, the pair's sellers were only able to stay below the 1.0000 mark for a few hours, after which the buyers seized the initiative. Today the situation is radically different. Traders not only settled within the 99th figure, but also approached its base, clearly intending to test the support level of 0.9900. This suggests that market participants have overcome the psychological barrier associated with a kind of "sacredness" of the notorious parity level. This factor prevented EUR/USD sellers from developing the downward trend in this price area in July: traders were in a hurry to close short positions, opening long positions at the same time. Nevertheless, the risk of catching the price bottom at the moment is as great as it was a month ago. And the lower the price goes, the riskier the sales look. In other words, despite the actual overcoming of the psychologically important level of resistance, it is advisable to open short positions on the EUR/USD pair only on the waves of corrective pullbacks. Whereas entering sales, for example, at the bottom of the 99th figure with the expectation of conquering the 98th price level is very adventurous. Please note that not all dollar pairs of the "major group" have a greenback that demonstrates dominant positions. For example, the USD/CAD pair is declining today, the USD/JPY pair is frozen in place, as is the AUD/USD pair. Even GBP/USD shows some resilience, resisting the onslaught of bears. This suggests that the downward impulse for the EUR/USD pair may fade at any moment, especially after a protracted and almost non-recoiling 4-day downward shaft. Also, do not forget that the dollar is gaining momentum on the eve of the most important event of this month. We are talking about the Jackson Hole Economic Symposium, in which the heads (representatives) of many Central Banks will speak, including Jerome Powell. As a rule, the speeches of the heads of the Central Bank at this symposium are not formal. It is expected that the head of the Fed will comment on the latest macroeconomic reports (strengthening of the labor market, slowdown in the growth of the consumer price index), assessing the possible pace of tightening of the Fed's monetary policy. It is likely that the dollar is now the beneficiary of the "buy the rumor, sell the fact" trading principle. Greenback is in high demand amid growing hawkish expectations, especially after the latest speech by Fed Rep. James Bullard (who has the right to vote this year), who returned the issue of a 75-point rate hike to the agenda next month. He said he would support the idea at the September meeting, given the fact that US inflation "remains at a high level." Some other representatives of the Fed (George, Barkin, Daly, Bowman) did not rule out this option either. If Jerome Powell joins this chorus of hawks on Friday, the dollar will receive additional support. Actually, due to these expectations, the greenback is now keeping afloat, strengthening its position in many pairs. But if contrary to expectations, the head of the Fed voices restrained rhetoric, thereby hinting at the advisability of a 50-point rate hike, the dollar will weaken across the market. In this case, the EUR/USD pair will not be able to hold under the 1.0000 mark—the buyers will have a great opportunity to organize a corrective counteroffensive. In my opinion, at the moment it is best to take a wait-and-see attitude. Longs in any case look risky, but sales are best viewed at the peak (when fading) of corrective pullbacks. After all, even if Jerome Powell disappoints the dollar bulls, the euro will remain under significant pressure amid the deepening energy crisis in Europe. So, according to many experts, the cost of blue fuel is likely to continue to grow. The upward dynamics is due to a decrease in supplies from the Russian Federation and increased demand for gas against the background of the upcoming heating season and insufficient filling of underground gas storage facilities in Europe. All these factors will push the price up while putting pressure on the single currency. Therefore, it is advisable to open short positions on the EUR/USD pair on corrective bursts. At the moment, entering into sales or purchases is quite risky. Source: Forex Analysis & Reviews: EUR/USD. Euro is cheaper than dollar, dollar is more expensive than euro: new realities have created new risks    

Summary:  Equities were sold off on Monday, continuing a slide from their summer rally high, in the midst of position adjustments ahead of the Jackson Hole central banker event later this week. U.S. 10-year yields returned to above 3%. China cut its 5-year loan prime rates and plans to extend special loans to boost the ailing property markets. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities lost ground and continued to retrace from the high of the latest rally since mid-June.  The market sentiment has become more cautious ahead of Fed Chair Powell’s speech this Friday at the Jackson Hole symposium and a heavy economic data calendar, S&P 500 – 2.1%, Nasdaq 100 -2.7%.  The rise of U.S. 10-year bond yield back to above 3% added to the selling pressures in equities.  Zoom Video (ZM:xnas) fell 8% in after-hours trading as the company reported Q2 revenues and earnings missing estimates and cut its full year revenues guidance. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Bonds were sold off as traders adjusted positions ahead of the Jackson Hole.  The treasury yield curve bear flattened with 2-year yields surging 8bps to 3.30% and 10-year yields climbing 4bps to 3.01%, above the closely watched 3% handle.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Seng fell 0.6% while CSI300 climbed 0.7% on Monday. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and the Chinese authorities plan to provide special loans through policy banks to support the delivery of stalled residential housing projects, CIFI (00883:xhkg) +11.5%, Country Garden (02007:xhkg) +3.2%.  China extended EV waivers from vehicle purchase tax and other fees to the end of 2023, but the share price reactions of Chinese EV makers traded in Hong Kong were mixed.  Great Wall Motor (02333:xhkg) soared 11%, benefiting from launching a new model that has a 1,000km per charge battery while Nio (09866:xhkg) and Li Auto(02015:xhkg) fell 4.2% and 1.4% respectively. Xiaomi (01810:xhkg) dropped 3.3% after Q2 revenues -20% YoY and net profit -67% YoY, on lower smartphone shipments (-26% YoY).  Smartphone parts suppliers, AAC Technologies (02018:xhkg) and Sunny Optical (02382:xhkg) declined 5.6% and 4.2% respectively.  The share price performance of the four companies that will be added to the Hang Seng Index was mixed, Baidu (09888:xhkg) +0.9%, China Shenhua Energy (01088:xhkg) +2.1%, Hansoh Pharmaceutical (03692:xhkg) +3.2% but Chow Tai Fook Jewellery (01929:xhkg) -0.6%.  SenseTime (00020:xhkg) gained 4.2% as the company will replace China Pacific Insurance (02601:xhkg) -2.8% as a constituent company of the Hang Seng China Enterprises Index.  ENN Energy (02688:xhkg) plunged more than 14% after reporting H1 results below market expectations.  China retailer Gome (00493) collapsed 20% after resuming trading from suspension and a plan t buy from the controlling shareholder a stake in China property assets.  EURUSD falls below parity, eyes on 0.9500 The latest concerns on the European energy crisis weighed on the Euro which was seen sipping below parity to the US dollar. Higher US yields and gains in the US dollar also underpinned, taking EURUSD to lows of 0.9926. The European recession is coming hard and fast, and the PMIs today will likely signal increasing pressure on the region. Also on the radar will be Fed Chair Powell’s speech at the Jackson Hole later this week, with a fresh selloff in the pair likely to target 0.9500 next. USDCNH heading to further highs After PBOC’s easing measures on Monday, the scope for further yuan weakness has increased. USDCNH broke above 6.8600 overnight and potentially more US dollar strength this week on the back of a pushback from Fed officials on easing expectations for next year could mean a test of 7.00 for USDCNH. Still, the move in yuan is isolated, coming from China moving to prevent the yuan from tracking aggravated USD strength rather than showing signs of desiring a broader weakening. EURCNH has plunged to over 1-month lows of 6.8216 on the back of broader EUR weakness. Crude oil prices (CLU2 & LCOV2) Crude oil prices made a recovery overnight despite the strength in the US dollar. A global shift from gas to oil, from Europe to Asia, has taken a deeper hold amid gas shortage fears accelerating in the wake of another upcoming maintenance of the Nordstream pipeline. Diesel and refinery margins have also been supported as a result, with Asia diesel crack rising to its previous high of $63 amid low inventory levels. WTI futures reversed back to the $90/barrel levels and Brent were back above $96. Comments from Saudi Energy Minister threatening to dial back supply also lifted prices, but these were mis-read and in fact, focused more on the mismatch between the tightness in the futures and the physical market. Gold (XAUUSD) and Silver (XAGUSD) Gold broke below the key $1744 support and is now eying $1729, the 61.8% retracement of the July to August bounce. Dollar strength and a run higher in US yields weighed on the shine of the yellow metal, which has seen downside pressures since last week after touching the critical $1800-level. Hawkish Fed talk this week could further weigh on the short-term prospects for Gold. Silver also dipped below the key 19 handle, erasing most of the gains seen since late July.   What to consider? German year-ahead power prices hit a fresh record high German year-ahead power prices surged to EUR 700/MWh with Dutch TTF gas prices close to EUR 300/MWh. The surge came on the back of another leg higher in natural gas prices which rose over 8% in Europe amid concerns around the next scheduled 3-day maintenance of the Nordstream pipeline. It appears that demand destruction remains the most obvious but painful cure right now, along with a longer-term focus on ensuring a broad-based supply of energy from coal, gas, nuclear, solar, hydrogen, and more.  Australia and Japan services PMIs plunged into contraction Australia saw its services PMI drop to 49.6 in August in a flash print, from 50.9 in July. Manufacturing PMI, however, held up at 54.5, just weakening slightly from last month’s 55.7. The spate of rate hikes seen from Reserve Bank of Australia is likely taking its toll on demand and manufacturing. Meanwhile, prices remain elevated amid the persistent supply chain issues, and more rate hikes are still on the cards. Japan’s flash manufacturing PMI for August came in lower at 51.0 from 52.1 previously, nut stayed in expansion territory. Services PMI however plunged into the contraction zone below 50, coming in at 49.2 for a flash August print from 50.3 in July. The fresh COVID wave in Japan, although comes without any broad-based new restrictions, is impeding the services demand and will likely weigh on Q3 GDP growth. Europe and UK PMIs may spell further caution The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. China’s plan to provide loans to ensure delivery of presold residential projects is said to be of the size of RMB 200 billion Last Frida, Xinhua News reported that the PBoC, jointly with the Housing Ministry and the Ministry of Finance rolled out a program to make special loans through policy banks to support the delivery of stalled residential housing projects but the size of the program was not mentioned.   A Bloomberg report yesterday, citing “people familiar with the matter”, suggested the size of the support lending program could be as large as RMB 200 billion.  Beijing municipal government rolled out initiatives to promote hydrogen vehicles The municipal government of Beijing announced support for the construction of hydrogen vehicle refueling stations with RMB500 million for each station, aiming at building 37 new stations by 2023 and bringing the adoption of fuel-cell cars to over 10,000 units in the capital. Earlier in the month, the Guangdong province released a plan to build 200 hydrogen vehicle refueling stations by 2025. Since last year, there have been 13 provinces and municipalities rolling out policies to promote the development of the hydrogen vehicle industry.  Earnings on tap Reportedly there have been shorts being built up in Dollar Tree (DLTR:xnys) as traders are expecting that discount retailer missing when reporting this Thursday.   On the other hand, investors are expecting Dollar General (DG:xnys) results to come in more favourably, , which also reports this Thursday.  Key earnings scheduled to release today including Medtronic (MDT:xnys), Intuit (INTU:xnas), JD.COM (09618.xhkg/JD.xnas), JD Logistics (02615:xhkg), Kingsoft (02888:xhkg), and Kuishaou (01023:xhkg). Singapore reports July inflation figures today Singapore's inflation likely nudged higher in July, coming in close proximity to 7% levels from 6.7% y/y in June. While both food and fuel costs continue to create upside pressures on inflation, demand-side pressures are also increasing as the region moves away from virus curbs. House rentals are also running high due to high demand and delayed construction limiting supplies. The Monetary Authority of Singapore has tightened monetary policy but more tightening moves can be expected in H2 even as the growth outlook has been downwardly revised.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast Source: APAC Daily Digest: What is happening in markets and what to consider next – August 23, 2022

WTI crude oil futures rose above the $93 per barrel level today. The price increase may be supported by both macroeconomic data and statements from Saudi Arabia and OPEC. The Organization of Petroleum Exporting Countries may decide to cut oil production in the event of a global recession, representatives of several countries in the alliance told The Wall Street Journal on Tuesday. OPEC and its partners, led by Russia, have been closely coordinating oil production volumes, especially since the initial impact of the coronavirus pandemic in the first half of 2020. The alliance's members will meet again on September 5 to set an oil production rate, according to the BBN news service. Meanwhile, crude inventories in the United States fell by 5.6 million barrels last week, according to data released by the American Petroleum Institute (API). The market consensus was for a much lower decline of 0.9 million barrels. The EIA's official government data will be released today. It is expected to reduce reserves by 933,000 barrels. Probably by a combination of the above two factors, oil prices rose almost 4 percent on Tuesday. Counting from the June peak, however, oil has lost about 25 percent, probably due to growing concerns that a global economic slowdown could dampen consumption. Does the Fed need to be aggressive? The U.S. dollar index rebounded on Wednesday to near 108.7 and rose again toward its highest level in 20 years. USD appreciation may have been influenced by comments from US Federal Reserve officials. Minneapolis Fed Chairman Neel Kashkari said that his biggest concern is that the extent of price pressures has been underestimated and that the central bank will have to be more aggressive for a longer period if inflation persists. This could mean tightening monetary policy even as the specter of a stronger brake on the economy looms. Kashkari added that the central bank may ease interest rate hikes when it becomes clear that inflation is heading toward 2 percent. Further clues about the Federal Reserve's action plans may emerge later this week, when Jerome Powell, chairman of the Fed, addresses the annual symposium in Jackson Hole. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Oil rises in price, dollar rises in strength

Summary:  A zany day for US data as the August flash S&P Global Services PMI suggests a deepening contraction is afoot in the US services sector after an already weak July reading that contrasted with strength in the ISM Services survey for July. What are we supposed to believe. Elsewhere, crude oil has cemented its comeback with an extension higher yesterday and coffee is at risk of a further rise on supply woes. In equities, we look at the latest in the Tesla/Twitter saga, earnings ahead including NVidia after the close today, and an interesting company in the EV batter supply chain in Europe. 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 found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Crude oil bounce extends. Zany mismatch in US Services sector surveys

Summary:  Crude oil’s bounce from a six-month low has so far seen Brent crude oil return above $100 per barrel while WTI following a brief dip to the mid-80’s has turned higher to trade around $95 per barrel. With oil fundamentals still very supportive, the market seems to be realizing the energy market is not the best hedge against an economic slowdown, and it has raised the risk of a response from specualators who recently cut bullish oil bets to an April 2020 low. Crude oil’s bounce from a six-month low has so far seen Brent crude oil return above $100 per barrel while WTI following a brief dip to the mid-80’s has turned higher to trade around $95 per barrel. In our previous update we mentioned the fact that crude oil, in a downtrend since June, had started to show signs of selling fatigue as the technical outlook had started to turnmore price friendly while fresh fundamental developments added some support as well. After finding support below $94 per barrel, the 61.8% retracement of the December to March surge, Brent crude oil now trades back above its 200-day simple moving average with the next key upside hurdle being an area below $102.50 per barrel. Source: Saxo Group While the macro-economic outlook remains challenging due to the lower growth outlook and renewed dollar strength, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The energy crisis in Europe continues to strengthen, with gas and power prices surging to levels that measured in dollars per barrel of crude oil equivalent equates to $470 and $1,050 per barrel respectively. The latest surge being driven by recent low-water level disruptions on the river Rhine and Gazprom announcing a three-day closure of the Nord Stream 1 pipeline due to maintenance, starting on August 31.  Should Gazprom (Putin) decide for geopolitical reasons to keep the pipeline shut after maintenance ends, the risk of further spikes remains, thereby extending the already wide price gap between gas and crude oil. A development that will further support an already very visible increase in demand for fuel-based product, especially diesel, at the expense of gas. This gas-to-fuel switch was specifically mentioned by the IEA in their August update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published the incentive to switch has increased even more, and the result being sharply higher refinery margins for diesel across the world, led by Europe which so far this month has seen the Brent – Gas Oil (diesel) crack spread jump 55%.  The trigger which eventually sent crude oil higher this week where comments from the Saudi Energy Minister flagging possible cuts to production amid an increased disconnect between falling futures markets and a physical market that has yet to show weakness. While his comment sent the ball rolling, yesterday’s API report gave it an extra spin, resulting in the rally back above $100 per barrel. A recovery at this point may force money managers to reassess their exposure in Brent and WTI with a potential short-squeeze brewing. During a three-week period to August 16 these speculative traders increased their gross short positions in Brent and WTI by 43k lots to 125k lots, while cutting gross longs by 61k lots to 403k lots, developments that has reduced the net long to 278k lots, the lowest since April 2020.          Later today the EIA publishes its weekly oil and fuel stock report and expectations for a bigger-than-expected draw in crude oil stocks has risen after the American Petroleum Institute reported a 5.6 million barrel drop together with small increases in gasoline and diesel stocks. Traders will also be watching implied gasoline demand which reached a high for the year in the previous week. Crude oil hungry refineries around the world, balking at buying Russian crude, helped drive US exports to a record 5 million barrels per day, and the market will be watching this pace as well as signs of a recovery in production which dipped 100k barrels per day during the previous reporting week.  The result of the EIA report will be published on my Twitter profile: @ole_s_hansen.    Source: Brent on watch for short squeeze above $100

Relevance up to 15:00 2022-08-25 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. One of the theories that pushes the cryptocurrency market up is a misunderstanding of the economy and monetary policy pursued by central banks worldwide. Conspiracy theories could also be added here, but the governor of the central bank of Finland did not go that far in his interview. In his opinion, the central bank's money in digital form can be trusted unconditionally. "Some joked that the central bank's digital currency (CBDC) is the solution to the problem. Although I may not be an ardent fan of CBDC, I think that detractors unfairly downplay the potential advantages of this tool," said Olli Rehn during a speech at the University of California at Berkeley. Since last year, when the special activity began, central banks worldwide have begun to explore the benefits of CBDC. Some of them, for example, China and Nigeria, have already introduced digital currencies inside their countries. The European Central Bank is still in the middle of an experiment with the digital euro, which is due to end in October 2023. However, the bank's public announcement about the digital euro has been repeatedly criticized for the perceived dangers and risks. During the interview, Rehn also warned against the potential risks of moving to a more digital economy, as evidenced by the growth of cryptocurrency markets over the past five years. According to Rehn, the high volatility of crypto assets will be quite difficult to link with monetary policy and the general movement of prices. "Central banks should prepare for a digital future in which the demand for cash as a medium of exchange may decrease, requiring convertibility into digital money by the central bank. We must remember that our main task is maintaining price and financial stability," Ren said. If we return to the real market and set aside the future, the further direction of bitcoin will depend directly on what the Fed representatives say at the end of this week. Several politicians have already made disappointing statements that they support a further hard course of raising interest rates, which goes against market expectations and affects the demand for risky assets, which includes bitcoin. Bitcoin buyers tried returning to the $21,500 level earlier this week, but it didn't work out well. Most likely, the pressure on the trading instrument will continue to increase as investors abandon risk. The bulls' focus is now on the nearest support of $20,800, a fall to which for the third time could be fatal for the bulls. In the event of a breakthrough in this area, the $19,966 level will play an equally significant role. Its breakdown will send the trading instrument back to the lows of $19,232 and $18,600. It is necessary to consolidate above $21,500 as quickly as possible to restore the demand for bitcoin. It is necessary to break above the resistance of $22,180 and $22,670 to build an upward trend. Fixing this range will give a real prospect of returning to the highs: $23,180 and $23,680. Ether buyers have every chance to miss the nearest support of $1,605, so it is not yet possible to talk about the resumption of a bullish scenario. There will be a change in the market direction only after the return of the $1,670 level, allowing you to get to $1,740 and reach the $1,820 test. The $1,885 area will act as a further target. While maintaining pressure on the trading instrument, buyers will likely show themselves at around $ 1,540. A breakdown at this level will quickly dump the ether at a minimum of $1,490 with the prospect of updating to $1,420. Source: Forex Analysis & Reviews: The Governor of the Central Bank of Finland supports CBDC  

Summary:  Asia has been vulnerable to rising energy prices, and will now face further headwinds in securing energy supplies as bidding wars with Europe heat up. Japan, China and South Korea are the biggest importers of LNG in the region, and Asia LNG prices have shot up to record highs, following the European gas prices higher. Power shortages in China and a re-embrace of nuclear in Japan are some of the early signals of what’s to come in the winter ahead. From energy prices to energy supply Despite lower dependence on Russian energy supplies, Asia won’t be spared from the winter energy crisis. Vulnerabilities stem from higher import dependence, which has been felt so far in higher fuel prices taking the headline inflation in the region to fresh highs. This has taken a heavy toll on the emerging and frontier markets, such as Sri Lanka, Bangladesh and Pakistan which have been pushed to the brink of a collapse. The next and the more severe risk is seen from shortage of energy supplies to Asia which raises the risk of blackouts, manufacturing halts, involuntary demand destruction, calculated energy rationing, depleting forex reserves and market volatility. The shortage of gas supplies in Europe from Russia is switching demand to LNG and dictating global spot LNG prices. Asia is losing LNG cargoes to Europe in a bidding war, and inflows to Asia are expected to drop for the rest of the year. The countries most exposed in Asia from the global shortage of energy supplies are Japan, China and South Korea. The International Energy Agency (IEA), which has forecast that Asian economies will account for almost half of global gas consumption to 2025, expects LNG to play a pivotal role in meeting rising gas demand in Asia. LNG bidding wars: Asia vs. Europe Asian spot LNG prices for the summer of 2022 are at their highest level on record, about 7x the average price in 2017-2021. India and China have posted some of the largest declines in LNG imports as the spot LNG inflows have largely evaporated. China's LNG imports in the first six months of 2022 are down more than 20% year on year, while India's spot LNG imports are down around 14% year on year. Japan and South Korea are also seeing declining LNG imports. Global exports have risen by just over 10 million tonnes to 234.83 million in the first seven months, even as LNG producers try to maximise output and minimise outages. Strategic shifts remain likely Much of the energy pain has been priced in for Europe, a lot may well be in store for EM assets. Meanwhile, there are reports that natural gas inventory levels in Europe are reaching near 80% capacity targets. LNG terminals in Poland may be coming online, and more countries like Germany itself may add LNG capacity as well. So even as Europe may survive the energy crisis, the same is hard to say for the weaker emerging markets. Demand destruction is possibly the only way forward in Europe and Asia. Several provinces and cities in China have issued plans for "orderly" electricity consumption in 2022 to prepare for the risk of insufficient power supply in peak summer, and Chinese Premier Li Keqiang has repeatedly called for maximizing domestic coal production and energy supply from all sources. In the medium-to-long term, the lack of fuel supply will pose a serious threat to EM fundamental factors as it may slow down urbanization and improvements in living standards. This suggests investments in LNG infrastructure will likely ramp up to counter that threat, especially in China which remains committed to LNG use. Meanwhile, Japan’s new strategic energy plan to 2030 envisions the share of LNG in the power mix to fall to 20% by 2030 from the current 37%. This means Asia will also diversify its energy sources and shift towards broader energy dependence on a variety of sources including the traditional coal and the renewable sources such as solar, hydro, wind, hydrogen etc. Japan’s re-embrace of nuclear is a first step towards more such measures to come in the region.   Source: Asia won’t be spared in the energy crisis

