us equities

US equities lack a clear direction as the sovereign bond selloff intensifies across the globe, pressuring the yields higher, and the equity valuations lower. But, cryptocurrencies are on the rise, with meme coins gaining the most in the crypto space despite poor and volatile risk appetite. In FX, the EURUSD faces important resistance between 1.1480/1.1550 before we call it the end of the weak euro against the US dollar, the GPBUSD may not keep it above the 1.35 while the Turkish lira is stoic to the global FX moves, and sky-rocketing inflation in Turkey. In stock news, Peloton, due to announce earnings today, is in focus on rumours that it could be the acquisition target for Big Tech companies including Apple, Amazon and Disney. Why would anyone buy Peloton? Watch the full episode to find out more! 0:00 Intro 0:25 Market update: yields on the rise! 3:06 Approaching the end of the weak euro 4:15 FX thought bubble: GBP, TRY 5:24 Bitcoin & meme coins rise 7:01 Who will buy Peloton? 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.

Asian markets fall, ex-China Wall Street suffered another day of recession fears overnight, with equities slumping once again, relying on Bostic’s comments to salve the wounds and cap US yield rises and the US dollar rally. The S&P 500 retreated by 3.20%, with the Nasdaq slumping by 4.29%, and the Dow Jones losing 1.97%. No sector was spared, notably, and despite high inflation, cash is increasingly becoming King. The rot has stopped in Asia, with US futures attempting to claw back some of the overnight losses as the bottom-feeders come out to play. S&P 500 futures have risen by 0.60%, Nasdaq futures have jumped by 0.95%, and Dow futures have gained 0.45%.   In Asia, equity markets initially tumbled in response to the Wall Street moves, in a rerun of yesterday. However, the recovery by US futures this morning seems to have taken the edge of the sell-off, with Asian markets recouping some of their earlier losses. Japan’s Nikkei 225 is now down just 0.44%, with South Korea’s Kospi down 0.47%,   Meanwhile, after a tough session yesterday, the intraday rally in sentiment has pushed mainland China exchanges well into positive territory. The Shanghai Composite and CSI 300 have rallied by 1.0%. Hong Kong was pummelled earlier today but has also recovered somewhat, but it remains 2.25% lower for the day.   In regional markets, Singapore is still down by 1.20%, while Kuala Lumpur is unchanged, and Jakarta has slumped by 2.90% led by resource stocks. Taipei has retreated by 1.65%, while Manila is down 1.0% post-election, with Bangkok managing a 0.30% gain. Australian markets are also in retreat, the ASX 200 and All Ordinaries falling by 1.30%.   What makes the session odd is that markets with a high sensitivity to the China slowdown are the worst performing in Asia today, but mainland equities have rallied. The cynic in me suspects that China’s “national team” are busy today supporting the market, especially as covid-zero policies remain in force and nerves are rising around mainland property developers once again.   European markets will struggle to construct a bullish case today as well, also President Putin not declaring a was on Ukraine at yesterday’s May Day parades could be a straw to grasp. The question is really whether the bounce in US equity futures today is the start of a recovery or merely a corrective bounce to short-term oversold indicators. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Today's daily CNY fixing will be watched closely to see how much pushback the authorities will deliver after the recent CNY weakness. Industrial profit data for China are also on the calendar, as well as lower Australian May inflation numbers.     Global Macro and Markets Global markets: China’s daily CNY fixing was lower (stronger) yesterday, suggesting that the authorities felt that the pace of CNY depreciation had been a little too fast, or had gone on too long without any correction. The CNY traded in a much flatter range yesterday and is 7.2242 currently, well off the 7.24 peak on Monday. Today’s fix may hint whether the PBoC is more concerned about the level, or the rate of change in the currency. The USD lost some ground yesterday, and EURUSD traded up to 1.0977 before settling back to 1.0957. The AUD tried to go higher yesterday but hit a barrier at 0.6720 and has returned to 0.6682, little changed from a day ago. Cable made some modest gains, rising to 1.2747. But the JPY lost some further ground, drifting up to 143.90 amidst a lot of talk about intervention. For the most part, Asian FX gained against the USD yesterday, and the PHP led these gains, moving down to 55.32. The KRW also got back to 1300, and the SGD followed, dropping to 1.3496. A brighter session in US equities overnight may help Asian FX make further gains today. The S&P 500 rose 1.15% and the NASDAQ gained 1.65% making it one of the strongest sessions in the last few weeks. Semiconductor stocks did well, but so too did household items producers, auto manufacturers, steel producers and homebuilders after strong durable goods orders data and consumer confidence figures.  Chinese stocks also did well. The CSI 300 rose 0.94% and the Hang Seng index rose 1.88%. The stronger data and improved risk sentiment lifted US Treasury yields. 2Y yields rose 7.5bp to 4.755%, while the yield on 10Y Treasury bonds rose 4.3bp to 3.764%.   G-7 macro: Contrasting with the expectation for a decline, May durable goods orders actually rose 1.7%MoM, with core capital goods orders rising 0.7% and upwards revisions to April data showing that US industry is not as battered as might have been imagined after all the monetary tightening. Consumer confidence figures from the Conference Board were also considerably better than expected, and some of the regional manufacturing surveys also came in stronger than the previous month. US house price data also firmed. There is less on the calendar today, with only mortgage applications, inventory figures and advance trade balance numbers to peruse.   China: Industrial Profits are expected to weaken further in May after their 18.2%YoY decline in April (-20.6%YTD YoY%). Ongoing slowdowns in manufacturing together with falling factory gate prices will weigh on the May numbers.     Australia: May CPI inflation will fall from the 6.8%YoY April rate to only 6.2% (INGf, consensus 6.1%YoY). The decline mostly owes to strong month-on-month gains last year not being replicated this year. We anticipate the month-on-month increase came in at around 0.2%, which if it could be sustained, would take inflation back to the RBA’s target range. The lower May inflation rate will, we think, be enough to keep the RBA on hold in July after they hiked in June. But August may see a further, and hopefully, final rate hike as electricity tariff increases will keep inflation from falling much further, and could provide an excuse to hike due to slow progress.   What to look out for: Australia CPI inflation (28 June) Philippines bank lending (28 June) US MBA mortgage applications and wholesale inventories (28 June) Fed’s Powell speaks (28 June) Japan retail sales (29 June) Australia retail sales (29 June) US initial jobless claims and pending home sales (29 June) Fed’s Powell and Bostic speak (29 June) South Korea industrial production (30 June) Japan labour market data (30 June) China PMI manufacturing (30 June) US personal spending and Univ of Michigan sentiment (30 June)        

