Weekly Commodities Update Weekly Commodities Update Weekly Commodities Update

Market Insights Today: Stocks and bonds soared, Dollar weakened on softer CPI print – 11 November 2022

Equities 6 minutes to read
APAC Strategy Team

Summary:  A softer US CPI print sent the equity markets skyrocketing in an extreme reaction, but there was some pushback against dovish expectations from Fed speakers and WSJ’s Timiraos, highlighting that a 50bps rate hike at the December Fed meeting is still in play. Dollar weakness fueled gains across the metals space, but oil market remained volatile on concerns around China’s covid cases even as the authorities urged targeted measures will remain in place. UK GDP due in the day ahead before focus turns to G20 meetings next week.

What’s happening in markets?

The S&P 500 (ESZ2) jumped 5.5% and Nasdaq 100 (NQZ2) soared 7.5%, staging the biggest rally in two years

US equities surged the most since 2020 on a softer-than-expected CPI report. S&P 500 gained 5.5% and Nasdaq 100 soared 7.5%. The gains were board-based. All 11 sectors of the S&P 500 rose, with the information technology, real estate, and consumer discretionary sectors leading the charge higher. Semiconductor names surge, Marvel Technology (MRVL) up 16.1%, Nvidia (NVDA:xnas) up 14.3%, and Advanced Micro Devices (AMD:xnas) up 14.3%.  Amazon (AMZN:xnas) surged 12%, Meta (META:xnas) gained 10.3% and Apple (AAPL:xnas) climbed 8.9%. The shift of sentiment from risk-off to risk-on saw the crypto stabilize and Bitcoin rally 13%.

US treasury (TLT:xnas, IEF:xnas, SHY:xnas) soared, yields tumbling 22 to 30bps across the curve

Treasuries jumped in price and yields plunged on slower-than-expected CPI data. Large buying first concentrated on the 2-year and the 5-year notes. The yield curve bull-steepening in initially, with the 2-10 spread narrowed 8bps to minus-41bps at one point. However, the long ends rallied strongly in the afternoon following a strong 30-year bond auction. The curve reversed and became more inverted with 2-10-year finishing the session at minus-52 bps. At the close, 2-year yields fell 25bps to 4.33% and 10-year yields tumbled 28bps to 3.81%. On Fedspeak, Cleveland Fed President Mester said “services inflation, which tends to be sticky, has not yet shown signs of slowing” and she views “the larger risks as coming from tightening too little”. San Francisco Fed President Mary Daly remarked “it was indeed good news that inflation moderated its grip a bit” but “one month of data does not a victory make”.

Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) retreated on Covid outbreaks

Hong Kong and China stocks retreated on Thursday as China’s daily new domestic Covid cases came in above 8,000 second day in a row and Guangzhou extended lockdown in one of its districts. Hang Seng Index dropped 1.7% and CSI 300 lost 0.8%. China Internet and EV stocks underperformed. NIO (0988:xhkg) fell 13.2% on a bigger-than-expected loss in Q3 and a Q4 guidance below analysts’ expectations. Overnight in U.S. hours, Hang Seng Index futures jumped 4.6% after U.S. stocks soared on softer CPI data. ADRs of Alibaba (09988:xhkg), Meituan (03690:xhkg), and Tencent (00700) surged around 7% to 9% in New York hours.

FX: Massive dollar selloff in the aftermath of the US CPI release

The Dollar Index saw its greatest losses in a single day since 2009, falling to lows of 107.7 after the release of that softer-than-expected US CPI. The biggest gainer on the G10 board was JPY, no surprises there, given its yield-sensitive nature and the plunge in US yields. USDJPY broke below 141 although it has rebounded to 141.68 in the Asian morning. If we do see hawkish Fed comments in the coming days/weeks, some of this rally in the JPY is likely to be unwound but overall the trend in USDJPY remains biased to the downside now with most of the interest rate expectations already in the market. GBPUSD was also a big gainer as it surged to the 1.17 handle, but a test lies ahead with UK GDP release today likely to confirm the onset of a recession (read preview below).

Crude oil (CLZ2 & LCOF3) volatile amid dollar weakness and China's Covid concerns

Crude oil ended higher in a volatile session as earlier concerns of weak demand were overtaken by the broader market rally in response to lower inflation and the weakness in the US dollar. Concerns however remain on China’s Covid cases with Beijing reporting its highest number of cases in a year, which kept the gains restrained. WTI futures rose above $86/barrel while Brent went above $94 before retreating later.

Cooler US inflation prompts gains across metals

The weaker USD eased pressure on the base metals complex, with copper rising more than 2%. This was boosted by reports coming out of a Politburo Standing Committee meeting that suggest Beijing would take more targeted measures to avoid damage to the economy. If China’s Zero covid measures remain targeted, this could shift focus back to supply issues and dollar weakness. Copper (HGZ2) broke the September high of $3.6925, and is now testing resistance at $3.78. Gold (XAUUSD) also broke above the double top at 1730, likely suggesting that the bottom is in place. Silver (XAGUSD) rose to $21.83 but has since returned to the resistance turned support at $21.50.


What to consider?

Softer US inflation, but what does it mean for the Fed?

