nvidia

Summary:  Nvidia has see a dramatic reduction in demand for its GPUs related to its gaming segment. While there might be some weakening of demand in gaming the real driver is most likely Bitcoin mining which has seen a plunge in profitability forcing many Bitcoin miners to end operations and flood the market with used GPUs causing prices to tumble. The lower GPU prices are forcing Nvidia to write down its inventory by $1.3bn. Shares opened 8% lower but have recovered half the losses as the company says the long-term gross margin profile is intact. What happened to the gross margin? A little more than two months ago Nvidia announced FY23 Q1 results showing record revenue, but today the graphics card maker is pre-announcing Q2 results cutting its gross margin (GAAP) guidance for the Q2 quarter (ending 31 July) from 65.1% to 43.7% and expected revenue of $6.7bn compared to previously announced $8.1bn. The shortfall in revenue is driven by its gaming segment which Nvidia is saying is impacted by the macroeconomic backdrop. The fall in demand in its gaming segment has also meant that Nvidia has too much inventory and has been forced to adjust prices. The company is therefore booking a $1.3bn inventory write-down. It is a well-known fact that Nvidia’s GPUs are heavily used in Bitcoin mining despite the graphics card maker has never officially linked its business to the industry. Because Nvidia does not know precisely the end use case of their GPUs, revenue related to Bitcoin mining likely ends up in both its datacenter and gaming segments. The falling demand for Nvidia’s GPUs has nothing to do with the gaming industry but instead the profitability of the Bitcoin mining industry. As the chart below shows, the profitability of Bitcoin mining has shrunk from being massively profitable in late 2021 to almost loss-making today. This naturally drives lower demand for additional GPUs used in Bitcoin mining and it also forces miners out of business which subsequently floods the market with old GPUs. This increase in available GPUs through secondary sales has caused GPU prices to fall dramatically as revealed by Gizmodo back in June. Nvidia says long-term outlook is unchanged The last time Nvidia saw a dramatic decline in its share price was back in late 2018 as Bitcoin mining profitability went negative following Bitcoin’s massive speculative rally in late 2017 drumming up demand for GPUs for mining. This time is no different. Long-term Nvidia is riding many of the most important technology vectors, but a key risk of course is the growing tensions between the US and China which could alter its supply chains and market opportunity. Nvidia has 102 partners in China which is roughly 12% of its total number of partners. Despite the significant guidance being cut investors are bidding up shares after being down 8% on the open. Nvidia shares have corrected half of the initial decline down only 4%. The reason is likely that the company states that it believes that its long-term gross margin profile is intact. Nvidia weekly share price | Source: Saxo Group Bitcoin mining profitability | Source: https://en.macromicro.me/charts/29435/bitcoin-production-total-cost Source: Nvidia shares down 4 on guidance cut | Saxo Group (home.saxo)

Summary:  Revenues misses and weaker-than-expected guidance from Nvidia and others dragged technology names and stirred some concerns about potentially more downward earnings revision from other companies. Moderation of U.S. consumers’ inflation expectations helped provide a bid for long-end treasuries and brought the yield curve further inverted. What is happening in markets?    Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities pared a 1% rally in the morning and finished moderately lower, S&P 500 -0.12%, Nasdaq 100 -0.37%.  Tech giant Nvidia (NVDA:xnas) reported preliminary Q2 revenues of US$6.7 billion, missing the expected US$8.1 billion by 17%. The company said demand for its video game processors being weak and the challenging market conditions will persist in Q3.  Share prices of Nvidia fell 6.3%. Palantir Technologies (PLTR:xnys) plunged 14% after reporting guidance expecting slower growth.  The news sparked some concerns among investors’ about more earnings downgrades for the technology sectors. U.S. 2-10 yield curve getting more inverted U.S. treasuries started to rally during London hours, as German bunds and gilts gained, and traded well bids, especially the longer end of the curve, throughout the U.S. session. The long-end was help by moderation of U.S. consumers’ expectations of incoming inflation. In the New York Federal Reserve Banks’s consumer survey, U.S. consumer expectations for inflation over the coming 1 year fell to 6.2% in July  (vs 6.8% in June) and expectations for inflation over the coming 3 years fell to 3.2% in July (vs 3.6% in June), the lowest since April 2021.  In the survey, consumers’ 5-year inflation expectations came down to 2.3% in July (vs 2.8% in June). The 10-year yield declined 7bps to 2.76%.  As the 2-yield was down only 2bps to 3.21%, the 2-10 year yield spread further inverted to -45bps, approaching its -56bps low in 2000.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Stocks traded in Hong Kong and mainland bourses finished Monday moderately lower, Hang Seng Index -0.77%, CSI300 -0.2%.  Chinese internet, online education and Chinese property stocks traded in Hong Kong were mostly down.  Hang Seng Tech Index (HSTECH.I) lost 1.8%, Alibaba (09988:xhkg) -4.4%, Tencent (00700:xhkg) -2.7%, Xiaomi (0181:xhkg) -3.6%, JD.COM (09618:xhkg) -3.3%. After the market close, a report from Bloomberg saying that India, the largest overseas market of Xiaomi, is going to restrict the company from selling smartphones cheaper than 12,000 rupees (USD150).  Cathay Pacific (00293:xhkg) gained 1.4% following Hong Kong’s announcement of cutting inbound travelers’ hotel quarantine to 3 days from 7 days.  In the mainland, the lockdown of Hainan, a southern resort island, triggered some buying of traditional Chinese medicine and Covid-treatment related names.  Australian dollar rallied against the U.S. dollar DXY (DXU2) finished Monday trading 0.2% lower.  Among the G10 currencies, the Australian dollar was the top performer and rallied 1.1% versus the greenback.  Euro and JPY were little changed against the U.S. dollar. Crude oil prices (CLU2 & LCOV2) WTI Crude gained 1.6% to USD90.45, being helped by stronger Chinese import figures. What to consider? Nvidia preannounced weaker-than-expected revenues Nvidia pre-announced preliminary Q2 revenues coming at USD6.7 billion (-19% QoQ, +3% YoY), 17% below the company's prior guidance and below market expectations.  Weaknesses in the processors for the gaming industry, and to lesser extents, the data center and professional visualization industries dragged down revenues.   Softbank's Vision Funds suffered large losses Softbank reported a net loss of 3.16 trillion yen and its Vision Funds business segment reported pretax losses of JPY2.33 trillion. The pre-exit unrealized losses in the Vision Funds 1 & 2 were USD10.9  billion for listed stocks and USD8.9 billion for unlisted stocks.  The company announced smaller additional share buyback authorization of 400 billion yen and said that the company may not use all of it in the coming 12 months. 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 9, 2022 | Saxo Group (home.saxo)

Nvidia shares dived 6.30% yesterday on news that the company missed its revenue projection by $1.4 billion due to slower demand for PCs and gaming. Nvidia pulled other US chipmakers into the negative along with it, and brought the question of whether the chip rally, which was triggered by a $52 billion government help is over. US Dollar Index Amid NFP The dollar index gave back gains following the blowout NFP figures printed on Friday. Investors are confident that inflation in the US may have peaked last month, as the New York Fed's Survey of Consumer Expectations showed steep drops in inflation expectations in July. Forex - EUR/USD and more In the FX, the EURUSD is steady around the 1.02 level, waiting for the dollar to soften on ‘good news’ to make a further attempt toward the 1.0350 mark, where stands the 50-DMA. Given that the European Central Bank (ECB) played its biggest cards at last meeting, there is not much upside potential from the ECB standpoint. On the dollar-yen front, traders now call the end of a particularly winning long USDJPY trade this year. View on Flipboard!   Watch the full episode to find out more! 0:00 Intro 0:23 Nvidia plunges on slowing earnings 1:44 The revenge of energy stocks 3:10 Crude oil: where to? 4:59 Meme stocks rally, but gains are fragile 6:06 US inflation expectations ease before CPI print 7:52 FX update: EURUSD steady, USDJPY under pressure For economists, inflation expectations are more important than the actual data. Find out why! ▶️ Discover today's market highlights on our #MarketTalk with @IpekOzkardeskay: https://t.co/XnXQYVPS3H pic.twitter.com/v4SJEssR8z — Swissquote (@Swissquote) August 9, 2022 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. #Nvidia #earnings #drop #chip #energy #meme #stocks #BBBY #AMC #XOM #Chevron #crude #oil #US #inflation #expectations #EUR #USD #JPY #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:  The U.S. Department of Treasury has blacklisted the largest mixer on Ethereum used in hiding blockchain traces. On to companies, Coinbase and BlackRock have announced a partnership in trading and custody of Bitcoin, while Nvidia feels the heat of the upcoming Ethereum merge. U.S. Sanctioned Tornado Cash Yesterday, the U.S. Department of Treasury blacklisted every smart contract and address connected to Ethereum-based mixer Tornado Cash for its use in money laundering. The latter is a popular decentralized protocol used to hide the blockchain trace of Ether and Ethereum-based tokens. It has allegedly been used by North Korean state-backed hacking group Lazarus Group in a $615mn hack earlier this year, however, the protocol is also used by ordinary people wanting to interact on Ethereum with a higher degree of privacy. Elliptic, a blockchain analytics company, has estimated that over $1.5bn has been laundered through Tornado Cash out of a total amount of $7bn. The blacklisting bans American citizens alongside American entities such as exchanges from engaging with clients depositing funds from Tornado Cash. Since the protocol is fully decentralized, governments cannot disable the protocol itself. However, since many crypto users and exchanges are based in the US, the blacklisting might be enough to remove sufficient liquidity from the protocol for it to work properly. This was somewhat the case some hours after the announcement yesterday, as the issuer behind the second-largest stablecoin Circle froze every USDC in Tornado Cash’s smart contracts, meaning users are not able to transfer them out of Tornado Cash anymore. Coinbase and BlackRock announce partnership Coinbase announced a partnership with the world’s largest asset manager BlackRock last week. The partnership enables institutional clients of BlackRock to access Bitcoin brokerage and custody facilitated by Coinbase but handled through their existing portfolio management. Even though we are in a bear market it does genuinely not seem that institutions are shy to interact with crypto, as also both Morgan Stanley and Citigroup have announced positions concerning crypto in the past week to strengthen their internal crypto resources. On another note, Coinbase is set to announce its Q2 earnings later today. Nvidia stock drops. Ethereum got involved As Ethereum miners generated a record-high revenue of $16.5bn in 2021 by validating blocks on the network, there was an equal demand for GPUs utilized in mining operations. Nvidia has for years been the main supplier of GPUs to Ethereum miners. Although Nvidia does not directly state its revenue from providing GPUs to mainly Ethereum miners, it is anticipated that the company generates an appreciable part of its revenue from miners. However, that may soon come to an end, since the Ethereum merge is expected to happen sometime next month, completely taking miners off the equation. Since miners have known this for some time, it seems few acquire new equipment, as it will be challenging to break even in such a short period. It seems Nvidia felt this in its second quarter (ended 31st July). The company cut its expected revenue to $6.7bn from $8.1bn yesterday while simultaneously writing down its inventory by $1.3bn, mainly since the secondary market of GPUs has been flooded by cheap GPUs. If the merge occurs successfully in September, then the market of GPUs used in Ethereum mining will by default never exist again. Bitcoin/USD - Source: Saxo Group Ethereum/USD - Source: Saxo Group Souce: https://www.home.saxo/content/articles/cryptocurrencies/crypto-weekly-09082022

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

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  

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  

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

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

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

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:  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:  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