Asia Morning Bites Monday features China's inflation report which should show both CPI and PPI reflecting weak demand.   Global Macro and Markets Global markets:  US equities didn’t much like Friday’s labour market report, though they didn’t hate it either. The S&P 500 fell 0.29% while the NASDAQ lost 0.13%. US equity futures are looking a little brighter currently. Chinese stocks also had a disappointing end to the week. The Hang Seng fell 0.9% while the CSI 300 dropped 0.44%. US Treasuries were also a little unsure how to react to the labour report. The yield on 2Y US Treasuries fell 3.5bp, but yields on the 10Y UST rose 3.2bp to 4.062%. The USD weakened against the EUR on Friday. EURUSD rose to 1.0964. Other G-10 currencies were also strong, including the JPY, which has tended to strike its own path recently. USDJPY has fallen to 142.22. Friday was a mixed day for the Asia FX pack. The CNH made some modest gains, falling to 7.2328, but most of the rest saw modest losses, which they may well recoup in early trading today. G-7 macro:  The US labour report on Friday showed some welcome signs of slowdown in hiring, especially after the much stronger than expected ADP survey earlier had increased anxiety about a much bigger number, but it was a very mixed story, with a falling unemployment rate, and sticky wages all indicating that the Fed will be hiking again in July. James Knightley provides more detail in this note. In terms of the numbers, non-farm payrolls rose 209 thousand, the unemployment rate declined from 3.7% to 3.6%, and average hourly wages growth was unchanged at 4.4% YoY. There isn’t much on the G-7 calendar of note today. China: PPI data for June will likely show a further deterioration from the -4.6% YoY May figure, weighed down by weak demand. Aggregate finance data is released this week, possibly as soon as today. We should see an increase over the May figure of CNY1362bn, but probably less than last year’s June number of CNY2806bn. The consensus estimate is about CNY2300bn.   What to look out for: China inflation China CPI inflation (10 July) Japan trade balance (10 July) US wholesale inventories (10 July) Australia Westpac consumer confidence and NAB business confidence (11 July) Philippine trade (11 July) South Korea unemployment (12 July) Japan PPI inflation (12 July) New Zealand RBNZ policy (12 July) India CPI inflation (12 July) US MBA mortgage application, CPI inflation (12 July) South Korea trade and BoK policy (13 July) China trade (13 July) US PPI inflation (13 July) Singapore GDP (14 July) Japan industrial production (14 July) India trade (14 July) US import prices and University of Michigan sentiment (14 July)

US stocks extend rally  But it doesn't seem to be a concern for the US equities, as despite the morose mood in Asia and Europe yesterday, the S&P500 advanced yet to another high since April 2022, as Nasdaq 100 reached levels last since at the start of last year. The US 2-year yield which consolidates near the 4.70% level on hope that the Federal Reserve's (Fed) tightening cycle is soon over. And the 7-9% drop expected in S&P500 earnings is nothing compared to a chance that the US economy could avoid a hard landing following the Fed's steep interest rate hikes.   After all, the Fed's balance sheet only slowly drops, as the Fed's reverse repo operations tank, which means that the Fed is keeping the market liquidity in a sweet spot as the US Treasury general account is being refilled after the debt limit crisis. And all that liquidity continues to be supportive of stock prices, no matter how fast the Fed increases its interest rates.

