US Equities: After two days of sharp selloffs, markets somewhat stabilized last Friday, but sentiment remained fragile and technicals weak. The S&P500 dropped 0.2%, hitting a new recent low, and the Nasdaq 100 ended nearly flat. Nvidia rose by 1.5%.
Fixed income: Treasuries recovered some of their losses post-FOMC, with the 10-year yield declining 6bps last Friday, closing at 4.43%. No specific news drove this movement. We believe that, like us, investors see value in Treasuries after the recent selloffs that pushed yields to levels not seen since 2007.
China/HK Equities: The Hang Seng Index saw a decent rally, reclaiming 18,000 and closing up 2.3% at 18,057. This may signal exhaustion in the recent selling waves. Additionally, China and the US are forming working groups on economic and financial matters. China is also reportedly easing the 30% foreign ownership cap and 10% single foreign shareholder cap on listed companies. Technology stocks led the surge, with the Hang Seng Tech Index jumping 3.7%, driven by internet and EV stocks. Mainland investors, however, sold Hong Kong-listed stocks worth HKD4.2 billion, while overseas investors returned as net buyers, acquiring RMB7.5 billion worth of A shares. The CSI300 increased by 1.8%.
FX: Dollar index closed a 10th straight week of gains with losses led by GBP and CHF after the BOE and SNB announced a surprise pause in their monetary policy decisions last week. NZD emerged as the G10 outperformer with Q2 GDP data coming in better than expected, followed by SEK (on FX hedging announcement) and CAD (with oil prices staying higher). USDJPY rose back higher towards 148.50 after BOJ’s announcement on Friday lacking any hints of a potential shift by early 2024. EURUSD holding up above 1.0635 support and any upside in German Ifo today or hawkish Lagarde could bring it back closer to 1.07 with EURGBP testing a break above 0.87.
Commodities: Brent still around $93/barrel after Russia temporarily banned gasoline and diesel exports further adding to supply tightness concerns. Demand expectations, meanwhile, could get a lift this week with China travel expected to pick up. Iron ore prices rose to USD 121/t with strong demand from steel mills and restocking ahead of the National Day holiday week. Gold continues to be resilient despite Fed’s hawkish tilt.
- UK PMIs confirmed the hint in last Thursday’s Bank of England Minutes that they had deteriorated. Manufacturing remained in contraction at 44.2 in August (prev 43) while services dipped deeper in contraction at 47.2 (prev. 49.5)
- Eurozone PMIs were mixed with Germany improving but still remaining weak but France deteriorating. German manufacturing PMI was at 39.8 (prev 39.1) and services was 49.8 (prev 47.3), while France manufacturing PMI was at 43.6 (prev 46.0) and services at 43.9 (prev 46). Overall Eurozone manufacturing PMI dipped a notch to 43.4 from 43.5 while services held up but still in contraction at 48.4 vs. prev 47.9.
- US S&P Global PMIs saw manufacturing improve but services deterioate, but its Composite reading is still just above 50 (50.1 from 50.2) and of late has been sharply at odds with the more established (and much stronger) ISM surveys.
- Fed speakers struck a hawkish chord with Governor Michelle Bowman (voter) saying she expects “further rate hikes”. Boston Fed President Susan Collins (non-voter) and San Francisco Fed President Mary Daly (non-voter) talked about higher-for-longer.
- The Bank of Japan maintained a dovish rhetoric, with Governor Ueda trying to undo the hawkish interpretations from his previous remarks. For a full review, read Friday’s Macro/FX article.
In the news:
- U.S., China agree to forge new economic, financial dialogues (Washington Post)
- China mulls easing foreign stake limits to lure global funds (Bloomberg)
- Apple boosts retail worker pay to cope with tighter labor market (Bloomberg)
- Amazon to run ads in Prime Video shows and movies (WSJ)
- UAW strikes more GM, Stellantis facilities, cites Ford progress (Reuters)
- Microsoft’s Activision Deal Clears Main Hurdle as U.K. Regulator Accepts Changes (WSJ)
- German Ifo (Sep) exp 85.2 (prev 85.7) due 1600 SGT
- US Chicago Fed National Activity Index (Aug) due 2030 SGT
- ECB President Lagarde testifies to parliament, and the (usually hawkish) Schnabel speaks at 2100 SGT
Key company events:
- Alibaba’s Cainiao plans to raise at least $1 Billion in Hong Kong IPO soon (Bloomberg)
- China Evergrande scraps creditor meetings in risk to US$20 billion debt restructuring as homes sales sag, lawsuits snowball (SCMP). The Chinese developer is unable to meet the regulatory qualifications for the issuance of new notes under the proposed restructuring of offshore debts (China Evergrande’s filing with the HKEX).
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.