Summary:  In today’s ‘Macro Chartmania’, we give an update on the German economy. Back in 2019, we wrote that the German economy was structurally doomed to decelerate due to China’s slowdown and severe underinvestment in the ICT (Information and Communication Technology) sector. This was before the 2020 pandemic outbreak and the 2022 energy crisis. Now, there is little doubt that Germany will enter into a recession this year. It is facing a perfect storm : high inflation for a prolonged period, failure of the multi-decade model growth based on cheap Russian energy and massive imbalance in R&D investment. This is not to say that Germany will become Europe’s new sick man. The country has everything in hand to overcome these challenges. But, in the short-term, it is without doubt a tough time for Germany and thus for the rest of the eurozone. Click here to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week. The below chart partially explains why the German economy is not out of the woods anytime soon. So far, the country has avoided entering into a technical recession. This is explained by a rebound in external demand reflecting improved export growth to Turkey and a stabilization in export growth to the United Kingdom - two key trade partners. However, a recession is certainly only a matter of time. On Monday, the Bundesbank acknowledged that a recession is likely this year. The weak economic momentum in China is a source of concern. China is Germany’s most important trading partner with an average total trade volume in recent years of around €200bn. The latest data show that Germany export growth to China is close to its lowest level since the pandemic outbreak, at minus 8.3 % year-over-year in July. Based on preliminary trade data, the recent stabilization we can see in the below chart is likely to continue. But China’s weak growth is not Germany’s only problem. Inflation is here to stay. The Bundesbank forecasts it will peak around 10 % in the coming months versus 8.5 % year-over-year in July. This is likely. Contrary to the United States, the peak in eurozone inflation is ahead of us. Even if we pass the peak, inflation will remain elevated for long due to higher energy prices (lower reliance on Russian gas and oil will take years to materialize), weak euro exchange rate (a drop of the EUR/USD cross to 0.96 by year-end is highly possible) and the easing of government measures to cap prices (eurozone inflation is actually now artificially low). On top of that, Germany is also facing a structural challenge due to misallocation of investment. This is nothing new. But this is becoming an accurate problem nowadays as the economy is showing worrying signs of weakness. Looking at the global level, Germany is well-ranked in terms of R&D investment. Here comes the issue. A big chunk of it is attributable to the struggling automotive sector. It represents more than 50 % of total R&D investment over the recent years against only 6 % in the United States, for instance. The automotive sector is now in disarray. Supply chain disruptions, weaker demand and high energy bills are hurting carmakers. In the latest ZEW report for August 2022, the current conditions subindex for the car industry was out at minus 44.1. This is a better reading than a few months ago. It fell at minus 61.7 in April 2022 on the back of the Ukraine war, for instance. This is still close to its lowest annual levels, however. The oversized share of R&D investment coming from the car industry has an immediate negative impact : the ICT sector suffers from chronic underinvestment. This negatively impacts potential growth and leadership in key technological innovation. The pandemic outbreak and the following lockdowns showed that Germany is lagging behind in digitalization notably. Germany’s economy is now at a crossroads. For years, policymakers avoided tackling the issue of overdependence on cheap Russian energy (which was a key factor behind German industry’s high competitiveness) and massive imbalance in R&D investment. Hopefully, the upcoming recession will help to move forward on these two issues. There is no other choice but to find new energy alternatives.  The process has already started. This is also urgent to reduce economic dependence on the car industry and channel R&D investment in other sectors. This has yet to happen. In the meantime, if Germany sinks into a recession, expect the eurozone to follow immediately after.     Source: Chart of the Week : Weak Germany

Summary:  US Henry Hub Natural gas has following a 160% year-to-date surge become the biggest component in the Bloomberg Commodity Index, and it highlights just how extreme market moves and developments have been during the past year across the commodity sector. In this we look at what it means and what investors in commodity tracking funds should be aware of US Henry Hub Natural gas (ticker: NG) has following a 160% year-to-date surge become the biggest component in the Bloomberg Commodity Index (BCOM), the first time this has occurred in the index’ +30 year history, and it highlights just how extreme market moves and developments have been during the past year across the commodity sector. The BCOM index which together with the S&P GSCI and DBIQ Optimum Yield Diversified Commodity Index belongs to the heavy weights within the global investment industry, tracks the performance of 23 major commodity futures targeting a one-third exposure in the main sectors of energy, metals and agriculture. The target weights are set once a year every January and if prices shift significantly during the year, a reweighting will not occur until the following January. The mentioned 160% year-to-date surge in US natural gas futures has more than doubled its weight to 17.2% from 8%, and in the process made it the biggest component in the BCOM index, more than double that of WTI and Brent combined. From a sector perspective, and given strong gains across the other energy components, especially fuel-based products, it has lifted the total energy exposure by 9.2% to 40.9%. All other sectors and sub-sectors share the reduction with the biggest seen in metals with industrial and precious down by a combined 7.5%. What it means?The BCOM index is likely to become more volatile with its performance increasingly dependent on developments within the energy sector, especially natural gas. Recently the price hit $10 per MMBtu before suffering a 10% setback due to a further delay of the restart of the Freeport LNG export plant which has been closed for months following an explosion. The expected restart will increase demand for US gas and with that slow the process of adding stockpiles before the winter extraction season starts in a couple of months’ time. The biggest threat to the energy sectors strong performance is the combination of a deep recession eroding demand and a peaceful solution to the war in Ukraine sending EU gas prices sharply lower in anticipation of flows from Russia normalizing. What should investors in commodity tracking ETF’s do?The short answer is nothing as the reasons for investing in tangible assets such as commodities has not changed. The other commodity tracking funds mentioned earlier, and which also include the CRB Index will all be affected depending on their individual exposure to natural gas. Overall, the BCOM has from the outset the largest exposure and is therefore the index impacted the most. From an investor perspective these types of futures tracking commodity funds remains a cheap solution to gain exposure to commodities. With natural gas being notoriously volatile some increased price swings on the index can be expected, and if the strong gains are being maintained we should expect a very active rebalancing next January where gainers will be sold, and losers bought in order to reset the target weights. Source: Bloomberg, Saxo Group   Source: NatGas surge weighs heavily in commodity indices

Leading investment and commercial banks are vital to the international financial system. They are responsible for money transfers, investments, currency exchange, hedging corporate exposures, etc. Banks may be exposed to potential risks in an environment of changing interest rates, or it may be a potential opportunity for them to improve their profits. Given the volume of lending activities, commercial banks' performance seems most sensitive to a change in interest rates. Investment banks, meanwhile, through their handling of investment projects and trading activities, have the potential to profit when interest rates change significantly. How did the banks perform? JPMorgan Chase (JPM), Bank of America (BAC) and Goldman Sachs (GS) are among the largest and most influential banks in the world. In the second quarter, they generated revenues of $31.6 bln, $22.8 bln and $11.9 bln, respectively. Out of them, only JPM failed to beat Wall Street analysts' expectations in terms of revenue. JPM and BAC expect some borrowers to default through the difficult economic situation in the US. As a result, the former has set aside reserves of  $428 million to cover non-performing loans. Figures from leading banks seem to indicate that, after a record 2021, the number of mergers and acquisitions (M&A) and IPOs is declining significantly. BAC reported a decline in investment banking deal volumes in Q2 after last year's historic highs of a whopping 47%. However, the impact on books was offset by a 22% growth in net interest income, most likely driven by rapidly rising interest rates.  Moreover, rising interest rates due to the popularity of fixed-rate lending in the US do not seem to translate as strongly as one would expect into corporate profits. Irresponsible credit policies seem to be hitting the sector's performance hard, as can be seen in the share prices of JPM and BAC. They have already fallen 28.4 and 25.3% respectively this year. However, the announcement of the suspension of buybacks is also not a good sign and may indicate that management might consider the current share price too high. Goldman Sachs, which shares have lost 13.5% this year and surprised positively relative to expectations on Wall Street, appears to be a peculiar exception. Historically, GS has been relatively immune to periods of crisis, in which the company has taken advantage of high volatility to boost earnings. Nonetheless, the current situation is probably unsuitable due to its high vulnerability to declining transaction revenues (M&A) and share issues.  In contrast to the mixed and less-than-ideal performance of JPMorgan Chase and Bank of America, Goldman surprised the market with a significant increase in high-margin sales of securities to companies (especially those looking to hedge in a challenging macro environment). Income from these rose by a staggering 55% to $3.61 bln against the $2.89 bln estimated by Wall Street. Income from the sale of shares also rose more than estimated to 2.86 bln against a forecast of $2.67 bln. Finally, JPM, BAC and GS profits were 8.6 bln (-28% year-on-year), 6.25 bln (-32% year-on-year) and $2.79 bln (-48% year-on-year) respectively. This significant decline may shatter the stereotype that a high-interest rate environment can only be beneficial for banks.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Banks' earnings summary - do rising interest rates benefit financial institutions?

Summary:  U.S. equities rallied ahead of the Jackson Hole Powell keynote. Comments from discount retailer Dollar Tree about pressures to cut prices and customers shifting to “needs-based consumable products” cast doubts on the health of U.S. consumers. The market chatters and then a WSJ article on a potential deal between the U.S. and China on access to audit working papers and avoiding Chinese ADR delisting sent the share prices of China internet stocks and ADRs soaring. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities rallied for the second day in a row ahead of the much anticipated Powell speech at the Jackson Hole symposium on Friday, S&P 500 +1.4%, Nasdaq 100 +1.8%.  Discount retailers, Dollar General (DG:xnys) and Dollar Tree (DLTR:xnys) reported Q2 results.  Discount General beat the relatively high expectations and finished the session down modestly -0.6%.  Peer Dollar Tree’s results fared weaker with in-line Q2 results but a downward revision of full-year EPS due to its plan to cut prices sent its share price 10.2% lower.   U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) U.S. treasury yield fell 7 to 8 basis points from the belly to the long-end of the curve after a strong 7-year auction. The change in 2-year yields was relatively modest, -2bps. Flows were light ahead of Chair Powell’s keynote speech at the Jackson Hole event on Friday. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) China internet stocks rallied dramatically in a typhoon-shortened session in Hong Kong on Thursday, JD.COM (09618:xhkg) +11%, Bilibili (09626:xhkg) +10.3%, Baidu (09888:xhkg) +9.2%, Alibaba (09988:xhkg) +8.8%, Meituan (03690:xhkg) +8%, Tencent (00700:xhkg) +4.8%.  Hang Seng Tech Index (HSTECH.I) surged 6%.  Investors found optimism in the 19-point stimulus package as well as chatters among traders about unverified progress on resolving the audit working papers access issue in the heart of the Chinese ADR delisting risk.  During New York hours, the Wall Street Journal ran an article, suggesting that the U.S. and China are nearing a deal to allow American regulators to inspect in Hong Kong the audit working papers of Chinese companies listed in the U.S.  The NASDAQ Golden Dragon China Index soared 6.3%. Compared to their respective Hong Kong closing levels, Alibaba +4.5%, Meituan +4.0%, Tencent +2.1%.  Chinese property names rallied across the board by 2% to 5%.   The performance in A-shares was more measured, CSI 300 fluctuated between gains and losses and finished the session 0.8% higher.   Coal miners, oil and gas, and crude tankers stocks surged in Hong Kong as well as mainland bourses.  Mainland investors did not participate much in the sharp move higher as southbound flows registered a net outflow. AUDUSD on the backfoot in early Asian hours The USD rebound returned in early Asian hours on Friday amid a sustained hawkish tilt inn Fed commentaries ahead of Powell taking the stage at the Jackson Hole summit. AUDUSD saw downside pressures and slid to sub-0.6960 from an overnight high of 0.6991. AUDNZD found support at 1.1200 and may be looking at new highs of the cycle with the current account differentials at play. USDJPY caught a bid early as well, and rose to 136.70 with focus squarely on high Powell’s comments can take the US yields. Crude oil prices (CLU2 & LCOV2) Hawkish Fed comments and further prospects of Iran deal saw crude oil reversing lower in the overnight session. However, modest gains have returned this morning with the supply side remaining a key focus with Brent futures close to $100 and WTI at $93+. Saudi Arabia was joined by Libya and Congo in supporting the view that supply curbs may be needed to stabilise the oil market. Further concerns on Kazakhstan’s supply also emerged amid repair works required on three damage moorings at the port facility. What to consider? Some more hawkish Fed comments before we get to Powell Several Fed speakers were on the wires echoing the same message on inflation and more rate hikes. The markets are still holding their breath for wat Powell has to say later today. James Bullard (2022 voter) reiterated his year-end target of 3.75% to 4% and market expectation is not too far from that now. Esther George (2022 voter) was more open about rates going above 4%, but stayed away from a specific guidance for the September meeting. Patrick Harker (2023 voter) said rates need to be lifted into restrictive territory. Raphael Bostic (2024 voter) told the WSJ it's too soon to call inflation’s peak and that he hasn't decided yet on a 50 or 75bps rate hike next month. Tokyo CPI surprises to the upside Japan’s Tokyo inflation for August has come in close sight of the 3% mark, with headline at 2.9% y/y vs. expectations for 2.6%. The core measure was also above expectations at 2.6% y/y, coming in despite measures to help cool price pressures. Further gains can be expected later in the year as cheaper cell phone fees are reversed, and we also see threats of an energy crisis in Japan as LNG imports get diverted to Europe. This will continue to erode the purchasing power and keep the risk of a BOJ pivot alive. Europe’s energy woes French power prices soared 15% to EUR 900/MWh, more than 10x last year’s price amid expanding nuclear outages. Meanwhile in Germany, power prices for next year soared as much as 23% to an all-time high of EUR 792/MWh. UK and Italy also recorded fresh highs in power prices while Spain's parliament approved a law aimed at cutting energy use. The UK will announce its financial commitment for a new nuclear plant, Sizewell C, next week. The U.S. and China are said to nearing a deal in resolving the Chinese ADR audit papers inspection issue According to a Wall Street Journal article, Chinese securities regulators “are making arrangements for U.S.-listed Chinese companies and their accounting firms to transfer their audit working papers and other data from mainland China to Hong Kong” and “would allow American accounting regulators to travel to Hong Kong to inspect the audit records”. It is important to note that an agreement has yet to be reached and the regulators from both sides remain silent about it so far.  One of the hurdles to the proposed arrangement of transfer of audit working papers from the mainland to Hong Kong can satisfy the U.S. regulators, particularly the U.S. SEC Chair Gensler who has emphasized “full access”.  If this turns out to happen, it will not only benefit the Chinese companies that are listed in the U.S. but also sets the U.S. and China in a more conciliatory mood at least in some financial matters, and shows case the uniqueness of the position of Hong Kong.  German business sentiment is not that bad in August The headline reading is out at 88.5 versus expected 86.8 and prior 88.6. This is only a bit softer than the previous month. The same goes as well for the current conditions (out at 97.5 in August versus prior 97.7) and the expectations (80.3, unchanged compared to July). Overall, business sentiment remains soft. But given the quick economic deterioration, it could have been much worse. We still expect sentiment to further fall in the coming months as the German economy sinks into a recession. The energy crisis is hitting very hard consumers and companies – thus leading to lower demand and corporate investment. Yesterday, Germany’s benchmark year-end power kept rising (+13% in one day) to a new record of EU725/MWH. So far, the German government has spent roughly €60bn to limit the impact of higher energy prices on households and corporations. This represents about 1.7% of GDP according to the calculations of the Belgium-based think tank Bruegel. In percentage of GDP, this is still much less than many other European countries (3.7 % of GDP for Greece, 2.8 % for Italy and 2.3 % for Spain, for instance). In any case, this is unsustainable, of course. Softer July US PCE print would not derail Fed’s tightening After a softer CPI report in July, focus will turn to the PCE measure – the version of the CPI that is tracked by the Fed to gauge price pressures. Lower gasoline prices mean that PCE prints could also see some relief, although we still upside pressures to inflation given that energy shortages will likely persist and easing financial conditions mean that inflation could return. We would suggest not to read too much into a softer PCE print this week, as the stickier shelter and services prices mean that the 2% inflation target of the Fed remains unachievable into then next year. This suggests that the aggressive tightening by the Fed will likely continue, despite any likely softness in the PCE this week. U.S. discount retailers reported mixed Q2 results, highlighting pricing pressures ahead Dollar General (DG:xnys) reported revenue growth of 9% YoY to $9.4 billion, in line with the consensus estimate, and EPS of $2.98, +10.6% YoY, above the consensus estimate of $2.94.  Same-store sales in Q2 grew 4.6% YoY, above the consensus at +3.8%.  In the company’s guidance for 2022, revenue growth was raised to +11% from previously +10.0-10.5% and the same-store-sales growth was raised to +4.0-4.5% from +3.0-3.5%.  Q2 results from another discount retailer, Dollar Tree (DLTR:xnys) were however weaker, with revenue growth of 6.7% YoY to $6.77 billion, slightly below the consensus estimate of $6.79 billion.  EPS came in at $1.60, in line with expectations.  Same-store-sale for the quarter was +4.9%, below the consensus estimate at +5.0%.  The company lowered its 2022 full-year EPS guidance to $7.10-$7.40 and said that 60% of the cut was due to cutting prices.  The management said that they “expect the combination of this pricing investment at Family Dollar and the shoppers’ heightened focus on needs-based consumable products will pressure gross margins in the back half of the year”.  The comments from Dollar Tree casts a shawdow over the health of consumers in the U.S. in general.  Earnings on the tap Meituan (03690:xhkg) is scheduled to report Q2 results on Friday after the market close.  Analysts are upbeat about the food and grocery delivery platform’s potential in being benefited from the recovery of consumer demand amid the reopening and cost control initiatives.  The consensus estimate (as per the Bloomberg survey) for Q2 revenue is to grow 11% YoY to RMB48.59billion and adjusted net loss of RMB2.17 billion.  Coal miner China Shenhua Energy (01088:xhkg) and oil and gas company Sinopec (00386:xhkg) are also scheduled to report on Friday.      For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 26, 2022

