Jessica Amir
Market Strategist
Summary: Watch our video in under four minutes or read the text for what’s happening in markets, what to watch; plus potential trading and investing ideas to consider.
Markets seem defensive coming into this week - worried firstly, the Fed can keep rates higher for longer, triggered by hawkish Fed speaker comments last week. Secondly, investors are cautious ahead of US inflation being released on Tuesday - with CPI expected to drop from 5.7% to 5.5% YoY. The 10-year bond yield climbed 9 bps to 3.72% - its highest level since Jan 1, flagging there a bit of concern ahead. While also in defense mode - buying picked in the US dollar for the second week - taking the US dollar index to close at its highest level since the Jan 2. And this pressured commodities lower. So these catalysts caused investors to trimmed equity gains, also in case CPI data blows hotter than expected. The S&P500 fell 1.1% last week - its biggest weekly drop in 2023.
This week investors and traders will be focused firstly – Australian employment data out for January, due on Thursday, expected to show employment rose by 20,000 from the prior drop, with the unemployment rate expected to remain unchanged at 3.5%. Also importantly, consider the Aussie share market, may be potentially vulnerable for a pair back as the Australian 10 year bond yield has moved up aggressive to 3.81%- its highest level since January. The reason for this, is that the market is expecting the RBA to make ~78.6bps of hikes before pausing in August. So this means unprofitable tech companies and those businesses that don’t pay a dividend yield are vulnerable. From a technical perspective, it also looks like the ASX200 is running out of steam. Click here for our technical analyst's views
Oil posted its largest weekly gain in four months and is currently up 2% $79.72, on Europe banning Russian supply. While Russia is wanting to limit its discount on Urals oil to Brent at $34 a barrel in April, $31 in May, $28 in June and $25 in July. Elsewhere, other supply returned to the market with Tanker loadings of Azeri crude docking at Turkey's Ceyhan terminal. As our Head of Commodity strategy points out, the oil market is awaiting for more demand from China to drive prices higher. For Ole Hansen's weekly oil take click here. As per our Quarterly outlook, we’re expecting Brent Oil to remain around the $80 levels in this quarter, and move to the $90s in the second quarter and beyond. For more, read our Quarterly Outlook.
Lithium imports to China and USA are surging this year, ahead of car makers ramping up production with some of the IEA countries planning the end of sale of fuel engines in seven years, while EV car makers are eager to ramp up car production. Meanwhile, Albemarle reports earnings this week - and will be a proxy to watch for what we may expect from lithium companies this year. In other news, Ford and CATL are reportedly planning to build a $3.5 billion mega battery plant, across 1,900 acres - and employ 2,500 workers. Meaning, they will need to buy industrial metals to produce batteries. This supports Saxo’s bullish view on battery metals; copper, aluminium and lithium. Click the link, for a look at stocks to watch this week across these metals sector. Alternatively refer to Saxo's Equity baskets under Research, Stocks.
To listen to our take on markets tune into our global Podcast.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.