The trading week kicks off on mixed sentiment. Last week marked the end of a four-week rally in the US stocks, and the new week starts with unpleasant new that drought in China’s Sichuan region will cause ‘severe’ power cuts. The S&P500 will kick off the week after having slid 1.20% last week, Nasdaq will be testing the bull’s nerves after having lost more than 2.5% over the course of last week. All eyes will be on the Federal Reserve’s (Fed) Jackson Hole meeting. This year, Jackson Hole may have a bigger-than-usual impact on investor sentiment, as investors don’t really know where the market is going, as the market doesn’t really know where the Fed is going. In the FX, the US dollar consolidates strength as euro traders keep a close eye on the flash PMI figures today to see the impact of the latest spike in energy prices on economic activity. On Friday, the German PPI data came as a shocker, with more than a 5% rise in factory-gate prices only during July, due to a nearly 15% rise in energy prices, ONLY IN JULY. Elsewhere, the strong dollar continues pressuring gold to the downside. The price of an ounce retreated to $1743 this morning, as Bitcoin struggles to hold ground above the $20K level. If we see the US stocks, especially tech stocks, give back gains this week, we could see Bitcoin vanish below the $20K mark. Zoom Video, Nvidia, Salesforce, Dollar Tree and Peloton Interactive   On corporate side, Zoom Video, Nvidia, Salesforce, Dollar Tree and Peloton Interactive will reveal earnings this week, and Tesla’s 3-for-1 stock split will become effective from Aug 24th. Watch the full episode to find out more! 0:00 Intro 0:25 Market update 2:33 All eyes on Jackson Hole 6:23 EURUSD eyes parity 7:31 Gold, Bitcoin under pressure 8:22 Nvidia to reveal earnings, Tesla to split in 3 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. #Jackson #Hole #Fed #monetary #policy #inflation #USD #EUR #China #drought #PBoC #rate #cut #Nvidia #Zoom #SalesForce #DollarTree #Peloton #earnings #Tesla #stocksplit #gold #XAU #Bitcoin #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: Nvidia stock price falling. Thursday's premarket trade saw a more than 5% decline in Nvidia stock. Nvidia (NVDA) SEC filing In a filing with the Securities and Exchange commission on Wednesday, chip giant Nvidia (NVDA) informed investors that the U.S. government has imposed additional licensing requirements on several of its sophisticated products. Unless Nvidia obtains a license to sell quickly, this will have an impact on sales to Russia and China. Part of the submission stated that according to the government, "the new licensing requirement will address the possibility that the covered products may be utilized in, or diverted to, a 'military end use' or 'military end user' in China and Russia." Although Nvidia noted that it doesn't conduct business with Russia, $400 million in third-quarter sales to China may be at risk. Currently, $5.9 billion in third-quarter sales are anticipated for the corporation by Wall Street. In a new SEC filing on Thursday, Nvidia stated that the government had approved some chip development as well as chip sales through Hong Kong till September 2023. Investors will continue to have reservations about Chinese chip sales for the overall sector in the upcoming months. Thursday's premarket trade saw a more than 5% decline in Nvidia stock. Since the recent SEC filing, shares have somewhat recovered their losses. The price of Tesla (TSLA) stock fell 1% in premarket trades as well. Nvidia hardware was used by some older Tesla models, although Tesla seems to have stopped using Nvidia as a chip hardware supplier recently. After being contacted for comment regarding any Nvidia goods used, Tesla didn't react right away. NVDA Price Chart Sources: finance.yahoo.com, barrons.com

Summary: Nvidia's stock price last week reached new 52-week lows. Nvidia foreshadowed a significant revenue shortfall. NVIDIA price chart Nvidia's stock price last week reached new 52-week lows after falling more than 60% from its highs. Watch this important support area right away. The pioneer of revolutionary graphics chips, Nvidia (NVDA), has had a difficult year. The stock hit fresh 52-week lows on Friday and is now 64% below its November 52-week high. It has not been a terrific stretch for the stock, to put it frankly. The Santa Clara, California, corporation is not the only one, to be sure.   Nvidia foreshadowed a significant revenue shortfall, then followed that with a sluggish quarter and dismal guidance. This week, Nvidia will host its GTC event, which could serve as a trigger. However, it is facing strong fundamental and technological momentum. Despite all of this, Nvidia has a great future and its stock has been severely undervalued. I want to look at the stock again for that reason. The harsh correction of Nvidia's shares, which saw a drop of more than 63%, is depicted on the weekly chart up top. On Friday, the shares recovered after touching the 200-week moving average. For almost a month, we have been keeping an eye out for this mark's tag. After all, the trend has been on your side if you are short Nvidia. However, many of these shorts also believe that Nvidia's 200-week moving average may serve as significant support and that the company has a limited downside. The Nvidia stock has experienced significant reductions throughout the years. The stock has had three significant drops of more than 50% in the past 12 years, but—and this is a big but—never more than 57.5%. The bottom line: Over the past twelve years, Nvidia stock has experienced maximum drops of 54% to 57.5%. A recent drop of 63.5% from its highs and entry into a significant support region could serve as a bounce area. An accumulation approach might not be the worst choice for long-term investors. NVDA Price Chart Sources: finance.yahoo.com, thestreet.com

As we slowly approach the end of the results season, we found ourselves with elections for the Senate and House of Representatives in the United States, after which we would find out whether Joe Biden's party would retain its majority in those chambers. In addition, we encountered a slump in the cryptocurrency market caused by the problems of the FTX exchange. Macroeconomic data This week it seems that we were able to relax relatively after last week's FOMC decision to raise interest rates in the United States and the announced use of all means by the Fed to choke off inflation. On Wednesday, we learned of the change in U.S. crude oil inventories, which rose by 3.25 million barrels (1.36 million barrels were expected) compared to the last period, in which they declined by 3.115 million barrels. We learned the results of the CPI inflation rate, which amounted to 7.7% y/y. (forecast 8 percent y/y). It seems that inflation surprises for another month in a row, falling, which could be perceived as a positive signal for the markets. Elections for the Senate and House of Representatives in the United States were held on Tuesday. The vote counting is still underway, but Republicans are in the lead in both chambers. Stock market On Monday, we were able to learn the results of gaming giants Activision Blizzard (Blizzard) and Take-Two (TakeTwo), among others. The former surprised positively, reporting earnings per share EPS of 0.68 (forecast 0.51). The second posted a loss per share EPS of -1.54 (forecast 1.38), in addition to reporting lower revenue than expected. Source: MT5, Blizzard, Daily On Tuesday, we learned the results of media giant Walt Disney (Disney), which reported a decline in earnings per share EPS to 0.3 (forecast 0.59). It seems that the entertainment industry is not doing well, which could support the thesis of the current economic slowdown. Today we were also able to learn how the medical industry has performed recently. Among other things, we learned about reports from the maker of medications and vaccines AstraZeneca (AstraZeneca), which showed earnings per share more than doubled relative to expectations. Medical instrument and machine manufacturer Becton Dickinson (BDickinson) showed earnings per share of 1.99, in line with expectations, on increased revenues. Elon Musk appears to be having problems with his workforce after taking over Twitter. After massive layoffs at the company, we could learn from the media about mistakes in this aspect and the dismissal of valuable employees, whom the billionaire seems to be trying to recruit back. Currency and cryptocurrency market After the publication of inflation from the US, the EUR/USD exchange rate broke out above parity and reached around 1.016 at its peak. It seems that the market needs to update its valuation when it comes to the announced US interest rate hikes, which may put pressure on the USD. Source: MT5, EURUSD, Daily Blood has been shed in the cryptocurrency market. After the largest crypto exchange Binance announced the sale of the FTT token (FTTUSD.p) belonging to the third largest FTX exchange, the price of the cryptocurrency fell from $26 to $2.7 (89 percent). This situation revealed the problems behind this exchange. This seems to have led to a massive outflow of capital from the virtual money market, as we could see from the largest of them. Bitcoin fell by more than 20 percent during this period, and the price of the second largest cryptocurrency ETH fell by about 28 percent. Source: MT5, FTTUSD.p, Daily What's in store for us next week? On Monday we would learn the GDP reading in the Cherry Blossom country. The current quarter-on-quarter forecast is for growth of 0.3 percent (previously 0.9 percent). China's reported year-on-year change in industrial production may seem key. The forecast, according to analysts, is for an increase of 5.2 percent (previously 6.3 percent). On Tuesday, we'll learn the results of Germany's ZEW economic sentiment index, which recently reached -59.2 points, where values below zero signify deteriorating economic conditions. On Thursday, we would find out how much inflation in the Eurozone was (forecast at 10.7 percent). Among the key Q3 earnings reports it seems we could count Monday's results from the largest retailer in the United States, Walmart (Walmart). On Tuesday, graphics card giant Nvidia (Nvidia) would present its report, along with one of the largest digital communications technology conglomerates Cisco (Cisco).Grzegorz Dróżdż, Junior Market Analyst 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. 75,21% 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. Read the article on Conotoxia.com

On Wednesday, we were able to learn about the Q3 financial report of the software giant Nvidia Corp. (Nvidia), a technology company that develops software and processors, among other things. Although the recent environment seemed unfavourable, the financial results may have positively surprised analysts. Is Nvidia's performance dependent on cryptocurrencies? Along with Intel and AMD, Nvidia is one of the top three suppliers of processors and graphics cards. It seems that one of its revenue drivers is the sale of chips, used especially in graphics cards. It could be thought that, due to their computing power, they were mainly bought by cryptocurrency 'miners' in recent years. Following recent problems and the bankruptcy of one of the largest cryptocurrency exchanges, bitcoin (BTC/USD) has seen a decline of more than 76% since its peaks. Read next: Many sued in FTX scandal, Elon Musk to reduce his time at Twitter, EU stocks edged higher on Thursday| FXMAG.COM However, Nvidia states: "We believe the recent transition in verifying Ethereum cryptocurrency transactions from proof-of-work to proof-of-stake has reduced the utility of GPUs for cryptocurrency mining." This category, according to the report, makes up around 1.2% of revenue, illustrating how small this segment is for the company. Source: Conotoxia MT5, BTCUSD, Weekly The company's Q3 revenue was US$5.93 billion (US$5.77 billion was expected), down y-o-y. by 22%. Cloud computing power sales service accounted for as much as 65% of the company's revenue and sales. This increased by 29% year-on-year. In second place was revenue from the gaming sector, accounting for 26% of revenue, but recording a decline of 51%, which appears to be the aftermath of the pandemic. With this data, we could say that Nvidia's performance does not appear to be linked to risks in the cryptocurrency market. An additional argument in favour of the independence of these assets is their correlation, which stands at 0.55 since the beginning of the year, which may indicate their low level of dependence. Earnings per share EPS for the period came in at US$0.58, below analysts' expectations (US$0.69 was expected). The company's gross margin was also negative, falling to 53.6% (previously 65.2%), which the company attributed to increased chip inventory due to falling demand in China. Maribel Lopez, principal analyst at Lopez Maribel comments: “...there is a long tail of AI workloads which will create a return to growth, but it may take several quarters ”. “The issue for Nvidia is the short term, the next several quarters will be rough. Investors will have to take a longer view, similar to what’s required with Intel." - Lopez said. What does Wall Street think of Nvidia shares? Source: Conotoxia MT5, NVDIA, Daily According to Market Screener, the company has 40 recommendations, with 'buy' opinions prevailing. The average target price is set at USD 200.93, 26% higher than the last closing price. The lowest target price is at USD 320 and the highest is USD 110. Author: Grzegorz Dróżdż, a Market Analyst 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. 75,21% 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. Read the article on Conotoxia.com

Consumer appetite for electronics has waned against a backdrop of rising interest rates, falling stock markets, and recession fears. Problems Nvidia and other chipmakers have been hit hard by increasing pressure on consumer spending, including high inflation and rising interest rates, which has triggered a wave of industry-wide cost cuts and layoffs. They are also struggling with the reversal of the surge in demand for electronics caused by the pandemic, which has driven the shift to working and learning from home. In recent months. HP Inc. and Dell Technologies Inc., two of the biggest PC makers, say their products, which disappeared from shelves at the start of the pandemic, are now on the shelf longer. Rival Advanced Micro Devices Inc., which also makes central processing units that go into personal computers, warned of elevated stock levels. Nvidia situation Graphics chip maker Nvidia Corp. issued a muted forecast in November and reported a sharp decline in quarterly sales, driven by weakening consumer demand for its video game chips after a pandemic-fueled boom and the onset of crypto winter. America's largest chip company by value said revenue fell 17% to $5.93 billion after gaming segment sales more than halved in the fiscal third quarter. Net profit was $680 million. Smartphone sales are also declining It's not just PC shipments poised for their biggest drop in more than two decades that chipmakers are destroying the fortune of. Smartphone sales are also declining. Micron said it lowered its forecast for phone shipments this year from a forecast just three months earlier. Qualcomm Inc., which supplies the chips that go into Samsung Electronics Co.'s flagship smartphones. and Apple Inc., has repeatedly lowered its sales forecasts this year. The company in November said it expected a persistently weak phone market and elevated chip inventories. Negative effects on employees Computer memory manufacturer Micron Technology Inc. is cutting jobs and expenses in response to a further weakening in demand for electronics and the chips it supplies, as it reported a sharp drop in sales and a net loss in the last quarter. Two sides What happens in chips is good news for consumers, who can get their hands on products from washing machines to laptops faster and sometimes cheaper than a year ago. For chipmakers, the change has sparked a wave of layoffs and capital spending cuts as companies try to restore profitability levels that have eroded in recent months. Some chipmakers see stockpiling as an opportunity. While developers of the processors that are at the heart of the personal computer must deliver their product before a new, more powerful version is introduced, others create chips that will essentially remain the same for years. Read next: GBP/USD Is Struggling, The Aussie Pair Have Good Day And Is Trading Above 0.67$, The EUR/USD Is Trading Above 1.0650| FXMAG.COM Expectations Chip executives said they expect a gradual recovery next year, although there is still uncertainty as to when an industry known for its sharp ups and downs cycles will be ready for another recovery. Despite the short-term glut, chip directors are bracing for a long-term surge in demand for chips that will require them to build more factories. Industry executives expect chip sales to double by 2030, exceeding $1 trillion globally. Micron Micron's revenue fell 47% year-on-year in its fiscal first quarter, which ended December 1. Bit shipments fell by double-digit percentages from the previous quarter across Micron's entire product lineup, and average selling prices fell more than 20%. Micron is aggressively cutting costs and capital spending to deal with this crisis. Total capital expenditures for fiscal year 2023 are expected to be a maximum of $7.5 billion, and the company expects capital expenditures for wafer equipment to decline by approximately 50% year-on-year. The Share Price is practically the lowest of the year, and the current month is one of the weakest of the year. The price is currently just over $50. Source: wsj.com, finance.yahoo.com

