Head of Commodity Strategy
Summary: The Commitments of Traders reports highlight speculators positions and changes made during the week to September 22 in FX, bonds and stocks. A week were the dollar, at one point having its best week since April, was bought against all the ten currencies on our board. In bonds, speculators continue to accumulate a record net short in US T-bonds
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
This summary highlights futures positions and changes made by speculators in forex, bonds and stocks up until last Tuesday, September 29.
A week were the S&P 500 took a tumble before ending up by 0.6%. Key drivers were a boost to banks led by HSBC, stronger economic reports from China and continued hopes that U.S. politicians would agree a new fiscal stimulus deal. Elsewhere the dollar traded close to unchanged against a basket of major currencies, bond yields were a tad softer while the Bloomberg Commodity Index lost 1% with all the major sectors trading lower.
The dollar traded lower against EUR, JPY and GBP but higher against every other contract on our board below. At one point during the reporting week the dollar had its best period since April and as a result, the Greenback was net bought against all ten IMM currency futures and the Dollar Index. Overall it drove an 11% reduction in the dollar short to $31 billion. One-third of the change occurred against sterling which despite trading higher by 1% on the week still saw a major reversal from a long back to a net short.
"Record Shorts Show New Bets on Steeper Treasury Yield Curve" was the headline in a Bloomberg article. It stated that the non-commercial short position in longer-dated Treasuries hit a record in the week to September 29. In this update we use the more detailed breakdown between asset managers, leveraged funds (another name for hedge funds and speculator) and dealer intermediaries.
While the numbers differ the direction of the position does not. The leveraged fund net short reached a record 418k lots short last week. The almost controlled (by the FED) nature of the front of the curve out to ten years have seen speculators betting or hedging against rising inflation and rising bond yields move further out the curve.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