Overview: Ahead of the much-anticipated speech by Federal Reserve Chair Powell, the Fed funds futures are pricing in about a 70% chance of a 75 bp hike next month.  The US 10-year yield is up nearly five basis points today to 3.07% and the two-year yield is firm at 3.38%.  Asia Pacific equities were mostly higher, with China the main exception among the large markets, after US equities rallied yesterday.  Europe’s Stoxx 600 is off about 0.3% to bring this week’s loss to a little over 1%.  It would be the first back-to-back weekly loss in two months.  US futures seeing yesterday’s gains pared.  Europe’s benchmark 10-year yields are mostly 4-8 bp higher.  The greenback is mixed with the European currencies mostly higher, led by the euro, pushing above parity where options for 1.5 bln euros expire today.  The dollar bloc and yen are nursing losses.  The firmer euro tone appears to be lending support to the central European currencies, while the South African rand and Thai baht are off a little more than 0.5% to pace the declines.  Gold set the high for the week yesterday near $1765 and is struggling to stay above $1750 today. October WTI is up 1% today and 3.4% for the week.  It posted an outside down day yesterday to fell 2.5% but is consolidating quietly today. Europe’s natgas benchmark is off 0.5% to pare this week’s gain to around 25.2% after rallying 20.3% last week.  The US natgas is gaining for a third day, up 2.2%.  It was nearly flat on the week coming into today. Iron ore rose almost 3% to bring this week’s gain to 5.2%, the strongest weekly advance this month.  September copper is up 1.4% after yesterday’s 1.5% advance. December wheat is firm after a four-day rally was snapped yesterday. Poor weather is seen behind the week’s 3% gain.   Asia Pacific Tokyo's August CPI, which does a good job of reflecting national forces, rose more than expected.  The headline rate rose to 2.9% from 2.5%, its highest in 30 years.  The core measure, which excludes fresh food, stands at 2.6%, up from 2.3%.  Several banks are now warning it could surpass 3% in Q4.  A little more than half of Japan's inflation stems from fresh food and energy, with which CPI rose 1.4% from a year ago, up from 1.2%.  The Bank of Japan meets on September 22 and is expected to remain the outlier among the high-income countries and maintain the current policy setting, with the target rate at -0.10%.   There are three developments in China to note.  First, after several initiatives, which individually have been played down by observers as not going far enough, China's high-yield bond market, dominated by the property sector, have shown some new domestic interest.  The back-to-back gains are the first in four months. Second, there appears to be some progress in US-China talks about US regulators access to the accounting records of Chinese companies that list on American exchanges.  These Chinese companies have been instructed to prepare audit working papers to bring to Hong Kong to be reviewed by US officials.  Although mainland equities have languished this week (CSI 300 is off 1%), Hong Kong stocks have rallied.  The Hang Seng gained 2% this week, half of which came earlier today.  The HK China Enterprise Index (mainland companies that trade in HK) rose 3% this week.  Third, dubbed teapot, the independent oil refiners in the Shandong province have cut their run-rates to 61.3% this week, the lowest since May.  This seems to reflect the poor state of the economy, hampered by the extreme weather and shortage of electricity.   The dollar rose 2.65% against the yen last week but has gone nowhere in recent day. It continues to chop in Tuesday's range (~JPY135.80-JPY137.70). The ranges have gotten steadily narrower. Today's range has been roughly JPY136.40 to JPY137.15.  Two images come to mind, a spring coiling (dollar bullish) or a sideways affair.  Momentum indicators are mixed.  The exchange rate still seems sensitive to US interest rate developments.  The Australian dollar reached a six-day high yesterday near $0.6990, and although it closed firmly, there has been no follow-through buying.  It has consolidated down to $0.6950.  A convincing move through $0.6940 may refocus attention on the downside.  The PBOC again set the dollar's reference rate lower than the market (Bloomberg survey) expected at CNY6.8468 vs. CNY6.8542.  The gap was half of yesterday's, which was the most since February 2020.  Nevertheless, the market still extended the greenback's gains.  Around CNY6.8620, the dollar is up about 0.2% today and 0.65% for the week.  If sustained, it will be highest weekly close since August 2020.    Europe The record of last month's ECB meeting, where it delivered its first rate hike with a half-point move did not tell us anything we did not already know.  First, the rise in inflation to near 9% was the catalyst for the rate hike. That there were some who wanted a quarter-point move is not surprising.  The preliminary estimate of this month’s CPI will be released on August 31.  The month-over-month pace is expected to rise by 0.3% after a 0.1% gain in July.  However, the base effect will translate this in a slightly slower year-over-year rate (8.8%). The core rate is expected to be steady at 4.0%, though the risk is on the upside. The market has fully priced in a 50 bp hike at the September 8 meeting, the swaps market is consistent with around a chance of 75 bp move, which seems a bit exaggerated.  While there is some debate in the US whether inflation has peaked, in the eurozone this may be a brief respite.   Like the FOMC minutes, the ECB's record of its meeting should not be understood as an objective report of the meeting, but another channel by which officials communicate to the market.  In its record, the ECB insists that the 50 bp rate hike should be seen accelerating removal of accommodation, what it calls front-loading, rather than raise the terminal rate.  While many press accounts repeated it, the market seems less sanguine.  Consider that on July 1, the swap market had the policy rate at 1.23% in mid-June 2023.  Now it is 1.77%.  ECB officials were cognizant that the economies were slowing, and a recession may be near.  However, in what seems to be an innocuous comment observed that governments may be better positioned to address it.  What is striking is that this goes against ordoliberalism, which Draghi and others said its part of the ECB's DNA.  Ordoliberalism reject Keynesian demand management through fiscal policy.   We had thought there was a quid pro quo at the July ECB meeting, which allowed for the larger rate hike in exchange for the new Transmission Protection Instrument.  However, if this was case, the hawks have the advantage.  There appear to be so many hurdles to its use that, like the Outright Market Transactions (announced with Draghi's "whatever it takes") it may never be used.  The ECB's record indicated that the Governing Council would take into account analysis by the EC, the European Stability Mechanism, the IMF, "and other institutions", alongside the ECB's own analysis, with no ranking provided.  Unlike the OMT, which was to be triggered at a country's request, the TPI is done at the ECB's discretion.   The euro slipped through yesterday's low by a couple hundredths of a cent in Asia but has come back bid in Europe, and pushed above $1.00, where options for 1.5 bln euros expire at the same time today that Fed Chair Powell is scheduled to begin presenting in Jackson Hole.  The single currency has not closed above parity this week and set a new 20-year low on Tuesday slightly ahead of $0.9900.  It seems like the recent price action is more about market positioning than new developments.   Sterling set a range on Tuesday between $1.1720, a new 2-year low, and $1.1880.  It has not traded out of that range in subsequent action.  Near $1.1825, sterling is virtually flat this week against the dollar and about 0.35% first against the euro. Press reports suggest that Truss, who looks set to become the new Prime Minister in a couple of weeks could trigger Article 16 that would allow the suspension of some parts of the Northern Ireland protocol as early as September 15, when the existing arrangements that allowed for easier checks expire.  Between this, Italy's election on September 25, and the ongoing energy and extreme weather challenges cast a pall over the outlook.  America Fed Chair Powell's long-awaited speech at Jackson Hole is a few hours away, and the market is pricing in about a 70% chance that the Fed hikes 75 bp next month.  Of course, there is important data due before the FOMC meeting concludes on September 21 including the jobs report next Friday and CPI on September 13.  Still, it is unlikely that either report changes that overall assessment that the labor market remains strong, even if job growth slows a bit from the unexpectedly sharp 528k jump in July nonfarm payrolls, and that price pressures are far too high, even if the pace eases a little.  Those who insist on reading Powell dovishly seem to be focusing on the line in the recent FOMC minutes, which noted that many members recognized the risk that the Fed could overdo it.  However, what these observers seem to under-appreciate is that the observation was in the context of a general assessment of the risks and the minutes recognized an even greater risk that inflation expectations get embedded.  Indeed, in recent weeks there have been numerous essays claiming that the era of low inflation is over, due to various structural factors, including the re-shoring and pullback from globalization, the integration of large populations in central Europe and Asia, and the costs of sustainable development.   We do not think Powell is as dovish as the many pundits argue, and despite this era for forward guidance, we think it best to focus on what the Fed does rather than what it says in this context.  Among the high-income countries, no central bank has been as aggressive as the Federal Reserve, even if some like the Bank of England began normalizing policy earlier.  In addition, starting in a few days, the pace that the Fed will shrink its balance sheet will double to $95 bln a month. If dovish and hawkish are to signify anything of importance, they cannot be understood in the abstract, but placed in a context.  By the Fed's own history, and in comparison, to other high income central banks, several of whom have higher inflation than the US, it has acted expeditiously this year and knows that it is not done.  Many of those who criticize the Fed for not being even more aggressive are also among those that have the most pessimistic economic outlooks.  It is an easy space to occupy if one is not held accountable. For whom do they speak? Even the hawks at the Bundesbank are not hawkish enough for many of these critics.   Play the player or play the game?  What Powell actually says may not means as much in the short run as to how the market responds.  Consider the FOMC minutes again.  When they were initially reported, the pundits said it was dovish and the December Fed funds futures made new session highs on August 17 and follow-through buying the next day.  We insisted that a dovish reading was a mistake, and although the subsequent economic data have mostly been weaker than expected, the December Fed fund futures have sold off and the implied yield rose to new highs for the month (~3.54%) yesterday. Similarly, since those "dovish minutes" were released, the implied yield of the October Fed funds futures contract (no FOMC meeting in October, so arguably a cleaner read than the September contract) has risen by 5.5 bp, reflecting perceptions of heightened Rather than focusing on Powell's exact words, we suspect it may be more fruitful to focus on the market's penchant for reacting as if the Fed were dovish.   Ahead of Powell, the US reports a bevy of data, which include the advanced estimate of US merchandise July trade figures, and inventory, and personal income and consumption data.  Given the importance attributed to Powell's speech, the data is likely to be more important for economists as they work on their Q3 GDP forecasts than market participants.  The PCE headline deflator, which the Fed official targets are expected to slip toward 6.4% from 6.8%. The core deflator is projected to tick lower to 4.7% from 4.8%.  The CPI, which comes out first, and is based on different methodology, has stolen the deflators thunder and was cited by Powell in explaining the larger-than-signaled hike in June.  Mexico also reports July trade figures today.  Mexico's trade balance is deteriorating sharply.  The Q2 monthly average deficit was $2.69 bln.  In Q2 21, it was in surplus by $927 mln.  This has been blunted a little by surging worker remittances, and the July report is next week.  Worker remittances averaged $5.01 bln in a month in Q2 22 (vs. $4.3 bln in Q2 21). The US dollar set a five-day low yesterday, slightly below CAD1.2900.  It was probing the CAD1.3060 area in the first two sessions this week.  It is near CAD1.2935 in the Europe, and it needs to resurface above CAD1.2960-80 to open the upside again.  If the yen takes is cues from US yields, the Canadian dollar takes its from the general risk appetite reflected in the US S&P 500. Initial support is seen now near CAD1.2920.  The US dollar slipped to seven-day lows against the Mexican peso yesterday (~MXN19.85) and recovered through the North American session to MXN19.98.  It is trading sideways today above MXN19.92.  The intraday momentum readings seem to favor the dollar's upside today provided that the MXN19.90 area holds.      Disclaimer   Source: Jackson Hole and More

Summary:  Chinese earnings were less impacted than the rest of the world in the initial phase of the pandemic, but since then China has moved into crisis mode due to a housing crisis and energy constraints lately being intensified due to severe drought. We also take a look at Lululemon earnings next Thursday where expectations are high for revenue growth and a significant margin rebound. Underweight Chinese equities as growth has stalled China came through the early phase of the pandemic with less scars on the economy due to the country’s effective lockdown. The impact on corporate earnings were less than that in the rest of the world (see chart), but the subsequent phase during the reopening has been much more challenging. China is currently facing a real estate crisis, rising unemployment, energy shortages that have recently been worsened by severe droughts, and general slowdown of the economy. In many ways it looks like the Chinese economy will go through some painful years of readjustment away from being heavily dependent on heavy investments in housing and exports. Earnings in Q2 have been better than expected but Chinese earnings growth since Q3 2019 has lacked behind the rest of the world. A lot of new regulation in the private sector has lowered profit growth and investor flows into China has slowed down as well. Following the war in Ukraine investors have further cut exposure to China and our take is still underweight Chinese equities at this point. Is Lululemon still attracting the consumer amid worsening inflation outlook? While big Chinese earnings are scheduled for next week it will not have the market’s attention. From a macro perspective we are much more interested in Lululemon reporting Thursday because the company’s result will be a good barometer on consumer spending and also the outlook. We have recently seen in earnings releases from Dell and Salesforce that both companies are observing a significant change in business spending starting in July. Analysts expect Lululemon to grow revenue in FY23 Q2 (ending 31 July) by 22% y/y with operating margin expanding again from a low level in Q1. Freight rates and global supply chains have eased somewhat over the past three months and Lululemon has had great success with its introduction of footwear. The key downside risk to watch is revenue growth expectations for the current quarter ending in October as analysts expect 20% y/y which might be too optimistic given the current trajectory of the US economy. The list below shows the most important earnings releases next week. Monday: Haier Smart Home, Foshan Haitian Flavouring, Agricultural Bank of China, BYD, Pinduoduo, Trip.com, DiDi Global, CITIC Securities Tuesday: Woodside Energy, ICBC, China Yangtze Power, Muyuan Foods, SF Holdings, Shaanxi Coal, Midea Group, Tianqi Lithium, Ganfeng Lithium, Bank of Montreal, China Construction Bank, Bank of China, Great Wall Motor, COSCO Shipping, Partners Group, Baidu, Crowdstrike, HP Wednesday: MongoDB, Brown-Forman, Veeva Systems Thursday: Pernod Ricard, Broadcom, Lululemon Athletica, Hormel Foods Friday: BNP Paribas Fortis   Source: Chinese earnings are playing catch-up

Summary:  The commodity sector continues to recover with the Bloomberg Commodity Index clawing back more than half of what it lost during the June to July 20% correction. It supports our long-held view that commodities can weather headwinds from an economic slowdown with supply of key commodities being equally challenged. Gains this past week were seen across most sectors, led by agriculture and energy, the latter seeing rising demand diesel as the cost of gas continued its near vertical ascent. PLEASE NOTE: This update was written before Friday’s Jackson Hole speech from Federal Reserve Chair Jerome Powell The commodity sector continues to recover as the Bloomberg Commodity Index claws back more than half of what it lost during the June to July 20% correction. Gains were seen across most sectors, led by agriculture as weather woes lifted the cost of coffee and the three major crops – especially corn. Industrial metals received a boost from China’s continued efforts to support its weakening economy by announcing more stimulus policies that would pump billions into infrastructure projects. The energy sector was supported by surging gas prices driving up demand for diesel and Saudi Arabia flagging the risk that OPEC+ may cut production to stabilise volatile markets.In financial markets, the dollar reached a fresh 20-year high against the euro as Europe’s energy crisis continued to pressure the economic outlook for the region. US stocks tumbled and bond yields rose ahead of Friday’s eagerly awaited speech by Federal Reserve Chair Jerome Powell. In which, he was expected to reiterate his determination to bring down inflation by continuing to hike interest rates. Inflation-fighting measures, such as hiking interest rates and removing stimulus into a post-pandemic economic slowdown, was the main driver behind the recent correction in commodities. Overall, however, we maintain the view that commodities can weather headwinds from an economic slowdown with supply of key commodities being equally challenged. In the long term, support for commodities will be driven by underinvestment, urbanisation, the green transformation and deglobalisation. In the short term, prices are likely to be supported by the unfolding energy crisis in Europe, Russia-sanctions related supply disruptions, adverse weather raising fresh concerns about food supplies, and China’s efforts to support its economy.    Crude oil sellers having second thoughts While the macro-economic outlook remains challenging due to the lower growth outlook and recent dollar strength, crude oil and the product markets have nevertheless managed a strong rebound this past week. The energy crisis in Europe continues to strengthen, with gas and power prices surging to levels that measured in dollars per barrel of crude oil equivalent equates to $530 and $1,400 per barrel, respectively. The latest surge was driven by recent low-water level disruptions on the river Rhine and Gazprom announcing a three-day closure of the Nord Stream 1 pipeline due to maintenance, starting on August 31.Should Gazprom (President Putin) decide to weaponize supplies further and keep the pipeline shut after maintenance ends, the risk of further spikes remains – thereby extending the already wide price gap between gas and crude oil. A development that will further support an already very visible increase in demand for fuel-based product, especially diesel and later on this autumn also heating oil, at the expense of gas. This gas-to-fuel switch has supported the recent recovery with the US last week shipping a record amount of diesel to energy-starved customers looking for alternatives to Russian supplies.However, the trigger which eventually sent crude oil higher this week were comments from the Saudi Energy Minister and other OPEC members. These comments flagged possible cuts to production following a recent and growing disconnect between falling futures markets and a physical market that has yet to show weakness. A discrepancy we have noticed as well in recent weeks with crude oil futures being sold as a hedge against an economic slowdown with little focus on the physical market and its current price supportive supply and demand fundamentals.Having found support after retracing 61.8% of the December to March 111% surge, the Brent crude oil futures contract has now returned to $100 per barrel with trendline resistance, currently $102.25 preventing a further upside push. A continued recovery at this point may force money managers to reassess their exposure in Brent and WTI with a potential short-squeeze brewing. During a three-week period to August 16, speculative traders reduced their net long to 278k lots, the lowest since April 2020. Source: Saxo Group Rising grain prices and strong dollar re-ignite food supply worries. U.S. corn reached a two-month high and, together with more muted gains across the other major US traded crop futures, the Bloomberg Commodity Grain Index has now risen by 12% following the May to July correction which at least temporarily helped reduced worries about a global food crisis. However, with bad weather continuing to impact production and with Ukraine exports still well below previous years, the mentioned worries have started to re-emerge – not least considering the recent run up in the dollar which has only made matters worse for buyers of grains in local currencies.The latest run up in US corn has been supported by concerns that hot and dry weather in the Midwest during the final crop development period may limit the production outcome. The US is the biggest producer and exporter of corn – which is used in everything from animal feed to biofuels and sweeteners – and a poor US harvest will likely rekindle recent worries about food security that was driven by war, drought and the overall impact of climate change. In addition to the above and the mentioned slow pace of shipments from Ukraine, we are currently seeing drought in China threatening the local harvest which could lead to higher imports. Dryness within the European Union this summer has continued to drive production forecast lower.   Coffee prices surge on Brazil and Vietnam supply worries Both Arabica and Robusta coffee futures returned to strength, both rallying strongly on signs of a deteriorating supply outlook. Stockpiles in Vietnam – the world’s top supplier of the Robusta variety – are expected to halve by the end of September from a year earlier while stocks of the Arabica bean monitored by the ICE exchange has slumped to a 23-year low. Freak weather in South America during the past year has decimated the production outlook for Brazil, Colombia and Central America, while recent dryness and a continued surge in the cost of fertilizer have already started to raise concerns about next year’s crop. The Arabica futures contract paused after reaching the June high at $2.42 per pound, but the risk remains that it may push towards the 11-year high at $2.605 reached in February Industrial metals find support in China Industrial metals, led by steel, aluminum and zinc responded positively to news that the Chinese government has stepped up its efforts to support an economy damaged by repeated Covid lockdowns and a property market slump. China’s State Council announced a 1 trillion yuan ($146 billion) stimulus package with 300 billion going towards infrastructure projects, thereby doubling the amount the government has pledged towards project that will boost demand for industrial metals.Following a period of range trading between $3.55 to $3.73, High Grade Copper broke higher on Friday and may now target $3.85/lb next, but it will likely require a rally above $4/lb before speculators, having traded the metal with a short bias since April, start to reverse back to a net long. The primary focus remains on China and whether the mentioned stimulus measures will be strong enough to shore up enough support for the upside push to continue. Source: Saxo Group Gold trades steady despite fresh dollar and yield strength Gold managed a small bounce but overall, it continued its recent struggle amid headwinds from a stronger dollar and rising bond yields. Not least ahead of Friday’s Jackson Hole speech from Fed chair Powell with gold traders worried that a hawkish statement would provide additional strength to the dollar and yields, thereby further delaying gold's return to strength by potentially sending it below support at $1729. In a year where inflation has been surging higher, some investors may feel hard done by gold’s negative year-to-date performance in dollars but taking into account it had to deal with the biggest jump in real yields in more than 25 years and the dollar rising 10% against a broad basket of major currencies, its performance, especially for non-dollar investors remains acceptable. We maintain the view that the market is overly optimistic with the assumption that central banks can successfully bring inflation down to the levels currently being projected. Such a scenario would create a challenging outlook for interest rate and growth sensitive stocks, thereby raising the need for tangible assets such as gold and commodities in general to weather a period of low growth and high inflation. Natural gas, now the biggest component in the Bloomberg Commodity index The BCOM index together with the S&P GSCI and DBIQ Optimum Yield Diversified Commodity Index belongs to the heavy weights within the global investment industry for commodities. It tracks the performance of 23 major commodity futures targeting a one-third exposure in the main sectors of energy, metals and agriculture. The target weights are set once a year every January and if prices shift significantly during the year, a reweighting will not occur until the following January. However, an astonishing 160% year-to-date surge in US natural gas futures has more than doubled its weight to 17.2% from 8%, and made it the biggest component in the BCOM index for the first time ever – more than double that of WTI and Brent combined. From a sector perspective, it has helped lift the total energy exposure by 9.2% to 40.9%. All other sectors and sub-sectors have seen reductions with the biggest impacting industrial and precious metals by a combined reduction of 7.5%. These moves away from target weights will not be adjusted until next January. At which point, we may see some major activity as the rebalancing process would see selling of gainers, especially natural gas while the biggest losers will be bought.   Source: WCU: Weather woes and energy crisis lift commodities

Relevance up to 14:00 2022-08-27 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Technical analysis: USD/CNY has been trading upside as I expected. There is the breakout of the symmetrical triangle pattern in the background, which is good sign for further rally. Trading recommendation: Due to the breakout of the symmetrical triangle pattern and strong upside trend, I see further growth. Watch for potential buying opportunities on the intraday dips with the upside objectives at 6.909 and 1.079. MACD oscillator is showing strength and no bigger divergences. Key short-term support is set at the price of 6.835 Source: Forex Analysis & Reviews: USD/CNY analysis for August 26, 2022 - Upside breeakout of the triangle pattern

Britain's energy industry regulator has raised the cap on annual electricity bills to keep up with the constantly rising cost of procuring electricity. The yearly bill will be capped at £3549 from October 1. That's a whopping 178% increase since last winter and an 80% increase from the current level.  An increase in the UK's price cap may occur in future quarters if demand is not met with a sufficiently large supply of fuels, especially gas.    According to estimates by consulting firm Auxilione, the price cap on electricity in the UK could rise to a staggering £7272 by April 2023. At the same time, Cornwall Insight estimates that a year from now, in August, the level could reach £6616.    Natural gas is a popular source of energy in Western Europe. Despite its small share in energy mixes, it is an essential source of heat in winter for most EU countries and helps quickly supply the electric grid when power generation from other sources drops. These two reasons are most likely behind such significant increases in electricity prices following the cut in Russian gas supply.  More quarters of record profits for energy companies?   BP and Shell are the most prominent Western European petrochemical companies in the natural gas market in terms of revenue. They rank No. 2 and No. 3 globally, respectively, and are among the most important suppliers of blue fuel to Europe, especially after the reduction of its supply from the East.   In the last quarter, BP and Shell announced record results, reporting $67.9 billion (85.9% year-on-year growth) and $100.1 billion (65.3% year-on-year growth) in revenue, respectively. However, it wasn't the strong sales growth that came as the biggest surprise to investors but the net profits, which amounted to $9.3 billion and $11.5 billion, respectively, due to significantly expanded margins.   The current market situation may indicate that the excellent performance will continue in the coming months due to the record price of natural gas and the stabilization of oil prices after the recent decline. Even if the consulting firms' estimates were halfway correct, this could mean a record price for fuel supplies for power generation and household heating.   BP and Shell, which serve much of the European market, may continue to face high demand. Despite the expected drop in production in the EU market and thus industrial demand, European countries still need to stockpile plenty of gas to fill their reserves for the upcoming winter.   European energy index prices have had their strongest week of increases in 2 months. In Germany alone, electricity prices have risen by 860% over the year. Even in France (which bases 74% of its power generation on nuclear power plants), energy prices have reached an annual increase of more than 950% after it was announced that some nuclear reactors would be temporarily halted for maintenance work. Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Europe's energy crisis is getting worse every day - more record profits for the energy sector?

