Platform GL Asia 1406x160 v2 Platform GL Asia 1406x160 v2 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 2024 Q2

2024: The wasted year

01 / 05

  • 350x200 steen

    Macro: It’s all about elections and keeping status quo

    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.

    Read article
  • 350x200 charu (1)

    FX: The rate cut race shifts into high gear

    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.

    Read article
  • 350x200 peter

    Equities: The AI and obesity rally is defying gravity

    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.

    Read article
  • 350x200 althea

    Fixed income: Keep calm, seize the moment

    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.

    Read article
  • 350x200 ole

    Commodities: Is the correction over?

    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.

    Read article

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.