Market Strategist, Greater China
Summary: Mega-cap technology and semiconductor stocks drove the US market higher, with the S&P 500 rising 1.6% to 4,415 and the Nasdaq 100 gaining 2.3% to 15,529. Nvidia marked its eighth consecutive day of increases with a 3% gain, while Microsoft extended its rise for the tenth day, adding 2.5%. The PHLX Semiconductor index surged 4%. Moody’s shifted the outlook on the U.S. sovereign's Aaa ratings to negative from stable, citing increased "downside risks to the US’ fiscal strength." Gold fell 1% to $1,933, and crude oil rebounded over 2%, with WTI and Brent crude reaching $77.35 and $81.70, respectively.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: Mega-cap technology and semiconductor stocks propelled the market higher, boosting the S&P 500 by 1.6% to 4,415 and the Nasdaq 100 by 2.3% to 15,529. Nvidia gained 3%, marking its 8th consecutive day of increases. Microsoft added 2.5%, extending its rise for the 10th day. The PHLX Semiconductor index surged 4%, driven by TSMC, Rambus, KLA, Lam Research, Applied Materials, Microchip Tech, Broadcom, and AMD. The US is scheduled to release CPI on Tuesday, and PPI and retail sales on Wednesday.
Fixed income: Yields edged up 3 to 4 bps across most of the curve, except the 30-year, which finished Friday unchanged. The 2-year yield concluded at 5.06% and the 10-year yield last traded at 4.65%. The U of Michigan’s Sentiment survey showed that 1-year, as well as 5-10-year inflation expectations, climbed more than expected and caused front-end yields higher late New York morning. The long end of the curve sold off about 3bps 30 minutes before the close after Moody’s changed the outlook on U.S. sovereign’s Aaa ratings to negative from stable, citing “downside risks to the US’ fiscal strength have increased”.
China/HK Equities: Stocks tanked again last Friday as sentiment dipped on earnings disappointments and weaknesses in overseas markets overnight. SMIC plunged 6.8%, and Hua Hong Semiconductor plummeted nearly 16% after the two leading Chinese chip makers reported Q3 results below estimates. EV names slid as Li Auto fell 6.5%, despite reporting earnings that beat estimates. The Hang Seng Index dropped by 1.8%, and the CSI300 fell by 0.7%. This Wednesday will be in investors' focus as President Xi and President Biden meet in San Francisco, and China is scheduled to release October industrial production, retail sales, and fixed asset investment, along with announcing the 1-year Medium-term Lending Facility Rate policy.
FX: The US dollar oscillated within a narrow range against the G10 currencies, except the Norwegian Krone (NOK) which strengthened by 1% after a hot CPI print that increased the likelihood of rate hikes from the Norges Bank. USDJPY added 0.1% to 151.52, approaching a test of the high of 151.72 two weeks ago and then the 151.95 high in October last year.
Commodities: Gold, silver, platinum, and copper slid around 1% to 2% on Friday. The more hawkish comments from Powell at the IMF conference and diminishing fears of escalation in the Middle East continued to dominate trading. Spot gold fell 1% to as low as 1,933 before finishing the week at 1,939. In the energy space, crude oil rebounded over 2%, with WTI and Brent crude front-month futures reaching $77.35 and $81.70, respectively.
Macro:
Macro events: NY Fed survey consumer expectations, US CBO’s monthly budget review
Earnings: British American Tobacco, ANZ, Mizuho Financial, Johnson Controls, Sun Life, Tyson Foods, Samsonite
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
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Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
