Platform GL Asia 1406x160 v2

Global Market Quick Take: Asia – June 7, 2024

Macro 6 minutes to read
Saxo Be Invested
APAC Research

Key points:

  • Equities: US equities traded sideways as US data continues to weaken.
  • FX: MXN drops 2% on reform concerns
  • Commodities: Gold extends gains for two days
  • Fixed income: Rate cuts continue to support bonds
  • Economic data: US NFP

------------------------------------------------------------------

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

QT 7 June
Disclaimer: Past performance does not indicate future performance.

Equities: US equities traded within a narrow band as they awaited this morning's economic updates. US data continues weakening with unit labour cost coming in at 4%, below estimates of 4.7% and initial jobless claims ticking higher at 229K. US futures traded a muted start, with a minor drift toward losses by mid-morning—small caps lagging notably, as signaled by the 0.5% dip in the Russell 2000 Index. Communications, Health Care, and Consumer Staples took the lead, with Utilities, Industrials, and Materials trailing behind—a sign of investor hesitancy about the market's trajectory. Both the ECB and BOC have now cut rates while the Fed is unlikely to cut until September 2024.

FX: The dollar saw some upside earlier on Thursday but it reversed back later and ended the day lower again. Safe havens outperformed, signaling some growth weakness concerns may be setting in and focus is on the US non-farm payrolls data out today. USDJPY wobbled around 156 while USDCHF took a look below 0.89. Mexico’s lawmakers raised reform alarm, which could likely spook carry trades and provide a further floor on low-yielding currencies. MXNJPY dropped to 8.65 from highs of 8.95 yesterday. EURUSD was choppy on the ECB decision but stayed below 1.09 while EURGBP was higher at 0.8515.

Commodities: Oil is poised for a weekly drop after OPEC+ unexpectedly signaled a supply boost this year, leading some member countries to affirm their commitment to market stability.West Texas Intermediate crude remained near $76 a barrel, stabilizing after a 2% increase on Thursday, buoyed by reassurances from OPEC+ members, including Saudi Arabia. Brent settled just shy of $80. OPEC+ officials emphasized the group's readiness to respond to market fluctuations with supply adjustments. Amid concerns about the demand forecast, oil prices have been on a downward trend since the start of April. Yet, regional tensions in the Middle East, particularly Israel's intensified warnings to Hezbollah in Lebanon, suggest potential disruptions that could reignite price increases, as fears of conflict with the Iranian-supported faction grow. Gold advanced as traders looked past fresh US data and the European Central Bank’s widely expected interest rate cut to focus on Friday’s key nonfarm payrolls report for clues on the Federal Reserve’s rate path.

Fixed income: Market participants have ramped up wagers on interest rate reductions over the last week, encouraged by a series of U.S. economic figures falling short of expectations, the Bank of Canada's recent policy easing, and anticipation of a European Central Bank (ECB) rate cut—a move that materialized on Thursday. U.S. Treasury 10-year yields hovered around 4.29%, with swap markets increasingly factoring in a Fed rate cut beginning in November and another likely in December. Conversely, yields on 10-year German bunds climbed by four basis points as the ECB lifted its inflation projections, and policymakers largely dismissed the possibility of an additional cut in July. ECB President Christine Lagarde emphasized that despite a significantly brighter inflation outlook, the central bank intends to maintain "sufficiently restrictive" policy rates for as long as necessary.

In Asia, over half of the analysts tracking the Bank of Japan expect a reduction in the central bank's government bond purchases at the upcoming meeting, with an increasing contingent also predicting a potential interest rate increase come July.

Macro:

  • ECB review: Historic move from the ECB to cut rates by 25bps bringing the deposit rate down to 3.75%. While the move was well-telegraphed, but it came with higher growth and inflation forecasts continuing to raise the question whether this may be a policy error. The ECB however signalled a data-dependent approach to from here, not pre-committing to further rate cuts for now.
  • US jobless claims rose to 229k from the upwardly revised 220k for the prior week, coming in above expectations again. The rise in the weekly claims is consistent with the softness of the labour market seen recently, although it is not yet something to be overly concerned about but many do expect the claims numbers to tick up throughout the Summer.
  • NFP preview: Next key focus today will be the non-farm payrolls. April print showed a gradual cooling in labour market conditions, and several labor market indicators have showed modest softening last month which could get reflected in the May NFP print. Consensus expects headline payrolls to have risen by 180k in May, just a notch above April 175k with unemployment rate steady at 3.9%, the highest level since early 2022. Market reaction to the jobs data may be measured, especially if the print is hot given that it may not be enough to turn the Fed hawkish. If headline jobs growth comes in softer than expected, markets may try to bring forward Fed rate cut expectations, and that can fuel risk-on sending stocks higher and the US dollar lower as long as growth concerns do not over-rule the rate cut narrative.

Macro events: CBR Announcement, RBI Announcement, German Industrial Production (Apr), EZ GDP Revised (Q1), US Jobs Report (May), Canadian Jobs Report (May), Chinese Trade Balance (May).

Earnings: Graham, J.Jill

News:

  • US stock futures steady with nonfarm payrolls in focus, Gamestop surges (Investing)
  • Japan consumer spending rises in April for first time in 14 months (Investing)
  • Possible ‘some fluff’ is keeping Nvidia high, says Damped Spring’s Andy Constan (CNBC)
  • European equities beginning to outpace U.S., says Fairlead Strategies’ Katie Stockton (CNBC)
  • Short bets against Nvidia stand at $34 billion, S3 Partners says (Yahoo)
  • GameStop surges almost 50% as 'Roaring Kitty' teases livestream (Yahoo)
  • Oil Extends Recovery as OPEC Taper Worries Ease (Barron’s)
  • Stock Market News: Dow Edges Up Ahead of Jobs Report (Barron’s)

For all macro, earnings, and dividend events check Saxo’s calendar.

For a global look at markets – go to Inspiration.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

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

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

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