Companies shown in the chart (TSLA, NVDA, AMZN, GOOG and more) have increased significantly more than SPX itself YTD. Taking it into consideration, why the gain of SPX amounts to subtle 5%? Naturally, SPX is about 500 companies from various branches, but isn't it certainly about the banking sector weakening the index? What companies have underperformed recently weighing on the index performance? Let's hear from Chris Beauchamp, Chief Market Analyst at IG Group. Source: TradingView Chris Beauchamp, Chief Market Analyst at IG Group: The past week has seen an impressive rebound for indices, but it is the resurgence of tech stocks that has caught the eye. They led the charge lower in 2022, as rates rose and risk appetite evaporated, but with the banking sector in turmoil tech has once again become a remarkable safe haven. Chris Beauchamp, Chief Market Analyst at IG Group: But for every strong performer there is usually an underperformer, and the banks are the culprits here. While no other bank has yet gone to the wall, there are still fears that others could follow SVB and Silvergate, which has meant that the Nasdaq continues to have the edge over its broader S&P 500 cousin. Other stocks linked to consumers have been something of a drag too, with Alphabet being a notable weakness over the past five days. There are still fears that others could follow SVB and Silvergate Chris Beauchamp, Chief Market Analyst at IG Group: Overall the rises appear to take place mostly in the cash session itself, but with indices around the globe still moving higher it seems that traders can find opportunities throughout the day if they wish to enter into positions to take advantage of this upward move, providing scope for the All Sessions markets that IG offers on certain US stocks. Read next: Earnings season is near. US financials go first and they're more important than ever| FXMAG.COM

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

Nvidia Q1 24 – 24/05 – having hit two-year lows back in October last year, Nvidia shares gone an absolute tear since then, pushing above their highs from 2022 in the process, as it looks to return to the record highs seen in November 2021. Nvidia, along with Meta Platforms has helped to drive a lot of the gains seen in both the Nasdaq 100 and S&P500 so far year to date with the shares up over 100%. The sharp rebound appears to be being driven by demand for higher specification AI chips, where Nvidia is a key supplier. At the end of last year Q4 revenues came in line with expectations at $6.05bn, while profits saw a beat at $0.88c a share. On guidance, the company was more bullish contrasting with the pessimism that characterised its Q3 downgrades, projecting Q1 revenue of $6.5bn +/- 2%. With the increasing popularity of AI, the company appears to be banking on the push towards AI to drive its revenue growth given the slowdowns in other areas of its business, like gaming. Profits are forecast to come in at $0.92c a share. Snowflake Q1 24 – 24/05 – another company that benefitted from the pandemic lockdowns as more businesses moved into the cloud. The recent numbers from Amazon, Microsoft and Alphabet have shown that their cloud business has continued to grow, and as a relative minnow in this space there is no reason why Snowflake can't do something similar. The shares haven't moved much since February when the company posted strong Q4 numbers and solid guidance. In Q4 revenues rose 54% to $555.3m, while projecting that revenues for 2024 would rise by 40% to $2.7bn. Snowflake management went on to project Q1 revenues of between $568m to $573m, though consensus has seen this rise to $609.5m and profits of $0.05c a share.   Read next: Earnings season: this week Kingfisher and Mark & Spencer report their results| FXMAG.COM Williams-Sonoma Q1 24 – 25/05 – this high-end retailer has seen its shares struggle over the past few months, the shares have sunk towards the November lows of last year, despite retail sales in the US remaining relatively robust. In Q4 revenues came in at $2.45bn, which was 5% below consensus with all areas of the business missing forecasts. The mood didn't appear to be helped by weak Q1 guidance, even allowing for the fact that Q1 tends to be a weak quarter for the owner of Pottery Barn. Q1 revenues are projected to decline from last year to $1.79bn, although e-commerce is expected to do well, and generate a good proportion of that number. Given the low-ball expectations here there is scope for an upside surprise, with profits also expected to be lower at $2.38c a share. 

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

The technology industry is currently going through a challenging period. The financial results of companies in this sector are noticeably worse than they were a year ago. However, NVIDIA seems to be relatively resilient to market turbulence. The company has released its financial results for the first quarter of fiscal year 2024.   Although the overall results are worse than they were 12 months ago, there is a visible quarterly growth. The question remains whether this trend will continue in the near future. The first quarter of fiscal year 2024 ended on April 30th.   According to the published data, NVIDIA recorded revenues of $7.19 billion during this period. This represents a 13% decrease compared to the same period last year and a 19% increase compared to the previous quarter. At the same time, the company achieved a GAAP net income of $2.04 billion. For the Non-GAAP comparison, it amounted to $2.71 billion.   These figures are interesting when compared to previous financial results. In the case of GAAP, there was a 26% increase in profit compared to the same period last year, while for Non-GAAP, it decreased by 21%. Both cases showed growth compared to the previous quarter, with increases of 44% and 25% respectively. We would like to hear the commentary on this matter from HFM Market Analyst, Marco Turatti.     Could you please comment on Nvidia earnings after they're released? Nvidia presented extraordinary results for Q1 2023, which far exceeded analysts' expectations on Wall Street, as well as a very strong outlook, and soared +25% in after-hours trading on the wings of its dominant position in GPU chips for AI. It added $220 billion in market cap in 1 hour, becoming the sixth largest company in the US500 and surpassing the value of all its US competitors combined (AMD, Intel, Micron).   Adjusted EPS was $1.09 versus 92 cents expected; Revenues was $7.19 billion, versus $6.52 billion expected. Sales of $11B exceeded the $7.5B forecast by 50%, with $4.28B coming from the Data Center business. Performance was driven by demand for its GPU chips from cloud vendors as well as from companies developing big LLM models like OpenAI (and many others).   Nvidia chief Jensen Huang said that the development of AI applications puts Nvidia in a prime position for a 10 year cycle at least. But he also warned of the risks of huge damage that could ensue from the US tensions with China, a market that ''cannot be replaced'' and will grow four times (up to 178 B Yuan) over the next four years, including for projects related to smart cities and edge computing.   One has to look between the lines to find some blemishes in the earnings reported: the gaming division reported a 38% drop in revenue while the automotive division grew 114% yoy but remains small at $300 million. One of the ''biggest problems'' right now are the financial ratios: NVIDIA has a Price to Sales of 29.4x, the most expensive of any US stock in front of MSFT at 11.5x (US500 average is 2.4) and a Price to Earnings Ratios of 182, second only to AMZN and 10 times higher than the US500 average (24). With an expected opening on 26/05 at $380, NVDIA is at an all-time high and looks rather expensive despite its excellent prospects.           Marco Turatti – HFM Market Analyst  After working for about 10 years in institutional trading rooms across Europe, Marco entered the FX sector as an analyst leveraging his knowledge of the financial markets. With a degree in Economics, from 2007 onwards he has constantly -and sometimes obsessively- studied and improved his trading and risk management techniques through active and direct investments. He is a firm believer in the need to know completely the securities one is dealing with, to always have a plan B ready, to build a macro view from which to derive the micro plan of action and -above all- to be strict with the rules one has set oneself, without taking anything personally.

Investors finally believe the Fed Financial markets kicked off the week on a weak note, but not because of the Wagner's mini, failed, or fake coup over the weekend, but because of the diminishing rate cut bets for the Federal Reserve (Fed) for this year - and the beginning of next year.   Activity on Fed funds futures gives more than 75% chance for another 25bp hike in July, and there is expectation for one more rate hike after that. A set of soft data could do the magic of bad news is good news, and that investors could gently return to longer-term quality bonds, as despite what the Fed says, the end of tightening is certainly near. We saw a heavy slump in open interest in US government bonds as a result of waning dovish bets, but we also see the US 2-year yield slump below a two-month rising trend this morning, as the 10-year yield remains paralyzed a touch below the 3.75% level. The dollar index hardly challenges the 50-100-DMA area, and the stock markets are down, with the S&P500 steadily giving back gains, while MAMAA stocks are seen most vulnerable to a further downside correction due to the recent AI-led rally. Nvidia for example lost almost 4% yesterday, while Tesla fell more than 6%. Small caps, on the other hand, were better bid this Monday, as a sign of a portfolio rebalancing effect before the quarter ends. In this respect, the Russell 2000 index saw support and traded above its 100-DMA despite a broad-basedselloff in big caps, and especially in Big Techs.      The softer US dollar maintains the EURUSD above the 50-DMA, near 1.0875. News from Germany were less than ideal yesterday. The German business climate and expectations deteriorated faster than expected in June, but the Spanish producer prices fell nearly 7% versus a steady deceleration of 4.5% expected by analysts. Slower inflation is the only way to soften the European Central Bank (ECB) rate hike expectations. The Italian PPI, due Wednesday, is expected to print a nearly 10% slump y-o-y in May, and more than 6% slump just in May.   Today, US durable goods orders and house prices will be under close watch while Canada will release the latest set of CPI data. Both headline and core inflation are expected to slow, as a result of continued policy efforts to bring price pressures lower. The dollar-CAD drifts lower, due to a hawkish Bank of Canada (BoC) stance and despite selling pressure in crude oil. The pair is now at the lowest levels since September and is preparing to test the 1.30 support shortly.   Speaking of oil, the barrel of US crude remains steady at around the $70pb level, bulls don't want to join in given the hawkish central bank stances and rising recession odds, while bears are not willing to push hard, as the geopolitical uncertainties maintain a high level of upside risks.   OPEC lately claimed that the global oil demand would rise to 110 mio barrels per day, with a 23% rise in overall energy demand expected by 2045. That goes perpendicularly against the IEA forecast of higher short-term demand but waning long term demand for oil because of energy transition to greener sources. You believe who you want to believe but the higher the traditional, dirty energy prices, the faster the transition will be.     By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  

Wall Street awaits Fed Chair Powell and counterparts at ECB forum Mortgage demand rises for a 3rd straight week 10-year Treasury yield down 1.9 bps to 3.745%   The artificial intelligence trade had a major setback after the Wall Street Journal reported that the Biden administration could unveil new restrictions on the exports of AI chips to China. Nvidia, a pivotal mega cap tech trade, gets about 20% of its revenue from China. In Asia, AI related stocks were under significant selling pressure.   Despite a potential headwind for the AI trade, the NASDAQ 100 will likely have a record first half. BlackRock, the world’s largest asset manager is also betting big on AI, coming out with a new overweight call. BlackRock sees a mild recession happening later this year but anticipates a mega force like AI could still help equities outperform, given a weakening macroenvironment.   We should get some volatility going into quarter close as so many traders are starting to become bullish stocks and as so many stocks are near critical option levels. The FOMO trade might be here, but the economy is clearly feeling the effects of the Fed’s tightening cycle and the consumer is weakening but has no trouble getting a job, so it will be interesting how the stock market’s back gets broken.    

