Weekly Commodities Update Weekly Commodities Update Weekly Commodities Update

Market Insights Today: Softer US CPI supports Fed downshift, Bank earnings ahead - 13 January 2023

APAC Research

Summary:  A Fed downshift to 25bp hikes may be firmer in the cards with the in-line 0.3% M/M increase in the core CPI bringing the measure to 3.1% on a three-month annualized basis. Yields on the 10-year Treasury notes plunged 10bps to 3.44% and the S&P 500 closed just below its 200-DMA. The Japanese Yen was the biggest winner in the currency space on speculation for further policy shifts by the BOJ next week. Bank of America, JPMorgan Chase, and Citigroup report Q4 earnings today.

What’s happening in markets?

Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) advanced on CPI prints supporting a Fed downshift

U.S. stocks climbed, following CPI data that support the Fed to slow the pace of rate hike to 25bps in February. Nasdaq 100 gained 0.5% and S&P 500 edged up 0.3%. Closing at 3983.17, the S&P 500 has its 200-day moving average of 3,984.39 within reach. Energy, rising 1.9, was the best-performing sector within the S&P 500 as WTI crude oil climbed over 1% to USD78.29. Interest rate-sensitive REITS was the other top winning sector. American Airlines (AAL:xnys) surged 9.7% on upbeat revenue growth and earnings guidance and a debt reduction plan.  

US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied, yields on the 10-year sliding to 3.44%

After choppy initial reactions when traders digested the CPI prints, U.S. Treasuries advanced and their yields slid decisively. The headline and core CPIs in December were in line with expectations. Investors noted the decline of the core inflation on a three-month annualised basis to 3.1% and the softness in core services excluding shelter and concluded that the Fed is on track to downshift to a 25bp hike in February. Comments from Fed’s Harker (voter) that “hikes of 25bps will be appropriate going forward” added conviction to the notion. The strong results from the USD18 billion 30-year auction saw yields on the long end richer further. Yields on the 10-year finished the session 10bps lower to 3.44% and those on the 2-year were 4bps lower to 4.12%.

In Australia and Asia today focus is on; risk-on assets, Oil, Iron Ore and Copper charging

The Australian share market (ASXSP200.I) opened 0.8% higher, with most other Asian markets are set to open in the positive. Ahead of Australia’s company reporting season kicking off next month, we’re thinking we could likely see many commodities companies upgrade their outlooks for 2023, expecting higher earnings as many resources prices have quickly entered bull markets amid China easing restrictions sooner than expected. However today, eyes will once again be on commodities and affiliated equites; as the oil price jumped for the 6th day, moving up to $78.30, after rising 1.1%, The copper price rose 0.1% to $4.17 on the COMEX market in New York. Iron ore (SCOA) is 0.6% higher at $123, a new 6-month high.

Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) traded sideways on profit taking

After making a new six-month high, Hang Seng Index reversed and pared gains to finish Thursday only 0.4% higher. Profit-taking weighed on recent policy beneficiaries, such as mainland Chinese property developers, domestic consumption names, mega-cap internet stocks, and Macao casino operators. Country Garden, down 6.3%, was the biggest loser within the Hang Seng Index. Shares of EV makers bucked the market trend of retracement to advance, led by BYD (01211:xhkg) which was up 5.3% and was the top winner among Hang Seng Index constituents. NetEase (09999:xhkg) outperformed other China internet names with a 3.7% gain on collaborating with the state-owned CCTV to broadcast the Lunar New Year gala on the company’s metaverse platform. FIT Hong Teng (06088:xhkg), a subsidiary of Foxconn, soared 17.2% on speculation that the company might replace GoerTek (002241:xsec) to assemble AirPods for Apple. In A-shares, telecommunication, electric equipment, EV, non-bank financials, and new energy outperformed as the domestic consumption space retraced. CSI300 climbed 0.2%.

FX watch; Australian dollar is on the heels of 0.70 US

After US CPI data showed US prices have continued to fall, the US dollar vs the AUD continued to fall, taking its fall from its peak to 10%. Inversely, Australia's trade balance data released yesterday, as well as Aussie retail and Aussie CPI earlier in the week, plus the all-important easing of China’s restrictions sooner than expected, all support upside in the AUD. As such the Aussie versus the US rallied to new four-month highs, 69.67 US. The next resistance level, the psychological 70.00 US is the next hurdle to get over. Aussie home loan data released today is the next catalyst to watch. If it’s stronger than expected, the AUDUSD could march on up.

FX: USDJPY crumbles on weaker USD and BOJ speculation

The Japanese yen was the biggest gainer on Thursday, boosted both by lower US yields as well as speculation around a policy tweak by the Bank of Japan at the next week’s meeting. USDJPY slid from 132.50 to 129 handle. Japanese 10-year bonds continued to test the upper limit of the permitted trading band, and rose higher to 0.53% in early Asian hours testing the central bank’s resolve on a dovish policy. EURUSD broke above 1.08 to fresh highs of 1.0867 with expectations of Fed-ECB divergence setting a bullish tone.