TL;DR BitTorrent is one of the largest decentralized peer-to-peer (P2P) file-sharing platforms. It’s powered by the Tron blockchain and BTTC, a TRC-10 utility token. BTTC is used to incentivize users on the network to provide their local computer resources for fast download speed and secure decentralized storage. The BitTorrent ecosystem also features a community-based live streaming platform, where content creators and viewers can earn and stake BTTC rewards.   Introduction In the 2000s, a common way to download music and movies over the Internet for free was using peer-to-peer (P2P) platforms like BitTorrent. Despite its popularity, one of the biggest challenges for users was the long hours it took to find and download their desired content, as most users weren’t incentivized to continue sharing files to the network once they received their content.    What is BitTorrent?  BitTorrent is one of the largest and longest-standing P2P platforms for data and file sharing. Initially released in 2001 when the Internet was just starting to catch on, BitTorrent revolutionized the way users download and obtain entertainment media and other large files and data.  Later in 2018, BitTorrent was acquired by the Tron Foundation. It relaunched as a decentralized P2P platform on the Tron blockchain, featuring various new tools and integrated a TRC-10 token, BitTorrent (BTTC), to incentivize its network participants.   How does BitTorrent work? The original BitTorrent platform was founded by Bram Cohen and David Harrison to facilitate the interchange of entertainment media, such as movies and music, among Internet users. BitTorrent does not store content on a single server. Instead, the files and data are distributed and hosted across their users’ computers. When a user downloads a file, they will receive pieces of that file (the torrent) from multiple providers within the network, after which they can remain connected to the BitTorrent network and “seed” the file to other users. Within the BitTorrent network, anyone with the complete file can become a seeder. The more seeders support a file, the quicker the download speed. However, there was little incentive for users to remain connected to the network after downloading a file. To enhance the file transferring speed, BitTorrent launched an upgraded version of the BitTorrent protocol that adopts the native cryptocurrency BTTC.   BitTorrent Speed Powered by blockchain technology, BitTorrent Speed enables faster download speed through an incentive system. To request a file, users (“service requestors”) need to submit a bid to specify how many BTTC tokens they are willing to offer to those seeding the file. Once the other parties (“service providers”) accept their bid, the service requestor needs to transfer the agreed-upon BTTC amount into escrow in a payment channel on the Tron blockchain. The BTTC will be credited to the providers after the file is transferred, and the transaction will be logged on the Tron blockchain. BitTorrent Speed uses BTTC to incentivize users to continue seeding files, which can significantly increase the file-sharing efficiency and accelerate the download speed. With more readily-available files on the P2P network, this could also benefit users that are still using the free BitTorrent client to download files from their peers.    BitTorrent File System (BTFS) Beyond file sharing, BitTorrent also features a decentralized P2P file storage system called the BitTorrent File System (BTFS). BTFS aims to offer a scalable, censorship-proof, and cost-effective alternative to the traditional centralized cloud storage.  The BTFS network consists of millions of BTFS nodes called renters and hosts. Renters are users who rent storage on the network and hosts are those that share their idle disk space for BTTC rewards. When renters use the BTFS service, their files will be sharded and distributed to multiple reputable hosts on the network. Through advanced encoding methods and file repairing technologies, BTFS can guarantee the confidentiality and security of the files, and users can access them conveniently without interruptions.   DLive In 2020, BitTorrent acquired DLive, a community-based blockchain live streaming platform, to offer more decentralized services in the BitTorrent ecosystem. In contrast to traditional platforms, both creators and viewers are rewarded for their contributions to the platform. Users who watch, chat, gift, and share content can also earn BTTC rewards. In addition, the BTTC can be staked to earn more rewards and to unlock premium services on DLive.   What is BTTC? BTTC is a TRC-10 utility token of the BitTorrent ecosystem, with a total supply of 990 billion. It was launched to build a token-based economy for networking, sharing bandwidth, and storage resources on the BitTorrent network.  BTTC can be used as payment for P2P services on the network, including paying for decentralized storage space, bidding for file downloading bandwidth, rewarding those who provide these services, and more. BitTorrent plans to utilize BTTC beyond the current use cases, such as crowdfunding the creation of new content, purchasing downloadable assets directly from creators, and tipping live streaming content creators with BTTC gifts on DLive.   How to buy BTTC on Binance? You can buy the BitTorrent Chain token (BTTC) on cryptocurrency exchanges like Binance.  1. Log in to your Binance account and click [Trade] - [Spot]. 2. Search “BTTC” to see the available trading pairs. We’ll use BTTC/BUSD as an example. 3. Go to the [Spot] box and enter the amount of BTTC to buy. In this example, we will use a Market Order. Click [Buy BTTC] and the purchased tokens will be credited to your Spot Wallet. Closing thoughts BitTorrent is a unique project that uses blockchain technology and cryptocurrency to revolutionize its existing peer-to-peer file sharing platform. It offers a more decentralized, efficient, and cost-saving alternative to the traditional P2P file-sharing platform. In the future, the BitTorrent team is looking to add more use cases to the BTTC token and support more DApp functionalities, which could be an enticing tool for developers looking to launch their own DApps with file sharing and storing capabilities.    Source: What Is BitTorrent (BTTC)?

The poor preliminary PMI readings, the ongoing European energy crisis, and the recognized commitment of most major central banks to rein in prices through tighter financial conditions are risking a broad recession. These considerations are weighing on sentiment and shaping the investment climate. Most high-frequency data due in the days ahead will not change this, even if they pose some headline risk.   What we have seen among some central bankers applies to market participants too  It is not so much that these central bankers are congenitally doves or hawks, but they are simply activists. Whether conditions warrant tighter or easier monetary policy, the activists lead the charge and are more aggressive than most of their colleagues in both directions. Similarly, some market participants are just extreme in their views. On the one hand, given that market returns are often characterized by fat tails, it makes sense that market views are not normally distributed. Hugging the median (there is rarely truly a consensus, despite the market jargon) draws little attention and is unlikely to promote sales of research products and newsletters.   On the other hand, depending on the corporate culture, there may be little incentive to take the risk of standing out from the crowd  It is as if some take Keynes to heart: "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally." Sometimes, corporate culture is broad enough to accept either approach, allowing the idiosyncrasies of the economist/analyst wider latitude. However, some are conditioned to fear being wrong that they do not let themselves be right. For them, being part of the crowd is safe. Being part of the consensus nearly always gets less pushback than being an outlier.   II Three high-frequency economic prints next week will likely move the markets whether they meet expectations or not: China's PMI, the eurozone's CPI, and the US employment report  These are the three biggest economies, and each is struggling to put it mildly. The data are unlikely to change this view but could impact the policy outlook. In addition, extreme weather aggravates existing challenges, including the energy crisis, supply chain disruptions, and inflation pressures.   The US, Japan, the eurozone, and Australia's preliminary composite PMIs fell below the 50 boom/bust level  Ironically, the UK's held slightly above, though the Bank of England of a recession that will extend into 2024. Where is China?   Its July composite stood at 52.5. It had been below 50 due to the lockdowns associated with its zero-Covid policy from March through May. It reached a 15-month high in June of 54.1.    In the US, we argued that back-to-back quarterly declines in output were a bit of a statistical quirk stemming from the challenge of managing inventories in the current economic environment and trade, to a lesser extent  While recognizing that a sustained economic contraction was likely, we did not think it actually had begun and expected policymakers to act accordingly.   In China's case, the economic data is consistent with growth  The median forecast in Bloomberg's survey sees the world's second-largest economy expanding by 3.4% quarter-over-quarter after a 2.6% contraction in Q2. However, Chinese officials are acting as if it were in a recession or will be shortly. It unexpectedly shaved its benchmark one-year medium-term lending facility rate and allowed lending prime rates to be cut. The larger (15 bp) cut in the five-year rate clearly reflected the ongoing concerns about the housing market. Beijing is using command functions and coordinating capabilities to push lending from banks to the property sector and new local government borrowing for infrastructure projects. It has accepted a weaker yuan against the US dollar. It fell to a new two-year low last week. The softer the PMI, the more the market will look for further easing, including reducing required reserves.   On August 31, the eurozone publishes its preliminary estimate of the month's CPI  Headline inflation accelerated to 8.9% in July, surpassing the US 8.5% pace. The median forecast in Bloomberg's survey is for the pace to tick up slightly to 9.0%. In addition, the core rate is seen edging up to 4.1% from 4.0%.  Many EMU members are helping struggling households by cutting the VAT on energy or other subsidies, but the price of energy is rising even quicker  While there is some debate over whether US inflation has peaked, there is less debate in Europe. Prices are still rising. Seasonal patterns may be distorted, but July's monthly change has been less than June since 2003. August's monthly CPI has increased more than July's since 2000, with the one exception of 2020 when it matched July's 0.4% decline. This month's inflation is expected to rise by 0.4% after the 0.1% increase in July. The weakness of the euro also risks boosting prices. The single currency is off about 2.5% this month after falling roughly 4.8% in the previous two months.  The European Central Bank meets on September 8  The swaps market is confident that even though the flash PMI warns that output is contracting, the ECB will continue to hike rates. Following the half-point increase in July, the market expects another 50 bp hike next month. More than that, the swaps market has about a 50% chance of a 75 bp move. Press reports confirmed that several ECB officials want to discuss a three-quarter point hike. That said, they do not appear in the majority. Not to get too far ahead of the game, but the market is pricing in around 85 bp of tightening in Q4 (two meetings, October 27 and December 15). The latest Bloomberg survey found a median forecast for the euro to finish the year at $1.02. This seems increasingly optimistic. A one-standard-deviation band around the year-end forward suggests a mathematical range of about $0.9430 to $1.0675. While the median is in the upper third of the range, our subjective idea would put it in the bottom third.  That brings us to the US August employment report on September 3, just before the long holiday weekend (Labor Day, US markets closed)  Recall that nonfarm payrolls rose about twice as much as expected in July, 528k. That the average growth in the first seven months was slightly above 470k. In the Jan-July period last year, the US grew about 555k jobs a month on average. However, that appears to have underestimated US job growth. In the benchmark revisions announced last week. The US added 571k more private sector jobs in the year through March, which translates into around 47.6k more a month.   The median forecast in Bloomberg's survey has crept up in recent days to 300k  The unemployment rate, which slipped to a new low of 3.5%, is expected to remain unchanged, while a 0.4% rise in average hourly earnings could see the year-over-year pace ticked back to 5.3% year-over-year. It was at 5.2% in June and July. By nearly any reckoning, that would still be a solid report and one that will likely encourage the Fed to deliver another 75 bp hike when it meets in late September.    Market sentiment has swung back and forth a bit over the likelihood of a third consecutive 75 bp hike  Despite the poor housing sector data and the dismal PMI, the Fed funds futures market finished last week discounting a little more than a 2/3 chance of a 75 bp instead of 50 bp. Such a move would lift the target to 3.00%-3.25%. The pricing suggests that Fed will likely slow the hikes going forward. The market is pricing in a year-end rate between 3.50% and 3.75%. The market is pricing in a strong probability of a hike in Q1 23 (~80% chance). This was unchanged from before Powell's speech at Jackson Hole. In the middle of last month, the Fed funds futures market had priced in 60 bp of cuts next year. That was the gap between the implied yield of the December 2022 Fed funds futures and the December 2023 contract. It finished last week near seven basis points., about two basis points less than before Powell's speech. III The dollar's two-week rally that began August 10-11 may not be over despite the volatility spurred by position adjusting around Powell's Jackson Hole speech Powell specifically warned that some pain will be associated with efforts to rein in inflation, which the Fed is committed to doing. That seems to suggest some economic weakness will not interfere with its course until inflation convincingly moves back towards its target. Other major central banks, but the Bank of Japan, have implied pretty much the same thing.   Dollar Index:  DXY rallied from a six-week low near 104.65 on August 10 to slightly above 109.25 on August 23. However, it stopped short of the mid-July high of almost 109.30. The sell-off before the weekend took it briefly through 107.60 to set a new low for the week before recovering to almost 108.90. The MACD is rising albeit more gently, but the Slow Stochastic is overextended and suggests that this leg up is getting long in the tooth. Still, the prospect of another healthy job report at the end of next week may deter a significant retreat. The pre-weekend low approached the minimum (38.2%) retracement of the leg up (~107.50).  Euro:  The euro recorded a new 20-year low near $0.9900 on August 23, seeming to complete the leg down that began on August 10 at around $1.0370. However, the Jackson Hole-related position adjustment saw it recover to $1.0090, which marginally surpassed the (38.2%) retracement objective (~$1.0080). The next retracement (50%) and the 20-day moving average are found in the $1.0135-40 area. Yet, the euro continues to struggle and settled nearly cent off its session highs before the weekend. The MACD descent has slowed, and the Slow Stochastic is moving sideways in oversold territory. Selling into upticks continues to be the preferred strategy. A significant low does not appear to be in place. Potential next week to toward $0.9800, maybe.   Japanese Yen:  The greenback reached JPY137.70 on August 23 and settled into a narrow range in dull dealing for the remainder of the week. Although the dollar traded on both sides of Thursday's range ahead of the weekend, it remained mired in the range established on August 23 (~JPY135.80-JPY137.70). The MACD looks constructive, but the Slow Stochastic is poised to turn lower. The US 2- and 10-year yields reached their highest level in two months, which underpins the dollar. Above the JPY137.70 area, the next resistance may be encountered near JPY138.20-40, but there is little standing in the way of another run at the JPY140 area.   British Pound:  Sterling posted a bearish outside down the day before the weekend by trading on both sides of Thursday's range and settling below Thursday's low. The Jackson Hole-related position adjustment stalled at $1.19, shy of the $1.1930 (38.2%) retracement target. It reversed low and fell to $1.1735, just above the two-year low on August 23 (~$1.1720). The MACD is trending lower, but the Slow Stochastic is moving sideways in oversold territory. The 2020 low slightly above $1.14 beckons, and there is little on the charts to prevent it. Sterling cannot sustain upticks even though its discount to the US on two-year yields has fallen from around 135 bp on August 9 to 45 bp in the middle of last week before finishing around 60 bp.   Canadian Dollar:  The US dollar had given back about half of the gains scored since August 11 (~CAD1.2730 to almost CAD1.3065) before Powell spoke at Jackson Hole. That retracement and the 20-day moving average converged around CAD1.2895. The sharp sell-off of US equities ahead of the weekend saw the greenback jump to almost CAD1.3045. The MACD is rising gently, while the Slow Stochastic has begun moving sideways near its highest level in two months near overbought. The poor price action in the S&P 500, with the upside gap on the weekly charts left unfilled before the breakdown to the lowest level since August 2, warns that the US dollar could challenge the CAD1.31 area in the coming days. The nearly two-year high was set on July 14 at around CAD1.3225. That may be the next important chart area.   Australian Dollar:  Like the Canadian dollar, the Australian dollar has recovered half of the losses seen in the latest leg down that began from the August 11 high near $0.7135 and bottomed on August 23 around $0.6855. The Aussie staged a key reversal from that low and closed above the previous day's high. That retracement objective was near $0.7000 and the next (61.8%), and it was briefly surpassed before the weekend and Aussie's reversal back to $0.6900 to take out the previous session's low.   The MACD is not generating a strong signal, while the Slow Stochastic is curling higher after dipping into oversold territory. A return to the $0.6855 area looks likely, and below that could see $0.6800, though a return to the two-year low set in mid-July near $0.6680 cannot be ruled out.   Mexican Peso:  The dollar forged a bottom against the peso in mid-August around MXN19.81-82. That is also roughly where the dollar bottomed in late June. The greenback bounced to MXN20.2665 and retreated last week to around MXN19.85. The momentum indicators are not generating strong signals, but the floor looks strong. In the face of the sharp US equity losses, and the broader risk-off mood, the peso was surprisingly resilient.  It rose by about 0.65% last week. Initial resistance may be near MXN20.06 and then MXN20.11-13. Latam currencies generally outperformed within the emerging market space last week. Four of the top five emerging market currencies were from Latam, led by the Chilean peso's 5.9% rally. The current intervention program runs out on September 30 but could be extended. The intervention to support the Chilean peso after it fell to record lows last month has given the currency a reprieve but could exacerbate the current account deficit, which reached 8.5% of GDP in Q2.   Chinese Yuan: The Chinese yuan slumped to two-year lows last week as policy divergence grew more acute with the latest Chinese rate cuts. More easing of monetary policy is expected, and there is some speculation that another cut in required reserves could materialize in early Q4. China's discount to the US on 10-year bonds rose for the fourth consecutive week, and at 37 bp, was the largest weekly close since June. The PBOC has fixed the dollar weaker than expected over the last few sessions, and the magnitude seems sufficient to suggest a warning from Chinese officials not to get too carried away. That seems similar in spirit to the reports that the State Administration of Foreign Exchange called a few banks last week and warned them about large speculative yuan sales. We suspect the message is that while a weaker yuan is acceptable, the current pace is not. The next objective is around CNY6.90, but the risk of a move to CNY7.0, which did not seem so likely a couple weeks ago, seems more so now.      Disclaimer   Source: The Week Ahead: Dollar Bulls Still in Charge

Overview: The reverberations from last week continue to roil the capital markets today. Equities and bonds have been sold and the greenback bought. Most of the large markets in Asia Pacific fell by more 2%, including Japan’s Nikkei, Taiwan’s Taiex, and South Korea’s Kospi. Ironically, the Shanghai and Shenzhen Composites eked out minor gains, but the CSI 300 still eased. Europe’s Stoxx 600 is off 1% after falling nearly 1.7% before the weekend. US futures warn of another lower opening. Recall that the major indices gapped lower last Monday as well. The US 10-year yield is up 7 bp to 3.11%, probing last week’s highs, while the two-year yield reached new highs near 3.48% before steadying. European benchmark yields are 12-13 bp higher. The dollar is firmer against all the major currencies. Most of the European currencies but the Norwegian krone and British pound are off modestly, while the yen, the Australian dollar and sterling are off more than 0.5%. Emerging market currencies are under pressure, though the Hungarian forint and Czech koruna are steady to firm. Rising rates and a stronger dollar are no match for gold, which has been sold to a new low for the month (~$1720.45). There appears little support in front of $1700. October WTI is firm near $93.75. Talks with Iran will carry over into next month. US natgas slipped fractionally last week and is up nearly 2.5% today to about $9.55 after testing $10 last week. News that Germany is near its 85% tank capacity objective for next month has seen Europe’s benchmark soften a little (off ~1.8%). Iron ore is giving back most of last week’s 4.7% gain. December copper is off 3.4% after posting a minor gain last week (~0.7%). December wheat rallied 4.4% last week and is off almost 1% today.  Asia Pacific As China's Xi awaits the coronation for a third term, the challenges seem to be intensifying. Shijiazhuang, the provincial capital of the Hebei province that borders Beijing is in a partial lockdown for three days, which started yesterday, and includes the suspension of subways and non-essential business operations. It is a city of more than 11 mln people and follows lockdowns in other parts of Hebei last week. Power shortages are leading to rolling blackouts in different regions and compounding the challenge arising from the end of property boom. The economic toll spurred the government into action recently with rate cut and new lending/spending initiatives mostly concentrated on infrastructure. Over the weekend, China reported that industrial profits fell 1.1% in the Jan-July period. They had risen by 0.8% in the first half. The decline in profits dovetails with the deepening of the economic slump seen in a batch of data reported recently. While several central bankers used the Jackson Hole gathering to brandish their anti-inflation credentials, BOJ's Kuroda stuck fast to his commitment to easy monetary policy. He argued that nearly all of Japan's inflation is a function of higher commodity prices. He said that inflation would decelerate next year toward 1.5%. It was 2.6% in July, but 1.2% excluding fresh food and energy. Kuroda's inflation outlook is not much different than the market’s. A recent Bloomberg survey found a median forecast for Japan's 2023 CPI of 1.3% at the headline rate than 1.4% core. July retail sales in Australia surged 1.3%, the most in four months, and four-times more than the median forecast in Bloomberg's survey. It did nothing for the Australian dollar, which extended the pre-weekend sell-off. Still, the resilience of the Australian consumer was impressive despite the cost-of-living squeezes. Gains were recorded in five of the six retail categories., with only demand for household goods softening. The Reserve Bank of Australia meets on August 6 and the swaps market has a little more than a 70% chance of 50 bp hike discounted and about 150 bp priced between now and the end of the year. The jump in US rates helped lift the dollar to JPY139.00 in late Asia turnover. It is the highest since July 15, the day after the 24-year high was set near JPY139.40. Japan's Cabinet Secretary Matsuno noted that the government is closely was closely watching market movements. However, the price action can hardly be surprising given the divergent messages at Jackson Hole. The greenback's momentum stalled a bit. Initial support is seen near JPY138.50. Although there was not take-up at the BOJ's offer to buy bonds today, the 0.25% cap on the 10-year is being approached again. The Australian dollar recorded a bearish outside down session ahead of the weekend by trading on both sides of Thursday's range and settling below Thursday's lows. Follow-through selling today has seen it approach $0.6840, new lows for the month. Importantly from a technical perspective, it appears to have broken the neckline of a possible head and shoulders top that projects through the two-year lows set in mid-July near $0.6680. Nearby resistance is now seen around $0.6870. The dollar gapped sharply higher against the Chinese yuan. It reached a new two-year high of CNY6.9225 and did not trade below CNY6.90 today. The pre-weekend high was about CNY6.8730. Since August 10, the greenback has risen by roughly 2.50%. The CNY7.0 is an important psychological level, but it peaked in September 2019 near CNY7.1850 and revisited it in May 2020 (~CNY7.1780). For the fourth session, the PBOC set the dollar's reference rate weaker than the median in Bloomberg's forecast as it moderates the pace of the dollar's rise. Today's fix was at CNY6.8698 vs. expectations for CNY6.8794. Europe Europe is on the verge of a recession. Indeed, it may have already begun. It is not going to deter the European Central Bank or the Bank of England from continuing to aggressively tightening monetary policy. A few ECB members from creditor countries, like Austria and the Netherlands, want the central bank to consider raising rates by 75 bp at next month's meeting. They do not yet seem to represent a majority, but it is not like the members from the periphery are advocating a quarter point move.  The surge in natural gas and electricity prices promise to drive inflation higher and intensify the squeeze on the cost-of-living. Before the weekend, the UK regulator (Ofgem) confirmed what was suspected. The cap on gas and electricity will be lifted by 80% on October 1. This likely means that UK inflation will rise above the BOE's latest forecast of 13.2%, and the new UK government face strong pressure to help households and businesses. It had previously committed GBP30 bln to households but that was three months ago. To cover the same proportion now of the increase would require another GBP14 bln, according to some estimates. We had thought that increased military spending would replace some of the Covid-related spending, and while that may be true, it now seems that energy subsidies and the like will also generate wider deficits. It may also lead to increased nationalization of the parts of the energy sectors. Sweden holds legislative elections on September 11 and the law-and-order and anti-immigration party that has been shunned by the mainstream parties appears to be surging in the polls. The Swedish Democrats could be the second largest party after the ruling Social Democrats. Three different polls published last week give it 1/5-1/4 of the vote compared with 30% for the government. The Moderates have been pushed into third place with 16-18% support. The center-right bloc of the Moderates, Christian Democrats, and Liberals could ally with the Swedish Democrats. The polls show it is virtually tied with the center-left bloc of Social Democrats, Left, Centre, and Green parities. Separately, Sweden reported the economy expanded by 0.9% in Q2, missing 1.4% expectations, though Q1 was revised from a 0.8% contraction to a 0.2% expansion. Sweden's CPI was at 8.5% in July and the underlying measure, which uses fixed interest rates, and is the target measure was at 8.0%. The policy rate stands at 0.75%, following the 50 bp hike in June. The Riksbank meets on September 20 and the swaps market is pricing in a large hike (~100 bp). The euro retested last week's 20-year low near $0.9900, and when it held a small, short-covering bounce in early European activity lifted it to almost $0.9960. A combination of bearish sentiment and options for nearly 1.6 bln euro at $1.000 may deter a move above parity. The session high is a little shy of $0.9990. For its part, sterling slumped to a new two-year low near $1.1650. It posted a bearish outside down day ahead of the weekend. Sterling has met the double top objective near $1.17, we had monitored that had a $1.20 neckline. The spike low in March 2020 saw it trade to almost $1.1410. Sterling is finding some support in the European morning, and the $1.17 area now should offer resistance. America Fed Chair Powell terse speech at Jackson Hole before the weekend did not appear to change expectations for the trajectory of monetary policy. The implied yield of the March 2023 Fed funds futures contract continued to trade about 20 bp above the December 2022 contract as it had for a couple of weeks. This points to a strong expectation of a rate hike n Q1 23. The implied yield of the December 2023 Fed funds futures was about seven basis points below December 2022 contract. This implies a small chance of a cut late next year. These spreads were virtually unchanged in response to the Fed Chair's speech. Powell did succeed in doing was to drive down the two-year breakeven, which speaks to the much-maligned anti-inflation credibility of the Federal Reserve. The two-year breakeven dropped almost 16 bp before the weekend to 2.74%. Consider that it was near 4.5% as recently as mid-June. This speaks to the increase in the real rates, which in turn punished equities and risk assets more broadly. One common refrain against the Federal Reserve is that is does not have tools to address the supply shocks that have lifted prices. Another tact, illustrated by a paper presented at Jackson Hole, is that fiscal policy is responsible for around half of the recent increase in inflation and that when inflation is of a fiscal nature, monetary alone does is not effective. There are at least two answers to these criticisms. First, it underscores our claim that the extent of fiscal tightening has not been appreciated. The budget deficit is expected to fall to below 4.5% of GDP this year from 10.8% last year. Consider that after the Global Financial Crisis, the US deficit peaked around 10% of GDP (2009) and did not fall below 5% of GDP until 2013. Second, Powell address this in his Jackson Hole Speech in the first lesson of the 1970s inflation. Price stability, regardless of what threatens it, is the Fed's responsibility. He argued that the Fed needs to constrain demand to bring it in line with supply.    What will be a data-packed week, culminating with August nonfarm payrolls, will begin slowly, with only the Dallas Fed manufacturing survey and the sale of $96 bln in 3- and 6-month bills on tap for today. The risk-off mood has sent the greenback through last week's highs (~CAD1.3060-5) against the Canadian dollar. The next chart area is seen around CAD1.3100-35, and the two-year high set in mid-July (~CAD1.3225). The intraday momentum indicators are flagging and warning of the risk of some backing and filling before those highs are attacked. Initial support is seen in the CAD1.3030-50 band. Meanwhile, the greenback appears to have built a base around MXN19.82 and looks poised to challenge recent highs near MXN20.26. It reached MXN20.15 in Asia before pulling back to below MXN20.10. Further easing toward MXN20.05 may provide a lower risk entry.    Disclaimer   Source: Stocks and Bonds Sell Off, while the Dollar Rallies