Fed's got the greenlight for more hikes. US and European stocks were up on Wednesday. The US chipmakers dampened appetite across the Atlantic Ocean on news that the Biden Administration will bring more restrictions to the US chipmakers' exports toward China, but Nasdaq still eked out gains.     Unfortunately for Nvidia, its A800 chips which were launched as a response to last year's export ban could be included in the new set of restrictions. Nvidia stock fell yesterday, but not as bad as premarket trading suggested. Taking a closer look to Nvidia's revenue per region, revenue slowed by around $2bn in China amid the chip export ban last year, but the fall in Chinese revenue was compensated with a doubling revenue for the US. This means that, even though the Chinese growth potential is weakened, there is potential to grow business for Nvidia. For others, AMD was almost flat, and Micron was up following an upbeat forecast for the current period amid the easing chip glut.     Same, same  The major central bankers' speeches were the same background music. The Federal Reserve's (Fed) Powell, the Bank of England's (BoE) Bailey, and the European Central Bank's (ECB) Lagarde agreed that their fight against inflation wasn't done yet, and that more rate hikes are on the pipeline.   What was interesting however was that the Bank of Japan's (BoJ) Ueda didn't necessarily think that the Fed, the BoE and the ECB overtightened, while he, on his end, didn't move an inch to fight back inflation. What's even funnier is, Powell, Bailey and Lagarde acknowledged that their policy actions come with a lagging effect, but BoJ's Ueda joked saying that because Japan hasn't started hiking yet, the lag effect could be 'at least 25 years'. I don't know if it makes you laugh or cry, but it made the central bankers, and the yen shorts laugh.  The dollar yen is now at the highest levels since November last year, a touch below the 145 mark, and on its way toward higher waters. Yet, a rapid and extended period of yen depreciation remains concerning for Japanese officials and could end up with direct FX intervention to halt bleeding. That's one risk that the short yen positions carry right now, as the yield differential plays clearly in favour of further yen selling.   Elsewhere, sentiment in euro was weak yesterday on the back of a mixed set of data. The Italian PPI fell much slower than expected in May, but consumer price inflation eased more than expected. The ECB's money supply slowed, and loans to the private sector grew slower than expected as a sign of tighter credit due to higher rates. Germany will reveal its own inflation figures today, and we could see an uptick in German inflation according to a consensus of analyst expectations. It would be bad news for the ECB. So many hikes, and so many more promised by the ECB, and inflation is hanging around.   It is because the Fed, ECB and BoE's balance sheets remain the elephant in the room, and they are the reason why economies don't react efficiently to interest rate hikes, and inflation doesn't slow at the desired speed. Yes, the Fed, ECB and BoJ's combined balance sheet size has been shrinking since last year, but total assets remain indisputably HIGH - almost 50% higher than pre-pandemic levels. So, you bet, the higher rates don't do much harm to the economy, except for those who have to renew their mortgages.  For the ECB however, the fact that the cheap loans are drying out could achieve some faster results. But it could trigger a divergence between core and periphery, widen the spread between Germany and the periphery and the latter could slow down the euro's appreciation.     Fed's stress test gives the greenlight for more hikes  The US banks passed the Fed's stress test, giving a greenlight to the Fed for more rate hikes. The US banks gained in the afterhours trading, with Bank of America and Wells Fargo leading gains, but the new regulations regarding capital requirements will likely hold back investors from full heartedly going back to banks.     Crude jumps  Crude oil jumped off below the $67pb level on the back of an almost 10mio barrel decline in US crude inventories last week. There is now a triple bottom formation at around the $67pb level, and that could throw a floor under any short-term selloff in crude oil. But the $70pb resistance remains strong, and more offers are waiting into the 50-DMA, a touch below the $72pb level. The chances are that we will see some back and forth between $67 and $72 range, until one side gives in. 

After a difficult previous year marked by market volatility and economic difficulties, the US stock market has experienced a strong recovery since the start of the new year. This recovery was driven by several key factors: the resilience of the technology sector, growth in the semiconductor industry driven by the development of AI, the expected pause in Fed rate hikes and the assessment of future rate cuts in late 2023 amid lower inflation.    The technology sector, which includes leading companies in innovation and digital transformation, has played a critical role in the market's resurgence. Industry giants such as Apple, Amazon, Microsoft and Alphabet have achieved significant stock price gains as they continue to innovate and provide products and services that meet changing consumer demands. The development of artificial intelligence technology has been a major catalyst for growth in the technology sector.   The semiconductor sector has also been one of the growth drivers of the markets. Companies such as Nvidia and AMD are experiencing strong demand for their advanced chipsets, which are vital for AI applications. The widespread adoption of AI technology across sectors has made semiconductor companies key drivers of innovation, contributing to their stock prices and overall market recovery.   The market was also supported by the expected decision of the Fed to pause its rate hikes. This pause in monetary policy tightening has helped to maintain the thesis of an end to the tightening cycle as early as H2 2023. 

USD/JPY  Yen dives on reports BOJ sees little need to adjust YCC   Central bank-a-palooza was supposed to start next week, but traders got a head start after reports surfaced that the BOJ saw little urgency to adjust their yield curve control program (YCC).  It looks like FX traders are expecting the BOJ to maintain their ultra-loose monetary policy and for the Fed to deliver a quarter-point rate rise and to have a wait-and-see approach about the September meeting.  The Japanese yen is the weakest major currency and that could remain the case if risk appetite remains healthy.  It seems that while the BOJ stands pat, the other major central banks are tightening and that should continue to drive that interest rate differential trade. Soft landing hopes are not getting derailed by earnings season so far, in fact market breadth in the stock market continues to improve which could help keep the rally going strong.   Initial Rate Decision Expectations The Fed will raise rates by 25bps and likely signal a wait-and-see approach for the September meeting (saving that decision for the end of August at Jackson Hole). Analysts are unanimously expecting the ECB to raise all three key rates by 25bps but are unsure what will happen in September The BOJ is expected to keep rates steady, no change to YCC, and revise up its inflation forecasts for this year alone.     Soft stochastics suggest euro pullback       The EUR/USD weekly chart shows a bearish bias could be emerging as the slow stochastics overbought conditions is seeing a tentative drop below the 200-week SMA.  If bearish momentum accelerates key support will come from the 1.1080 level, with major support eyeing the heavily tested 1.1030 price level.  Intraday resistance resides at the 1.1150 level, with major resistance be provided by the psychological 1.1200 handle.   Nasdaq Friday Volatility The Nasdaq could see excessive volatility at the close as a special rebalancing will address overconcentration in the index by redistributing the weights.  In addition to this special rebalancing, traders will have to deal with options expiration. Three mega-cap tech giants (Apple, Nvidia and Microsoft) make up almost 30% of the weight in the fund, which is not diverse enough for a key index.  Some profit-taking might occur ahead of busy next week that contains handful of market moving events that include three big rate decision, several key earnings, and key GDP, ECI , and PCE data.  

Top 10 Stocks to Watch: August 2023 BY:RYAN SULLIVAN Our list of hot summer stocks includes ecommerce, auto, gambling, entertainment, retail and AI S&P 500 E-Mini Futures reached a year-to-date high of about $4,600, with potential for new all-time highs if it surpasses resistance at $4,630 and $4,700.  The $4,500 support level could be tested if the current bull run ends, possibly triggering another push toward all-time highs.  Stock options can be beneficial after earnings reports to dodge binary volatility but exploit short-term fluctuations.  Market update: S&P 500 e-mini futures up 18% year to date  The S&P 500 e-mini futures—electronically-traded futures and options contracts on the Chicago Mercantile Exchange (CME)—pushed to new year-to-date highs this month on July 12. Since then, we have continued higher to $4,600. We are currently retesting this year-to-date (YTD) high. As I type, the S&P is ticking into $4,600. The next key resistance level above current price action is around $4,630, and the next stop after that is around $4,700.  If price action breaks through $4,630 with force, look for bulls to target $4,700. If that happens as we roll into August, and we do tag $4,700, it would not be too surprising if we try to push to new all-time highs in the S&P 500.    It is also possible that this is the last leg up for the current bull run that started at the end of May this year. If that is the case, the next thing the bears are going to want to test is the $4,500 level support. If $4,500 support holds, we could then see a push to all-time highs anyway.   If the market doesn’t want to record an all-time high yet, it is likely that price action bounces around $4,500 looking for either buyers or sellers to take control.  A quick note on the stock picks in this article; you can put on an options position right after an earnings report, so that you can avoid the binary volatility event but still take advantage of short-term volatility.    Year-to-date price percent change chart for SPY, QQQ, SLV and TLT     Top 10 stocks to watch in August 2023   UBER – 8/1 - Before the Open  AMD – 8/1 - After the Close  PYPL - 8/2 - After the Close  SHOP – 8/2 - After the Close  AMZN – 8/3 - After the Close  DKNG – 8/3 - After the Close  RIVN - 8/8 - After the Close  DIS – 8/9 - After the Close  TGT - 8/16 - Before the Open  NVDA – 8/23 - After the Close  1) Uber Technologies Uber (UBER), a multinational ride-hailing company, disrupted traditional taxi services. Beyond transportation, Uber has diversified into new verticals like food delivery with Uber Eats and freight logistics with Uber Freight. It operates in numerous cities globally and primarily makes money by taking a commission from each ride or delivery.  Uber stock is trading at $47.28, an 86.34% increase from its 2023 opening price of $25.37. The current implied volatility rank (IVR) on the tastytrade platform is 34.5, with the implied volatility (IV) in the next two monthly contracts above 47. Uber has reported positive net income in one of the last five quarterly reports.  Uber’s options market in August and September contracts is a couple pennies wide and offers a field to craft almost any assumption you might have. The product is small enough for a strangle position in smaller accounts. Iron Condors and spreads will also set up well. August and September contracts can be used for earnings plays. It may be helpful to play earnings in August and roll out to September if you need to.     2) Advanced Micro Devices Advanced Micro Devices (AMD), a leading global semiconductor company, designs and builds processors and graphic cards for computers and professional systems. AMD is known for its consumer- and professional-grade CPUs (central processing units) under the Ryzen, Threadripper and EPYC brands, as well as Radeon GPUs (graphic processing units). The company competes directly with Intel (INTC) in the CPU market and Nvidia (NVDA) in the GPU market.  AMD is trading at $112.36, up 70.25% from its opening price of $66.00 in 2023. The IVR on the tastytrade platform is 45.4, with IV in the next two monthly contracts above 49. AMD has reported positive net income in four of the last five quarterly reports.  This options market in August and September is pennies wide and offers the opportunity to form almost any options position you’d like to put on. Five- and 10-dollar wide iron condors and spreads set up well. Make your earnings play in August and roll out to September if you need to.    3) PayPal Holdings PayPal (PYPL), an American company operating a worldwide online payments system, supports online money transfers. PayPal serves as an electronic alternative to traditional paper methods like checks and money orders, enabling users to make payments or hold funds in 25 currencies. The company also offers services like credit product offerings and has business solutions that help merchants collect payments.  PayPal is trading at $73.42, a -0.37% change from its 2023 opening price of $73.69. The IVR on the tastytrade platform is 25.3, and the IV in the next two monthly contracts is above 42. Paypal has reported positive net income in four of the last five quarterly reports.  Paypal’s options market in August and September is pennies wide. An eighteen-delta short Strangle sets up well in August and September with a decent premium to buying power requirement ratio. Short thirty-delta Spreads also set up well if you have a directional assumption.    4) Shopify  Shopify (SHOP), a Canadian e-commerce company, provides a platform for businesses to create their own online stores. Shopify offers tools for managing products, inventory, payments and shipping, which are used by businesses of all sizes. Shopify's platform is subscription-based, and it also generates revenue from its payment processing system, Shopify Payments, as well as other merchant solutions.  Shopify is trading at $65.26, up 82.9% from its opening price of $35.68 in 2023. The IVR on the tastytrade platform is 32.6, with the IV in the next two monthly contracts above 58. Moreover, SHOP has reported positive net income in one of the last five quarterly reports.  Short 17-delta Strangles set up well in August and September, with a good premium collected to buying power required ratio. Iron condors and spreads will also set up well if you’d like to define your risk going into an earnings play.    5) Amazon  Amazon (AMZN), an American multinational technology company that started as an online marketplace for books, but has expanded to a wide variety of products and services. It is known for its disruption of well-established industries through technological innovation and mass scale. It is now the world's largest online marketplace, AI assistant provider, live-streaming platform and cloud computing platform, with various other operations in areas like digital streaming, brick-and-mortar retailing and more.  Amazon is trading at $129.10, reflecting a 51.06% increase from its opening price in 2023. The IVR on the tastytrade platform is 30.3, and the IV in the next two monthly contracts is above 38. Amazon has reported positive net income in three of the last five quarterly reports.  Amazon’s options market is very liquid and pennies wide in August and September. A liquid market like Amazon's offers the opportunity to craft almost any type of options position you’d like create. Calendar spreads are available if you’d like to take advantage of the difference in volatility between monthly contracts. Strangles, iron condors and spreads also set up well.     6) DraftKings  DraftKings (DKNG), a digital sports entertainment and gaming company, provides daily fantasy sports, sports betting and iGaming. DraftKings enables users to enter daily and weekly contests and win money based on individual player and team performances in five major American sports, Premier League and UEFA Champions League soccer, NASCAR auto racing, Canadian Football League, mixed martial arts, and tennis.   DraftKings is trading at $31.50, marking a significant increase of 170.15% from its 2023 opening price of $11.66. The IVR on the tastytrade platform is 28.2, while the IV in the next two monthly contracts stands above 60. However, DKNG has not reported positive net income in any of its last five quarterly reports.  DKNG is a small enough product and has liquid enough markets for smaller accounts to consider an undefined risk position. However, be cautious because smaller underlyings tend to make bigger moves when they get going. At-the-money spreads also set up well for directional assumptions.   Read more