Crude oil (CLG3 & LCOH3) rounding in at about 6% gains for the week

Crude oil prices gained further on Thursday amid the risk on tone set by further softening in inflation pressures. China’s steady commitment to reopen the economy and provide a stimulus to the economy continued to support sentiment this week, along with Chinese buyers become more active in the physical market as import quotas were increased. WTI futures rose to $79/barrel while Brent moved above $84/barrel.

Gold (XAUUSD) reached $1900 on expectations of Fed downshift

Gold saw another rally with a softer inflation print in the US bolstering the case for a further downshift in the Fed’s rate hike trajectory. A broadly dovish tone from the Fed members also saw a plunge in US yields and weighed on the USD, helping support gains in Gold as well. Silver outperformed gold, and platinum and palladium gained as well.  


What to consider?

US CPI boosts the case for a Fed downshift

A further slowdown was seen in US CPI last night, with the headline sliding to 6.5% YoY as expected from 7.1% YoY in November, stepping into the disinflationary territory on a m/m basis with a negative 0.1% print from +0.1% previously. Core inflation also eased in-line with expectations to 5.7% YoY in December from 6.0% YoY previously but still higher on m/m basis at 0.3% from 0.2% in November. Services inflation was still higher, being the more sticky component of inflation, but with six consecutive months of softening in inflation, the Fed could take some comfort that its tightening moves are working. Market is pricing in another step down at the Fed’s next decision on Feb 1 to 25bps rate hike, but the terminal rate pricing still stands at sub-5% levels compared to a unanimous voice from the FOMC members calling for rates over 5%. Meanwhile, US jobless claims unexpectedly fell to 205,000 from a revised 206,000 the previous week, suggesting labor market is still tight. Continuing claims also surprisingly improved, dropping to 1.63 million from 1.7 million.

Fed members also signal a further downshift

Patrick Harker (voter) said 25-bp increases "will be appropriate going forward" after data showed inflation moderating. Thomas Barkin (non-voter) also emphasised that Fed has more work to do, although he signalled that "it makes sense to steer more deliberately." Bullard was relatively more hawkish, but he also doesn’t vote this year. He said that he favors getting the benchmark above 5% as soon as possible before holding.

US Bank earnings kickstart today

US banking earnings kick off the Q4 earnings season today, most notably from Bank of Bank of America, JPMorgan Chase, and Citigroup. Analysts remain muted on US banks with earnings expected to show another quarter of negative growth compared to a year ago. Peter Garnry, Saxo’s Head of Equity Strategy, wrote in his recent article that the interest rate shock had been bad for banking earnings and activity levels across the investment banking division. As credit portfolios have an average maturity of around seven years banks will slowly begin rolling their assets into higher interest rate levels which will begin to accelerate their net revenue figures improving profitability over time. If the US economy just experience a shallow recession in real terms and strong nominal growth then US banks should be considered as a good tactical trade over the coming years.

CPI and PPI inflation remained low in China

CPI in China rose to 1.8% y/y in December from 1.6% in November, in line with expectations. The year-on-year growth was due to a low base. On a month-on-month basis, CPI was unchanged in December. Excluding food and energy, core CPI came in at 0.7% y/y in December, edging up slightly from 0.6% y/y in November but remaining subdued. The change in PPI rebounded less than expected to -0.7% y/y versus -0.1% expected and -1.3% y/y in November. Deflation in the processing sector narrowed to -2.7% Y/Y in December from -3.2% Y/Y in November. The mining component in the PPI swung to 1.7% Y/Y in December from -3.9% Y/Y in November.

TSMC (TSM:xnys) Q4 earnings beating estimates, expecting revenue decline and CAPEX cuts in 2023

The world’s largest foundry of semiconductors beats on net income in Q4 driven by a gross margin of 62.2% versus the 60.1% expected. TSMC says the company is to face margin headwinds in 2023 with revenue growth slowing down. For Q1 2023, the management expects revenues to fall to between USD16.7 billion and USD17.5 billion from USD17.57 billion in Q1 2022. CAPEX in 2023 is expected to be between USD32 billion and USD36 billion, against $36bn in 2022. The company is considering a second manufacturing plant in Japan and a new automotive chips plant in Europe. It has also expanded its 28nm production in China and is planning to mass produce its new 2nm in 2025 in its facilities in Taiwan. TSMC expects that revenues of the global semiconductor industry, excluding memory chips, to fall 4% in 2023.

UK November GDP to signal an incoming recession

UK’s monthly GDP numbers are due this week, and consensus expects a contraction of 0.3% MoM in November from +0.5% MoM previously which was boosted by the favourable M/M comparison vs. September, which was impacted by the extra bank holiday for the Queen’s funeral. The economy is clearly weakening, and another quarter of negative GDP print remains likely which will mark the official start of a recession in the UK.


For a look ahead at markets this week – Read/listen to our Saxo Spotlight.

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



Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

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 https://www.home.saxo/en-au/legal/.

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 (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

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 www.home.saxo/en-au/about-us/awards

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.