Asia Morning Bites After the Fed, attention now shifts to the BoJ tomorrow and ECB later today.   Global Macro and Markets Global markets:  US equities didn’t hate Jerome Powell’s message last night at the FOMC following the latest 25bp rate hike. But they didn’t love it either. That probably suggests Powell got it about right in terms of the overall tone. (see our detailed note here). The door is left wide open for more hikes, the question is, will they actually deliver?   The S&P 500 was down just 0.02%, while the NASDAQ fell only 0.12%. Practically flat on the day. Chinese stocks were a bit more subdued also, maybe figuring that the earlier Politburo comments were more hot air than cold cash, and the CSI 300 drifted 0.21% lower, while the Hang Seng index fell 0.36%. US Treasury markets clearly felt that they were appropriately priced for the FOMC message, and 2Y yields came off just 2.3bp, while the 10Y dropped just 1.8bp to 3.867%. These slight yield reductions enabled the EUR to claw a little ground back against the USD, and EURUSD rose to 1.1083. Other G-10 currencies – GBP and  JPY made gains against the USD, though the AUD lost some ground after their June inflation figures, which on the whole, could have been better even though they did show inflation still dropping (see our note here for more detail). Asian FX had a mixed day. The CNY has begun to drift weaker again after its Politburo-induced strengthening earlier. But there were some positive outcomes from the THB and MYR. G-7 macro:  After the FOMC excitement, which turned out not to be so exciting after all, it’s the turn of the ECB today. Here’s a cheat sheet from our European economists, rates and FX strategists, who think that they may veer towards a more data-dependent strategy after this meeting, which could be viewed as a slightly dovish tilt and lead to a weaker EUR. On top of that, we also get Advance 2Q GDP from the US, with a consensus view of 1.8%QoQ annualized growth – only slightly down from 2.0% in 1Q23. Any upside surprise is likely to see bond yields pushing higher again. China: Industrial profits data for June will not likely buck the trend of other weak data. Industrial production growth remained weak in June, while producer price inflation turned more negative. So a  further dip from May’s -12.6%YoY outcome seems possible. What to look out for: ECB and BoJ China industrial profits (27 July) ECB policy decision (27 July) US personal consumption, durable goods orders initial jobless claims (27 July) South Korea industrial production (28 July) Japan Tokyo CPI and BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)

Traders push back RBA rate hike bets until November WTI and Brent crude implied volatility falls to lowest since 2020 Turkey unloads significant portion of gold holdings The Australian dollar tumbled after the RBA kept rates on hold again and signaled they might be done tightening.  Given most economists expected a hike, aussie-dollar was ripe for a plunge.  US dollar strength also supported the decline after the Treasury increased their net borrowing estimate.     Oil The oil price rally is ready for a break as US stocks soften and the dollar firms up.  August is off to a slow start for energy traders as the outlook on demand could face rising prices.  The oil market will likely remain tight even if the oil giants, like BP start delivering large price increases.  Oil remains one of the most attractive trades and buyers will likely emerge on every dip.   Gold Gold prices are not seeing safe-haven flows as US equities tumble, because the US dollar is catching a bid as yields rise higher.  Gold is going to need to see Treasury yields come down, but that might not happen until the market fully prices all the longer-dated issuance that is coming from the Treasury.  Gold’s moment in the sun is coming, but first markets need to see the bond market selloff end. If bearish momentum remains in place, gold could find major support at the $1940 level. Until we get beyond Apple earnings and the NFP report, positioning might be limited.  

Asia Morning Bites Asian Markets have yet to fully respond to Friday's mixed payrolls report. Indonesian 2Q23 GDP today.   Global Macro and Markets Global markets:  US equities dipped slightly on Friday after a mixed labour report that contained some hints that the US economy was slowing. The S&P 500 declined 0.53% and the NASDAQ fell 0.36%. Chinese stocks had a better end to the week. The Hang Seng rose 0.61% and the CSI 300 rose 0.39%. US Treasury yields retreated sharply on Friday. The 2Y yield dropped 11.7bp, and 10Y Treasury yields fell 14.1bp to 4.034%. The USD also softened against the EUR. EURUSD rose sharply to 1.104 intraday, before settling back to just over 1.10.  The AUD took a look above 0.66 but has also settled back to 0.6572. Cable rose to 1.2747, and the JPY dropped to 141.91. Asian FX was mostly weak against the USD on Friday but will likely recover lost ground in early trading today. The KRW and THB were the two weakest currencies on Friday. The KRW is now 1309.70. G-7 Macro: Friday’s labour report was very mixed, with the headline payroll numbers coming in a bit lower than expectations, but wages growth rising and the unemployment rate falling. James Knightley thinks this should keep the FOMC on hold at their September meeting.  Fed speakers last week gave conflicting messages. Bostic suggested that as the labour market was now slowing, the Fed did not need to hike any more  - a view that is in line with our house forecast. Bowman said that more hikes were likely. There is nothing of any note from the G-7 today. Later this week, we get July CPI inflation from the US, which could move slightly higher again from June’s 3.0% reading.  Core inflation is forecast to stay at 4.8%YoY. Indonesia:  2Q23 GDP is set for release today.  The market consensus points to a 5.0%YoY expansion for 2Q with consumption getting a lift from fading inflation.  Meanwhile, softer export growth, partly due to moderating global commodity prices likely capped growth momentum amidst slower global trade.  This would match the expansion reported in 1Q with growth on track to meet government expectations.  Bank Indonesia recently retained its growth outlook for 2023 at 4.5-5.3%YoY.   What to look out for: Fed speakers Thailand CPI inflation (7 August) Indonesia 2Q GDP (7 August) Fed’s Bowman and Bostic speak (7 August) South Korea BoP current account balance (8 August) Japan trade balance (8 August) Australia Westpac consumer confidence (8 August) China trade (8 August) Philippines trade (8 August) Taiwan trade (8 August) US trade balance (8 August) South Korea unemployment (9 August) China CPI inflation (9 August) Taiwan CPI inflation (9 August) US MBA mortgage application (9 August) Japan PPI inflation (10 August) Philippines GDP (10 August) RBI policy meeting (10 August) US initial jobless claims and CPI inflation (10 August) Singapore CPI inflation (11 August) Hong Kong GDP (11 August) US PPI inflation, University of Michigan sentiment (11 August)