China's surprise cut won't be enough.  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   China surprised by cutting its one-year medium-term lending facility (MLF) rates by 15bp to 2.50% today to give a jolt to its economy that has not only completely missed the expectation of a great post-Covid recovery, but that deals with deepening property crisis, morose consumer, and investor sentiment – which is worsened by Country Garden crisis and missed payments from the finance giant Zhongzhi Enterprises. Data-wise, things looked as worrying as we expected them to look when China released its latest set of economic data today. Growth in industrial production unexpectedly dipped to 3.7%, retail sales unexpectedly fell to 2.5%, unemployment worsened, while growth in fixed investments dropped further. Foreign investment in China fell to the lowest levels since 1998, and the 13F filings showed that Big Short's Michael Burry already exited Alibaba and JD.com, just months after increasing his exposure to these Chinese tech giants. People's Bank of China's (PBoC) surprise rate cut will hardly reverse appetite for Chinese investments as meaningful fiscal stimulus becomes necessary to stop halting.       The Hang Seng remains under pressure, the Chinese yuan fell to the lowest levels against the US dollar since last November, before the post-Covid reopening, and crude oil stagnates around the $82.50pb, close to where it was yesterday morning at around the same time. Tight supply and warnings of increased risk to shipping near the Strait of Hormuz, which is a strategic waterway for oil transit for exporters like Saudi Arabia and Iraq, certainly helped tempering the China-related selloff. But the demand side is weakening and that could stall the oil rally at the actual levels, forcing a return of the barrel of US crude toward the $80pb level, as worries regarding the Chinese recovery are real, and China will have to deploy further stimulus measures to fix things and bring investors back on their side of the table. If that's the case however, oil prices could take a lift.      Elsewhere, Argentina devaluated its currency by 18% to 350 per dollar and hiked its interest rates by 21 percentage points to 118% after populist Javier Milei won the presidential primary, while the dollar ruble traded past the 100 mark for the first time since Russia invaded Ukraine and the Indian rupee traded near record, as well. So all that helped the US dollar index shortly trade above its 200-DMA yesterday, a day before the release of the FOMC minutes which could hint that most Federal Reserve officials were certainly happy with the progress on inflation, but not yet convinced that the war against inflation is won just yet. And given the rebound in global energy and food prices, the Fed officials' careful approach to inflation looks like it makes sense. That's certainly why the US 2-year yield continued its advance toward the 5% mark yesterday, even though the latest survey from New York Fed showed that inflation expectations recorded a sharp drop to 3.6% for the next twelve months and fell to 2.9% for the next three years. The same survey showed that the mean unemployment expectation fell by 1 percentage point, giving support to goldilocks or to the soft landing scenario. Goldman now expects the Fed to cut rates in the Q2 of next year. It also said it expects core PCE to have fallen below 3% by that time.       Today, investors will focus on the US Empire manufacturing index and the retail sales data, and earnings from Home Depot will also hit the wire. While expectation for Empire manufacturing points at a negative number, consensus for July retail sales is a slight acceleration on a monthly basis. Any improvement on the US data is poised to further back the pricing of soft landing and give a further boost to both the US dollar and the US stocks.  The S&P500 recovered yesterday, as Nasdaq 100 advanced more than 1% with technology stocks leading the rebound. Nvidia was one of the best performers with a 7% jump after a Morgan Stanley analyst reiterated his $500 per share price target yesterday. But Tesla didn't benefit from the tech rally of yesterday and closed the session below $240 per share after cutting its car prices in China, yet again.    

Stocks rebound, but volatility rises.  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank       Stocks rebounded on Monday, in a move that looked more like a correction than a reaction to fresh news, as there was no fresh news that went against the slowing China rhetoric, nor against the fear that we will hear something sufficiently hawkish this Friday from Jerome Powell's Jackson Hole speech. At this point, the hawkish Federal Reserve (Fed) expectations are mostly priced in, leaving room for some up and down moves. So yesterday's session was not only marked by a rebound in the S&P500 from the October to July ascending baseline, but also by a visible rise in volatility. Nasdaq 100 jumped 1.65% as well, but the US 2-year yield returned well above 5%, and the 10-year yield pushed to a fresh high since 2007.     One interesting thing is, in 2007, when the US 10-year yield was at these levels, the positioning in the market was deeply negative – meaning that investors expected the yields to rebound, while today the positioning is deeply positive, meaning that investors expect the yields to bounce lower. And that's understandable: the US 10-year yield was on a steady falling path in 2007, so there was a reason for investors to expect a rebound – which did not happen. In a similar way, today, we are just coming out of a long period of near zero rates, so for our eyes, the actual levels seem very high. That explains why many asset managers expect the yields to fall. There is also a growing interest in US 10-year TIPS – which are protected against inflation, and which hit the 2% mark for the first time since the GFC as well. But there is not much reason other than our low comparison levels that gives reason to an imminent reversal in market direction. The US data is strong, the labour market is tight, and inflation is slowing but 'significant upside risks' prevail. A recent study warned that unless the monthly CPI stays below the 0.2%, inflation is headed higher in 2024. So there is a chance that we won't see a downside correction in the US 10-year yield, and if that's not the case, the selloff could extend until the 10-year yield settles somewhere between 5-5.50%.     Anyway, the market mood got significantly better yesterday. Tech stocks fueled the rally in the US, as Nvidia jumped 8.5% yesterday, a day before the release of its Q2 results. Nvidia'd better meet its $11bn sales forecast for last quarter, otherwise, there is a chance that we will see a sizeable downside correction.     In Europe, oil stocks shouldered yesterday's rally, as the barrel of US crude made an attempt above the $82pb, on lower OPEC+ exports and on the back of a golden cross formation on a daily chart where the 50-DMA crossed above the 200-DMA. But yesterday, that wasn't the case. Oil's positive attempt remained short-lived, on the contrary, and the barrel of crude is preparing to test the $80pb support to the downside again this morning. The market is driven by two major forces: the supply tightness and the Chinese demand expectations. These days, the Chinese demand expectations are very much in focus, which could help the oil bears take advantage for selling the recent rally in oil prices. But tighter OPEC rhetoric will remain a major support into the 200-DMA, near $76pb.  

In the FX  The dollar index remains bid above its 200-DMA – though we see a slowing positive trend, and weakening trend and momentum indicators. While I believe that there is room for further USD recovery, we could well see a temporary downside correction in the next few days, depending on what Powell will say, and how the markets will react. The EURUSD is still on a decidedly bearish path. Trend and momentum indicators remain comfortably bearish, and the pair is not yet at the oversold market conditions; the actual selloff could extend toward the 200-DMA, near the 1.08 mark. The USDJPY is steady a touch above the 145 mark, as the possibility of a direct FX intervention holds many traders back from topping up their short yen positions. Cable on the other hand sees resistance at its 50-DMA, a touch below the 1.28 mark.  In energy, the US crude remains close to the $80pb psychological mark, lacking a clear short-term direction. Therefore, this week's US inventories report could help traders decide whether they want to play the slow China demand rhetoric or continue backing the supply tightness narrative. In both cases, we shall see range-bound trading within the $75/85 range, including the 200-DMA and the August peak.     Nvidia goes to the earnings confessional!  Today, all eyes are on Nvidia earnings due after the closing bell. Investors will focus on whether Nvidia's Q2 sales meet the $11bn estimate. Anything less than absolutely fantastic could trigger a sharp downside correction in Nvidia's stock price which rallied 345% since the October dip.      

05:40BST Thursday 24th August 2023 Positive start expected after Nvidia knocks it out of the park   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Despite a raft of disappointing economic data from France, Germany and the UK which saw services activity slide into recession territory, European equity markets managed to finish the day higher yesterday. Rather perversely markets took these data misses as evidence that rate hikes were starting to work and that further rate hikes were likely to be unnecessary, sending bond yields sharply into reverse, as markets started to price an increased probability of recession. Yesterday's economic data will certainly offer food for thought for central bankers as they get set to assemble today at Jackson Hole for the start of the annual symposium, ahead of interest rate meetings next month where they are likely to decide whether to raise rates further to combat sticky inflation. If yesterday's data is in any way reflective of a direction of travel, then we could see a Q3 contraction of 0.2%. Of course, one needs to be careful in reading too much into one month of weak PMIs, especially in August when a lot of industry tends to shutdown or pare back economic activity, however the weakness in services was a surprise given that the summer holidays tend to see that area of the economy perform well.     US markets also underwent a strong session led by the Nasdaq 100 in anticipation of a strong set of numbers from Nvidia with the bar set high for a strong set of Q2 numbers. Back in Q1 when Nvidia set out its revenue guidance for Q2 there was astonishment at the extent of the upgrade to $11bn. This was a huge increase on its Q2 numbers of previous years, or any other quarter, with the upgrade being driven by expectations of a big increase in sales of data centre chips, along with investments in Artificial Intelligence.       Last night Nvidia crushed these estimates with revenues of $13.5bn, datacentre revenue alone accounting for $10.3bn of that total, a 171% increase from a year ago. For comparison, in Q1 datacentre revenue accounted for $4.3bn. Gross margins also beat expectations, coming in at 71.2% as profits crushed forecasts at $2.70 a share. Nvidia went on to project Q3 revenues of $16bn, plus or minus 2%. The company also approved an extra $25bn in share buybacks, with the shares soaring above this week's record highs in after-hours trading, with the big test being whether we'll see those gains sustained when US markets reopen later today.     On the back of last night's positive finish, as well as the exuberance generated by the belief that interest rate hike pauses are coming next month, European markets look set to open higher later this morning. The focus today is on the latest set of weekly jobless claims numbers which are set to remain unchanged at 239k, as well as July durable goods orders, excluding transportation, which are forecast to see a rise of 0.2%, a modest slowdown from June's 0.5% gain.      EUR/USD – bounced off the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – the 1.2600 area continues to hold with resistance still at the 1.2800 area and 50-day SMA. A break below 1.2600 targets 1.2400.        EUR/GBP – briefly hit an 11-month low at 0.8490 before rebounding sinking towards support at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – the failure to push above the 146.50 area has seen a pullback below the 145.00 level. This raises the prospect of a move towards the 50-day SMA at 142.70 area.     FTSE100 is expected to open 24 points higher at 7,344     DAX is expected to open 70 points higher at 15,798     CAC40 is expected to open 36 points higher at 7,282  

Amazing Nvidia.  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Nvidia announced STUNNING results when it released its Q2 earnings yesterday after the bell. The company reported $13.5bn sales last quarter, well above its $11bn projection, and said that it expects $16bn sales for next quarter, up from $12.6bn forecast last quarter. And oh, earnings jumped to $2.70 per share, versus $2.09 expected by analysts, and the most-loved chipmaker of the year approved $25bn in share buybacks. There is nothing an investor could ask more. The market expectations were sky-high, the results went to the moon, the forecasts for this quarter are as stunning, and the company is expected to earn around $30bn in FY2024 because Nvidia is not and will not be concerned about the industry-wide slump in chips demand, thanks to a decent surge in demand for AI processors in data centers. Magic is happening for Nvidia. So, the stock price jumped 10% in the afterhours trading to flirt with $518 per share, and Nvidia news has a boosting effect on technology stocks, if nothing by confirming that all the talk around the AI-craze was not empty, after all. Nasdaq futures are up by around 1.23% this morning, the S&P500 futures are also in the positive, and further good news is that the yields are down from Europe to US, on meagre PMI numbers released yesterday. And that is the perfect combo for the tech stocks – which have, so far this year, been – unquestionably - the best place to be in the S&P500 this year.    

