Morning Brew May 31 2023

Erik Schafhauser
Senior Relationship Manager
Summary: Markets extremely divergent
Saxo Morning Brew
We are seeing interesting divergences in markets at the moment and it is not easy to identify the current drivers.
While Nvidia passed the 1 trillion market cap yesterday, everything but big tech seems to be in Limbo. The Hang Seng is approaching bear market territory, almost 20% off the recent high. Peter wrote a very strong piece on AI stocks (link below) - it seems a bit off that Nvidia is trading at 40 times sales.
The Debt ceiling seems on the track to being resolved again after the House Rules Committee voted 7-6 to approved passage to the house, a vote is expected today.
US Yields are extremely volatile with the 1 month yield now at 5.3% from 5.8% just yesterday. Althea wrote an outlook for near term yields, pasted below. The 2 year fell to 4.45 from a high of 4.65 on Monday, the probability of a 25 BPS hike in 2 weeks remains near 60%.
The Change in Indexes yesterday was minute with all big three US indexes within a span of 0.5%. Weak Chinese data weighs on sentiment this morning and the US 500 is at 4191, the US 30 32.897 and the GER40 at 15820. Tesla rose on Elon Musk visiting China
The USD Index is trading at 104.30 with EURUSD at 1.07, GBPUSD 1.2390 and USDJPY 139.40. Gold broke aboe the important 1950 again and Silver is at 23.30.
With rates and inflation expectations extremely volatile, consider your FX exposure for speculation as well as fundamentally. It might be a good time to hedge any FX risk you carry. On the 14th and 15th of June we are expecting the FOMC and the ECB rate decision, also the SNB will announce rated after 3 months, it is seen to hike by 25 basis points with 85% probability.
Today we are expecting a good amount of secondary datapoints, the German import prices just came out even lower than expected indicating inflation may be cooling, the German CPI cold confirm that at 14:00 CET, the Chicago PMI is likely the most important US Datapoint at 15:45.
Expect volatility also from month end adjustments as well as the debt ceiling vote.
Key Articles:
The AI hype feels like an echo from past bubbles
COT: Gold length reduced but no appetite for short selling
https://www.home.saxo/content/articles/commodities/cot-on-forex-and-commodities-30052023
FX Update: Greenback shrugs off debt ceiling deal
Prepare for a liquidity squeeze and higher US Treasury yields
Today
U.S. Chicago PMI (May)
U.S. JOLTS job openings (Apr)
U.S. Fed Beige book
Germany CPI EU harmonized (May)
Japan Industrial production (Apr)
Japan Retail sales (Apr)
Japan Housing starts (Apr)
China NBS manufacturing PMI & non-manufacturing PMI (May)
Australia CPI (Apr)
India Real GDP (Q1)
South Korea Industrial Production (Apr)
Earnings: Salesforce, Crowdstrike, Okta
Thursday 1 June
U.S. ADP private employment (May)
U.S. Initial jobless claims (weekly)
U.S. ISM manufacturing index (May)
Eurozone CPI EU harmonized (May)
Japan Investment in plant and equipment (Q1)
China Caixin manufacturing PMI (May)
Earnings: Broadcom, VMware, Lululemon Athletica, Dell Technologies, MongoDB, Zscaler, Dollar General, Hormel Foods, Bilibili
Friday 2 June
U.S. Non-farm payrolls, average hourly earnings, & unemployment rate (May)
Expiries
HOM3 will expire 31 May 2023 at 15:00 GMT
RBM3 will expire 31 May 2023 at 15:00 GMT
Expiring CFDs
OILUKJUL23 will expire 31 May at 15:00 GMT
LIVECATTLEJUN23 will expire 01 Jun at 15:00 GMT