FX Daily: Currencies starting to detach from bond dynamics Volatility in long-dated sovereign bonds has remained elevated, but that has almost only been mirrored in a weaker yen in FX since the start of the week. The currency market is starting to detach from short-term bond swings, but the dollar’s newfound resilience could still consolidate into Thursday’s US inflation numbers.   USD: Wait and see It’s been a slow start to the week in the currency market, with the dollar being mixed but generally supported yesterday and in today’s Asian session. We continue to observe rather elevated volatility in bond markets, with long-dated Treasury yields rising again: unsurprisingly, the only notable move in FX since the weekend has been another leg higher in USD/JPY. With the Bank of Japan normalisation still looking too remote to temper bearish pressure on the yen, USD/JPY is the most exposed G10 pair to the ongoing bond market instability, especially given some signs of resilience in US equities, which limited losses in high-beta currencies. The US data calendar only includes second-tier releases until Thursday’s CPI figures. Today, the key highlights are the NFIB Small Business Confidence Optimism Index – which is expected to rise very marginally from June – trade balance figures from June, and final wholesale inventory numbers. It will be interesting to hear what FOMC members Patrick Harker and Thomas Barkin say about the economy in two separate speeches today, especially following last week’s slightly weaker-than-expected headline payroll figures. With the exception of the yen, it appears that most G10 currencies are losing their direct exposure to swings in US bond yields. At this stage, it would probably take a larger swing in yields to cause a substantial spill-over into FX than it did before the US credit downgrade by Fitch. Still, we expect some consolidation of the dollar around current levels into Thursday’s inflation numbers.

FX Daily: Manning the renminbi barricade In quiet summer FX markets, the top story remains Chinese authorities' defence of the renminbi, This stands to be a long campaign given that USD/CNY is trading near 7.30 for good reason. Elsewhere, tech stocks are making US equities look bid even though steadily higher US Treasury yields pose a challenge. And looks out for BRICS expansion news today.   USD: 'We've got tech stocks' US equity markets continue to outperform. This seems largely down to the rally in tech stocks on the AI bandwagon, where Nvidia's 2Q results are widely anticipated for tomorrow. US equity performance is adding to the sense of 'US exceptionalism', backed also by better growth numbers and a central bank that has more reason than most to stay hawkish late into its tightening cycle. There is only second-tier US macro data today, but with US Treasury yields continuing to push higher, headwinds to the equity rally are growing, and temporarily parking funds in the dollar paying 5.30% in overnight rates doesn't seem like a bad idea. Equally, we expect the dollar to stay largely bid into Friday's Jackson Hole speech from Fed Chair, Jay Powell. Two other highlights today. The first is the People's Bank of China's battle to keep USD/CNY under the 7.30 area. In addition to representing their displeasure with USD/CNY levels by printing very low onshore fixings (7.1992 last night), yesterday it seemed as though the focus was on the funding side where 1m CNH implied yields spiked over 5% (the highest since 2018) making it more expensive to run CNH short positions. As mentioned recently, Chinese FX intervention is opaque, but another measure to support the renminbi would be cutting the required reserves on FX deposits. Brief dips in USD/CNH see the dollar offered across the board, but with Chinese authorities cutting official interest rates, we suspect any CNH gains will be limited and temporary. Also today we see the start of the BRICS summit in South Africa. Expansion tops the agenda and names in the frame we think could be the United Arab Emirates, Egypt, and Bangladesh - all of which joined the BRICS New Development Bank in 2021. It would be a massive surprise were Saudi Arabia to join the grouping - which would inevitably lead to speculation over oil being priced in non-dollar currencies and a headline that may temporarily hit the dollar. DXY looks very comfortable within the 102.70-103.70 range.