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 August 23. A week that saw financial markets trade increasingly nervous with stocks selling off while the dollar and yields rose ahead of Friday’s speech by Federal Reserve Chair Jerome Powell. Developments that triggered fund selling in precious metals while energy and grains was in demand due to a tightening supply outlook Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.   Link to latest report   This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 23. A week that saw financial markets trade increasingly nervous ahead of Friday’s Jackson Hole speech from Federal Reserve Chair Jerome Powell. Stocks sold off while the dollar and bonds yields rose in anticipation of a hawkish message. In the end that was exactly what Powell delivered on Friday when he cautioned about loosening monetary conditions prematurely while flagging the likely need for restrictive monetary policy for longer than the market had priced in to curb high inflation. Commodities The Bloomberg Commodity index rose 1.6% during the reporting week with concerns about the impact on demand from central banks hiking rates to curb economic growth being more than offset by concerns about a tightening supply outlook, especially across energy and key food commodities. Precious metals being the only sector struggling amid the mentioned dollar and yield strength. Overall hedge funds increased their exposure for a fourth consecutive week, this time by 13% to 1.1 million contracts, some 264k above the end of July low point.  Energy: Funds increased bets on rising crude oil prices for the first time in five weeks with the combined long in WTI and Brent being lifted by 22% to 338k lots. This in response to a near +8% rally during the week as the focus returned to a continued tight supply outlook with the gas-to-fuel switching providing an additional layer of support. While the combined gross long was increased by 20k lots, it was a 40k lots capitulation among short sellers that provided the main input to the change.Surging gas prices driving increased demand for diesel helped lift gas oil by 10% and the net long by 24% to 76.5k lots, still only half the 152k lots peak seen from last October. Natural gas traders cut their net short by 66% with the bulk of the change being driven by fresh longs being added. Metals: Precious metals saw renewed selling ahead of Jackson Hole with the stronger dollar and rising yields triggering a fresh round of short selling by funds. The result being a 34% reduction in the gold long to 30k while silver and platinum saw big increases in already established net short positions. Copper found support after China’s government announced fresh initiatives to support an economy struggling with Covid lockdowns and a property sector crisis. The result being a 71% reduction in the net short to -4.8k lots, an 11-week low. Agriculture: The grains sector, led by corn and soybeans, continued to recover from the June to July 25% correction. Buyers bought the sector for a fourth consecutive week with an improved fundamental outlook due to adverse weather in the US and China triggering fresh buying interest. The bulk of the 111k lots increase during this time has been driven by corn with the soybean complex also picking up steam while the two wheat contracts have seen net selling during this time.     Forex The forex market responded to a 1.6% increase in the Dollar index ahead of Jackson Hole by turning broad buyers albeit in small size of dollars against nine IMM currency futures. The two exceptions being GBP and CHF where short covering reduced the net short in both. The euro net short reached 44k lots or €5.5 billion, the highest since March 2020 when the market was in covid panic mode. Overall the gross dollar long reached a three week high at $18 billion, down 24% from last months peak and high for the year at $23.8 billion.   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   Source: COT: Crude oil and grains bought despite Jackson Hole jitters

Relevance up to 13:00 2022-08-30 UTC+2 Technical analysis:   USD/CNY has been trading upside as I expected. The price reached my first upside objective at 6.910 and is heading towards second upside target. Trading recommendation: Due to the strong upside momentum and no sign for the reversal, I see further growth. Watch for potential buying opportunities on the intraday dips with the upside objective at 7.080. MACD oscillator is showing fresh new upside momentum, which is good sign for further growth. Key support is set at the price of 6.830 Source: Forex Analysis & Reviews: USD/CNY analysis for August 29, 2022 - First upside target has been reached, second target in the playt at 73080

The Japanese yen has started the week with sharp losses, with USD/JPY rising as high as 139.00 earlier today. In the European session, USD/JPY is trading at 138.52, up 0.75%. The month of August can’t end soon enough for the yen, as USD/JPY has climbed 4.0%. The yen fell 0.78% on Friday, as Fed Chair Powell delivered a clear, no-nonsense message to the markets from scenic Jackson Hole. Dollar soars after hawkish speech from Powell Powell’s speech essentially reiterated what the Fed has been saying for weeks, but the markets reacted sharply, with equities tumbling and the US dollar recording strong gains. Investors finally acknowledged that the Fed means business and will not U-turn on policy, even if inflation drops in one or two reports. Powell appeared determined to avoid any repeats of the market euphoria after inflation declined unexpectedly in July, which raised speculation that the Fed was set to make a dovish pivot. Powell reiterated that the Fed would continue to use all its tools to fight inflation, acknowledging that high interest rates would remain for some time, and the Fed would be careful not to ease policy prematurely. The highly-anticipated speech was unusually brief, which may have been an attempt to prevent investors from looking for some dovish remarks in the speech and ignoring the gist of the speech. Powell used strong language to get his message across – saying that Fed tightening would cause “some pain” to the economy, and avoiding soothing terminology, such as “soft landing”. The Fed plans to continue to raise rates until it’s convinced that inflation has peaked and is on the decline and judging by the market’s reaction, investors heard Powell’s message loud and clear. US Treasury yields have moved higher, with the 2-year yield rising to 3.445% today, up from 3.032% on Friday, prior to Powell’s speech. This upward movement is weighing on the yen, which is sensitive to the US/Japan rate differential. If the upward trend continues, we could see an assault on the symbolic 140 level. . USD/JPY Technical USD/JPY has broken above resistance at 1.3759 and 1.3822. Above, there is resistance at 1.3891. 1.3701 and 1.3632 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: Yen slumps as Powell pledges tighter policy

The medical giant is after another phase of testing a new drug for type II diabetes and chronic kidney disease. The test results proved positive, and analysts have issued further favourable investment recommendations. Bayer is a German medical company that produces medical equipment, drugs and supplements. It operates globally and has about 100,000 employees, generating more than 44 billion euros in revenue last fiscal year.  In the last quarter, the company announced a whopping €12.8 billion in revenue (an 18.1% year-on-year increase) thanks to favourable currency movements and price increases. Despite a significant increase in net profit (up 87%), the company still posted a loss of €298 million. Despite a significant reduction in costs in the last quarter, the corporation is still struggling to optimize them. This applies especially to the high price of energy, materials and the war in Ukraine. Dealing with intense competition from companies such as Pfizer, Roche, and Novartis remains problematic.  Last year, the company spent as much as 5.4 billion euros on research and development. This enormous amount is used to develop more breakthrough devices and drugs. One of them is Kerendia (finerenone). It's a medicine to treat type II diabetes and chronic kidney disease. Today, the results of the third phase of clinical trials were released, showing that the use of the drug allows a significant decrease in the mortality rate of the mentioned diseases. Kerendia has thus been approved for distribution in the US, Europe and China and could become an essential source of revenue for the company in the coming years.  Bayer has also begun new clinical trials of a thrombosis drug (asundexian). The company said on Sunday that the next phase will test the effectiveness and safety of asundexian in patients with atrial fibrillation and those suffering from certain types of stroke. According to Bloomberg, this is the next step in the company's plan to refresh its drug portfolio, which is under threat from low-cost competitors.  JPMorgan and Barclays have issued a buy recommendation for the German giant, maintaining their previous target price of €75 and €90, respectively. According to MarketScreener data, the current average target price is 78.91 euros for all 24 recommendations. This implies a possible increase in the share price of more than 46%, while the lowest and highest target prices are 55 and 106 euros, respectively. At the close of trading on Friday, the company's share price was €53.70.    Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Bayer’s drug effective - a medical giant with new recommendations from investment banks

Summary:  Consumer discretionary stocks were part of the winners since the Great Financial Crisis, but with rising interest rates and soaring energy costs the consumer is getting taxed on credit and available income for discretionary consumption. These dynamics will intensify and worsen over the winter period in Europe and several sell-side firms are already cutting price targets on many consumer discretionary stocks. We identify the 10 largest global and European discretionary stocks so investors can understand their exposure to global energy crisis. Soaring energy costs are a massive tax on consumption In our recent equity note The tangible world is fighting back we highlighted how intangibles-driven industry groups had outperformed significantly since April 2008 until October 2020. Consumer discretionary stocks was part of this mega trend, but the global energy crisis and especially here in Europe is going be negative for consumer stocks going forward. Primary energy costs in percentage of global GDP has rising to 14% up from 6.5% in 2021 according to Thunder Said Energy. This is equivalent to 7.5%-points tax on GDP which must be offset by households by cutting down on other things. The most vulnerable parts of the economy are the activities that sits at the very top of the Maslow pyramid, so things such as media & entertainment and consumer discretionary. Global consumer discretionary stocks are down 13% after being down as much 20% in June this year relative to global equities since the peak in November 2021 when the Fed announced its pivot on monetary policy in the recognition that inflation was more sticky than initially thought. The initial underperformance was interest rate driven as the higher interest rates caused equity valuations to decline. Higher interest rates also impacts consumption through consumer loans etc., but the critical point to understand is that the energy crisis has not been fully priced into consumer discretionary stocks.  Consumer discretionary stocks have been one of the big winners since the Great Financial Crisis but with households under pressure we expect demand to cool dramatically and several sell-side firms have drastically cut their price targets on many European consumer discretionary companies. MSCI Consumer Discretionary / MSCI World | Source: Bloomberg Watch out for French luxury and the car industry When talk about which consumer discretionary companies that could be in trouble the European luxury industry is probably going to be the hardest hit industry. Next after is the global car industry where the big open question is whether the EV adoption is strong enough to shield Tesla from the demand destruction. The energy tax is bad for consumer stocks but good for global energy companies, so we have also highlighted the 10 largest energy companies in the lists below. The 10 largest global consumer discretionary stocks Amazon Tesla LVMH Home Depot Alibaba Toyota McDonald’s Nike Meituan Hermes International The 10 largest European consumer discretionary stocks LVMH Hermes International Christian Dior Volkswagen Inditex EssilorLuxottica Richemont Kering Mercedes-Benz BMW The 10 largest global energy stocks Exxon Mobil Chevron Reliance Industries Shell ConocoPhillips TotalEnergies PetroChina Equinor BP Petrobras   Source: Consumer stocks to be hit by historically high energy costs

Summary:  France is well-known for his strong resilience on nuclear energy (about 69 % of electricity generation). But France’s forward energy prices are currently higher than those of any other major European economies (Germany, for instance). This is puzzling. In today’s ‘Macro Chartmania’, we explain the current state of France’s electricity crisis, why the worst is yet to come and why it may last for more than a single winter. We also discuss the monetary policy implications of elevated energy prices in France and in the rest of the eurozone, in light of European Central Bank (ECB) Board Member Isabel Schnabel’s speech at Jackson Hole last week. Click here to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week. France’s electricity prices are close to record highs. The baseload power price is above €900 per MWh – see below chart. Many other European countries face similar prices (Germany, Belgium, Italy, for instance). But tensions are higher in France. The French-1 year electricity forward is at the highest level among major developed European economies. Last Friday, it jumped to a historical record of €1,000 per MWh (versus €900 per MWh for Germany). This represents an increase of +1000 % compared with the long-term average of 2010-2020. This is also a clear signal that traders don’t expect prices to get back to normal anytime soon. Contrary to other European countries, France’s energy crisis has little to do with the Ukraine war and the European sanctions against Russian gas. This is mostly due to corrosion issues in nuclear reactors (this caused the shutdown of about half of France's fifty-six nuclear reactors.) and low water levels related to unusual heat during the summer (three nuclear reactors were shut down temporarily because of climate conditions this month). The country is highly dependent on nuclear energy. This represents about 69 % of electricity generation (this is a larger share than any other country). About 17 % of nuclear electricity is produced thanks to recycled materials. Summer heat will likely stop soon. But corrosion issues are partially structural and here to stay. In a statement a few months ago, the French nuclear energy regulator ASN mentioned that a restart of nuclear reactors closed due to corrosion could take up to several years. The risk of electricity shortage is therefore real this winter (no matter how the weather conditions are, actually). During the summer, electricity demand is around 45 GWh. During the winter, higher consumption will push electricity demand around 80-90 GWh on average. This will put under tension all France's electricity infrastructure, thus increasing the risk of a shortage. We think that France is certainly in a worse position than Germany when it comes to energy supply (at least, in the short-term). So far, the French government has mitigated the energy crisis by capping electricity and gas prices for households (gas prices were frozen at Autumn 2021’s levels and electricity price increase was capped at +4 % this year). This does not apply to corporations, however. This cannot last forever. The cap on energy prices will expire at the end of the year for gas and in February 2023 for electricity. The government is not planning to extend it further. It is too costly (about €20bn so far this year on a total of €44bn of various measures to support companies and households facing high inflation. This represents the total annual budget for education in France). From 2023, more targeted measures to help the low-income households to cope with higher energy prices is the most likely scenario. Will it be enough ? This is far from certain. A repeat of the 2018 Yellow Vest Movement (meaning massive demonstrations against the cost of living) is not out of the table, in our view. Eurozone monetary policy implications France is not the only European country in a very uncomfortable position, at the moment. The situation is worse than in its counterparts. But all the continent is facing the prospect of a difficult winter due to persistent high inflation. Contrary to the United States, we think the peak in eurozone inflation is ahead of us. The explosion of power prices is one of the three factors (along with a weak euro exchange rate and the easing of government measures to cap prices from 2023 onwards) which make us consider that inflation will remain elevated for a prolonged period in the eurozone. In terms of monetary policy, this means the ECB is likely to be more aggressive in the short term before potentially reviewing its policy stance if the recession materializes. The ECB Board Member Schnabel was very clear about it at last week’s Jackson Hole Symposium. In her speech, she argued that three arguments of why central banks should act with determination : 1) inflation uncertainty (there is no way to predict accurately the evolution of energy prices in such a volatile environment, for instance) ; 2) credibility ; and 3) the cost of acting too late (in some respect, the ECB certainly waited for too long between the February policy pivot and the July interest rate hike). In the short-term, this means there will be more weight on realized data (especially the preliminary release on Wednesday of the August eurozone CPI expected at a new record high of 9 % year-over-year). This increases the probability of a significant move of 75 basis points at the next Governing Council of 8 September.   Source: Chart of the Week : The energy crisis is hitting France

The US futures look better after the post-Powell selloff, but the market sentiment will likely remain morose after Powell’s clear declaration that the Federal Reserve (Fed) will have no pity for the markets, and continue tightening its policy until it puts inflation on a sustainable path toward its 2% policy target. At this point, it’s difficult to get a pricing that goes against the Fed. Happily for oil bulls, the Fed drama doesn’t concern the energy stocks, which had a good session yesterday thanks to firmer oil prices. The barrel of US crude advanced past the 200-DMA. The European nat gas futures however slumped 20% yesterday, as Germany said its gas stores are filling up faster than planned. But energy prices remain exorbitantly high, and governments are increasingly frustrated with the skyrocketing energy prices that hammer economies and households, while putting a lot of money in energy companies’ pockets. As a result, the European policymakers are now cooking new measures to stop the excessive rise in energy prices and decouple the price of gas from electricity. Investors will be watching how the energy companies will react to the measures. On the data front, Germany and Spain will release the latest inflation update today. The euro is making a great effort to throw itself above parity against the US dollar, and stronger than expected inflation figures could help boosting the European Central Bank (ECB) hawks, but the topside should remain limited. Special focus on Uber: is the company a good play in the long run, what are the short-term risks? Watch the full episode to find out more!   0:00 Intro 0:27 Equities under pressure 1:37 But energy stocks do well 2:17 European nat gas drops 20% on encouraging German news 2:48 European leaders will step in to bring energy prices lower 5:00 Eurozone inflation data in focus 7:59 Focus: Uber Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Energy #crisis #natural #gas #prices #crude #oil #energy #stocks #Exxon #OccidentalPetroleum #USD #EUR #inflation #ECB #hawks #Uber #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH   Source: Europeans preparing to intervene in energy markets! | MarketTalk: What’s up today? | Swissquote

