Head of FX Strategy
Summary: Big tech led gains in equities ahead of Bank of Japan and RBA decisions today kicking off a heavy central bank week with Fed, BOE and SNB ahead later in the week. While the AI theme is back in focus with Nvidia’s chip launch and Apple’s Google Gemini deal, US equity futures are turning lower amid the Fed risks ahead. USDJPY remains muted while Japanese equities edge slightly lower with Bank of Japan expected to end negative rates today. Meanwhile in commodities, copper and oil extended the recent run higher after surprisingly strong China economic data out yesterday.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: US stocks rebounded from a recent sell-off with NASDAQ 100 closing at near 1% gains and S&P 500 up over 0.6%. Gains were mostly driven by tech stocks as AI optimism returned to the forefront with Nvidia revealing its newest line of hotly anticipated AI chips, named Blackwell, at the GTC conference. Meanwhile, Alphabet surged 4.6% on reports that Apple will use Google’s Gemini AI in iPhones. Tesla also jumped 6% on reports of potential price hikes for some of its European models. However, after-market sentiment cooled with Nvidia down 1.8%, and markets jitters ahead of central bank decisions that kick off from today. First up is Bank of Japan and RBA, followed by Fed on Wednesday and Bank of England and Swiss National Bank on Thursday.
In Asia, Nikkei 225 saw a muted start ahead of the likely BOJ exit decision today, while Chinese stocks will also be in focus after strong economic data from China yesterday helped markets close higher. CSI 300 closed up 0.9% and Xiaomi earnings are on tap today and its first EV launch on March 28 still in focus.
FX: The dollar saw a modest upside in the US session with Treasury yields higher ahead of the key central bank decisions this week. Scandis and Swiss franc led the declines, with USDSEK jumping above 10.40 after being rejected at that level a few times. NOK found some support from the rising oil prices, but USDCHF got close to a re-test of the 0.89 handle. EURCHF printed fresh YTD highs at 0.9657 with SNB meeting on Thursday still likely to throw a dovish surprise as we discussed in the podcast yesterday. EURUSD was attempting a rally to 1.09+ but dollar strength came in the way and pair slipped back to 1.0870. GBPUSD remained range-bound around 1.2720 ahead of UK CPI and BOE decision this week, but likely also supported by a stronger equity risk sentiment as we noted in our weekly FX chartbook. AUDUSD lifted higher to 0.6570+ on upbeat Chinese eco data yesterday but could not sustain the momentum overnight, and RBA tone will need to be hawkish today to bring back gains. USDJPY quiet ahead of monumental decision from BOJ today, but gains in yen coming through against CHF.
Commodities: Iron ore returned to over $100 with nearly 4% gains as China’s factor output and investment at the start of the year was upbeat, but focus stays on Copper which extended its recent rally amid positive signals from China adding to the price action coming on the back of supply risks at mines and smelters. Copper is a key metal for energy and AI transition, but iron ore could remain volatile. Crude oil also got close to a five-month high with Ukraine’s drone attacks on Russian refineries over the weekend adding to supply risks along with OPEC+ cuts and deamd signals remaining strong.
Fixed income: Treasuries continued to be offered on Monday as the spate of central bank decisions are awaited. The 2-year yield got in close sight of the 4.75%, reaching its highest level YTD, with odds of a June Fed rate cut now hovering at about 60%. Focus today will be on BOJ decision after a Nikkei article last night noted that the BoJ will end its yield curve control, ETF purchases, and NIRP.
Macro:
Macro events: BoJ Announcement, RBA Announcement, German ZEW Survey (Mar), Canada CPI (Feb)
Earnings: Xiaomi, China Unicom Hong Kong, Partners Group
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
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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.