All ears on Powell and Lagarde at Jackson Hole today   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     After an initially positive start to the day yesterday, only the FTSE100 managed to eke out any sort of gains, after a rebound in yields and the fading of the Nvidia sugar rush saw European markets slip into negative territory.   US markets, having started very much in a positive vein with the Nasdaq 100 leading the way higher, also turned tail as bond yields pushed higher, along with the US dollar, finishing the day sharply lower. As we look towards today's European open, the rise in yields and weak finish in the US, as well as weakness in Asia this morning, is set to see European markets open lower this morning. Much of the narrative for this month was supposed to be centred around what Fed chair Jay Powell would likely say at Jackson Hole today with respect to the prospect of another pause in the rate hiking cycle when the FOMC meets next month.   This week's poor economic data out of Germany and France has shifted the spotlight a touch when it comes to central bank policy towards the European Central Bank and Christine Lagarde's speech, at 8pm tonight, after Powell who is due to speak at 3:05pm.   While this year's Symposium is titled "Structural Shifts in the Global Economy" it won't be just Jay Powell whose words will be closely scrutinised for clues about rate pauses next month it will also be the Bank of England and the Bank of Japan where markets will be looking for important insights into the risks facing central banks in terms of the risks in over tightening monetary policy at a time when the challenges facing the global economy are numerous.   This week's PMIs have highlighted the challenges quite clearly to the point that it appears the ECB may well also look at a rate pause next month, alongside the Federal Reserve, although the reasons for an ECB pause are less about inflation falling back to target, than they are about a tanking economy.   The latest German PMIs suggest the prospect of another quarter of contraction in Q3, while the Bank of England has a similar problem, although the bar for a pause next month is slightly higher given how much higher UK CPI is relative to its peers.   Before we hear from ECB President Christine Lagarde, Powell will set the scene just after US markets open, and his tone is likely to be slightly less hawkish than he was a year ago.  When Powell spoke last year, he made it plain that there was more pain ahead for US households and that this wouldn't deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up. While Powell is unlikely to be anywhere near as hawkish, as he was last year, he won't want to declare victory either. As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it's unlikely he will deliver any dovish surprises.   This belief of a slightly hawkish Powell is likely to have been behind yesterday's sharp declines in US markets, which were driven by rising yields as investors continued to price in higher rates for longer. Not even a set of blow-out earnings from Nvidia was enough to keep markets in the black, with the shares opening at a new record high above $500, before sliding back to finish on the lows of the day, closing unchanged. The inability to hold onto any of the early gains suggests that the recent enthusiasm for this $1trn chipmaker may be due a pause. While investors will be focussing on Powell, the focus today returns to the German economy and in the wake of this week's poor PMIs we'll be getting the latest snapshot of the business sentiment in Europe's largest, but also sickest economy, as well as the final reading of Q2 GDP.   The most recent German IFO business climate survey showed sentiment falling to its lowest level since October last year in July at 87.3 and is expected to slow further to 86.8. Expectations also slipped back to 83.5 suggesting the economy could remain in recession in Q3.   Any thoughts that we might see an improvement in August are likely to have been dealt a blow by the sharp rise in oil prices seen in the last few weeks, as well as this week's PMIs. With recent economic data out of China also suggesting a struggling economy, German exporters are likely to continue to find life difficult.        EUR/USD – sinking below the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feelsrange bound with resistance at the 1.1030 area.   GBP/USD – slipped below the 1.2600 area which could well open up a move towards 1.2400 and the 200-day SMA.  We still have resistance at the 1.2800 area and 50-day SMA.       EUR/GBP – the rebound off this week's 11-month low at 0.8490 looks set to retest the 0.8600 area. We also have resistance at the 0.8620/30 area.   USD/JPY – rebounded off the 144.50 area with resistance at the highs this week at the 146.50 area, with resistance also at 147.50.   FTSE100 is expected to open 5 points lower at 7,328   DAX is expected to open 39 points lower at 15,582   CAC40 is expected to open 16 points lower at 7,198    

UK yields fall amid economic uncertainty BoE expected to raise rates twice more this year to 5.75% Cable testing key support for a second day   The pound is on the decline again on Thursday, having fallen over the last couple of days on the back of some worrying economic figures from the UK. Whether we’re talking about a blip in the data or cracks finally appearing in the economy after a very aggressive tightening cycle from the Bank of England, traders are paring back expectations for interest rates once more. We’re seeing UK 10-year bonds rising today (yields falling) which goes against the trend we’re seeing across Europe, the US, and Japan, for example. Two more hikes are still priced in over the coming months but that could be pared back further if the data continues on the same path, especially if we see some better wage numbers following the spike in the three months to June. That weakness in the pound may be helping the FTSE to outperform today, with it being one of the only European indices still in the green after early gains – seemingly driven by knockout earnings from Nvidia – fizzled out over the course of the day.   Fourth time’s a charm? The pound has fallen close to 1.26 on three other occasions so far this month, each time falling a little short somewhere between 1.2610 and 1.2620 before rebounding higher.   The least convincing of these rebounds came yesterday, with the price once again trending down today to once again come close to those prior lows. The difference so far today is there’s no sign of a recovery and, at the time of writing, the price remains below the 55/89-day simple moving average band. On each of the last three occasions, the price closed back within here or higher. A close below here would be the first since March and if accompanied by a new two-month low and break of 1.26, could be a very bearish signal for cable. Of course, with Jackson Hole underway, there’ll be a lot of central bank speak over the next couple of days which could sway this one way or another which is worth bearing in mind. But right now, the pair is looking under some pressure.    

Bearish elements have emerged at a key inflection/resistance level of 15,415. The leader of the AI boom, Nvidia has shaped a bullish exhaustion where its initial price actions’ exuberance dissipated ex-post Q2 earnings result release. 15,135 key short-term resistance to watch on the Nasdaq 100 to maintain bearish bias.   This is a follow-up analysis of our prior reports, “Nasdaq 100 Technical: Minor countertrend rebound” and “D-day for the US stock market as Nvidia earnings loom” published on 15 August 2023 and 23 August 2023 respectively. Click here and here for a recap. The price actions of the US Nas 100 Index (a proxy for the Nasdaq 100 futures) have indeed shaped the expected minor countertrend rebound sequence from the 18 August 2023 low of 14,553 and rallied by +5.6% to print an intraday high of 15,375 during yesterday’s 24 August European opening hour. The upward spurt seen on Thursday, 24 August at the start of the Asian session has been primarily attributed to a strong upmove of +6% seen in the share price of Nvidia in the after-US hours trading session of Wednesday, 23 August right after the release of its stellar fiscal Q2 earnings result. Interestingly, the exuberance of Nvidia that has triggered an initial positive feedback loop into the benchmark US stock indices dissipated as the US session got underway yesterday. In addition, several key bearish technical elements emerged which suggests that the potential impulsive down moves of the short to medium-term bearish trend of the US Nas 100 Index has resumed.   Daily bearish Marubozu candlestick formed right a key inflection/resistance zone   Fig 1: US Nas 100 medium-term trend as of 25 Aug 2023 (Source: TradingView, click to enlarge chart)     Fig 2: Medium-term trend of Nvidia & SPDR S&P Semiconductor ETF as of 24 Aug 2023 (Source: TradingView, click to enlarge chart) As seen in Figure 1, several bearish elements have been detected on the daily chart of the US Nas 100 Index. Firstly, its price actions have formed a firm bearish tone candlestick pattern called “Marubozu”, a long-body candle where its opening price and closing price were almost the same as its intraday high and intraday low respectively.   Secondly, the emergence of such a key bearish reversal candlestick pattern is being formed right at a key inflection zone where the 50-day moving average and the former swing low of 24 July 2023 confluence at a 15,415 resistance level adds credence to a potential future bearish movement in price actions of the Index. Thirdly, the current conditions of the daily RSI oscillator suggest that medium-term downside momentum remains intact. The price actions of Nvidia as seen in Fig 2 have also depicted similar bearish elements where it ended yesterday’s 24 August US session with a daily bearish “Marubozu” and reintegrated below a key resistance of 474.10 with a high-volume reading. The US Nas 100 slipped back below the 20-day moving average Fig 3: US Nas 100 minor short-term trend as of 25 Aug 2023 (Source: TradingView, click to enlarge chart) The hourly chart of the US Nas 100 has indicated the potential continuation of the impulsive down move of its short-term downtrend phase as the minor countertrend rebound from the 18 August 2023 low is likely to be over. Watch the 15,135 key short-term pivotal resistance (also the 20-day moving average) to maintain the bearish tone and a break below 14,580 exposes the next support at 14,300/250 (Fibonacci extension cluster & and a graphical support, refer to the daily chart in Fig 1). On the other hand, a clearance above 15,135 negates the bearish tone to see a retest on the 15,415/460 medium-term resistance.    

Here, get more stimulus!  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The Federal Reserve (Fed) Chair Jerome Powell's Jackson Hole speech was boring, wasn't it? Powell repeated that inflation risks remain to the upside despite recent easing and pointed at resilient US growth and tight US jobs market, and reiterated the Fed's will to keep the interest rates at restrictive levels for longer. The US 2-year pushed above 5%, as Powell's comments kept the idea of another 25bp hike on the table before the year end, but the rate hike will probably be skipped in September meeting and could be announced in the November meeting instead, according to activity on Fed funds futures. The US 10-year yield is steady between the 4.20/4.30%. The S&P500 gained a meagre 0.8% last week, yet managed to close the week above the 4400 mark and above its ascending trend base building since last October, while Nasdaq 100 gained 2.3% over the week, although Nvidia's stunning results failed to keep the share price above the $500 mark, even though that level was hit after the results were announced last week. And the disappointing jump in Nvidia despite beating its $11bn sales forecast and despite boosting its sales forecast for this quarter to $16bn, was a sign that the AI rally is now close to exhaustion.   What's up this week?  This week will be busy with some important economic data from the US. We will watch JOLTS job openings tomorrow, Australian and German CPIs and US ADP and GDP reports on Wednesday, to see if the US economy continues to be strong, and the jobs market continues to be tight. On Thursday, Chinese PMI numbers, the Eurozone's CPI estimate and the US core PCE will hit the wire, and on Friday, we will watch the US jobs report and ISM numbers. Note that the US dollar index pushed to the highest levels since May after Powell's Jackson Hole speech. The EURUSD is now trading a touch below its 200-DMA, even though the European Central Bank (ECB) chief Lagarde repeated that the ECB will push the rates as high as needed. Yet, the worsening business climate, and expectations in Germany somehow prevent the euro bulls from getting back to the market lightheartedly, while the yen shorts are comforted by the Bank of Japan (BoJ) governor's relaxed view on price growth – which remains slower than the BoJ's goal, but the possibility of a direct FX intervention to limit the USDJPY's upside potential keeps the yen shorts reasonably on the sidelines, despite the temptation to sell the heck out of the yen with the BoJ's incredible policy divergence versus the rest of the developed nations.   Here, get more stimulus!  The week started upbeat in China and in Hong Kong, after the government announced measures to boost appetite for Chinese equities. Beijing halved the stamp duty on stock trades, while Hong Kong said it plans a task force to boost liquidity. The CSI 300 rallied more than 2% and HSI jumped more than 1.5%. But gains remain vulnerable as data released yesterday showed that Chinese company profits fell 6.7% last month from a year earlier. That's lower than 8.3% printed in June, but note that for the first seven months of 2023, profits declined 15.5%, and that is highly disquieting given the slowing economic growth and rising deflation risks, along with the default risks for some of the country's biggest companies. Evergrande, for example, posted a $4.5 billion loss in the H1.  Therefore, energy traders remain little impressed with China stimulus measures. The barrel of US crude trades around the $80pb level, yet the failure to break below a major Fibonacci support last week – major 38.2% Fibonacci retracement on the latest rally, keeps oil bulls timidly in charge of the market despite the weak China sentiment. Oil trading volumes show an unusual fall since July when compared to volumes traded in the past two years. That's partly due to weakening demand fears and falling gasoline inventories, but also due to tightening oil markets as a result of lower OPEC supply. We know that the demand will advance toward fresh records despite weak Chinese demand. We also know that OPEC will keep supply limited to push prices higher. Consequently, we are in a structurally positive price setting, although any excessive rally in oil prices would further fuel inflation expectations, rate hike expectations and keep the topside limited in the medium run.    

“During a gold rush, sell shovels” One of the select few firms whose ability to capture the value of AI is already clear as day is GPU manufacturer Nvidia. As the leading supplier of the computing required to train AI models (for example, those by OpenAI), Nvidia has achieved conspicuous revenue growth in the past year, mainly driven by the eagerness of companies to acquire GPUs so as not to fall between the cracks of the AI rage. In late May, Nvidia said it expects revenue of $11bn in the second quarter of 2023, far surpassing the average analyst forecast of $7.18bn. This AI hoarding has sent Nvidia past the $1tn valuation mark, alongside only five other firms, quadrupling its stock price since its 1-year low in October 2022. The $750bn expansion to Nvidia’s $250bn market capitalisation less than 12 months ago is a clear reminder that AI is a speculative market, by which the imagination of investors has persuaded them that something truly great lies ahead. The story of Nvidia points to the adage that “during a gold rush, sell shovels”. This suggests that it’s more profitable to provide the required infrastructure to those pursuing a booming trend than to pursue the craze itself. In the crypto rush of 2021, Coinbase profited heavily by selling picks and shovels by facilitating crypto trading, similar to Nvidia now. In due time, the crypto bubble burst, shortening Coinbase’s revenue markedly and bringing an up to 90% drop in its stock price in a single year. Time will tell whether Nvidia is in an everlasting gold rush or will follow Coinbase’s “the higher you climb, the harder you fall” tale.      