Asia Morning Bites Tokyo inflation for August dips slightly on base effects. Asian markets await the outcome of Powell's Jackson Hole speech.   Global Macro and Markets Global markets:  Pre-speech nerves? US equities reversed Wednesday’s gains on Thursday. The S&P 500 dropped by 1.35% while the NASDAQ fell 1.87%. Equity futures are non-committal ahead of Powell’s speech today.  Chinese stocks put in a rare up-day on Thursday. The CSI 300 rose 0.73%, and the Hang Seng index rose 2.05%, though this may have been following the earlier US lead, and could reverse today. US Treasury yields moved a little higher yesterday after Wednesday’s large falls. The 2Y yield is back above 5% now at 5.023%, while the 10Y yield regained 4.5bp to reach 4.237%. That’s still about 13 bp off the recent high.  The increase in yields was enough to push the USD stronger against the G-10 currencies yesterday, and EURUSD is now down to 1.0799. The AUD reversed all of Wednesday’s gains falling to 0.6415, Cable has dropped below 1.26 and the JPY is back up again to just under 146. In Asia, the KRW benefited from the BoK’s hawkish pause, and has gapped down more than a per cent to 1322.35. The TWD was also among the gainers, moving down to 31.786. The VND was weaker again yesterday, rising to 24008 as it looks to recalibrate against the CNY against which it has appreciated this year. The CNY was roughly unchanged on the day at just under 7.28.   G-7 macro:  Today’s Powell speech will get a great deal of scrutiny and there has already been a lot written about what he will say, with the majority view being that he will tread a cautious path with respect to any further potential tightening, looking for confirmation from the totality of the data before committing to any additional hikes. Lots of comparisons to the Greenspan “risk management” era are being wheeled out. At the same time, the Fed pundits are also saying that he will not want to suggest that there is any pre-set path for easing. We will know soon enough how well markets take his comments. The fact that this speech is scripted, and there is no Q&A means that room for going "off-piste" is limited. Besides this, and all the other Fed speakers this weekend, the University of Michigan publishes its August consumer confidence and inflation expectations surveys. Sentiment has been picking up recently, while the inflation expectations numbers have eased back slightly. Yesterday’s data was mixed. Weaker durable goods figures but lower jobless claims.   Japan: Tokyo inflation eased to 2.9% YoY in August (vs 3.2% July, 3.0% market consensus) mainly due to base effects and lower energy prices. Utility prices dropped to -15.0%YoY from the previous month’s -10.8%. However, core inflation excluding fresh food and energy stayed at 4.0%YoY as expected for the second month, the highest level for decades. Demand side pressures are clearly building up, suggested by inflation increases in entertainment (5.7%), transport & communication (3.6%), and medical care (2.8%). On a monthly comparison, goods prices dropped -0.1% MoM sa while services prices stayed flat. Also, higher than expected PPI services inflation (1.7% YoY in July vs revised 1.4% June, 1.3% market consensus) also reinforced the same message.   There are risks on both sides in the near future. On the downside, entertainment price pressures will be partially reduced as the summer holiday season ends. On the upside: The energy subsidy program will come to an end by September; Recent renewed JPY weakness; and rises in pipeline service prices. We believe that upward pressures will likely build a bit more significantly at least for the next few months and push up inflation again. We think inflation will exceed the BoJ’s outlook for this year and next year and core inflation excluding fresh food and energy will likely stay in the 3% range by the end of this year.   Singapore:  July industrial production is set for release today.  We expect another month of contraction, tracing the struggles faced by non-oil domestic exports, which were down 20.2%YoY for the same month.  We can expect industrial production to stay subdued until we see a turn in NODX, which should also weigh on 3Q growth.   What to look out for: Jackson Hole conference Malaysia CPI inflation (25 August) Singapore industrial production (25 August) US Univ of Michigan Sentiment (25 August)

