Weekly Commodities Update Weekly Commodities Update Weekly Commodities Update

Market Insights Today: Hot CPI, wild markets – Oct 13, 2022

Saxo-Strats
APAC Strategy Team

Summary:  The Nasdaq 100 and S&P 500 indices plunged after hot US inflation (the highest in 40-years), then markets whip sawed higher, moving in a 5% range fueled by short selling covering. That being said, the futures market is now pricing in US interest rates will peak at 4.9% next year, setting the tone for value over growth assets. APAC equities may meet a similar fate to US stocks and have a wild day of trade, however most futures are trading higher suggesting APAC will have a positive day of trade.. We cover some of the most traded instruments at Saxo this week, with buying of Crude oil Futures picking up with the OPEC and EIA still predicting demand will outpace supply in 2023. Crude oil rallied 2% overnight.


What’s happening in markets?

The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) indices plunge after hot CPI then whip saw higher, moving in a ~5% range. Here’s what you need to know now 

Core inflation (which excludes volatile food and energy items) rose to a 40-year high in September which gives the Federal Reserve reason to continue with its aggressive interest-rate hikes. The Nasdaq 100 fell over 3% and the S&P500 fell 2.35% before both major indices whipsawed higher with the Nasdaq ending up 2.3% and the S&P500 up 2.6%. Short selling covering would have played a huge role in the reason markets whipsawed higher. Institutional investors spent more than $10 billion on put contracts (insurance on downside protection) on individual stocks last week. That’s a record. And we’ve been speaking about this for some time. At Thursday’s low, a lot of those contracts would have become immediately profitable when the market fell; causing traders to cover their put positions. That being said, the futures market is now pricing in US interest rates will peak at 4.9% next year, with the Fed expected to hike by 0.75% when they next meet, which implies markets still have to price this in, and so, too investors. We also believe markets will be driven by a ‘peak hawkishness’ narrative, essential where growth assets typically continue to face pressure and value strengthen. Also recall, amid the energy crisis, there are the most rising-free cash flows in energy markets, which offer value. 

Australia’s ASX200 (ASXSP200.1) may likely meet a similar fate to US equities and have a wild day of trade 

 
In Australia a similar situation is playing out with the futures market is now pricing in interest rates will peak at 3.9% next year.  We have seen the RBA express ‘peak hawkishness’, is behind it. But the market is still pricing in rate rises will continue, but at a steady pace. This means growth sectors remain pressured and value strengthens. Consider; amid the energy crisis, there are the most rising-free cash flows in energy markets, which offer value and support share price growth. This is worth perhaps reflecting on, especially given coal prices hit fresh highs and we are not at peak coal demand season (January) yet. As such energy prices seem supported higher. 


What to consider?

Most traded instruments at Saxo this week 

 

The most traded stocks this week at Saxo in Australia are Tesla, Apple, Whitehaven Coal (hit new high), Coles, and Bank of Queensland results. What’s the takeaway here? We need to reflect on the trends. Trends are your friends when it comes to making profits in markets. In the banking sector; we heard from Bank of Queensland who is forecasting house prices to drop and loan growth to slow. Coal prices are moving up and continues to be supported. And in when it comes to the most transacted upon futures, in commodities; we've seen a pick-up in buying of Crude oil Futures; with the OPEC and EIA still predicting demand will outpace supply in 2023, meaning we could expect higher oil prices into next year.

 

For a week-ahead look at markets – tune into our Saxo Spotlight.

For a global look at markets – tune into our Podcast.

 

 

 

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.