The top traded stocks among Saxo clients are also analyst favourites with a median upside from current price to price targets of 17%. In today's equity note we focus on Sunrun, Block, and Nvidia which are all three darlings of analysts. Sunrun is a US residential solar panel and battery storage company that has not lost its faith from analysts despite a share price that is down 44% this year and elevated default risk due to high debt levels and lack of profitability. Block is struggling with profitability and the recent outlook from Dutch competitor Adyen has soured investor sentiment on payment stocks. Nvidia is on everyone's mind as the company is the main beneficiary of the gold rush into generative AI.   Key points in this equity note Sunrun has the highest upside potential according to analysts among Saxo’s 30 most traded US equities. For this to come true, Sunrun must quickly increase its profitability. Block has recently seen their 12-month forward revenue estimates been raised by analysts despite the recent miss on volume from Adyen casting dark clouds over the entire payments industry. Nvidia remains the darling of Saxo clients, analysts and investors as the gold rush into AI means Nvidia is selling GPU at an insane rate. Nvidia’s 12-month revenue estimate has been raised 42% by analysts over the past three months.   Saxo’s most held and traded US equities In this equity note we present a table of useful information on the 30 most held and traded US equities sorted on the difference between analysts target and the current price. A general observation is that the median upside to analyst targets is around 17% with Sunrun being the most bullish case seen by analysts with the price target sitting 146% above the current price. 12-month forward revenue estimates have not changed much for this group over the past three months except for companies such as Block (+5.7%), Nvidia (41.8%), and Meta (+5.6%) reflecting the AI growth wave and better than expected developments in e-commerce and online advertising.      

Adyen has put Block and the entire payments industry into trouble The payments industry was one of the big winning themes of the pandemic and growth looked sure for decades to come inflating valuations to insane levels in late 2021. Since then, as a function of lower growth and higher interest rates, valuations have come down hard. Investors have gone from valuing Block at 5.6x enterprise value to sales in 2019 to 1.6x in 2023 reflecting lower expectations for growth but also operating margin as the industry has matured and technology advantages have converged among industry players. Adyen latest big miss on volume and operating margin was a big hit to the industry and has raised questions about whether payment companies outside American Express, Mastercard and Visa will ever be as profitable as the big three. Block, formerly Square, generated revenue of $19.7bn in the last 12 months with EBITDA of $225mn (1.1% operating margin) and thus it is quite clear that investors want to see the operating margin expand. The industry narrative has changed to that of profitability instead of high revenue growth at all costs. Analysts remain bullish on Block with an upside of 55% to their price target. Nvidia remains center of attention for analysts and investors The AI hype and outrageous growth that Nvidia is experiencing have caught everyone’s attention in equity markets this year. 12-month forward revenue estimates are up 42% over the past three months which is something we have never observed before for a $1.1trn market value company. Not only is Nvidia growing fast it is also highly profitable (33% operating margin and expanding). Analysts are also maintaining their positive outlook with a price target 43% above the current price despite the strong performance already this year. As we have noted in a recent equity note, the key risk for Nvidia shareholders is that the huge demand increase is driven a lot by the long tail of VC-backed AI startups that have gone all in on the gold rush. For Nvidia’s growth to continue over the coming year it is important that this gold rush into AI turns into commercial ideas that can be monetized on a grand scale. Adobe earnings Thursday after the US market close might give a clue of whether this is possible.

Therefore, the US 2-year yield may have bottom at 4.80% level and should be headed back toward 5%. The US 10-year yield should hold ground above 4.50%. As per equities, the direction is unclear to everyone, but the recent dovish shift in Fed expectations and the dropping yields gave a great energy boost to the US stocks. The S&P500 jumped more than 10% since end of October, the rate-sensitive Nasdaq 100 is now flirting with the highest levels since summer while the Russell 2000 index is having a blast since its October dip. The index rallied almost 12% in 3 weeks, pulled out the 50-DMA, the major 38.2% Fibonacci retracement and consolidated gains in the medium-term bullish consolidation zone yesterday.   As equities move higher and inflation slows, the anxiety regarding short positions mount – hence short covering is adding to the positive pressure.   The Big Short's Micheal Burry reportedly exited his short position against SPDR's P&P500 and Invesco's QQQ and began betting against semiconductor stocks, including Nvidia.   Nvidia, on the other hand, is flirting with its ATM levels near the $500 per share level. A quick glance at Nvidia's long-term price chart clearly suggests that the chances are that we are in the middle of an AI-led bubble and that the exponential move cannot extend infinitely. Yes, AI is boosting Nvidia's revenue and profits, but the revenues that will flow into the pockets of Nvidia thanks to AI are already embedded in the share price, and we will likely see the price bubble burst. But there are two things to keep in mind when you bet against a bubble. 1. A bubble is a bubble only when it bursts – it's like 'you are innocent until proven guilty'. And 2. You can wait a while before the market comes back to its senses. For now, we are in the middle of making eye-popping predictions and beating them. The company is due to release earnings on November 21st.  One big risk for Nvidia is the tense relations between the US and China, and the extension of chip export curbs to a bigger range of Nvidia chips. This week's meeting between Biden and Xi carried hope that the high-level communication could help melting ice. There has apparently been some 'real progress' in restoring military communication and foreign policy... Then, Joe Biden said that Xi is a dictator.

When fantastic falls short...  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The minutes from the Federal Reserve's (Fed) latest monetary policy meeting showed that the Fed members agreed to 'proceed carefully' with their future rate decisions. Carefully doesn't mean that the Fed is done tightening, it means that it will 'proceed carefully' in the light of the economic data and the market conditions to decide whether it should hike, pause, or cut the interest rates. Note that 'most' members 'continued to see upside risks to inflation'.   Alas, the cautious tone in Fed minutes went completely unheard as the latest CPI data acted as a shield against the Fed hawks. As such, the market reaction to the Fed minutes was muted. The US 2-year yield remained little changed near the 4.90% level, the 10-year yield rebounded past 4.40%, and is still around 60bp lower than the October levels. The S&P500, which is now trading in the overbought market, retreated 0.20% and Nasdaq 100 fell 0.60% from an almost 2-year high, as investors didn't want to do much before seeing the Nvidia's results.   When fantastic falls short...  Nvidia's Q3 results were strong. The company exceeded the $16bn revenue forecast by $2bn. They earned more than $18bn, made more than $4 profit per share and said that they will be earning around $20bn this quarter. But the latter forecast couldn't meet the top forecast ($21bn) and the share price fell in the afterhours trading, though by less than 2%; investors couldn't decide whether they should buy the fact that the company exceeded the sky-high expectations, or they should sell the reality that the chip sales to China will slow this quarter and that would weigh on revenue – although Nvidia stated that the 'decline will be more than offset by strong growth in other regions' and that they are working to comply with regulations to sell to China, anyway.   Taking a step back: Nvidia is growing, it is growing fast, it has potential to grow further, but the valuation of the company is also sky-high, its price got multiplied by almost five since October 2022. Its PE ratio stands around 120 versus a PE ratio of around 25 in average for S&P500 companies. And its market capitalization is more than $1 trillion more than Intel's, which used to be the world's biggest chipmaker. In summary, the company is growing but that strong growth is already priced in and out. Therefore, we will probably not see a big profit taking post-earnings, we will likely see correction and consolidation instead below the $500 psychological hurdle.   And with that – the Nvidia earnings – out of the way, the S&P500 and Nasdaq futures are slightly in the negative at the time of writing. The market will likely digest the Fed minutes and the Nvidia results in a calm mood before the Thanksgiving holiday.   

Elsewhere...  The nice jump in the Japanese yen pulled the dollar index lower yesterday. Of course, the EURJPY, GBPJPY and AUDJPY all made a similar move. The US bonds, on the other hand, were little changed yesterday – for once – as traders sat on their hands ahead of this week's much-awaited US jobs data, while technology stocks were on fire yesterday. Alphabet jumped more than 5% after Google released Gemini – the largest and most capable AI model it has ever built, and AMD jumped nearly 10% after the company unveiled a chip that will run AI software faster than rival products. But rival Nvidia was little hit by the news, as its chips gained 2.40% yesterday. The AI demand is big enough for everyone to benefit amply from it.   Today, all eyes are on the US jobs data.  According to a consensus of analyst estimates on Bloomberg, the US economy may have added 180'000 new nonfarm jobs in November, the pay may have risen slightly faster on a monthly basis, and the unemployment rate is seen steady at 3.9%. The fact that the data released earlier this week hinted at a clear loosening in the US jobs market makes many investors think that today's official data will also follow the loosening trend. If the data is soft enough, the rally in the US bonds could continue and the US 10-year yields could have a taste of the 4% psychological mark, while a stronger-than-expected figure could help scale back the dovish Federal Reserve (Fed) expectations but could hardly bring the hawks back to the market before next week's FOMC decision.      

Elsewhere...  The nice jump in the Japanese yen pulled the dollar index lower yesterday. Of course, the EURJPY, GBPJPY and AUDJPY all made a similar move. The US bonds, on the other hand, were little changed yesterday – for once – as traders sat on their hands ahead of this week's much-awaited US jobs data, while technology stocks were on fire yesterday. Alphabet jumped more than 5% after Google released Gemini – the largest and most capable AI model it has ever built, and AMD jumped nearly 10% after the company unveiled a chip that will run AI software faster than rival products. But rival Nvidia was little hit by the news, as its chips gained 2.40% yesterday. The AI demand is big enough for everyone to benefit amply from it.   Today, all eyes are on the US jobs data.  According to a consensus of analyst estimates on Bloomberg, the US economy may have added 180'000 new nonfarm jobs in November, the pay may have risen slightly faster on a monthly basis, and the unemployment rate is seen steady at 3.9%. The fact that the data released earlier this week hinted at a clear loosening in the US jobs market makes many investors think that today's official data will also follow the loosening trend. If the data is soft enough, the rally in the US bonds could continue and the US 10-year yields could have a taste of the 4% psychological mark, while a stronger-than-expected figure could help scale back the dovish Federal Reserve (Fed) expectations but could hardly bring the hawks back to the market before next week's FOMC decision.    

The Finish Line By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Here we are, on the last trading day of the year. This year was completely different than what was expected. We were expecting the US to enter recession, but the US printed around 5% growth in the Q3. We were expecting the Chinese post-Covid reopening to boost the Chinese growth and fuel global inflation, but a year after the end of China's zero-Covid measures, China is suffocating due to an unexpected deflation and worsening property crisis. We were expecting last year's negative correlation between stocks and bonds to reverse – as recession would boost bond appetite but batter stocks. None happened.  The biggest takeaway of this year is the birth of ChatGPT which propelled AI right into the middle of our lives. Nasdaq 100 stocks close the year at an ATH, Nvidia – which was the biggest winner of this year's AI rally dwarfed everything that compared to it. Nvidia shares gained more than 350% this year. That's more than twice the performance of Bitcoin – which also had a good year mind you.   Besides Nvidia, ChatGPT's sugar daddy Microsoft, Apple, Amazon, Meta, Google and Tesla – the so-called Magnificent 7 generated almost all of the S&P500 and Nasdaq100's returns this year. And thanks to this few handfuls of stocks, Nasdaq100 is set for its best year since 1999 following a $7 trillion surge.   The million-dollar question is what will happen next year. Of course, we don't know, nobody knows, and our crystal balls completely missed the AI rally that marked 2023, yet the general expectation is a cool down in the technology rally, and a rebalancing between the big tech stocks and the S&P493 on narrowing profit lead for the Magnificent 7 compared to the rest of the index in 2024. T  The other thing is, the S&P500's direction next year is unclear as the Federal Reserve (Fed) is expected to start chopping the interest rates, with the first rate cut expected to happen as early as much with more than 85% probability. So what will the Fed cuts mean for the S&P500? Looking at what happened in the past, the S&P500 typically rises after the first rate cut, but the sustainability of the gains will depend on the underlying economic fundamentals. Lower rates are good for the S&P500 valuations EXCEPT when the economy enters recession within the next 12-months. So that backs the idea that I have been trying to convey here since weeks: lower US yields will be supportive of the S&P500 valuations as long as the economy remains strong, and earnings expectations hold up.    For now, they do. The S&P500 earnings will certainly end a bit better than flat this year, and the EPS is expected to rise by more than 10% next year. The Magnificent 7 are expected to post around 22% EPS growth next year. But note that, these expectations are mostly priced in, so yes, there will still be a hangover and a correction period after a relentless two-month rally triggered a broad-based risk euphoria among investors. The S&P500 is about to print its 9th consecutive week of gains – which would be its longest winning streak in 20 years.  In the FX, the US dollar index rebounded yesterday as treasury yields rose following a weak sale of 7-year notes. But the US dollar is still set for its worse year since 2020. Gold prepares to close the year near ATH, the EURUSD will likely reach the finish line above 1.10 and the USDJPY having tested but haven't been able to clear the 140 support. In the coming weeks, I would expect the EURUSD to ease on rising expectations from the ECB doves, and/or on the back of a retreat from the Fed doves. We could see a minor rebound in the USDJPY if the Japanese manage to calm down the BoJ hawks' ambitions. Overall, I wouldn't be surprised to see the US dollar recover against most majors in the first weeks of next year.  In the energy, crude oil remains downbeat. The barrel of American crude couldn't extend rally after breaking the $75pb earlier this week, and that failure to add on to the gains is now bringing the oil bears back to the market. The barrel of US crude sank below the $72pb as the US oil inventories slumped by more than 7mio barrels last week, much more than a 2-mio-barrel decline expected. The latter brought forward the demand concerns and washed out the supply worries due to the Red Sea tensions. Note that crude oil is set for its biggest yearly decline since 2020; OPEC's efforts to curb production and the rising geopolitical tensions in the Middle East remained surprisingly inefficient to boost appetite in oil this year. 

