Market Quick Take - August 13, 2021

Market Quick Take - August 13, 2021

Macro 6 minutes to read
Saxo-Strats
Saxo Strategy Team

Summary:  The S&P 500 set another record yesterday with no change seen overnight despite some weakness in Asia driven China's regulatory curbs, the delta variant hampering the region's economic reopening together with a slump in semiconductor shares on chip outlook worries. Treasury yields trade softer, but near a one-month high following tepid demand at yesterday's 30-year auction. The dollar meanwhile remains close to key resistance which it so far has failed to break. In commodities, a production downgrade supports wheat, gold has found a small bid following a bumpy week while virus fears keep oil prices capped.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - rising US yields have already lost momentum and combined with good earnings yesterday, especially among technology companies, Nasdaq 100 futures have bounced back above the 15,000 level and trading around the average price since late July. S&P 500 futures on the other hand blasted higher yesterday to a new all-time-high and are trading above the 4,450 level in early European trading. With a quiet session and no major macro releases we expect a low volatility session with an attempt to set new highs in the S&P 500 or retreat mildly into the weekend.

EURUSD – bouncing off the local lows from early April as US interest rates have stopped their advance. We still see the USD could strengthen more from current levels with economic growth slowing in China, uncertainty over the delta variant, and potential more hawkish tone at Jackson Hole reflecting the positive momentum in the US economy. €1.1700 is the key support level to the downside while the upside is capped at €1.1755 before €1.1838 which is the natural gravitational point should it attempts to move higher.

Chicago wheat (WHEATDEC21) hit the highest levels in three months after the monthly supply and demand report from the US Department of Agriculture cut the outlook for production in multiple regions, led by Russia, the world’s biggest exporter. Corn surged the most since June and soybeans touched an almost two-week high before gains got trimmed ahead of the close. The downgrades all triggered by challenging weather developments across the world these past few months, and the report now leaves the outlook for these key crops increasingly tight ahead of the northern hemisphere winter, and the coming growing season in South America.

Gold (XAUUSD) is trying to consolidate following Monday’s flash crash that was triggered by the threat of rising yields and dollar. In addition, the slump on Monday was strengthened by the slump below an area of support-turned-resistance between $1750 and $1765. A break above would send a supportive signal to a market still dizzy following the latest rollercoaster ride. However, in order to look for a recovery silver needs to join in, and so far, it is struggling with the XAUXAG ratio trading above 75, its highest level and silver’s weakest against gold since December.

Crude oil (OILUKOCT21 & OILUSSEP21) trade lower again after managing a midweek bounce. The latest weakness in response to ongoing Covid-19 concerns and its short-term impact on demand. A development which yesterday led the IEA to reduce its demand forecast for the rest of the year. The biggest concern is the flare-up in China, where aggressive steps to contain the outbreak has led to reduce mobility.

What is going on?

Copper’s (COPPERSEP21) recent, and price supportive focus on potential supply disruptions in Chile is easing after BHP workers at Escondida, representing 5% of global output, voted to accept a final wage proposal. In recent weeks, the threats of supply disruptions have offset surging Covid-19 cases and worries about a Chinese slowdown hitting demand. With the risk of disruptions fading the market could, just like oil, see a period of sideways trading while the current virus outbreak is being brought under control. While resistance has been established above $4.4/lb, support has been equally strong below $4.20/lb.

South Korea export prices in Jul hits 16.9% y/y. South Korean manufacturers have raised prices the most since late 2008 consistent with inflationary pressures building in the global economy. The export price index m/m was whopping 3.5%.

Semiconductors stocks under pressure. The group was down 1.3% yesterday and among the worst segments in equities. The outlook for Chinese demand is worrying as soaring semiconductor prices are beginning to have an impact on demand. This could despite ASML reported highest ever demand in mid-July. The TWD and KRW were trading lower in Asian session. Tesla CEO Elon Musk also lashed out Renesas and Bosch on their failure to deliver semiconductors to the car industry.

Walt Disney shares up 4% on strong Disney+ numbers. Disney+ subscribers hit 116mn vs est. 113mn in FY21 Q3 (ending July 3) and group revenue hit $17bn vs est. $16.8bn with EPS jumping to $0.80 vs $0.55. Disney is also bullish on theme park demand which already running higher in the current quarter than the previous despite the surging Covid-19 cases in the US.

Airbnb and travel are back with bumpy ride still ahead. Airbnb is back on a strong growth trajectory despite various Covid-19 variants such as delta adding uncertainty over travel activity across many countries. Airbnb Q2 gross bookings were $13.4bn vs $11.2bn and EBITDA $217mn vs est. $50.4mn on $1.34bn in revenue showing that Airbnb is back at revenue level where economics of scale kicks in big time. Q3 revenue guidance is well above Q3 2019 and thus will be a record quarter for the company showing that Airbnb is out of the crisis despite the near-term visibility issues. Airbnb says in a statement: “In the last few weeks, we had our biggest night ever in the U.S. and our biggest night globally since the pandemic began, with more than 4 million guests staying at an Airbnb listing”. Despite the strong comeback Airbnb acknowledged that the delta variant will hit gross bookings and near-term outlook is uncertain. That was enough for investors to send the shares down 4% in extended trading.

What are we watching next?

Earnings to watch this week. Today the key earnings focus is on NetEase, one of China’s largest gaming companies, which has seen its share price decline by 18% as the Chinese is cracking down on the technology sector including gaming which is seen as toxic for kids. Analysts are looking for revenue of CNY 20.5bn up 13% y/y but EPS to decline both q/q and y/y. Trip.com Group is one of China’s largest travel-booking companies and has seen its share price decline by 43% taking the share price back to around the lows from 2020 when the world experienced its first wave of Covid-19 cases.

  • Today: Deutsche Wohnen, NetEase, Trip.com Group

Economic calendar highlights for today (times GMT)

  • 1400 – US Aug U of Michigan Sentiment

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher

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.