Overview: Corrective pressures were evident yesterday and they extended today in Asia and Europe but seem to be running their course now. Market participants should view these developments as countertrend and be wary of waning risk appetites in North America today. Most Asia Pacific equities rallied earlier today, save China and Hong Kong. Europe’s Stoxx 600 has retraced most of yesterday’s losses and US futures are trading higher. Benchmark bond yields are softer with the US 10-year note yield off about 3.5 bp to below 3.07%. European yields are mostly 3-5 bp lower, but UK Gilts are pressured by reports that foreign investors were heavy sellers last month. The US dollar surrendered earlier gains yesterday and is mostly lower today. The Australian dollar is leading the charge, despite a much sharper than expected fall in building approvals. Among emerging market currencies, only the Philippine peso and Taiwanese dollar are failing to push higher. Gold is soft, despite the weaker greenback and lower yields. It is nursing losses for the third session. After a sharp 4.25% gain yesterday, October WTI is pulling back by around 1.75% today toward $95. US natgas is off 2%, while Europe’s benchmark has extended yesterday’s 19.5% drop with a further 6.6% slide today. China’s property sector woes are weighing on the steel sector and iron ore prices have fallen 8% over the past two sessions and is below $100 for the first time this month. December copper is off 1% after falling 2.3% yesterday. December wheat is paring yesterday’s 4.6% gain.  Asia Pacific Japan reported that its unemployment rate was unchanged in July at 2.6%. The job-to-applicant ratio unexpectedly ticked up to 1.29 from 1.27. The upticks in the yen, however, are more related to the pullback in US yields than the developments in the Japanese economy. Tomorrow, Japan reports July industrial output, and after the 9.2% surge in June, related to the lagged response to re-opening in Shanghai likely eased a bit. Retail sales offer the opposite trajectory. They fell a whopping 1.3% in June and likely stabilized in July, allowing for a small gain. In June apparel and general merchandise purchases were particularly weak. Rising interest rates are squeezing Australia's property market more intensely than expected. Building approvals plunged 17.2% in July, six-times more than the median forecast in Bloomberg's survey. The drop was driven by the private sector apartments rather than houses. The number of private sector approvals was the lowest since January 2012. The disappointment did prevent the Australian dollar from recovering today, amid the general pullback in the US dollar, but the odds of a 50 bp hike next week were shaved to around 65% from 70% yesterday. Rains in Sichuan have eased the energy emergency allowing large-scale industry to result production this week. The provincial government downgraded the emergency to level-one from level-two yesterday and several companies (including Toyota, Honda, and Foxconn) indicated a resumption of production. Cooler weather was also helping reduce household demand for electricity. Yet, Sichuan has gone from drought to flood. Reports suggest that nearly 325 mines, including 60 coal mines, with 5000 workers have been asked to take shutdown for precautionary reasons. Meanwhile, the zero-Covid policy has led to lockdowns in parts of Shenzhen. Softer US rates and a downside correction in the US dollar after reaching JPY139 yesterday has seen the greenback ease toward JPY138.15. The JPY137.95 area corresponds to a (38.2%) retracement of the dollar rally since before Powell spoke at Jackson Hole at the end of last week. We suspect the corrective pressure have been exhausted or nearly so and expect North American traders to buy the dollar the on the dip. Yesterday's low was slightly above JPY137.35. The Australian dollar took out a neckline of what may be a potential head and shoulder top yesterday but recovered to close above it (~$0.6850). Follow-through buying today has lifted it to around $0.6955. Here too, we think the short squeeze has nearly run its course in the European morning. The $0.6965-70 area may offer the nearby cap. For the fifth consecutive session, the PBOC set the dollar's reference rate lower than the market (median in Bloomberg's survey) expected, and the gap today (~249 pips) was the most since the Bloomberg survey began four years ago (CNY6.8802 vs. CNY6.9051). The PBOC seemed willing to accept an orderly decline of the yuan, especially given the divergence of monetary policy, but wants to avoid a vicious cycle. This was underscored by its announcement of a consultation period as it considers a news policy to require prior approval for companies wishing to sell long-term debt in offshore markets. At the same time, we read the fixing as a type of affirmation through negation, i.e., the PBOC's action acknowledges the strength of the demand for dollars. The dollar rose to a two-year high yesterday, after rising nearly 2% over the previous two weeks. Today, it slipped less than 0.1%. Europe Attention turns to eurozone's August inflation, ahead of tomorrow's aggregate report. Spain began with a 0.1% month-over-month increase that saw the harmonized year-over-year pace ease for the first time in four months. It slipped to 10.3% from 10.7%. However, the core rate rose to 6.4% from 6.1%. German states have reported, and they all showed of the year-over-year rate, even as the month-over-month change moderated to 0.2%-0.4%. The median forecast in Bloomberg's survey sees a 0.4% increase in the harmonized rate for an 8.8% year-over-year increase (from 8.5% in July). The risk is on the upside. With the surge in energy prices, the Bundesbank chief Nagel warned that Germany inflation could rise to over 10%. The EU is holding an emergency energy ministers meetings on September 9 to consider efforts to coordinate a response. The focus appears capping gas prices and/or decoupling electricity prices from gas prices. EU countries have already "spent" and estimated 280 bln euros on tax cuts or subsidies for energy. Quietly, the German two-year yield has doubled in the past two weeks from 0.53% on August 15 to 1.10% yesterday. The German yield has risen faster than comparable US yield. As a consequence, the US 2-year premium has fallen below 240 bp for the first time since early July. It recorded a three-year peak on August 5 a little more than 277 bp. One of the spurs to the more than 22 bp increase in the German two-yield over the past two sessions has been the push from some of the hawks for a 75 bp move at next week's ECB meeting. While it is noteworthy that it was not done via leaks to the press this time, as sometimes is has appeared in the past, and the market seems to think it is likely. The swaps market shows it be a little more than a 60% chance of materializing, up from about a 20% chance a week ago. Our own subjective assessment is that a steady series of 50 bp hikes is more likely to achieve a consensus than a jump to 75 bp and a return to 50 bp or even 25 bp. Given the fragile economic condition, and with little to gain from a larger move than cannot be achieved through the ECB's forward guidance, a stable, predictable course is likely preferable. That said, the provocative tactics of the hawks seems to be an attempt to deliver a fait accompli to the ECB. If they deliver a 50 bp hike, they will appear as dovish versus expectations and could pressure the euro lower in disappointment. The short-covering bounce in the euro began yesterday when the $0.9900 area held. There are a little more than 3 bln euros in options struck there that roll-off today. The gains maybe spurring demand related to 1.55 bln in options struck at $1.00 that expire tomorrow. The euro is at its best level since Powell spoke. Just prior to the Fed Chair's speech last week, the euro spiked to $1.0090. This area should provide a cap now. Sterling's recovery off yesterday's two-year low (~$1.1650) seems less inspired and has not been able to push above yesterday's high (~$1.1785). And even if it does, the upticks will likely be limited to the $1.18 area, which is the (61.8%) retracement of the decline since the high set before Powell spoke (($1.1900). The intraday momentum indicators are stretched by the gains of a little more than half a cent in the European morning. Separately, the decision by the Hungarian central bank is awaited. It is expected to hike the base rate by 100 bp today after hiking by 300 bp last month. This move will bring the base rate to 11.75%. It was at 2.4% at the end of last year.    America The two-year breakeven has now fallen slightly more than 25 bp over the past three sessions to about 2.70%. Over the three sessions, the nominal two-year yield has risen by a grand total of three basis points to 3.42%. The odds of a 75 bp hike next has edged to about 75% from about 66% before Powell spoke at Jackson Hole and gave no signal besides saying it could be 50 bp or 75 bp move. The difference, the 25 bp is coming in addition to the other anticipated moves. What this means is the market now sees the year-end Fed funds target closer to 3.75% rather than 3.50%. The implied yield of the March 2023 Fed funds futures is pricing in about an 80% chance of a hike in Q1, unchanged for the third consecutive session. The market also continues to price in 7-9 bp of easing by the end of next year as it has for the past five sessions. Ahead of the US jobs data, which are the highlight of the week, with the ADP estimate tomorrow, house prices, the Conference Board's consumer confidence, and the JOLTS report on job openings are featured today. While the Fed's Kashkari's comments about the stock market and the Fed's objective of tightening of financial conditions are really revealing anything new, the undiplomatic expression seemed to set the chins wagging. Equity prices are part of the financial conditions but so are interest rates, ease of credit, and asset prices more generally. House price inflation appears to be slowing and this alongside weaker financial asset prices are part of the process. Canada reports its Q2 current account surplus, which is reflecting the positive terms-of-trade shock. Consider that in 2019, before Covid, Canada recorded a C$47 bln current account deficit. With a Q2 surplus of C$6.8 bln expected, it would mean Canada has recorded a nearly C$11 bln current account surplus in H1 22. Tomorrow, Canada reports Q2 GDP and it is expected to have accelerated to around 4.4% form 3.1% in Q1. Still, even with today's modest gain, the Canadian dollar is off about 2.7% this year against the US dollar. The broader risk environment is a more important driver of the exchange rate. Mexico reports its July unemployment rate. It is expected to have ticked up to 3.53% from 3.35%. The market does not appear sensitive to this time series. Tomorrow, the central bank's inflation report is due, but it’s unlikely to impact expectations for a 75 bp hike late September. The US dollar set a new high for August near CAD1.3075 before pulling back toward CAD1.2990. Follow-through selling today has been limited to the CAD1.2970 area, just above CAD1.2965 retracement objective. The momentum indicators suggest that losses below that will be limited and instead the greenback could recover toward CAD1.3025. The Mexican peso's resilience is evident. It continues to trade well within this month's range. The dollar has built a base around MXN19.81 and has not closed above the 20-day moving average (~MXN20.0735) since August 2. However, further dollar losses today look limited.     Disclaimer   Source: Turn Around Tuesday Began Yesterday, Likely Ends before Wednesday

The Japanese yen is in positive territory today after starting the week with sharp losses. USD/JPY is trading at 138.22, down 0.34%. Japan releases a host of events on Wednesday, including retail sales and consumer confidence. Retail sales for July is expected to come in at -0.5% MoM, following a 1.4% decline in June. Consumer confidence remains weak, with a July estimate of 31.0, following the June read of 30.2. The Japanese consumer is in a sour mood and nervous about the economy, so it’s no surprise that she is holding tight to the purse strings as inflation continues to rise. Yen remains under pressure The yen remains under pressure and took it on the chin after Fed Chair Powell’s speech at Jackson Hole on Friday. Powell’s brief speech went straight to the point, pledging to continue raising rates until inflation was brought under control. Powell pointedly said that one or two weak inflation reports would not cause the Fed to U-turn on its tightening, a veiled reference to the market euphoria which followed the July inflation report, which was lower than the June release. With the equity markets taking a tumble after Powell’s speech, it appears that investors have finally gotten the Fed’s hawkish message. Powell’s speech removed any doubts about the Fed’s plans to continue raising rates, but the size of the increases will depend not just on inflation, but also on other economic data. Overshadowed by Jackson Hole, US Personal Income and Spending data was weaker than expected. As well, the Core PCE index, the Fed’s preferred inflation indicator, fell to 6.3%, down from 6.8% and below the forecast of 7.4%. If Friday’s non-farm payrolls report is weaker than expected, it would be a clear indication that the sharp increase in rates is having its desired effect and the economy is slowing. In such a scenario, Fed policy makers may be more inclined to raise rates at the September meeting by only 50 basis points, rather than 75bp. . USD/JPY Technical USD/JPY is testing support at 1.3822. The next support line is at 137.01 1.3891 and 1.4012 are resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: Yen stabilizes after hitting 139

Brent Crude oil has broken above its short-term falling trendline and seems to start reversing the down trend trading around the 0.382 retracement level at USD104.38. Next key resistance is 110.67-112.32, the latter is the 0.618 retracement of the June-August Bearish move. A close above those levels 120-125 is in the cards.If Brent oil drops back below the falling trend line the uptrend is likely to be reversed. If closing below 98.14 it is reversed and 90 is likely to be tested. RSI is still below 60 and needs to close above to underline the uptrend. Source: Saxo Group On the weekly chart we can see that Brent Oil retraced 0.382 of the bullish trend since 2020. RSI is testing its falling trend line and a close above is an indication of Brent resuming its medium- to long-term uptrend Source: Saxo Group WTI Lights Sweet Crude oil that broke out of its falling trendline last week is now in a confirmed uptrend (higher highs and higher lows). However, RSI has not yet confirmed the trend by closing above 60. Resistance at around USD100.23. If buyers can lift WTI above that level the big test is can it move above 55 and 100 SMA’s. If that scenario plays out a move to 0.618 retracement at around 109.18 is likely.If WTI closes below 91.13 the downtrend is likely to resume Source: Saxo Group WTI only retraced around 0.236 of the 2020 extreme low (where WTI oil went to minus 40.32) till (so far) 2022 peak. RSI is still above i.e. in positive sentiment and could test its falling trend line with in a week or so.If WTI loses steam and closes below 85.41 a bearish move to 75.27 and even 65.25 could be seen. Source: Saxo Group Dutch TTF gas has peaked out a few Euros below previous peak at EUR345 – at least short-term - and has since retraced. A correction down to around 240 which is the 0.382 retracement level and a test of the short-term rising trendline is likely. However, a correction down to test the medium-term (black) rising trendline is not unlikely before uptrend quite possibly resumes.RSI is at the time of writing below its rising lower trend line but there is no divergence indicating we could see higher price levels in coming weeks. Source: Saxo Group Henry Hub Gas is having trouble closing above USD10 and could be set for a correction. If breaking the steep rising trendline and drops below 8.87 a correction down to 8.23 is likely but could spike down to around 7.68-7.55 key support.RSI is at the time of writing breaking below its rising trendline and if closing below it support the correction picture. However, there is no divergence on RSI indicating higher levels after a possible correction. Source: Saxo Group   Source: Technical Update - Oil breaking falling trendline, building uptrend. Gas rejected at previous peaks but higher prices are in the cards

Stock markets are bouncing back on Tuesday following a rocky couple of weeks as investors grew nervous about the economic impact of tightening. Fed Chair Jerome Powell could not have been more clear on Friday on the central bank’s tightening stance and unlike the warnings from his colleagues, the message appeared to have finally gotten through. Which makes today’s move all the more curious. It’s not the fact that we’re seeing a rebound as equity markets don’t move in straight lines, rather it’s the strength of it that is interesting. Prior to Friday’s speech, investors appeared determined to cast aside warnings in favour of the dovish pivot narrative and today’s moves may suggest the same could still be true after a brief pullback. With a 75 basis point rate hike now viewed as the more likely outcome from the Fed in a few weeks and ECB officials putting a similar move on the table ahead of its meeting next week, how strong of a recovery can we really expect in equity markets? Central banks have made it perfectly clear now that the fight against inflation is their primary concern and a hard landing may just be the price to pay. While that may change if we see any significant improvement on the inflation front over the coming months, the risks still appear more tilted to the downside for the economy. A big moment for bitcoin Bitcoin is enjoying a slight recovery today after surviving a brief dip below $20,000 over the weekend. The hawkish sentiment by Powell took its toll at the end of the week but crypto bulls are fighting back to defend what could be a key level. We may need to see more of the resilience displayed in recent months as a failure to do so could quickly see bitcoin retesting the June lows. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: A curious rebound

USD/CHF is up for a third straight day. In the European session, the pair is trading at 0.9717, up 0.36%. The US dollar continues to show strength against most of the majors. The Swiss franc has fallen sharply, with USD/CHF climbing 360 points since August 16th. KOF Economic Barometer falls again The KOF Economic Barometer continued its downward trend, declining for a fourth straight month in August. The index dropped to 86.5, down from 90.1 in July and shy of the estimate of 89.0. Much of the August decline was related to consumer consumption, but the manufacturing sector is also showing weakness. Similar to the situation in other major economies, manufacturing activity has been hurt by supply chain disruptions and a lack of employees. Switzerland will release the August inflation report on Thursday. The estimate for August CPI is 0.2% MoM, after a 0.0% reading in July. The Swiss central bank (SNB), which is not shy about intervening in currency markets, will be watching carefully. Higher inflation means the Swissie has less purchasing power, which suits the SNB as it has a paramount interest in the Swiss currency remaining weak so that Swiss exports are competitive. In the US, the markets continue to digest Fed Chair Powell’s hawkish speech on Friday. The “read my lips” speech in which Powell firmly stated that there would be no pivot in policy appeared to have hit its mark, as equity markets took a tumble on Friday and again on Monday, although we are seeing a rebound today. The Federal Reserve holds its next policy meeting on September 21st and we can expect plenty of discussions as to whether the Fed will hike by 50 or 75 basis points. CME’s FedWatch has pegged the likelihood of a 75bp move at 66.5%, with a 33.5% likelihood of a 50bp move. These numbers are sure to change in the coming weeks, as the markets hunt for clues as to the Fed’s plans. . USD/CHF Technical USD/CHF is testing resistance at 0.9720. Next, there is resistance at 0.9760 There is support at 0.9642 and 0.9524 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: Swiss franc falls to 5-week low

Summary:  US stocks move below the key 4,000 level for the first time since July, while also moving under the 50-day moving average, signifying the S&P500 could gain momentum to the downside and potentially retreat to the low set in June. Selling pressure in GBP ramps up, crude oil prices tumble from fresh highs, iron ore retreats below the key $100 level and could remain contained for the year ahead, meanwhile, coal prices remain in record territory. The first shipment of wheat out of Ukraine arrives in Africa. In company news, we cover the latest in the EV space, plus what the latest is from Crowdstrike, the cybersecurity giant. Here is what's happening in markets right now, and what to consider next. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) again on the back foot, being pressured lower US equities fell for the third straight day on Tuesday, with the S&P and the Nasdaq both falling 1.1%. Pressure fell upon equities last night for several key reasons; firstly the market had another reality check - rate rises will intensify. New York Fed President John Williams said on Tuesday restrictive policy will be needed to slow demand, and rate hikes have not achieved that yet. Over in Europe a policy makers said the ECB should make a 75 basis-point hike at its September meeting. All in all, this caused short-term rates, the US 2-year Treasury yield, to rise to its highest level in almost 15-years, as traders bet more rate hikes are coming. This pressured commodity prices, which pulled back on fears rate hikes will soften demand. On top of that OPEC+ didn’t discuss production cuts. So Oil fell ~6%. WTI settled around ~$91.64. As such, the Oil and Gas sectors fell 4%, adding the most weight to Tuesday’s drop. Secondly, equities were also pressured on fears that geopolitical tensions could escalate, after Taiwanese soldiers fired shots to ward off civilian drones flying close to islands near China. And Thirdly, equities are also facing end of month rebalancing; where investors typically take profits from top performers and buy laggards to bring their assets allocations into alignment. Noteworthy movers in US equities   Retailers Big Lots (BIG:xnys) and Best Buy (BBY: xnys) surged 11.8% and 1.6% respectively after reporting Q2 earnings that beat market expectations.  Big Lots’ narrower loss was attributed to margin improvements from cost controls. Likewise, Best Buy’s better-than-expected earnings was largely due to cost controls, as sales fell nearly 13% YoY in the quarter. The discount retailers indicated they’re copping the brunt of trade-downs, while they also warned about a pullback in consumer spending.  U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas)   Treasury yields were little changed on Tuesday, with the 2-year yield rising modestly by 2bps to 3.44% as the market continued to price in a 75bp Fed hike at the September FOMC.  The stronger JOLT job openings data and consumer confidence data, plus Fed officials’ reiteration of determination to bring inflation back under control contributed to the bids to the front end of the curve. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg)   Hong Kong and mainland China equities pulled back moderately, Hang Seng Index -0.37%. Tech names were weak.  Hang Seng Tech Index plunged as much as 3% before bouncing off the low to finish the day only 0.5% lower.  The news of Shenzhen and other cities stepping up pandemic control measures fuelled the risk-off sentiment that has already been hanging over the market.  Share prices of Chinese developers were broadly lower as mortgage repayment boycott cases increased to 103 cities and 347 development projects.  According to the Ministry of Industry and Information Technology, smartphone sales in China fell 2.9% YoY in the period between Jan and July.  Despite reporting solid 1H results, China automaker, BYD (01211:xhg) slid 0.5% following an exchange filing showing that Buffett’s Berkshire Hathaway reduced its stake in the company. Auto retailer, Zhongsheng (00881:xhkg) plunged by 7%.  In A-shares, mining stocks, gas, electric equipment, and auto parts underperformed. In U.S. trading, Hang Seng Index Futures tumbled 2.3% in a confluence of factors including Taiwanese soldiers on front-line islands firing shots at civilian drones believed flying from mainland China, a newswire report saying the U.S. regulator, PCAOB, selected Alibaba (BABA:xnys/09988:xhkg) for audit inspection commencing in September, Berkshire Hathaway reducing holdings in BYD, Covid-related lockdown concerns, and the continuous decline of the U.S. equity markets.  Compared to their closes in Hong Kong, ADRs of BYD fell by 4.2%, and Alibaba by 3.3%. Selling pressure in GBP ramps up Despite a relatively stable USD, pessimism built in sterling after Goldman Sachs hinted that peak inflation in the UK could reach 22% in early 2023 and downgraded its GDP forecast. GBPUSD touched lows of 1.1622 before settling around 1.1660. EURUSD was stable-to-stronger given the stabilising gas situation and the hawkish ECB rhetoric pushing for a jumbo rate hike at the September meeting again. EURGBP pushed higher to 0.8600, its strongest levels since early July.   Crude oil prices (CLU2 & LCOV2)   Crude oil was down over 6% after recording the best day in six weeks on Monday when Brent traded above $105/barrel. The reversal yesterday came on the back of a general improvement in risk appetite as European gas prices plunged. This will likely lower diesel prices, reducing the demand for oil. Fresh lockdown announcements in key Chinese cities also raised demand concerns. Meanwhile the supply situation looked better in the near-term amid reduced Iraq supply disruptions risk and rumours of a potential Iran agreement. Oil inventories also surprised with 593k barrel rise. Reports that OPEC+ not considering a production cut supported price action in the Asian morning hours, and WTI futures reversed to inch back above$92/barrel. Further volatility can be expected in European gas prices today, and that could spill over to crude oil as well, as Nord Stream 1 goes into maintenance.  Gold (XAUUSD)   Gold continues to have trouble finding direction amid a hawkish Fed speak but rising geopolitical tensions. A host of Fed speakers were on the wires yesterday, and all of them focused on inflation, suggesting aggressive action from the Fed will continue. Meanwhile, Taiwanese soldiers fired shots to ward off civilian drones flying close to islands near China, spooking fears that tensions could escalate. Strong US economic data both from consumer confidence and JOLTS jobs opening also bumped up the US 10-year yields, and Gold was seen dipping below the key 1729 support on Tuesday, coming in sights of the one-month lows.  First shipment of wheat out of Ukraine arrives in Africa   The first export of wheat from Ukraine since the invasion of Russia in February has arrived in Djibouti, east Africa. The 23,000-ton shipment is bound for Ethiopia which is struggling with ongoing drought and conflict. A recent agreement between Russia and Ukraine, mediated by the UN and Turkey, has allowed 50 ships to resume shopping grain around the world. Wheat harvest was also seen picking up in Canada as yields improved amid better weather conditions, helping to ease supply worries in the key agricultural crop.  What to consider?  US consumer confidence and JOLTS data came in better-than-expected   US consumer confidence rose to its highest level in three months to come in at 103.2 in August from 95.7 previously. Both the expectation index and present situation index saw improvements, rising to 75.1 (prev. 65.6) and 145.4 (prev.139.7), respectively. This could be partly driven by lower pump prices, but also signals that a healthy job market report may be coming this week. The 1-year ahead inflation expectation fell to 7.0% (prev. 7.4%), which was a seven-month low. Meanwhile, US JOLTS rose to 11.239mln in July, above the expected 10.45mln and previous 10.698mln, hinting that the labor market remains tight.  German CPI’s upside surprise, ECB still leaning towards front-loading   Germany CPI came in higher than expected at 7.9% YoY (vs. 7.5% prev and 7.8% expected) while the MoM print was slightly softer at 0.3% (vs. 0.9% prev and 0.4% expected). Food and energy price gains underpinned, but fuel rebate helped to take some pressure off. Meanwhile, ECB speakers continued to push for more front-loaded rate hikes, in contrast to ECB’s Lane calling yesterday for more step-by-step increases and signaling recession concerns yesterday. ECB’s Knot however clearly said he’s leaning towards a 75bp hike in September but he is open to a discussion, as did Muller. Wunsch also vouched for rates in restrictive territory, and Vasle (non-voter) said the September rate hike should exceed 50bps.  The Chinese Communist Party will hold its national congress on Oct. 16   The politburo meeting held on Tuesday decided to propose to the Central Committee of the 19th National Congress to schedule the next once-every-five-year National Congress of the Chinese Communist Party (the “CCP”) for Oct 16, 2022.  The 2,300-odd delegates attending the National Congress will elect the CCP’s Central Committee which consists of 205 full (voting) members and 170 alternate (non-voting) members. The full members of the Central Committee will elect among themselves the 25 members of the Politburo and the members of the Politburo will then choose among themselves the seven members of the Politburo Standing Committee, who are the highest leaders of the CCP.  The National Congress will review the CCP’s work over the past five years and formulate policy directions and action plans for the next five years.   Taiwan shot at drones flying close to its offshore islands    Taiwan’s authorities said in a statement Taiwanese soldiers fired shots in three incidents on Tuesday to ward off drones flying close to small offshore islands controlled by Taiwan. The statement did not identify where these civilian drones were from but said that the drones flew away in the director of Xiamen, a coastal city of mainland China. Taiwan’s President Tsai Ing-wen previously urged Taiwan’s military force to take “appropriate by necessary” actions to drive away civilian drones having been buzzing Taiwan’s military installations on its front-line islands.   Iron ore falls below the key $100 level   The key steel ingredient fell below $100 for the first time in five weeks, on signs of China’s steel industry worsening. Steel production will fall by more than 8 million tons in the second half, due to plans to restrict output in the key hub of Tangshan. This is according to Minmetals Futures. That cut in production equates to a decline of 10%. China’s steel industry is reeling amid a property crisis, that’s showing no promise of turning around any time soon. Authorities in Tangshan, near Beijing also decided to cut production at a recent meeting, Meanwhile a major steel maker, Angang Steel says it sees tough conditions persisting through the end of the year. This backs up BHP’s comments last week, where BHP’s CFO told Saxo in an one-on-one interview, that iron ore demand will remain limited in the year ahead, not able to outpace supply. This means iron ore pricing will remain capped. Coal prices are back at record highs, amid the energy crisis   With global electricity prices skyrocketing and likely to worsen, and nothing being resolvable, the coal price is being bid again, pushing it once again back to record territory. For consuemrs, unfortunately this means higher power bills, especially in those regions dependent on coal for electricity (India, China, Australia). With the coal futures price, and the spot coal price moving to higher levels, this supports future earnings and cashflows in coal companies. As such, many coal stocks are trading at record highs. Shares in Australia’s largest pure-play coal company Whitehaven Coal (WHC) hit a brand-new record all-time high yesterday, A$8.15, but today is facing selling pressure (profit taking perhaps). Other stocks that make money from Coal include BHP in Australia. In Asia, Bayan Resources, and Yankunang Energy, as well as Shaanxi Coal. Alibaba has been selected for audit inspection by the PCAOB   According to Reuters, Alibaba (BABA:xnys/09988:xhkg) has been selected, together with some others, by the Public Company Accounting Oversight Board (the “PCAOB”) for audit work inspection commencing in September.  Buffett’s Berkshire Hathaway reduces its stake in the Chinese EV maker BYD   Warren Buffett’s Berkshire Hathaway sold around 1.33 million shares of BYD (01211:xhkg) at an average price of HKD277.10, bringing its stake in BYD to 19.92% of the total issued H shares or 7.51% of the total issued share capital on Aug. 24.  Comparing the ending balance after the sale to the ending balance as of June 30 revealed in BYD’s interim results announcement released earlier this week, Berkshire Hathaway had previously undisclosed sale of 4.95 million shares since July.  Assuming the 4.95 million shares were sold at the average closing prices in July and August, Berkshire Hathaway cashed out a total of about HK$1.8 billion from the sale of these 6.28 million shares over the past two months which was similar to the aggregate cost that Berkshire Hathaway had initially paid for the whole amount of 7.73% stake (or 20.49% of H shares) in BYD. Covid cases resurface in 31 provinces in China   China’s southern technology hub, Shenzhen shut down the world’s largest electronics retailing marketplace in response to a surge of Covid cases. The cities of Dalian, Chengdu, Yiwu, and Sanya are also under some sort of restriction. Baidu reported inline Q2 results   Baidu’s (BIDU:xnys/9888:xhkg) revenue fell 5% YoY to RMB 29.65 billion, largely in line with consensus estimates. Its operating margin came in at 22%, contracting 5 percentage points YoY, due to sluggishness in the high-margin ads business and a revenue mix shifting toward lower-margin non-ads business.  Q2 Non-GAAP EPS increased 2% YoY to RMB15.79, well above analysts’ RMB9.82 median forecast.      American companies have a downbeat outlook on doing business in China   The US-China Business Council’s annual member survey showed that a record 21% of the 117 multinational companies headquartered in the US said they were downbeat on their business in China for the next five years, (according to those surveyed). 90% of respondents said their businesses were affected by lost sales and uncertainty over reliable deliveries.   China is set to tighten scrutiny of companies seeking to raise funds through issuing offshore bonds   According to a consultative draft document on the portal of the National Development and Reform Commission, China is planning to require companies that seek to issue bonds offshore to register, report and receive approval from the authorities for debts that have tenors exceeding one year.   China’s official PMIs are scheduled to be released today   The median forecasts of economists surveyed by Bloomberg expect China’s official NBS manufacturing PMI to edge up to 49.2 in August from 49.0 in July, while firmly remaining in contractionary territory. Heatwaves and drought-induced power curbs have caused Sichuan and Chongqing to shut-down manufacturing activities for six days and eight days in August respectively. The stepping up of pandemic controls in some cities could also affect the survey negatively. The median forecast for August official NBS non-manufacturing PMI is 52.2, down from last month’s 53.8 but remains in expansionary territory.   Crowdstrike, the cybersecurity giant reported better than expected results   Crowdstrike shares were higher after hours in the US, following a 0.7% rise in the regular session after reporting second-quarter results that topped analysts expectations, while it raised its forecasts for the year. The cyber security giant reported revenue rose to $535 million, up from the $337.7 million in the year-ago quarter. Annual reoccurring revenue grew 59% to $2.14 billion compared to the same time last year. This is a somewhat of a testament that cyber security is a defensive industry that is able to do well, regardless of economic conditions weakening. For a global look at markets – tune into our Podcast. Source: APAC Daily Digest: What is happening in markets and what to consider next – August 31, 2022