2023 key highlights & cross-assets performances in the past 2 years Fig 1: Cross assets performances as of 29 Dec 2023 (Source: TradingView, click to enlarge chart)   The US Federal Reserve’s stance of keeping interest rates higher for a longer period in the first half of 2023 triggered a resilient US dollar environment in the absence of a recession scenario in the US that led the US stock market to outperform the rest of the world. The outperformance of the US stock market in 2023 was led by the Magnificent 7 (Apple, Amazon, Microsoft, Alphabet/Google, Nvidia, Meta, Tesla) mega-cap technology stocks that have stronger balance sheets and are skewed toward “AI productivity” theme play. Also, these 7 stocks have a significant combined market-cap weightage in the Nasdaq 100 that recorded an annual gain of 54% in 2023 (2.3 times S&P 500’s 2023 returns). US regional banking crisis that led to the collapse of Silicon Valley Bank & First Republic Bank due to poor balance sheet risk management reinforced by outsized mark-to-market losses on longer-term US Treasuries (higher US Treasury yields via Fed’s tightening monetary policy). It also indirectly led to the demise of Credit Suisse which eventually was brought over by rival UBS. The US regional banking crisis was just a blip, negated by a liquidity backstop orchestrated by the US Treasury; the Bank Term Funding Program (BTFP). The risk-off behaviour in Q3 reversed abruptly in Q4 to a raging risk-on FOMO behaviour triggered by a significant easing liquidity condition in the US; the rapid drawdown of the Fed’s overnight reverse repo facility from a peak of US$2.55 trillion in December 2022 to US$683.25 billion (-74%) for the week of 11 Dec 2023 as money market funds that choose to invest their surplus cash in short-term US Treasury bills instead (rather than parking in overnight reverse repos facility) which in turn helped to fund the US Treasury general account (also US Treasury’s issuance switch from longer-term Treasuries to T-bills for funding needs). A rise in the expectations of a Fed’s dovish pivot where the first Fed funds rate cut is priced in to come as early in March 2024 indicated by the CME FedWatch tool that led to a slide of 120 basis points (bps) in the US 10-year Treasury yield from a 16-year high of 5% printed on 23 October 2023, synchronized with a weakening US dollar that kickstarted a rally in almost all asset classes (equities, bonds, gold, cryptocurrencies) except oil & China-related risk assets. China’s post-Covid re-opening bullish theme play on China and Hong Kong stock markets fizzled out after Q1 due to a heightened deflationary risk spiral caused by a persistent weak property market in China. The Hang Seng Index ended 2023 with a fourth consecutive annual loss of -14% (prior years’ losses of -15% in 2022, -14% in 2021 & -3% in 2020); its worst performance streak since 2000. Due to China’s structural weakness (deflationary risk spiral), China, and Hong Kong stock markets failed to respond to the cyclical upswing in risk assets during Q4 2023 reinforced by renewed US dollar weakness. The CSI 300 and Hang Seng Index recorded losses of -7% and -4.3% respectively in Q4 whereas the MSCI Emerging Markets Ex China exchange-traded fund gained by +12.5% over the same period, slightly outperformed the US S&P 500’s Q4 return of +11.24% The Japanese yen (JPY) plummeted to a 33-year low against the US dollar in Q3 2023 due to the Bank of Japan (BoJ)’s newly appointed Governor Ueda’s reluctance to offer firm guidance to normalize its short-term negative interest rate policy despite Japan’s core inflation rate had exceeded BoJ’s 2% target for the 20th consecutive month. Emerging themes for 2024 A potentially weaker US dollar due to the shrinkage of the US Treasury yield spread premium against the rest of the world, and a potential major JPY strength revival triggered by internal economic factors (service prices in Tokyo rose at their fastest pace since 1994 to a record gain of 3% y/y in November 2023, indicating an increase in the odds of sustainable wage-driven inflationary growth), political and business groups’ mounting pressures against a weaker JPY. The rest of the world equities may outperform the US stock market due to a weaker US dollar environment. Keep a lookout on China for potentially more “generous” fiscal and monetary policy stimulus measures that may stoke positive animal spirits in the short to medium term for China and Hong Kong stock markets. The stepped-up dovish expectations on the upcoming Fed’s interest rate cut cycle compiled with rosy earnings forecasts by analysts polled by FactSet that are projecting an earnings growth of +11.5% y/y for the US S&P 500 in CY 2024, a significant improvement from an expected CY 2023 earnings growth of just 0.6% which in turn have indicated another year of goldilocks scenario for the US economy. In contrast, the hastened speed of 6 interest rate cuts by the Fed in 2024 projected by market participants in the interest rates futures market also implied a probable US recession-liked scenario in 2024. In addition, the latest November 2023 data of the Conference Board US Leading Economic Index (LEI) has continued to flash a recession signal reinforced by weakness in the housing and labour market. If a recession hits the US economy in the second half of 2024, earnings downgrades are likely to materialize and the initial projected S&P 500 CY 2024 earnings growth rate of +11.5% is likely to be tapered to the downside which in turn may trigger a risk-off scenario that can overshadow the initial positive feedback loop from easing liquidity conditions. Potential heightened geopolitical tension between the US and China that may also spark a risk-off scenario in the latter part of 2024; the recently concluded China’s annual economic work plan conference attended by the top leadership stated that 2024 top priority will be on building a modern industrial system with a focus on developing cutting-edge technologies and artificial intelligence. Making high-tech industrialization a key priority in 2024 is likely to invite more scrutinization from neo-conservative US politicians that may put a strain on the current US-China relationship in the run-up to the November 2024 US presidential election. There is likely to be intense debate among the presidential candidates and finger-pointing again at China’s current industrialization policy that needs to be “neutralized” due to its potential national security threat to the US. Chart Of The Year – a potential major top in USD/JPY Fig 2: USD/JPY major trend as of 2 Jan 2024 (Source: TradingView, click to enlarge chart) The price actions of USD/JPY have declined by 8% to hit an intraday low of 140.25 in December 2023 after a bearish reaction from its 151.95 long-term pivotal resistance printed in mid-November 2023. The USD/JPY has traced out a potential impending major bearish reversal “Double Top” configuration considering the developments of its price actions from October 2022 to November 2023. In addition, the weekly MACD trend indicator has flashed out a bearish divergence condition over the same period (October 2022 to November 2023) which indicates the major uptrend phase from the March 2020 low of 101.18 has started to lose upside momentum which in turn increases the odds of a multi-month corrective decline to unfold next. A breakdown with a weekly close below 137.65 support exposes the next major support zone of 130.70/127.10 (also the neckline of the “Double Top” & 50% Fibonacci retracement of the prior major uptrend phase from March 2020 low to November 2023 high). On the other hand, a clearance above 151.95 invalidates the bearish scenario to see the next major resistance coming in at 159.30 in the first step.  

  When do you start to worry about Chinese stimulus?  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  The stock rally continued on both sides of the Atlantic on Wednesday; the technology and chip stocks remained in the driver seat. Sentiment in Europe was bolstered by an almost 9% rally in ASML on news that their orders more than tripled last quarter. Now, there is a catch. A third of the $10 billion dollar worth of orders came from China as Chinese companies rushed to buy these machines by the end of last year before the US and Dutch chip ban came into effect. But even if the Chinese demand will fade away, ASML says that it expects its sales to remain steady thanks to AI demand..  As such, the ASML news also boosted the stock prices of our favourite AI plays. Nvidia hit another record yesterday, TSM extended gains, Microsoft was worth $3 trillion for some time. The S&P500 and Nasdaq 100 hit a fresh record, and Netflix – which has nothing to do with AI, but which was just cheering its 13-mio new subscribers for the latest quarter - jumped 10%.   In summary, all goes well for those who are in the technology boat sailing north. For the rest, skepticism best describes how they feel about an unsustainable rise in valuations.   Tesla misses, Intel next.  Tesla missed estimates in its latest quarterly earnings report and warned that its EV sales growth will be 'notably lower' and that the numbers will suffer until the company comes up with a cheaper model. The series of price cuts weren't enough to bolster demand in a way to keep the company smiling and profits rising – sufficiently. As such, Tesla refused to offer a specific growth target and its share price took a 6% hit in the afterhours trading. Intel is due to report its earnings today.   Connecting the dots  The Chinese are serious about bolstering their economy and they look like they are getting to a place where they are ready to do whatever it takes to reverse the slowing trend.  In addition to a series of market stimulus news, the People' Bank of China (PBoC) announced yesterday that it will cut the reserve ratio for the banks by 50bp from February to release more liquidity to bolster stock valuations The latter will free up to an additional trillion yuan, which equals $139bn US dollars.  Will it help? Well, we will see. The good news is, if it doesn't, the Chinese will continue until it does.   The CSI 300 finally sees some positive reaction, stocks in Hong Kong are up 10% since Monday, American crude is drilling above the $75pb per barrel and copper futures – which are a gauge of global growth – also seem gently convinced that the Chinese will put all their weight – all they need to – to make things better.   But note that China's supportive policies may not echo well across the developed markets' central banks, because the Chinese stimulus – if successful – should boost global inflation and interfere with DM central banks' plans to loosen policies.   BoC calls the end of tightening, ECB next to speak.  But until we see concrete results from Chinese measures, softer policies remain the base-case scenario for the Federal Reserve (Fed) and the other major central banks (except Japan). In this context, the Bank of Canada (BoC) kept its rates unchanged at yesterday's meeting and called the end of rate hikes. The European Central Bank (ECB) will meet today and will certainly vehicle the same message - that policy tightening is over. But that's not enough.  When it comes to the ECB, what investors want to know is WHEN the ECB will start cutting the inteerest rates. If we had this conversation two weeks ago, I would say that the ECB would push back on expectations of premature rate cuts. But after having heard Christine Lagarde say that the first rate cut could come in summer, I am more balanced going into the meeting. Inflation has come lower – but we saw an uptick in the latest figures. The rising shipping costs and the positive pressure in oil prices mean that upside risks prevail. Yet the slowdown in European economies calls for lower rates. Released yesterday, the Eurozone PMI figures showed that aggregate activity remained in the contraction zone for the 8th straight month and slow down accelerated in January – except for manufacturing.   A hedge fund called Qube apparently built a $1 bn short position against German stocks, and Goldman Sachs says that a Trump presidency would increase risks for European businesses, and economically sensitive pockets of the market, like the German industries, would be the most exposed.  

Market echoes The US dollar index ticked higher yesterday, as the euro fell across board during ECB Lagarde's presser. But any further weakness in today's PCE numbers could limit the upside move in the dollar index and throw a floor under the EURUSD's weakness around the 200-DMA. It would sure be absurd if the Fed started cutting the rates with such a strong underlying US economy before the ECB, which, in opposition, deals with a serious economic slowdown across the euro area. But the Fed doesn't (need to) decide based on other central banks' actions. As such, a possible earlier Fed cut could slow down the euro depreciation but should not stop it. In equities, the good data gave a positive spin to the S&P500 and Nasdaq 100, but Tesla's 10% slump limited gains. Intel tumbled 10% in the afterhours trading following a disappointing forecast as it has hard time fighting back the all-strong Nvidia and AMD which are catapulted to the moon on the AI craze. The good news is, Nvidia and AMD lovers will barely react to Intel news.