Equities: New extremes and a challenging opportunity set
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Summary: Salesforce's strong Q3 results and guidance, surpassing expectations, drove a 9.2% surge in its stock, boosting the Dow Jones Industrial by 1.5%. However, the Nasdaq 100 slipped 0.3% due to weakness in Nvidia and Alphabet. The 10-year yield rose 7bps to 4.33%, and the dollar strengthened following balanced comments from Fed officials. Market reactions to the softer PCE data were muted. OPEC+ agreed to a 1mb/d production cut, adding to Saudi's extended voluntary cut into 2024. China's services PMI dropped below 50 for the first time in 2023, hitting 49.3. Investors await Powell's speech and ISM Manufacturing data on Friday.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: Stocks finished mixed. Salesforce surged 9.2% after the customer relationship management software company reported Q3 results and guidance, beating estimates. This contributed to propelling the Dow Jones Industrial 1.5% higher on Thursday. Meanwhile, the Nasdaq 100 slid 0.3%, dragged down by weakness in Nvidia (-2.9%) and Alphabet (-1.8%). The S&P 500 added 0.4% to 4,568.
Fixed income: The decline in yields was stalled and Treasuries retreated after San Francisco Fed President Daly said she was “not thinking about rate cuts at all”. Market reactions to the initial claims and core PCE prints both were in line with projections, and an improvement in the Chicago PMI was muted. The 2-year yield climbed 4bps to 4.68% and the 10-year yield rose 7bps to 4.33%. The curve initially flattened but reversed to finish 3bps steeper (2-year vs 10-year) at -35bp. On Friday, investors will focus on Powell speaking and the ISM Manufacturing data.
China/HK Equities: China and Hong Kong stocks edged up modestly despite the disappointing PMI data. The Hang Seng Index gained 0.3%, lifted by telcos, information tech, and utilities. Tencent added 3.2% following analysts’ opinions that the tech giant would benefit from ByteDance’s reportedly withdrawal from mobile game development. Contrary to that, Bilibili plummeted 11% after warning about lower-than-expected revenues. The CSI300 added 0.2%, helped by consumers and pharmaceuticals.
FX: Dollar jumped higher on Thursday despite a softer PCE report, suggesting a dovish fatigue in the markets and potentially fuelled by relatively hawkish Fed speakers balancing Waller dovishness earlier in the week. Kiwi still held up its gains, as NZDUSD traded close to 0.6160, while AUDUSD reversed earlier gains coming on the back of additional China stimulus hopes after PMIs underwhelmed, and slipped slightly to test the 0.66 handle support which has held up for now. EURUSD plunged back below 1.09 amid softer inflation and 1.0855 support will be in focus. GBPUSD also gave up the 1.27 handle and slipped to 1.2620-levels and 1.26 support will be key. A reversal higher in Treasury yields also put a floor on yen gains, and USDJPY rose back to 148+ levels.
Commodities: OPEC+ agreed to a deeper 1mb/d cut to add to Saudi’s current voluntary cut being extended into 2024. However, oil traders were unimpressed as this was already baked in the price with gains of about $5 since the start of the week. The absence of a comprehensive breakdown with only a select number of countries detailing their reduction also failed to convince the market that the cartel discord has been resolved. Angola rejected the new quota and will produce above the target. Market tightness will now depend on how demand outlook shapes up. Copper extended its gains despite China’s downbeat PMI as supply concerns underpinned, while Gold pared back some of its recent gains on yield and dollar rebound.
Macro events: Japan Jobs data, China Caixin Manufacturing PMI, Canada Labour Market report, Canada Manufacturing PMI, US ISM Manufacturing PMI. Fed speakers include Barr, Goolsbee, Powell and Cook. ECB speakers include Elderson and Lagarde.
Earnings: Bank of Montreal
In the news:
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