stocks stocks stocks

Bumpy ride in the markets will continue, watch for higher VIX levels. JPY appeals as a safe haven again and Gold at key support levels

Equities 7 minutes to read
APAC Strategy Team

Summary:  A sense of relief in the Asian markets today but peak capitulation in global markets is still some way off, and continue to watch for further higher VIX levels. Yen starts to appeal as a safe haven again, although it remains hard to push back the USD bulls which makes yen crosses relatively more interesting. Inflation continues to run hot in the US, but also in India and EM bond pressures will likely pick up further.

What’s happening in markets?

Markets poised for further pull back, but remember, markets rise over the long term. Long term downtrends have gripped most markets. In US; the S&P500 and Nasdaq are in Bear markets (down ~20%+). In Australia, ASX is not in a bear market, but the Tech Index is, after losing 44%, while the ASX’s Discretionary sector is in a bear markets (down ~20%). As mentioned last week and earlier this week, we could see a small term rally, but long term pressure remains. Markets could capitulate, given the US Fed has only risen rates twice. In Australia, the RBA, has only risen rates once, with both to make another 6+ potential hikes. Plus, both banks continue to get inflation forecasts wrong; which is spooking the market (causing further pull backs).

Asia markets taking a sigh of relief. With the US markets ending somewhat in the green and crypto panic abating for now, Asian markets were in the recovery mode on Friday. Japan’s Nikkei (NI225.I) was in gains of over 2% on Friday after BOJ governor Kuroda came out saying monetary easing must stay as economic pressures mount. Record losses were reported by SoftBank (9984) Vision Fund unit but the stock was up over 10% today as the bank has pledged to scale back investing activity and preserve cash as the market downturn hammered the tech portfolio, boosting buyback hopes. Chipmaker Tokyo Electron (8035) resumed gains as well after a beat on its earnings. Singapore’s STI Index (ES3) also took a breather with Singtel (Z74) being the most active stock but down 1%. Casino operator Genting Singapore (G13) reported earnings beat for Q1 but was only cautiously optimistic of the recovery trajectory due to the rising costs.

Hong Kong equity markets rallied with coal miners, EV autos, techs and property management services leading the charge higher. Hang Seng Index (HSI.I) and CSI300 (000300.I) were up 2% and 3.9% respectively. Coal mining stocks were up around 5% and EV autos rallied 6-7%. Semiconductor manufacturer, Hua Hong (01347) reported strong revenues growth (+12.6% QoQ, +95% YoY) but margin compression in 1Q22 (-5.6ppts QoQ). Net profits were down 23% QoQ  and +211% YoY. The Company is guiding double-digit ASP increases in 2H22. Hua Hong says that it has applied for dual listing in Shanghai.

Fed speakers continue to favor a series of 50bps rate hikes rather than 75bps. As the Senate confirmed Fed Chair Powell's second term, he reiterated his objective to get inflation under control but also highlighted some concerns regarding ensuring a soft landing. Notably, both Powell and Daly support 50bps increases at the next two meetings. While that means markets are close to pricing in peak Fed hawkishness, a bumpy ride is set to continue as we are just at the beginning of pricing in recession concerns by the markets.

Yen’s appeal as a safe haven returns. With recession concerns mounting, the yen is back as a safe haven although it remains hard to push back the USD bulls. Japanese investors are also selling overseas bonds and that means flows back into the yen. USDJPY slipped to mid-127 as sole standout performer among G10 peers. Yen crosses look more appealing especially GBPJPY which broke support at 158. GBPUSD is also under pressure not just because of USD strength but also with concerns around UK macro drivers. Q1 GDP growth was up 0.8% q/q March at -0.1% and BOE warning doesn’t bode well for Q2. EURUSD fell to lows of 1.035 despite multiple ECB speakers adding support for July rate hike. EURGBP has upside potential given the yield spread. AUDUSD still under pressure due to iron ore concerns.


What to consider?

US producer prices continue to run hot. US April PPI printed 11% y/y and 0.5% m/m driven mostly by goods. While this is moderate compared to the March print of 11.2% y/y, but still signals persistent supply-driven inflation pressures which signals continued elevated CPI going forward.

USDCNH rose to 6.838 before retracing slightly to 6.814. On the back of a strong U.S. dollar, the renminbi continued to weaken.  Reportedly, there was substantial amount of RMB bond selling from foreign investors this week. Chinese importers’ buying and USD bond issuers’ hedging activities also were said to contribute to the weakness of the renminbi. We are expecting the uptrend of USDCNH to continue but expecting profit taking from traders to emerge between 6.90 and 7.00.

India inflation not showing any signs of peaking.
India’s April CPI surged to an 8-year high of 7.79% y/y driven by broad-based increases in good and services prices. The Reserve Bank of India, having raised rates by 40bps in an out-of-cycle meeting, is still in for more tightening pressures and 50bps rate hike is in the cards for the June meeting. That could mean more pain for Indian assets, especially bonds.


Potential trading ideas to consider?

Volatility is set to rise. The oil price (biggest inflation contributor) is likely to head higher, so too are food and wage prices. So consider, that right now, the VIX index is just at 32. In March 2020, the VIX index was over 80. In October 2008 the VIX was almost 90. So expect volatility to rise, and watch if the VIX gets over 40, which it will likely to. This supports the US dollar rising. The takeaways? You can consider looking at oil, or investing in the US dollar ETFs to cushion your portfolio. Also consider looking at food stocks and energy stocks that are setting higher levels.

Gold (XAUUSD) on the verge of testing 1800. A hotter-than-expected US CPI print highlighted the FOMC’s struggle in bringing inflation down to levels the market has priced in. Overall, however, the yellow metal remains challenged by the strong dollar and the general level of risk adversity forcing investors to cut exposure across-the-board. Selling in ETFs has also contributed, while China demand has also been slower. But a real test is coming at $1800/oz support level.


Key economic releases this week:

  • Friday: US Univ of Michigan sentiment, US import price index

Key earnings release this week:

  • Friday: Deutsche Telekom, KDDI, Honda Motor, Alibaba


For a global look at markets – tune into our Podcast. 


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, 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. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such 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.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.