Atlanta Fed’s GDP estimate sees real Q3 GDP growth of 5.9%, up from last week’s 5.8% Fed Chair Powell’s Jackson Hole Speech is scheduled for tomorrow at 10:05 am EST Fed’s Harker (voter) says they’ve done enough with rates while Fed’s Collins (non-voter) more rate hikes may be needed   As Wall Street awaits Fed Chair Powell’s Jackson Hole speech, some traders shifted their focus to Federal Reserve Bank of Philadelphia Patrick Harker’s CNBC interview. When talking about interest Harker said, “Right now, I think that we’ve probably done enough.” Harker is a voting member of the FOMC and he appears to be positioning himself to turn dovish in the near future. He also noted that, “I’m in the camp of, let the restrictive stance work for a while, let’s just let this play out for a while, and that should bring inflation down.” He added that if inflation comes down quicker, they may cut rates sooner. A month ago, Harker was saying that they are making progress with inflation and that sometime next year the Fed will start cutting rates. Harker for most of this year has been viewed as a neutral FOMC voting member, one notch below Fed Chair Powell who has being leaning-hawkish.  Harker’s dovish comments don’t imply that is what we will get from Fed Chair Powell, but it does suggest the committee might be gaining confidence that they will be able to bring down inflation to the Fed’s 2% target. Fed’s Collins, a non-voter noted that “We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time.”   Foreign Investment Flows US stocks initially rallied after Nvidia’s miraculous earnings reignited the AI trade.  If AI is the future, then Nvidia is the “fluxcapacitor” that will drive the biggest transformation in tech since the Back to the Future trilogy wrapped up in the 1990s.  With Europe looking more recession bound, foreign investment might steadily come to US equities and that should support US equities. It is clear that massive investments are coming AI’s way and that could keep stock market bulls very happy as long as we don’t have Fed Chair Powell spoil the party.  If the bond market selloff doesn’t resume after Powell’s speech, the stock market might have a bullish case to make a run at record highs, which should provide underlying support for the dollar.   US data keeps Fed rate hike expectations low for the September 20th This morning’s round of data didn’t really move the needle on Fed rate hike expectations.  Yesterday odds were at 12% and today they rose to 17% for the September 20th meeting. Filings for unemployment benefits came in less than expected, signaling that the labor market is slowly cooling.  Initial jobless claims fell by 10,000 to 230,000, while continuing claims dipped from 1.711 million to 1.702 million.  A surge in claims (+3.7K) came from Hawaii as they were heavily impacted by the devastating wildfires. Jobless claims will likely stabilize or rise going forward. Durable goods order data showed business spending activity barely increased as companies became more cautious with the budget. ​ Bookings for all durable goods tumbled ​ given softness with the volatile commercial aircraft orders. ​ Businesses are turning very cautious here given how high borrowing costs have gotten and over the deteriorating outlook for business equipment.   USD/JPY 60-minute chart   USD/JPY (60-minute chart) as of Thursday (8/24/2023) shows the bullish move that started yesterday has continued by respecting short-term trendline support(shown in purple).  If we see a substantial rally towards last October’s high, that could trigger intervention pressure from Japan.  If the surge in Treasury yields continues, that could provide some tactical bullish positioning between the 145.00-148.00 region. If risk aversion emerges post Jackson Hole, the 143.50  level provides major support and a possible re-entry for long-term bulls.  

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

Investors were not impressed by the iPhone 15 and Apple Watch Series 9 reveal, causing Apple's shares to drop 1.8% and affecting the Nasdaq 100, which fell 1.1%. Adobe's stock also declined by 4% ahead of its upcoming earnings report. Meanwhile, OPEC's forecast of a tight oil market led to crude oil prices surging to 10-month highs. OPEC anticipates a significant 3.3mb/d supply deficit in Q4, one of the largest in over a decade. CAD outperformed in the G-10, while EUR made gains following an ECB leak about potential inflation forecast increases. Today's focus is on the US CPI report.     US Equities: Investors were not impressed by the iPhone 15 and Apple Watch Series 9 unveiled on Tuesday, seeing the shares of Apple drop by 1.8%. The Apple decline weighed on the Nasdaq 100 which slid 1.1%. Adding to the selling was a 4% decline in Adobe ahead of reporting on Thursday. Another focus in the tech space was Oracle, which plummeted 13.5% on weak cloud sales. The S&P500 shed 0.6%. Fixed income: The curve flattened as the 2-year yield rose 3bps to 5.02% while the 10-year yield slid 1bp to 4.28%. The short end was under some pressure ahead of today’s CPI data while the long ends held firm and absorbed the USD35 billion 10-year auction and around USD20 billion corporate bond issuance well. China/HK Equities: The Hang Seng Index ended a lackluster session with a thin trading volume session, down 0.4%. Energy and pharmaceutical names weighed on the benchmark. The Hang Seng Tech Index shed 0.5% as gains in Xiaomi and EV makers were offset by losses in Internet stocks. FX: Higher crude oil prices made CAD the G-10 outperformer with USDCAD down to 1.3550 from 1.3590 but EUR attempted to catch up in late NY/early Asian hours on ECB leak that inflation forecasts may be raised higher which are seen to be raising the prospect of a hike this week. EURUSD jumped higher to 1.0760 with EURGBP above the 0.86 hurdle as GBPUSD dipped below 1.25 on not-so-hawkish labor market. USDCNH sticking close to 7.30 and AUDUSD around 0.6425. Commodities: Crude oil prices rallied to fresh 10-month highs after OPEC forecast a significantly tight market. In its latest monthly outlook, the oil group said the market may experience a shortfall of 3.3mb/d in the fourth quarter of the year. This would make it one of the largest deficits in more than a decade. OPEC’s estimate was at odds with EIA’s predicted deficit of 230kb/d, and the IEA’s monthly report will be on watch today. Prices eased from the peaks as API reported a crude inventory build after four straight weekly draws although Cushing hub stockpiles declined, and official data will be reported today. Gold dropped below 200DMA as inflation concerns returned, bringing more fear of rate hikes and US CPI will be on watch today.    