Summary:  Crude oil’s bounce from a six-month low has faded fast with risk appetite across markets taking a hit after Fed chair Powell's hawkish speech once again raised concerns that the central banks aggressive stance towards combatting runaway inflation will drive down growth and demand for crude oil and fuel products. In addition, the energy market has to deal with long liquidation into a low liquidity market, reduce gas-to-fuel focus as EU gas prices drop as well as Iraq, Libya and Iran developments. Crude oil’s bounce from a six-month low has faded fast following Friday’s hawkish message from Jerome Powell, the Federal Reserve Chairman, which once again raised concerns that the central banks aggressive stance towards combatting runaway inflation would mean lower growth and with that lower demand for crude oil and fuel products. The battle between these macro concerns continues to battle with micro developments, the majority of which still point to tightness during the coming months. In Europe, the gas and power crisis continue with punitively high prices attracting substitution demand into fuel products like diesel and heating oil. In the short-term the price of gas into the autumn month will continue to be dictated by Russian flows, and not least whether Gazprom (and Putin) as announced will resume flows on the Nord Stream 1 pipeline following the three-day maintenance shutdown that ends at 0100 GMT on September 3. Other developments currently impacting the market: China’s continued battle with Covid infections which is currently found in 31 provinces, and which has led to fresh curbs being implemented, among others in two of southern China’s most economically vibrant areas. Deadly turmoil in Baghdad after Moqtada Al-Sadr, a prominent cleric, decided to resign from politics, thereby deepening a political crisis that has left the country without a government since last October’s election. For now, the clashes have not spread to oil-rich area and exports from one of OPEC’s biggest producers remain uninterrupted. Clashes in Libya’s capital Tripoli over the weekend which left at least 32 people dead have raised risks of a civil war in Libya, a very volatile producer which has seen its output swing between 0.7 and 1.2 million barrels per day during the past year. On the supply side, the market will be watching the impact of the EU embargo on Russian oil which will begin impacting supply from December and the 180-million-barrel release, at a rate of one million barrel per day, from US Strategic Reserves that look set to run until October 21. In the following months the US government plans to buy back 60 million barrels, a decision that is likely to be delayed given the prolonged war in Ukraine. Finally, an Iran nuclear deal has yet to be reached, but if successful it could lead to millions of barrels of on and offshore stored oil being released into the market. WTI Crude Oil: Following Monday’s short squeeze the subsequent sell-off has forced recently established longs to reduce their exposure. Developments that from a technical perspective have opened the risk of a return towards key support around the mid-August low at $85.5/b. Source: Saxo Group Lack of liquidity and speculative positions being wrongfooted have both added to the latest gyration which saw the biggest jump in six weeks on Monday being  followed by a near 9% two-day drop. In the week to August 23, hedge funds added 80k lots of crude oil and fuel exposure, the biggest weekly increase since January, and the latest tumble may have forced many too hastily exit those recently established and now loss-making positions.            With the summer holiday driving season winding up we are seeing gasoline refinery margins trading sharply lower while demand for diesel as a substitute for expensive gas has supported diesel margins, both in the US and especially in Europe. However, since Friday’s peak in EU gas prices we have seen softer but still elevated margins there as well.              The weekly oil and fuel stock report from the US Energy Information Administration will be watched closely given its frequency and with that the ability to provide an up-to-date snapshot of the current supply and demand situation across crude oil and fuel. Last night the API reported a 600k barrels increase in oil stocks and a combined 5.1 million barrels drop in gasoline and distillates stocks. The report will also provide the EIA’s assessment of production, which has been adjusted lower for the past two weeks to 12 million barrels a day, and somewhat short of the EIA’s latest end of year forecast of 12.45 million. Crude and distillates exports will also be watched after the combined figure hit a record last week. As per usual I will post the charts and tables on Twitter once the report has been released at 14:30 GMT.               Source: Oil drops as hawkish Fed drives fresh demand concerns

Relevance up to 10:00 UTC+2 The more euro falls, the more often European policymakers say there is a need to strengthen measures that curb inflation. ECB board member Joachim Nagel even stated that the next rate hike should not be delayed for fear of a potential recession. Unsurprisingly, these comments fueled speculation on how much the European Central Bank needs to raise interest rates at its meeting next week to keep the balance between the economy sliding into recession and countering further inflation. With the figure already at a record 8.9%, markets are divided over whether policymakers will raise rates by 50 basis points straight away or resort to changing them by 75 basis points at once. If the ECB increases rates by 75 points, euro will correct upwards, which will allow buyers to keep parity under their control. However, there are policymakers calling for restraint in the tightening of monetary policy. Executive Board member Fabio Panetta recently said the current rate hike will ease inflationary pressures anyway, while Chief Economist Philip Lane pointed out that sustained economic growth is more important than the observed inflationary pressures associated with the energy crisis. Although much of the surge in inflation is due to energy problems, there are fears that it could spread to other areas. Nagel mentioned that he supported last month's decision to raise rates by 50 basis points because a larger move minimizes the risk of future price increases being out of control. In terms of the forex market, there is a risk of further sharp fall in EUR/USD. Buyers need to hold above 1.0000 because moving down will make it hard for the pair to recover. Meanwhile, going beyond 1.0050 will give confidence to buyers in pushing the quote to 1.0090 and 1.0130. If euro falls below 1.0000, the bear market will continue, which would push the quote to 0.9970, 0.9940, 0.9905 and 0.9860. Pound is currently below the 17th figure, which creates certain difficulties for buyers. There is very little chance of a strong upward correction, especially if sellers take control of 1.1650. If buyers fail to stay above this level, there will be another set of sell-offs towards 1.1590. Then, its breakdown will lead to subsequent declines to 1.1530 and 1.1480. Only a rise above 1.1720 will bring the pair to 1.1760 and 1.1840. Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Source: Forex Analysis & Reviews: ECB members are calling for tighter monetary policy

Summary:  The G3 currencies are chopping around aimlessly versus one another while the bigger story afoot across FX is weakness in the rest of the G10 currencies, particularly in the Swiss franc and Norwegian krone, the currencies that had formerly traded the strongest against the euro as a bit of ECB catchup on tightening guidance and easing energy prices. NOK is particularly weak today, perhaps on fears that the EU is set to cap energy and power prices and may twist Norway’s arm in the process? FX Trading focus: EUR relief and squeeze for now, but remember longer term picture. Is NOK suddenly worried about price caps for its energy exports? Yesterday I highlighted the squeeze risk in EURUSD If the 1.0100 area traded, but the US dollar has remained quite firm, while the real story is in the euro upside squeeze elsewhere, particularly against the Swiss franc as the ECB has gotten religion on the need to bring forward and raise its tightening plans, while the collapse in oil prices and natural gas prices to a lesser degree over the last couple of days has EURNOK shorts running for cover. Yesterday, another flurry of ECB speakers at a conference saw ECB rate expectations pulled back a bit higher as some, including Nagel, argued for a front-loading of rate hikes, which has the market leaning a big harder in favour of a 75-basis point move at next Thursday’s ECB meeting. Still, as the weeks wear on, it is important to realize that Germany being ahead of its schedule on refilling gas storage reserves doesn’t mean the country can meet anything approaching normal gas demand through the winter unless Russia turns up the gas flow rates or the gas can be sourced from elsewhere, as storage is only a fraction of the amount need for winter consumption rates as heating demand jumps. The EU has called an emergency meeting next Friday that will likely result in a cap on electricity and perhaps also natural gas prices for some end users, a  move that will prevent many consumers and especially small businesses from going cold over the winter or going broke or having too much of their budgets swallowed by energy costs. But such a move to cap prices will also have the typical result that demand will remain higher than it would otherwise, and that will have to mean rationing of power/gas, a dicey process to manage. Either way, real GDP will decline if less gas is available, even if Russia does turn back on the gas after turning it off today for a few days of purported maintenance and continues to deliver the trickle of flows that it has been delivering recently. The August US ADP payrolls data release today is the first using a “revamped” methodology that is meant to provide more time and higher frequency data on the labor market, as well as information on pay rises, given the ADP access to salary information. The headline release of +125k was disappointing, but it will take time for the market to trust this data point even if the new methodology eventually proved better for calling the eventual turn in the labor market. Yesterday’s Jul. JOLTS jobs openings survey was nearly a million jobs higher than expected after the prior month was revised solidly higher, suggesting a still very strong demand for labor. The USD picture is still choppy and uncertain, with today’s ADP number chopping long treasury yields back lower after they trade to new local highs. The Friday’s official jobs report will weigh more heavily, with earning surprises potentially the largest factor, while the September 13 CPI data point will weigh heaviest of all ahead of the Sep 21 FOMC meeting. As discussed in this morning’s Saxo Market Call podcast, an Atlanta Fed measure of “sticky inflation” is showing unprecedented relative strength to the BLS’s standard core CPI measure. Chart: EURNOKEURNOK has backed up aggressively higher on the huge haircut to crude oil prices over the last couple of sessions and as the ECB has delivered a far sterner message on its intent to bring forward and steepen rate tightening intentions. As well, if the EU emergency meeting sees the spotlight turned on Norway’s gargantuan profits it is earning on oil and gas profits from the reduction of Russian deliveries, the EURNOK rise could be aggravated well through the pivotal 10.00 area. Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strength.The US dollar remains strong, with Euro flashing hot in the momentum higher – although questions remain how long this can last. Sterling continues its ugly slide, while CHF has lost moment likely on EURCHF flows, and NOK is losing altitude very quickly as noted above. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.USDCAD and AUDUSD are looking at interesting levels, with the former having now more decisively broken the range, while AUDUSD is teetering. Note the EURCHF and EURNOK readings trying to flip to positive here, together with other EUR pairs. USDNOK has flipped positive in rapid fashion after yesterday’s flip higher. Source: Bloomberg and Saxo Group Source: FX Update: NOK, NOK, who’s there? Energy price caps?

Avalanche (AVAX) on 29 August, lost almost 12% on a day when a new whistleblower accused it of paying lawyers to attack its competitors' reputations. Since the bottom two days ago, the cryptocurrency's price now seems to have recovered some of its losses, rising by around 10 per cent, presumably after the accusations lost credibility in the eyes of investors. CryptoLeaks is a young news site that aspires to become WikiLeaks - known for shedding light on the crimes of governments. Two days ago, the site published an article accusing Ava Labs of paying lawyers from the Roche Freedman law firm to damage the reputation of its competitors.  The alleged evidence was a statement by one of the insiders. However, the claims made in the article appear to be exaggerated, and the evidence is too weak to support allegations of a deliberate and paid legal battle against competitors.  According to Santiment data, Avalanche became the most searched token (by keywords) shortly after the article's release.   How did the AVAX price react? Most likely, as a result of CryptoLeaks, the AVAX token fell by a whopping 12%, but shortly after scepticism about the article began to gain traction, the listing rebounded. At the end of the day, the cryptocurrency had lost just 3.1%, and the token recovered all of its losses the following day. Furthermore, the price declines of 29 August coincided with a correction in other currencies, making it reasonable to believe that the accusations' impact on sentiment was much smaller.  Today on the Conotoxia MT5 platform at 11:00 GMT+3, AVAX is trading at $19.35, losing 1.4%. The price is below the 10, 20, 50, and 100-day moving averages. The MACD indicator may point to a potential trend reversal after the histogram started to turn back from negative territory. Although not yet in the overbought zone (below 30 points), the RSI signal line seems to be relatively low (less than 35 points), which could indicate a possible trend reversal. On the other hand, looking at the chart from a broader perspective, it seems that it may still be in a downtrend. It seems that there are still storm clouds looming over the cryptocurrency market in the form of a hawkish Fed, an economic slowdown, an energy crisis and a big unknown in the form of inflation.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Avalanche recovers after accusations against the project are met with scepticism

August seemed to be a month of high volatility, most likely due to the turbulent economic environment and a relatively good quarterly earnings season. We seem to be in for a very interesting bear market rally, with a possible peak in the middle of last month. At that time, the S&P 500 and Nasdaq Composite indices fell 3.2% and 3.9%, respectively. They set a peak (in mid-August), gaining 17.4% and 23.3% (the average historical magnitude of a bear market rally) from their local low (mid-June).    Disney (DIS) The entertainment market giant posted a 1-month gain of 5.9%. The stock had been declining for a year and a half, most likely influenced by extreme pessimism about the company's ability to continue to grow. As a result, the recession and lower consumer spending may have posed an additional threat to revenue from theme parks and streaming platforms. Since its peak in early 2021, Disney shares have fallen by 52.2%.  A short-term trend reversal occurred when Disney announced solid Q3 results (the financial year starts earlier than the calendar year for Disney). There was a 26% increase in revenue and a whopping 53% increase in net profits year-on-year. Net earnings per share were 10 per cent higher than expected. Among the main reasons for such a phenomenal jump in results is the expansion of owned streaming services, namely Disney+, Hulu and ESPN+.   Charles Schwab (SCHW) SCHW is a leading financial company engaged in brokerage, market making, investment banking, consulting and investment advisory services. Its share price rose by 5.5% last month. As for the stock price of other companies, Q2 results proved to be crucial the previous month.  The company reported an increase of as much as 31 per cent in interest income, which is the company's primary source of revenue (more than 50 per cent). Thus, SCHW's revenue and net profit increased by 11.7% and 41.7%, respectively. EPS (earnings per share) turned out to be 6.6% higher than Wall Street analysts' expectations. As a result, expectations of further possible interest rate rises and rising volatility (from which the brokerage business may benefit) appear to push the stock even higher.   Disney and Charles Schwab may be among the more interesting companies of August due to their phenomenal earnings despite the deteriorating macroeconomic environment.    Source: Leaders among the giants — stocks of the month?

TL;DR MANTRA is a vertically-integrated blockchain ecosystem. The MANTRA OMniverse encompasses the DAO; MANTRA Nodes: a blockchain infrastructure-as-a-service business; MANTRA Chain: a protocol for various assets for the Cosmos ecosystem; and MANTRA Finance: a DeFi platform that brings the speed and transparency of DeFi to the world of TradFi.   Introduction Launched in 2020, MANTRA is a vertically-integrated blockchain ecosystem. Previously known as MANTRA DAO, the ecosystem carries a reputation for an open and honest approach to crypto trading, fund-building, and innovation, all part of its goal to make crypto-pioneering personal, safe and secure.   What is the OMniverse? With MANTRA’s rebrand also came the restructuring of MANTRA into the all-encompassing MANTRA ecosystem, otherwise known as the OMniverse. The OMniverse is made up of four stacks that comprise the wide variety of products and services MANTRA offers to both retail and institutional investors. The four stacks are MANTRA Nodes, MANTRA Chain, MANTRA Finance and MANTRA DAO, with each comprising a range of innovative products within MANTRA’s ecosystem.  MANTRA Nodes MANTRA Nodes is the cornerstone of the vertically integrated stack that is the foundation for the OMniverse. The primary function of the node operations is to generate revenue for the business and grow Sherpa community holdings by providing more yield-earning opportunities across multiple blockchains. Additionally, these validator nodes support MANTRA in building a presence on new and emerging blockchain networks and growing it into a larger institutional space as an ecosystem. It also opens up opportunities to expand MANTRA’s multi-chain DeFi ecosystem. MANTRA also offers Infrastructure as a Service (IaaS), meaning it can set up validator node operations for both institutions and individuals. The MANTRA Nodes service line also includes node management, retail staking (both on- and off-chain), institutional nodes, and cloud / white-label node development and deployment. MANTRA Chain MANTRA Chain is the protocol for the Cosmos ecosystem. It is interoperable with other blockchains in Cosmos with the IBC module, providing developer tools and an opportunity to build anything from games and web3 applications to secure and decentralized exchanges (DEXs). The network is also EVM-compatible, combining the flexibility and reliability of both the Cosmos and Ethereum ecosystems in a builder-friendly environment.  MANTRA Chain also utilizes a powerful decentralized identify (DID) module for all KYC & AML needs. The module facilitates the development of the products that utilize enhanced features and ecosystems. MANTRA Finance MANTRA Finance aims to be a platform that brings the speed and transparency of DeFi to the established yet opaque TradFi world. The platform will allow for users around the world to trade, issue, and earn from digital assets in a non-custodial and permissionless way. MANTRA DAO Since its inception, MANTRA has always focused on involving its community at every stage, and the transparent governance mechanism is the core that brings the people together. To reach a wider community outside of the OMniverse and Sherpas, M DAO strives to bring this narrative and structure to other projects and their many protocols. The stack offers DAO services that securely increase the efficiency of various DAOs’ business functions, from finance to HR management. For example, some DAO solutions include treasury management, DAO issuance and launchpads, and DAO governance and grants, as well as DAO staking and DeFi. Some successful DAO partnerships include HeliSwap, the first DEX & DAO on the Hedera network and ZENSTAR, the first substrate based money-market built on the Astar network on Polkadot. The OM Token $OM is the native token of the OMniverse and has various utility including:Governance: $OM stakers can issue proposals, participate in governance votes, and suggest developments in various products across the OMniverse.Staking: $OM can be staked directly on MANTRA’s web app or on Binance for passive yield earning.DAO Token Access/ Airdrop Incentives: $OM stakers get special access to new DAO token issuances as well as partnering DAO token airdrops. Now that you’re familiar with the essential stacks that make up MANTRA as an ecosystem, let’s look at how you can buy MANTRA’s tokens, $OM, on Binance.  How to buy $OM on Binance   1. Log in to your Binance account and go to [Trade] -> [Spot]. 2. Type “OM” in the search bar to view the available trading pairs. We will use OM/BUSD as an example. 3. Go to the [Spot] box and enter the amount of $OM you want to buy. In this example, we will use a market order. Click [Buy OM] to confirm your order, and the purchased $OM will be credited to your Spot Wallet. How to stake $OM on Binance? 1. Log in to your Binance account and go to [Earn] -> [Binance Earn]. 2. Type “OM” in the search bar to view the available staking period (30, 60 or 90 days) and click [Stake Now]. 4. Enter the amount of OM you would like to stake and click [confirm]. Closing thoughts While MANTRA aims to create a secure, safe, and personal ecosystem for its users, it’s always important to remember that the crypto industry is not free of risks. Familiarizing yourself with MANTRA’s infrastructure will help you understand the services provided within the OMniverse.   Source: What Is MANTRA (OM)?

