Global Market Quick Take: Asia – June 6, 2024 Global Market Quick Take: Asia – June 6, 2024 Global Market Quick Take: Asia – June 6, 2024

Global Market Quick Take: Asia – June 6, 2024

Macro 6 minutes to read
APAC Research

Key points:

  • Equities: US stocks hits new record highs led by tech and semiconductors
  • FX: JPY erases gains, CAD weakness persists on the crosses
  • Commodities: Oil ends five days losing streak
  • Fixed income: Treasuries rally as yields hit new low since April
  • Economic data: ECB policy decision      

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The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 


Disclaimer: Past performance does not indicate future performance.

Equities: The upward trend in global stock markets continues, with the S&P and Nasdaq hitting new record highs yesterday. Momentum continues as US data starts to weaken over the past week, possibly supporting earlier rate cuts from the Fed this year. Tech equities lead robust risk asset demand, propelled by semiconductor strength (SOX up 4.5%, nearing peaks, with NVDA's daily dominance achieving a $3 trillion market cap, eclipsing AAPL), amid fervor for AI's growth potential. Concurrently, cryptocurrencies excel, with Bitcoin crossing $71,000, marking a 70% ascent YTD.

FX: The USD was choppy amid mixed US data keeping goldilocks hopes alive. Japanese yen erased Tuesday’s gains with USDJPY returning higher to the 156-handle from lows of 154.55 as haven currencies underperformed. USDCHF also rebounded from lows of 0.8885 but could not reach back the 0.90 handle. USDCAD jumped higher by about 60 pips to 1.3740 on BOC’s rate cut, but reversed back to sub-1.37 handle later. CAD weakness was however more sticky on the crosses with NZDCAD near its one-year highs of 0.85 and GBPCAD inching above 1.75 to its highest levels since Sept 2021. EURUSD has been steady around 1.0880 ahead of the expected ECB rate cut today, but the risk of a less hawkish tone could push the pair back lower towards 1.08.

Commodities:  Oil prices rebounded for a second day as traders found technical reasons to buy, offsetting earlier declines triggered by OPEC+'s decision to increase supply. WTI futures approached $75 a barrel, building on a 1.1% gain from Wednesday, while Brent neared $78. The recovery follows a drop into oversold conditions as indicated by the 14-day RSI. Despite a smaller-than-expected rise in U.S. crude stocks by 1.23 million barrels last week, as reported by the EIA, and an increase at the key Cushing storage hub, the market is showing resilience.

Gold prices stabilized as investors weighed a set of conflicting U.S. economic indicators ahead of a crucial employment report that could shed light on the Federal Reserve's rate-hike trajectory.

Ahead of Friday's nonfarm payrolls release, the precious metal's trading remained subdued. Data revealed that private-sector job growth hit its weakest point since early this year, suggesting a slowdown, yet the services sector experienced its most robust expansion in nine months. Spot gold was mostly unchanged at $2,355.68 per ounce. Silver and other precious metals like palladium and platinum also held steady.

Fixed income: Treasuries rallied for the fifth consecutive day, pushing yields to their lowest since early April, amid market bets on a bolder Federal Reserve rate-cutting strategy for this year and the next, even as the May ISM services report presented a mixed picture. The market gained additional support from a substantial block trade in 10-year note futures following the release of the data. In the options market, bets against volatility continued to be favored, as evidenced by numerous straddle sales in SOFR options.

Australian government bonds advanced as the Bank of Canada's interest-rate reduction spurred conjecture that other monetary authorities might enact similar cuts. U.S. Treasury futures edged up, extending gains from a surge in the cash bond market the previous night.

The yield on Australia's 3-year note dropped by 4 basis points to 3.89%, while the yield on the 10-year bond decreased by 4 basis points to 4.20%.

Macro:

  • US ISM services PMI was hotter-than-expected, with the headline coming in back in expansion at 53.8 vs. expected 50.8. Business activity accelerated to 61.2, the highest level since November 2022; New Orders rose to 54.1 from 52.2; while employment remained in contraction at 47.1. The report is an indication that some sections of the US economy still remain resilient and that could keep the ‘bad news is good news’ sentiment in play.
  • The ADP’s gauge of private payrolls reported additions of 152k jobs in the month, missing expectations (exp. 175k), with the payrolls services provider stating that both jobs gains and pay growth are slowing going into the second half of the year. This puts the focus on claims data due today, but more importantly, the non-farm payrolls out on Friday.
  • BOC Review: The Bank of Canada cut interest rates by 25bps, taking the key rate to 4.75%. Governor Macklem's post-meeting remarks noted that the BoC will take each meeting one at a time, and it is reasonable to expect more rate cuts if inflation continues to ease, indicating more rate cuts are likely. Markets have been sceptical about how far the Fed and the BOC can diverge, and Macklem repeated that there is a limit to this, but they are currently not near that limit – perhaps giving the BoC more leeway ahead, even in the event of a more hawkish Fed.
  • ECB Preview: Next up today is the rate decision from the European Central Bank, which is also expected to cut rates for the first time since September 2019. This comes despite inflation not having reached the 2% target and the economy showing some signs of tentative stability, which raises the question if the start of easing may be premature. In recent weeks, the ECB narrative has turned more neutral from dovish to signal data-dependency post the likely June cut. This suggests that President Lagarde’s press conference will be more important to watch than the decision itself. Market has pushed out the expectation of a second ECB rate cut this year to October, so the bar to surprise hawkish is high. Key risk going into this meeting, therefore, is if the ECB hawks fall short of the high bar or signal further rate cuts in a clear manner. The market can perceive this to be a policy mistake as a series of rate cuts can potentially exacerbate inflation in the medium term. Read Althea Spinozzi’s, Saxo’s Head of Fixed Income Strategy, ECB preview from last week for more insights.

Macro events: ECB Announcement, Swiss Unemployment Rate (May), EZ Employment Final (Q1)

Earnings: NIO, Ciena, Big Lots, Toro, The JM Smucker Co, ABM, Secureworks, Addex, Quantasing, Orion, Docusign, Samsara, Rent The Runway, Braze, Vail Resorts, Zumiez, Energy Partners LP, Tillys, MIssion, Planet

News:

  • Nvidia is now worth more than $3 trillion — and worth more than Apple (MarketWatch)
  • Gold rises as yields retreat after softer U.S. jobs data (CNBC)
  • European markets close higher as investors look ahead to ECB meeting; ASML jumps 8% (CNBC)
  • CrowdStrike shares jump as AI boosts cybersecurity demand (Yahoo)
  • Stock Market News: S&P 500, Nasdaq Close at Fresh Highs (Barron’s)
  • Mortgage demand falls for the second straight week, but all eyes are on Friday’s jobs report (CNBC)
  • Further drop in oil prices may spark OPEC+ to walk back phasing out of cuts: Roth (Investing)

 

For all macro, earnings, and dividend events check Saxo’s calendar.

For a global look at markets – go to Inspiration.

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