Asia Morning Bites China profits data for October to dominate Asian macro releases on an otherwise quiet day.   Global macro and markets Global markets: US Treasuries ended the week with yields rising again. The yield on the 2Y Treasury rose 4.9bp, while the 10Y yield went up 6.2bp to 4.466%, taking it close to the 4.50% line again. The USD was softer again on Friday. EURUSD rose to 1.0943. The AUD has tested the 0.6590 level before settling down to around 0.6584. Sterling has broached 1.26 for the first time since September. But the JPY is still hovering below 1.50 and hasn’t gained as much as its other G-10 peers. Other Asian FX was mostly softer on Friday and will likely catch up with the G-10 moves this morning. The weaker currencies, KRW, THB, and TWD will probably outperform the others. The CNY is little changed at 7.1490. US equities did very little on a low trading volume day as many market participants dragged the Thanksgiving holiday over to the weekend. US equity futures are looking a bit negative today. Chinese markets were down on Friday, possibly reflecting unease after a criminal probe was launched into the financial conglomerate, Zhongzhi, though most of the weakness in the CSI 300 came from the info-tech part of the index, along with consumer discretionary stocks and industrials. Financials were down 0.44% on the day. G-7 macro: Friday’s very meagre offerings on the macro front don’t offer much new insight. The S&P PMI indices for the US rose fractionally for manufacturing but remained just in contraction territory at 49.9. The service sector PMI was stronger at 50.3, but down from the October 50.8 reading, and takes the composite PMI down to just 50.4. There isn’t enough history for this series to draw any meaningful conclusions from this. Today, we just get US new home sales for October. The US housing market has been doing surprisingly well, but the market is looking for a small 4.7% MoM decline this month – mainly a statistical pullback from the very robust September figure. China: Industrial profits data for October come out today. This is expected to show the contraction in earnings abating slightly, in line with some of the slightly stronger PMI and activity figures. The September figure was a -9.0%YoY ytd decline. Figures around the -6.7% mark have been cited as the consensus forecast. What to look out for: China Industrial Profits and US new home sales China industrial profits (27 November) Thailand trade (27 November) US new home sales (27 November) Australia retail sales (28 November) Taiwan GDP (28 November) US Conference board consumer confidence (28 November) South Korea business survey (29 November) US GDP, personal consumption, wholesale inventories (29 November) US Fed Beige book (30 November) South Korea industrial production and BoK meeting (30 November) Japan retail sales and industrial production (30 November) China PMI manufacturing and non-manufacturing (30 November) US initial jobless claims and personal spending (30 November) US pending home sales (30 November) Japan jobless rate and job-applicant ratio (1 December) South Korea trade balance (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US ISM manufacturing (1 December)

USD slips below 200-DMA despite rebound in yields  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Last week ended on a positive note where the US equities advanced to fresh highs since summer on a holiday shortened trading week. The S&P500 gained for the 4th consecutive week and closed the week near 4560, the rate-sensitive and technology heavy Nasdaq 100 extended gains beyond the summer peak, and hit an almost 2-year high, while the VIX index, which is known as Wall Street's fear gauge, or the volatility index, slumped to the lowest levels since January 2020. The belief that the Federal Reserve (Fed) is done hiking the interest rates, and the rapidly falling US long-term yields are at the source of this optimism – especially after the latest CPI update in the US printed a softer-than-expected number, suggesting that inflation in the US fell to 3.2% last month. This week, investors will find out if the Fed's favourite inflation gauge, the PCE index, tells the same story. The PCE index is expected to have fallen from 3.4% to 3.1% in October, and core PCE may have eased from 3.7% to 3.5% during the same month. Anything less than soothing could lead to some more correction in the US long-term yields. The 10-year yield jumped to 4.50% early Monday, though the positive pressure slowed above 4.50%.   News that the Black Friday spending jumped 7.5% this year to hit a record high of $9.8 billion certainly reminds investors that consumer spending in the US remains strong. The latter gives a strong support to the US economy, which in return gives a solid confidence to the Fed that keeping the rates high for long is not necessarily a bad idea. Today, the sales continue with Cyber Monday deals.   Yet the holiday shoppers' enthusiasm is less visible on the financial markets this Monday. The US futures are down, along with their Asian peers on the back of a rebound in US yields, the nearly 8% slump in Chinese industrial profits in October and news that children in China are suffering from respiratory infections – which spurs speculation that it could be a new strain of Covid. Chinese authorities say that it's simply a mix of known respiratory diseases. But you know, once bitten, twice shy.   