Relevance up to 15:00 UTC+2 The dollar remains positive, while its DXY index remains near the resistance level of 109.00. Earlier this week, DXY broke last month's high at 109.14 and touched a new local high since October 2002 at 109.44. The tough rhetoric of Federal Reserve Chairman Jerome Powell regarding the prospects for monetary policy of the American central bank gave the dollar a new bullish momentum. During his speech at the Jackson Hole symposium last Friday, he reaffirmed that the Fed's priority goal is to fight high inflation, and "the Fed should continue like this until the job is done." At the same time, "restoring price stability will take some time and will require the decisive use of central bank instruments." In other words, the tight cycle of Fed monetary policy tightening will continue for now, perhaps even at the same pace. Thus, the trend of further strengthening of the dollar remains. Meanwhile, the price of gold continues to decline amid a strengthening dollar. Today, XAU/USD hit a new 6-week low at 1.1710, falling towards key support levels at 1700.00, 1690.00, 1682.00. As you know, gold quotes are extremely sensitive to changes in the monetary policy of the world's leading central banks and, especially, the Fed. However, the other major world central banks (BoE, RBA, RBNZ) are also on the path of tightening their monetary policies, and the ECB will soon join them. Despite the high risks of a recession in the economy, the fight against inflation remains a key issue for them. Gold does not bring investment income but is in active demand during geopolitical and economic uncertainty, and a protective asset in the face of rising inflation. Now is just such a moment. However, it seems that it is losing its role as a protective asset to the dollar, and in the event of a breakdown of the zone of long-term support levels of 1700.00, 1690.00, 1682.00, the long-term bullish trend of gold and the XAU/USD pair may be in jeopardy. It is hard to believe so far, but the fundamental and technical picture is still in favor of just such a scenario. On Friday, the publication of key macroeconomic statistics for the United States is expected. At 12:30 (GMT), data on the US labor market for August will be published. The positive momentum of recovery is expected to continue, which allows Fed officials to continue to fight inflation at an accelerated pace, which is bullish for the dollar and bearish for gold prices. Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Source: Forex Analysis & Reviews: XAU/USD: Bullish and bearish factors

Relevance up to 12:00 UTC+2 Markets are often wishful thinking. And the media actively support them in this. Bloomberg's report that the euro could have its own rally amid record high inflation and the hawkish rhetoric of ECB officials was full of pathos but little sense. Without a decrease in gas futures quotes, the "high prices - aggressive increase in deposit rates" scheme does not work. As soon as the cost of blue fuel began to recover after a two-day decline, EURUSD quotes rushed down. Of course, the acceleration of German and European inflation to 8.8% and 9.1%, respectively, which in the first case is the maximum level in 40 years, and in the second—a new record, cannot please the ECB. Especially in the conditions of EURUSD sliding to the 20-year bottom. The Bundesbank says the recession should not stop Christine Lagarde and her colleagues from raising rates, while the futures market is 60% sure that they will rise by 75 bps in September. After such impressive inflation figures, I won't be surprised if it will be +75 bps in October and another +50 bps in December. Monetary restriction is clearly accelerating, and judging by the reaction of the euro to the previous "hawkish" surprises of the Governing Council, we can expect the growth of the euro on the 8th. Or on expectations before that date. Dynamics of European inflation However, as long as gas prices remain at elevated levels, the market perceives the tightening of the ECB's monetary policy as a direct path to recession. So, the euro needs to be sold. This strategy works very well on the news. Expectations of inflation acceleration in Germany and the Eurozone pushed EURUSD up, and then the sale on the facts began. At the same time, the shutdown of the Nord Stream for maintenance contributed to the growth in the cost of blue fuel and thus deprived the regional currency of its main trump card. Russia has suspended gas supplies to Engie SA due to disputes over payments. In France, storage occupancy is now over 90%, and the country is ready to survive this winter and next. Russia claims maintenance on Nord Stream will take about three days, but eurozone money markets only give a 30% chance that the pipeline will be operational by the deadline. Fears about the complete shutdown of the taps create a major obstacle on the way of EURUSD upward. Technically, on the 4-hour chart of the pair, the possibility of a Broadening Wedge reversal pattern is not ruled out. In this case, the return of euro quotes above the fair value of $1 will be the basis for purchases. On the contrary, a fall in EURUSD below 0.9915 will increase the risks of a continuation of the peak towards 0.97. Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Source: Forex Analysis & Reviews: Euro sell on the news

Summary:  The Czech Presidency of the Council of the European Union (EU) announced an emergency energy meeting will be held on 9 September in Brussels (Belgium). This aims to discuss concrete measures to tackle the energy crisis while power prices continue to reach record high. Last week, France 1-year forward electricity prices crossed for the first time ever the level of €1,000 per megawatt-hour (MWh). Before the crisis, anything above €75-100 per MWh was considered as expensive. Three main options are on the table : targeted compensatory measures for low-income households, applying the ‘Iberian exception’ to the entire EU (temporarily decoupling the price of gas from that of electricity) and reforming more fundamentally the European electricity market. There is no easy answer. Each of these options has downfalls. In our view, the energy crisis is here to stay. The world of cheap energy is over. We have entered into a brave new world of high inflation and high energy prices. An unbearable cost : According to the calculations of the Brussels-based think-tank Bruegel, EU governments have allocated almost €280bn to help companies and households to cope with higher energy bills since September 2021. In nominal terms, the largest European economies allocated the most funding (Germany €66bn, Italy €49bn and France €44bn). In percentage of GDP (which is a better way to compare), the financial cushion deployed is the largest in Greece (3.7 %), Lithuania (3.6 %) and Italy (2.8 %). This cannot last forever. Several countries are looking to reduce financial support. They want to implement a targeted approach to mostly help low-income households. In France, the government capped energy prices in 2022 (gas prices were frozen at the levels of Autumn 2021 and electricity prices increased only by 4 % this year for households). But this is costly (around €20bn – this is about half of the annual budget of the French ministry of Education). Based on current energy prices, expect the cost to be close to €40bn for this year. In light of higher interest rates and risks that massive financial stimulus further fuels inflation, we believe that many European governments will follow the pace of the French’s. They will decide to downsize the financial package aimed to cushion the energy crisis. On top of that, several EU countries are embattled with the need to bailout utilities at risk of insolvency (Germany’s Uniper and two Vienna municipal utilities, for instance). This is only unfolding now. Electricity market intervention is back on the agenda : Yesterday, the president of the European Commission (EC), Ursula Gertrud von der Leyen acknowledged the EU electricity market is no longer functioning. This is an understatement. There are mostly two options on the table. Both will be discussed at the upcoming emergency meeting of 9 September. The first option is to propose that the entire EU apply the ‘Iberian exception’ to set electricity prices. In mid-April 2022, the EC agreed that Spain and Portugal create a temporary mechanism to decouple the price of gas from that of electricity for a period of 12 months. Concretely, the price of gas was capped to an average of €50 per megawatt-hour. This resulted in electricity bills being halved for about 40 % of Spanish and Portuguese consumers with regulated rates. This could be applied at the EU scale. This is supported by Germany, Austria, Belgium, Spain and Portugal especially. However, this is far from being perfect. It led to significant leakage – basically a surge in power exports to France. In other words, a lot of the subsidy actually ends up in France. In addition, prices continue to increase at a speedy rate for 60 % of consumers. The second option is to separate the wholesale power market into two segments : a mandatory pool for low-variable cost technologies (wind, solar, nuclear, for instance) and a conventional market for fossil condensing plants. This proposal is pushed forward by Greece. This is a more fundamental reform of the EU electricity market. But there are several downsides, especially regarding how existing long-term contracts will be treated. Much more emergency meetings will be required before a coherent approach will be approved. Don’t expect major decisions to be announced next week. The nuclear option : In our view, the European energy crisis is an opportunity to rethink policy stance on nuclear power. Last week, several non-partisan organizations launched a petition to prevent Switzerland from leaving nuclear power in 2027, as scheduled. This decision was initially taken in the aftermath of the 2011 Fukushima crisis (Japan). According to the July data from the World Nuclear Association, France and the United Kingdom are the two main European countries with the most nuclear capacity under construction. But others don’t seem to embrace this option. In Germany, the Greens prefer to restart coal-fired power stations rather than rethinking the nuclear exit plan. This is puzzling. Nuclear power is not without issues (see corrosion issues in France nuclear reactors). But it guarantees energy independence and lower energy prices in the long-run. While Asia is embracing nuclear power (South Korea is reversing nuclear phaseout and China is accelerating its huge buildout in reactors, for instance), we fear that the EU will still be reluctant to bet on nuclear for ideological reasons. Like it or not, nuclear energy is our best option at the moment to reduce dependence on expensive fossil energy and move forward fast with the green transition. On the spot side, electricity prices continue to remain close to record high in France and Germany, respectively at 641 and 604€ per MWh. In contrast, they remain comparatively low in Spain and Portugal, around 200€ per MWh. This is roughly 10 times more than before the Covid, however. Source: EU Emergency Energy Meeting : A Never Ending Story

Summary:  The S&P500 fell 4.2% in August, erasing half of July’s rally, with investors selling down companies that face balance sheet tightening from runaway inflation and higher for longer interest rates. Meanwhile, in August, investors bought into sectors contributing to inflation. At Saxo, we think these trends will probably continue. We cover everything you need to know about what is happening in markets today and what to consider next. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities declined for the fourth day in a row, with S&P 500 down 0.78%, the Nasdaq 100 falling 0.57%.The month of August ended with S&P 500 losing 4.24% and Nasdaq 100 down 5.22%.  The markets were in a risk-off mood with the focus being fixed on rising bond yields and the hawkish stance of the central bank in the U.S. and across the pond in Europe, and with an eye on the job report coming out of the U.S. tomorrow.  Chewy (CHWY:xnys) dropped 7.9%, as the pet retailer lowered guidance for 2022 revenues, citing customer pulling back on discretionary items. The consumer trade-down echoed the general trend found in other U.S. retailers.   Bed Bath & Beyond (BBBY:xnas) tumbled 21.3% after announcing a plan to close about 150 stores. Nvidia (NVDA:xnas) plunged 5% in extended hours after the company warned that the new U.S. rules restricting the export of artificial intelligence may substantially affect the company’s sales to China.  U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas)   Yields took a blip lower initially after the weaker-than-expected ADP Employment report but surged higher to finish the day at the high.  The benchmark 10-year note yield closed at 3.19%.  Cleveland Fed President Mester joined the recent chorus of hawkish fedspeaks vowed to get inflation down “even if the economy were to go into recession” and “it will be necessary” to raise the Fed fund rate to “above 4% by early next year and hold it there”.  The U.S. treasury yield curve bear steepened, with the 2-year yield +5bps as the belly to the long-end yields jumped 8bps to 9bps. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg)   Hang Seng Index gapped down by nearly 2% at the open but managed to crawl back all the losses to finish the day flat.  China consumption stocks led the market higher in anticipation of incremental policy stimuli and recovery of consumer demand during the mid-autumn festival, Xiabuxiabu Catering (00520:xhkg) +9.4%, Haidilao (06862:xhkg) +6.5%, China Tourism Group Duty Free (01880:xhkg) +7.1%, Li Ning (02331:xhkg) +3.9%, Anta Sports (02020:xhkg) +1.5%.  In the auto space, BYD (01211:xhkg) tumbled nearly 8%, following news of Berkshire Hathaway reducing its stake in the company. On the other hand, Nio (09866:xhkg) and XPeng (09868:xhkg) rose more than 2%.  Hang Seng Tech Index (HSTECH.I) gained 1%, with performance divergence among stocks.  Tencent (00700:xhkg) gained 1.1% while Baidu (09888:xhkg) dropped by 3.3% on operating margin contraction. China banking shares traded in Hong Kong were mixed after ICBC (01398:xhkg), China Construction Bank (00939:xhkg), and Bank of China (03988:xhkg) reported growth in revenues and profits but higher non-performing loan ratios. Coal mining and oil stocks fell on the Hong Kong bourse as well as the mainland bourses on weaker energy prices.  CSI 300 bounced from the early sell-off and closed little changed.     Australia's ASX200 (ASX:XASX) closes higher for the 2nd month, but on the first day of September equities unwind the August rally and cut July’s rally  Australia’s market has rallied for two straight months. But the rally is likely to run out of steam iin September, with Aussie equites to face selling pressure. September is historically the worst month for equities, with the ASX200 losing 0.6% each month on average since the index was formed. The reason for this? Companies pay out their yearly dividends in September. Today, many major companies go ex-dividend, transferring the dividend right to shareholders. Companies going ex-dividend include BHP, Whitehaven Coal, AGL and Credit Corp. This month, the ASX faces a host of extra issues. The RBA is tipped to hike interest rates at its September meeting next Tuesday, front loading rate hikes for the next few months. This comes at a time when home prices marked their steepest decline in four decades and building approvals for private homes, fell to their lowest level since 2012. This means banks will face selling pressure. Crude oil prices (CLU2 & LCOV2)   EIA reported a decline in crude oil inventory of 3.3 million and gasoline inventory of 1.1 million with SPR slowing to 3 million barrels, so resulting in an overall draw of 6.4 mb/d, but the reaction in the oil market remained muted. Production was adjusted higher by 0.1 mb/d to 12.1 mb/d. No change in net trade with imports and exports both declining 0.2 mb/d. WTI futures still trading below $90/barrel in Asian morning as focus shifts back to demand concerns, and Brent futures were below $96. USDJPY heading to 140   The late move higher in US 10-year yields has come back to haunt the yen, with Bank of Japan still remaining committed to keeping its 10-year yields capped at 0.25%. USDJPY rose to fresh 24-year highs of 139.44 in early Asian trading hours, and heading straight to 140 unless we see some verbal intervention coming through from the Japanese officials today. Risk abound with US jobs data due on Friday, and dollar momentum remaining strong. EURUSD still above parity with ECB’s rate hike in focus for next week, beyond the vagaries of gas supplies. GBPUSD however made fresh 2022 lows at 1.1586 as economic weakness remains in focus.    What to consider?  Fed’s Mester calls for over 4% Fed funds rate Cleveland Fed President Loretta Mester backed rates to go above 4% early next year and holding it there, while also clearly calling for no rate cuts in 2023. On inflation, Mester noted it is too soon to say inflation has peaked and wage pressures show little sign of abating, while the fight against inflation will be a long one. This message should get stronger if jobs, and more importantly CPI, data continues to be strong. At the same time, we now have Quantitative Tightening going to its full pace and Mester said that balance sheet reduction could take three years or so. New US ADP jobs data disappointed, but wage data remain upbeat While it is hard to trust estimates on the US ADP report given that it is using a new methodology and market impact/trust is only likely to build over time, it was notable that the headline came in at less than the half of the median estimate. Employment change for August was 132k vs expectations of 300k – clearly putting Friday’s NFP release in focus. ADP said that the data suggests a shift toward a more conservative pace of hiring. ADP noted that the median change in annual pay (ADP matched person sample) was +7.6% YoY for Job-Stayers, and +16.1% YoY for Job-Changers, still suggesting a pretty tight labor market.    Eurozone August CPI continues to climb According to the preliminary estimate, it was out at 9.1% year-over-year versus prior 8.9% and expected 9.0%. Core CPI, which is highly watched by the European Central Bank (ECB), is still uncomfortably high at 4.3% year-over-year. This is likely that double-digit inflation in the eurozone will become a reality by year-end. The Bundesbank has already warned that German inflation could peak around 10% year-over-year in the coming months. Expect a lively debate among the ECB Governing Council about the pace of tightening on 8 September. Several governors are leaning towards an aggressive hike (meaning 75 basis points) while a minority of governors and the ECB chief economist Philip Lane would rather prefer a step-by-step increase in order to take into consideration the risk of recession. US stocks wipe out half of the July rally, what is behind this and what’s next? The S&P500 fell 4.2% in August, erasing half of July’s rally, with investors selling down companies that face balance sheet tightening from runaway inflation and higher for longer interest rates. Meanwhile, in August, investors bought into sectors contributing to inflation (The Oil & Gas sector rose 9%, Agricultural 6%, Fertilizers 5%, and Food Retailers 3%). Meanwhile, investors topped up exposure to stocks/sectors that benefit from higher rates, which is why Insurance rose 3%. Inversely, the most selling was in sectors that will likely suffer from slower growth, higher rates, and inflation (Home Furniture fell 14% in August, Semiconductors lost 10%, Office REITs slid 10%). Notably, the S&P500 closed under its 200-day moving average for the 100th day. The last time this occurred was in the GFC. And since then, this is also the only time the S&P500 and Nasdaq have not made a typical V-shape recovery. This is something Saxo’s strategists Peter Garnry and Jessica Amir warned of, and recently highlighted in the Quarterly Outlook. As uncertainty remains, and comments from Fed and ECB speakers are increasingly bearish; we think growth sectors (tech, consumer spending, and REITs) will face further pressure given their futures earnings will dimmish. Inversely we expect commodities to continue to outperform.     China’s official manufacturing PMI edged up but remained in contractionary territory  China’s official NBS manufacturing PMI edged up to 49.4 in August from 49.0 in July, above expectations but remaining in contractionary territory. The improvement was largely driven by the rise of the new orders sub-index to 49.8 in August from 48.5 in July and helped by strong activities in the food and beverage industries ahead of the mid-autumn festival.  Covid-related disruptions and energy rationing were negative factors pressuring manufacturing activities.  Heatwaves and drought-induced power curbs have caused Sichuan and Chongqing to shut-down manufacturing activities for six days and eight days in August respectively. The stepping up of pandemic controls in quite a number of cities affected the survey negatively. The non-manufacturing PMI decelerated to 52.6 in August from 53.8 in July.  Both the services sector and the construction sector weakened.     Caixin China Manufacturing PMI is expected to fall to 50.0 The median forecasts of economists surveyed by Bloomberg expect the Caixin manufacturing PMI to slide to 50.0 in August from 50.4 in July, right at the threshold between expansion and contraction.  The official NBS Manufacturing PMI released yesterday showed that improvements were found in large and medium-sized enterprises but the activities in small businesses decelerated t a 47.6 reading in August from 47.9 in July.  Moreover, during the survey month, a Covid-19 outbreak hit Yiwu, an export-focussed manufacturing hub in Zhejiang, and might drag on the Caixin manufacturing PMI, which has a higher weight for medium and small-sized businesses in the eastern coastal region.   Australian manufacturing data falls, pressured by higher rates, wages, and scarcity of staff  Manufacturing only contributes 30% to GDP, however, two key sets of weaker manufacturing data will be reflected on by professional investors today. Manufacturing data released by AI Group showed activity fell into contractionary territory, following six months of expansion. The drop in Australian PMI to 49.3 in August was triggered by slower growth in factory activity from higher interest rates and wages, and a lack of workers. The other set of manufacturing data released from S&P Global showed manufacturing fell to a reading of 53.8 in August, down from 55.7 in July. Significantly, the reading was revised lower from the flash (preview reading) and was the lowest read in a year. As such, investors may see selling pressures in key manufacturing stocks. ASX manufacturers and producers to watch include; Woodside, Caltex, Woodside, Whitehaven and Viva Energy, in energy, which may also see profit-taking after gaining a post as some of this year’s best ASX performers. Other companies to watch include Amcor, the global packaging giant. CSL, the global vaccine, and blood therapy business. As well as BHP, Rio Tinto, and Fortescue, global mining producers.  US ISM manufacturing data due today Lower prices at the pump has seemingly helped the US economy reverse from the slowdown concerns, with Chairman Powell also getting the confidence to say that the economic momentum is strong. ISM manufacturing, which is scheduled to be reported on Thursday, may reflect the weakness seen in the S&P survey, but will still be lifted by the backlog in auto vehicle production. Consensus estimates expect ISM manufacturing to cool slightly from July’s 52.8 and come in at 51.9 in August, still remaining in expansionary territory. ISM employment will also be key to watch ahead of the NFP data due on Friday.  Singapore’s first digital bank launch Grab and Singtel have entered an alliance to roll out a banking app next week in Singapore called GXS, that will be Singapore's first digital bank. This is mostly targeted to younger users and small businesses, tapping on Grab's food and ride-hailing customers, in order to improve the penetration of financial services in Singapore. A savings account is also in the offering, with no minimum balance requirement, in direct competition to the traditional banks.   For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets, what to consider – September 1, 2022