Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Chief China Strategist
Summary: After the Bank of Japan maintained its policies and refrained from hinting about ending the ultra-loose monetary policy in the near term, USDJPY surged to 144.96 before settling around 144.00. U.S. stocks hit new highs for the year, with the S&P 500 rising 0.6% to 4,768 and the Nasdaq 100 up 0.5% to 16,812. The resilient U.S. economy sparked optimism, fueled by robust housing starts and moderated inflation. Crude oil rallied, reaching $79.23 for Brent, driven by increased risks from potential Houthi rebel attacks on tankers transiting the Red Sea and Suez Canal.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: Stocks advanced into new year highs again in the U.S., with the S&P 500 gaining 0.6% to 4,768 and the Nasdaq 100 adding 0.5% to 16,812. The robust housing starts print added to the optimism of a resilient U.S. economy while the moderation in inflation may allow the Fed to cut rates. Meta gained 1.7% while Nvidia slid 0.9%. In the extended hours, Fedex plummeted 10% after reporting profits missing estimates due to air-freight volume declines and revising down revenue guidance for the fiscal year ending in May 2024.
Fixed income: Treasury yields finished the Tuesday session nearly unchanged. This stability occurred amid robust housing starts data, Fed officials pushing back to rate cut anticipations, and a dovish-leaning Bank of Japan. The 2-year yield fell 1bp to 4.44%, while the 10-year yield remained flat at 3.93%.
China/HK Equities: The Hang Seng Index declined by 0.8% as Chinese property developers, property management companies, and Internet names experienced weaknesses. Meituan plummeted 5.7%, reaching a new 3-year low. NIO gained 5.7% after Abu Dhabi investor CYVN announced plans to invest USD 2.2 billion in the Chinese EV maker, increasing its stake to 20%. Xiaomi rose by 1.5% following CEO Lei Jun’s upbeat comments and commitment to building a successful EV business. The CSI300 edged up by 0.1%.
FX: After the BoJ kept its monetary policies unchanged, the post-Monetary Policy Meeting communication was deemed somewhat more dovish than anticipated. In particular, there were no hints of leaning towards ending its ultra-loose monetary policy in Q1 2024. As a result, USDJPY surged to a high of 144.96 before retracing to trade around 144.00. Additionally, AUDJPY gained 1.6% to reach 97.30, while EURJPY rose 1.3% to 158.00.
Commodities: Crude oil extended its rally as a result of elevated risks posed by potential attacks from Yemen’s Houthi rebels on tankers passing through the Red Sea and the Suez Canal. Brent crude oil gained 1.6%, reaching $79.23, while WTI crude added 1.5%, reaching $73.94. The tension is likely to underpin the crude oil prices in the coming days.
Macro:
Macro events: US existing home sales (Nov), US consumer confidence (Dec), Germany PPI (Nov), Germany consumer confidence (Dec), Eurozone consumer confidence (Dec), UK CPI (Nov), UK PPI (Nov), Japan Exports (Nov), China 1-year & 5-year Loan Prime Rate
Earnings: Micron, General Mills
In the news:
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