US CPI was softer than expected across the board, as headline M/M and Y/Y printed 0.4% (exp. 0.6%, unchanged) and 7.7% (exp. 8.0%, prev. 8.2%), respectively, while the core metrics came in at 0.3% M/M (exp. 0.5%, prev. 0.6%) and 6.3% Y/Y (exp. 6.5%, prev. 6.6%) on a Y/Y basis. Shelter prices still remained hot while the used vehicle prices declined by 2.4% M/M. While the inflation still remains high and far from Fed’s 2% target, it can be expected that the trend is lower. Markets cheered the release, expecting a downshift in Fed’s rate hike trajectory which has already been communicated at the last FOMC meeting. December Fed rate hike pricing is still close to 50bps, while the terminal rate projections have slid lower to 4.9% for May 2023. However, it is worth noting that there is one more labor market report and another CPI report due before the FOMC’s Dec 13-14 meeting.

Fed speakers pushed back on the market rally

The kind of market reaction we have seen to the soft CPI print in the US yesterday confirms that investors still remain on edge expecting a Fed pivot. This can prove to be counterproductive, as easing of financial conditions can derail this downtrend in inflation and reverse the less hawkish path that Fed is expected to take in the coming months. The Cleveland Fed’s Loretta Mester said that, while she was encouraged by October’s data, she sees bigger risks from tightening too little than too much. Kansas City Fed President Esther George said monetary policy “clearly has more work to do”, while the Dallas Fed’s Lorie Logan said earlier that inflation has a long way to go before it reaches the central bank’s target. They also noted it may be time to slow down the pace of hikes, however, but that it shouldn’t be interpreted as easing policy. Equally importantly, WSJ's Timiraos tweeted, "The October inflation report is likely to keep the Fed on track to approve a [50bps rate hike] next month. Officials had already signaled they wanted to slow the pace of rises and were somewhat insensitive to near-term inflation data". Easing financial conditions will likely drive the Fed speakers to a further hawkish tilt in the coming days.

US jobless claims still underscore a tight labor market

Initial jobless claims rose marginally to 225k from 218k, and above the expected 220k. Meanwhile, continued claims also exceeded consensus to print 1.493mln (exp. 1.475mln) from, the revised higher, 1.487mln. While this still continues to show a tight labor market in the US, it may be worth watching how it moves in the coming months especially after the wave of tech sector layoffs that we have seen in the past few weeks.

The latest in the Crypto space

Bloomberg reports a balance sheet hole of $8bn for FTX. Likewise, the Wall Street Journal reports that Alameda Research owes FTX about $10bn. Reuters says that the loan to Alameda Research was equal to at least $4bn. Sam Bankman-Fried (SBF), however, went to Twitter to give an explanation. He goes on to talk about two major mistakes that he has made, one being that he underestimated the demand for sudden liquidity by clients withdrawing funds. In terms of liquidity, SBF further says that: “FTX International currently has a total market value of assets/collateral higher than client deposits (moves with prices!). But that's different from liquidity for delivery--as you can tell from the state of withdrawals. The liquidity varies widely, from very to very little.” Remember, that this is contrary to the story by Bloomberg and likely the Wall Street Journal and Reuters story. It now seems plausible that FTX has a serious hole in its balance sheet”, though, hard to judge anything at this stage given the amount of rumors and unconfirmed information floating around. What remains clear is that any liquidity event will unlikely remain isolated as cascading margin calls and contagion effects are likely to be felt beyond the crypto space.

UK GDP to confirm the onset of a recession

UK’s Q3 GDP is scheduled for release today and the first quarterly negative print of the current cycle is expected to be seen. Consensus forecast is seen at 2.1% YoY, -0.5% QoQ, significantly lower than the second quarter print of 4.4% YoY, 0.2% QoQ. August GDP data had already begun to show a negative print with -0.3% MoM and the trend will only likely get worse in September, exacerbated by a one-off factor relating to Queen Elizabeth II’s funeral in the month, which was a national holiday. The economy is already facing a cost of living crisis, and both fiscal and monetary policy have to remain tight in this very tough operating environment. Technically, a recession may still be avoided as activity levels picked up in October, but still it will remain hard for the UK to dodge a recession going into 2023. This suggests there maybe some downside for the sterling, especially as the market refuses to cater to the Bank of England’s warning that the current expectations of terminal rate may be too steep.

Credit growth in China slowed in October

China’s new aggregate financing fell to RMB908 billion in October, much lower that the RMB1,600 billion expected in the Bloomberg survey and the RMG3,527 billion in September. The growth of outstanding aggregate financing slowed to 10.3% in October from 10.6% in September. New RMB loans declined to RMB615 billion in October, below the 800 billion consensus estimate and much smaller than the RMB2,470 billion in September. New RMB Medium to long-term loans to corporate fell to RMB462 billion as loan demand was weak.

China’s Politburo Standing Committee met to discuss pandemic control policies 

On Thursday, President Xi and the rest of the Politburo Standing Committee had a meeting to discuss its policies on pandemic control. While the statement from the meeting reiterated adherence to the dynamic zero-Covid policy, it also highlighted the push for vaccination and treatments and called on government officials to implementation of control measures more scientifically targeted and precise and to avoid doubling down on each layer of execution.  

China’s Singles’ Day this Friday, Nov 11

Investors will watch closely Alibaba, JD.com, and other online retailers’ sales on Singles’ Day this Friday to gauge the strength of China’s private consumption. Analysts are expecting slower sales growth as recent data indicated slower user growth across online shopping platforms.


For our look ahead at markets this week - Listen/watch our Saxo Spotlight.

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 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.