A dry July for markets, floods for Australia, likely US recession, commodity metals face more pressure, July 4 travel to wane, & AUD on notice A dry July for markets, floods for Australia, likely US recession, commodity metals face more pressure, July 4 travel to wane, & AUD on notice A dry July for markets, floods for Australia, likely US recession, commodity metals face more pressure, July 4 travel to wane, & AUD on notice

A dry July for markets, floods for Australia, likely US recession, commodity metals face more pressure, July 4 travel to wane, & AUD on notice

Equities 4 minutes to read
APAC Research

Summary:  The RBA rate decision Tuesday could spook markets and pump life into AUD. Markets hold breath for Thursday releases; Fed meeting minutes, Trade data from US and Australia, followed by Friday’s US employment data release and Saturday’s Chinese inflation data. The Bloomberg Commodity Index falls 14% from its high, yet could face further selling as covid cases in China are spiking again. For equites, although July is historically the third best months for equities, this July markets face a cliff hanger of disappointment. Plus why to look at gold and Australian insurance companies.

What’s happening in markets?

APAC equities mixed as July ushers in a new half year

With short-term pocket bounces in US equities, APAC equities started trading on mixed ground on Monday ahead of the US independence day holiday. Our three key indices – Australia’s ASX 200, Japan’s Nikkei and Singapore’s STI – were all in green even as others like Indonesia’s JCI were down over 2%. The star performers on the ASX are fossil fuel coal stocks like New Hope (NHC) and Whitehaven Coal (WHC) setting higher levels as the coal futures price looks supported at record levels, while building stocks are higher like James Hardie (JHX) and Brickworks (BKW) in anticipation that repatriation work will be needed ahead of flooding likely to worsen on the east coast. Elsewhere, the Tech sector across APAC remains sluggish especially as key warnings from Micron (MU) and Meta (META) came last week, suggesting cuts in capital expenditure could be ahead after marketing cuts and layoffs started earlier in the year. And investors await a look at numbers from Samsung this week which will likely be dark.

Chinese equities consolidate

After another week of notable outperformance versus other markets, CSI300 (000300.I) and Hang Seng Index (HSI.I) were treading water this morning. Heightened U.S. recession fears dampened market sentiment.  New locally transmitted local Covid-19 cases bounced to 380 in mainland China. Shares of auto makers traded down 1% to 4% and Macau gaming stocks declined 2% to 5%. Chinese developer, Shimao failed to repay a US$1 billion bonds maturing yesterday. Property names traded weak.  Gangfeng (01772) fell 4% after saying that the Company was being put under investigation by the Chinese regulator CSRC for alleged insider trading of an A-share company

USDJPY on its way to test the 134 support

As US Treasury yields remain pressured lower heading into July, that has spelled some relief for the Japanese yen which is off its 24-year lows printed last week. USDJPY is now trading close to 135, with recession fears helping to bring the yen’s safe haven appeal back. Still, Japan’s inflation threat is rising and the wage negotiation results due this week. Any signs of an uptick may mean further test of the Bank of Japan’s resolve to keep its accommodative yield curve control policy. Key level to watch for the yen is 134, and a break below could threaten the support at 131.50.

AUDUSD off 2-year lows, but next catalyst to come from RBA decision on Tuesday

The US dollar and FX haven have been bid up last week and the USD was close to YTD highs despite yields moving lower. This pressures the high-beta/activity currencies and AUD slid to 2-year lows of 0.6764 as Australian bonds rallied. The market expects a 0.5% Reserve Bank of Australia (RBA) hike, but the room of a 0.75% jump may turn the AUD higher on a knee-jerk/ larger than expected move. AUDUSD is off lows, but still remains below 0.6850 on Monday APAC morning. If the RBA is more dovish, the AUD’s could be pressured and move lower to the next level support 0.6500.

What to consider?


Equities kick off HY not ready for earnings disappointment and more likely downturns.

After the worst sell off in half a century the market pain for equities is probably not over. Company quarterly earnings estimates are still too high, and market is not conditioned for weaker than expected results, and guidance level to come through for US Q2 and for full financial year in Australia, with reporting season kicking off in August. With both events will likely reprice equities lower so we advocate for clients to remain defensive, and consider favoring companies deemed quality-  with high repeatable cashflow and earnings growth; likely in commodities (agriculture, and energy).

Commodities mixed bad divides; Agriculture commodities and industrial metals face headwinds. Energy looks up

Bloomberg Commodity Index (BCOM) has now fallen 14% from its record high and faces further selling, crushed by recessionary fears plus we are seeing the situation in China worsen with cases climbing, which effectively kills any hope of commodity metals picking up in demand. As such in APAC time today, the Iron Ore (SCOA, SCOQ2) price fell 4.4% to $109.60 which with further dent earnings in iron ore stocks like BHP (BHP) and Rio Tinto (RIO) and Vale (VALE). Across the board; wheat, Copper, Cotton, Iron ore and oil are lower… yet Coal prices remain in record territory. Weather conditions in the US have worsened, while Australia’s east coast is experiencing partial flooding, which means although the wheat price could head lower for now, it's likely to pick up again as supply issues grip the market.

US data is pointing to a sharper slowdown

Headline ISM Manufacturing fell to a two-year low of 53.0 in June from 56.1 in May, coming in below expectations. Atlanta FED GDP now model is predicting Q2 contraction of 2.1% after disappointment from ISM manufacturing survey last week. So there is a greater chance that the U.S. will be in a technical recession, or two quarters of negative GDP growth. Jobs data for June is out later this week, and will be key to watch as well to look for any indication on challenge to the ‘robust labor market rhetoric’.

Holiday spending may be squeezed on July 4 US holiday weekend

US travelers were warned of flight chaos for the July 4th holiday weekend with a spate of summer cancellations and delays. As we wrote last week, US credit card spending data from Barclays showed US households slowed travel spending over the last 4-6 weeks. So, a slowdown in consumer spending/curtailed holiday spending, suggests the strength of the services sector may not be enough to offset the weakness in US manufacturing as reported by the ISM survey index last week. The ISM services index for June is due this Wednesday and will be the next key to watch as recession concerns continue to pick up.

Potential trading and investing ideas to consider?

Gold tested key support on India’s import tax

Gold (XAUUSD) broke below the psychologically important $1800 level on Friday for the first time in six weeks amid faster Fed tightening concerns and India announcing import tax on gold to protect its ballooning trade deficit. Still, the yellow metal bounced off its key support at 1780 and is now back above 1800. With US yields remaining capped, more bid can be expected in H2 for gold – which serves as a safe haven. But India is the world’s second biggest consumer of Gold, and unless China demand is seen improving to offset the decline from India, Gold may need to clear more tests before embarking on a clear upward path.

Insurance companies in Australia to be flooded with claims  

Australia’s Defense Force (ADF) has been called upon to help NSW with their flood crisis, while no end is in sight for the weather, with the Bureau of Metrology warning flooding could continue for a week as Australia grapples with one of wettest winters we’ve seen.  Australia faces another winter of flooding rains which means Australia’s insurance companies claims face upward pressure. Companies like Suncorp (SUN), Insurance Australia (IAG) will be on watch, as well as Johns Lyng Group (JLG) who delivers emergency building works to flood affected areas.


For a weekly look at what traders and investors are watching - tune into our Spotlight

For a global look at markets – tune into our Podcast. 

Latest Market Insights

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.