Asia Morning Bites China 1Y MLF rates and Indonesia trade data are due today. Markets are digesting the Taiwan election results..   Global macro and markets Global markets:  US Treasury yields lurched lower again on Friday, and with little on the data calendar, this was probably a reaction to Middle East developments as well as perhaps some precautionary positioning ahead of Taiwan’s election. 2Y yields fell 10.1bp, and fell to 4.144%. There was less movement at the back end. 10Y yields fell just 2.7bp to 3.939%. Raphael Bostic suggested that further progress on reducing inflation was likely to be slow and cautioned against cutting rates too early. EURUSD hasn’t responded yet to the lower yield environment and edged a bit lower to 1.0947, which is consistent with a market that has become more risk-averse. G-10 currencies were not much changed. The AUD lost a little ground. But Cable is fractionally higher, and the JPY is also a little stronger at 145.03. The APAC region has also not shown much movement outside some weakness of the VND. USDCNY is currently at 7.1675. US equities had another flat day on Friday. Both the S&P 500 and NASDAQ were more or less unchanged.  Chinese stocks were slightly lower. The Hang Seng and CSI 300 both fell 0.35%.   G-7 macro:  Friday was pretty quiet on the macro front within the G-7. UK activity data was quite mixed, but there was a slightly better set of trade figures which may have helped sterling a little. US PPI for December was a little lower than expected which may have helped to encourage bond yields lower. Today there is nothing of note from the G-7.   Taiwan: As noted earlier, Taiwan re-elected a DPP President, and William Lai Ching-te was elected to the top job marking a third consecutive term for a DPP Presidency. Turnout was good, at 72% and President Lai received just over 40% of the vote. The more China-friendly KMT party got 33.49% of the vote, and the TPP got 26.45% of the vote.  It wasn’t all good news for the DPP though. The Legislative Yuan (parliament), which the DPP held in a narrow majority of its 113 members before the election, dropped to 51 seats, one less than the KMT, with the TPP picking up three seats taking their total to 8. This will make it harder for the DPP to pass new policies. Besides some slightly provocative language from both sides of the Strait of Taiwan, there don’t appear to be any reports of anything more tangible as yet.   China: Ahead of the activity data deluge later this week, China decides on its 1Y MLF rates today. Even though the CNY is still looking quite soft at 7.16-7.17, the consensus has pencilled in a 10bp cut of the rate from 2.5% to 2.4%. This follows some soft money supply figures at the end of last week.    Indonesia: Indonesia reports trade figures today. Exports will likely remain subdued because of soft global demand but imports are tipped to show a modest gain due to capital goods imports. This should keep the trade balance in surplus, though the market consensus has the surplus slipping to roughly $1.9bn. A smaller trade surplus would mean less support for the currency which could prompt BI to hold rates at 6% for longer.   What to look out for: China lending rate and Indonesia trade China new loans CNY (9-15 January) Japan M3 and tool orders (15 January) China medium-term lending rate (15 January) Indonesia trade data (15 January) India trade data (15 January) Philippines remittance data (15 January) Australia Westpac consumer confidence (16 January) Japan PPI inflation (16 January) US empire manufacturing (16 January) Singapore NODX (17 January) China GDP, industrial production, retail sales (17 January) Indonesia BI policy (17 January) US retail sales, industrial production and the Fed’s beige book (17 January) Fed’s Waller speaks (17 January) Japan core machinery orders (18 January) Australia labor data (18 January) Japan industrial production (18 January) US initial jobless claims, housing starts and building permits (18 January) Fed’s Williams and Bostic speak (18 January)

FX Daily: Unwinding the spurious dollar rally The dollar strengthened across the board yesterday with no clear catalyst. We suspect that in an environment that keeps pricing large Fed cuts, USD rallies aren’t very sustainable. We’ll be awaiting the next leap higher in short-term USD rates to endorse a dollar rebound. Today, the focus is on PMIs and the Bank of Canada, which may disappoint dovish bets.   USD: Sticky Fed cut bets hinder USD rebound The dollar rebounded sharply yesterday as the risk-on mood generated by Beijing’s reported stock support package evaporated during London trading hours. The Hang Seng is having another good day today, even though Beijing’s measures appear an emergency and temporary solution, more a symptomatic treatment rather than addressing fundamental economic concerns. European and US equities failed to follow the Hang Seng's gains yesterday but also showed broad resilience. The rise in US rates did not look large enough to justify the rotation from European FX (EUR and GBP) back into the dollar. In all, we admit the dollar jump was quite surprising, and without a clear catalyst, and therefore see room for the dollar correction initiated overnight to extend today. One dynamic to keep an eye on – however – is the impact on markets of US Republican Primaries. The underperformance of the Mexican peso since the start of the week may be indicating markets are pricing in a larger chance of Donald Trump winning the presidency after Ron DeSantis endorsed him. Trump won the New Hampshire primary yesterday, securing 55% of votes and casting serious doubt on the future of Nikki Haley’s campaign. It all seems rather premature, but Banxico is also on the brink of a rate cutting cycle – as discussed here by our rates team – which can compound to keeping the peso soft. This should not translate into a one-way direction for the peso though, we still expect to see high demand in the dips, not least due to the preserved carry attractiveness and our view of a US dollar decline. Today, the focus will be on S&P Global PMIs across developed countries. Markets have become gradually more sensitive to this US survey, even though the ISM remains the main reference. Expectations are for a tiny decline in manufacturing PMIs (already in contraction area) and a stabilisation in services. We don’t have a strong bearish view on the dollar in the short-term, but yesterday’s moves did appear overdone in an environment where Fed funds futures still price in 130/140bp of cuts this year. We’ll be more convinced of the sustainability of a near-term dollar rebound once short-term Treasury yields take another leap higher (two-year rates are down nearly 10bp since yesterday). Revamped rate hike bets in Japan are pushing USD/JPY lower this morning, favouring a broader dollar correction which could have legs today. Francesco