Summary: Tech-driven equity rally ensued at the start of the week with Microsoft emerging as the winner from the OpenAI debacle, and Nvidia earnings on watch in the day ahead. Treasuries saw bull-flattening amid a well-received 20yr auction. Dollar slumped further, breaking below its 200DMA, leading to show of strength for JPY, AUD, EUR and other G10 currencies expect CAD. Oil prices jumped further on hopes of additional OPEC+ cuts, while copper and iron ore rose amid supply concerns.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The Nasdaq 100 surged by 1.2% to reach 16,027, achieving a 22-month high. Microsoft contributed to this rise, climbing by 2.1% to reach a record high following the announcement of OpenAI's Sam Altman joining the company. Additionally, Nvidia saw a 2.3% increase in anticipation of its earnings announcement scheduled for Tuesday. The S&P500 gained 0.7%. All eyes are on Nvidia's results today, with the Bloomberg survey forecasting a 480% year-over-year surge in Nvidia's adjusted EPS to $3.365 and a 171% increase in revenue.
Fixed income: A strong 20-year auction saw the 10-year and 30-year yields 2bps lower to 4.42% and 4.56%. The 2-year yield rose 3bps to 4.91. Richmond Fed Barkin (non-voter) said the Fed’s job was not done. The Treasury is scheduled to auction $15 billion 10-year TIPS on Tuesday.
China/HK Equities: China Internet stocks and consumer staples names rebounded, driving the Hang Seng Index 1.9% higher. The Hang Seng Tech Index gained 2.4%, with Tencent rising 3.6%. XPeng surged 5.1% after unveiling a 7-seater MPV model X9. After the market close, Xiaomi reported in-line revenue growth of 1% Y/Y to RMB70.9 billion while adjusted net income increased by 183 % Y/Y to RMB6 billion, surpassing the estimate of RMB4.7 billion, due to record-high gross margins.
FX: The dollar extended its slide at the start of the new week, with DXY index breaking and closing below its 200DMA at 103.62. Bears seem to stay in control, but RSI is reaching oversold conditions and next key support is at 103 or the 61.8% retracement levels at 102.55. FOMC minutes due today will be skimmed for any further dovish hints. NOK was the outperformer in G10 again with oil prices extending gains, and USDJPY also extended its slide to sub-148.50. AUDUSD moved higher to 0.6560 ahead of RBA minutes due later and 200DMA at 0.6590 may be coming in focus. AUDNZD also finding support at 1.0850. EURUSD testing 61.8% retracement level at 1.0960 and break above could open doors to 1.10 but the move has been fast and remains prone to a correction first. GBPUSD finding it hard to move above 1.25 while USDCAD unable to break below 1.37 despite oil price gains. EURCAD above 1.50 and could target 2023 highs at 1.5113.
Commodities: Crude oil prices extended gains further on Monday, with Brent reaching $82/barrel, on hopes of additional OPEC+ production cuts along with an extension of Saudi Arabia’s voluntary cuts being extended to 2024. Copper and iron ore prices rose further amid USD weakness and hopes of China stimulus, while supply issues also underpinned with shutdown warnings at First Quantum’s Panama copper mine and strikes in Peru. Gold however remains depressed.
Macro:
Macro events: FOMC Minutes (Nov), RBA Minutes (Nov), UK PSNB (Oct), Canada CPI (Oct)
Earnings: Nvidia (preview here), Lowe’s, Baidu, Medtronic, Analog Devices, Dell, Autodesk, Kingsoft, Kuaishou, iQIYI
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
