Global Market Quick Take: Asia – June 3, 2024

Global Market Quick Take: Asia – June 3, 2024

Macro 6 minutes to read
Saxo Be Invested
APAC Research

Key points:

  • Equities: US stocks surged in the last 1 hour of trading but still down for the week.
  • FX: Yen underperforms despite soft dollar
  • Commodities: OPEC+ plans to restore production
  • Fixed income: September rate cut remains intact
  • Economic data: US ISM Manufacturing PMI

------------------------------------------------------------------ 

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

QT 3 June

Disclaimer: Past performance does not indicate future performance.

Equities: U.S. stocks saw a significant surge in the last 1 hour of trading, finishing the week near their day highs. Despite this late surge, S&P 500 still ended the week lower but still made considerable gains for the month of May, gaining 4.8%. Despite the strong reversal, signs of vulnerability emerged within the large cap tech sphere during the week, underscored by Dell Technologies' sharp 20% decline post a bleak margin forecast and an earnings guidance miss, impacting sentiment across related segments including PC manufacturers and data center AI contenders. The software industry faced its own set of challenges with Salesforce's guidance cut causing a widespread pullback across the industry. The SOX Index managed to recover from a short-lived downturn, showing that investors remained optimistic despite the unpredictable changes during the week. Last Friday’s April PCE inflation data came in at 2.7% yoy in line with expectations and remained unchanged from the previous month, leading to a decline in 10-year Treasury yields below 4.5%. Meanwhile, the Chicago PMI, indicating the manufacturing sector's health, dropped to its lowest since May 2020 at 35.4, below estimates of 41.1. Following last week's focus on inflation, this week shifts to employment, with anticipated updates on JOLTS job openings Tuesday, private ADP job growth Wednesday and the May NFP report on Friday.

FX: The US dollar ended the week again in minor decline, with CHF leading the G10 pack higher and JPY underperformed. USDJPY trades back above 157.20 this morning as buying interest continues below 157 amid carry interest despite intervention threat as we noted here. Election outcomes in India and Mexico could signal policy continuity, and further fuel interest in carry trading strategies, pressuring funding currencies such as Yen. EUR is heavily in focus this week with ECB expected the start cutting rates, but Eurozone inflation came in higher-than-expected for May at 2.6% YoY and may mean that the ECB will have to take a data-dependent approach post this week’s rate cut. EURUSD trades around 1.0850 with immediate resistance at 1.0880 and a series of supports near 1.08 and just below that. For more on our ECB preview and impact on bonds and EUR, read this article. GBPUSD was neutral last week as equity sentiment was weak, but pair trades above 1.2740. USDCAD also in focus as it approaches 1.36 despite oil prices taking a hit after OPEC meeting, and BOC meets this Wednesday.

Commodities: Oil prices continued to decline after OPEC+ announced a plan to gradually restore some suspended production starting in October. Despite concerns about demand and strong supply from outside the group, production cuts will remain in place for the third quarter and then be phased out over the next 12 months, according to the Saudi Energy Ministry. Meanwhile, gold dropped by 0.67% to $2,337 and silver fell by 2.45% to $30.41, despite a decrease in the dollar and Treasury yields. Despite the weekly decline, gold managed to achieve its fourth consecutive monthly gain, rising by 1.8%. The top commodity loser was Arabica coffee futures, which tumbled by 5.5%.

Fixed income: U.S. Treasury securities advanced on Friday, contributing to their monthly advance, following the release of encouraging inflation figures that sustained forecasts of a potential Federal Reserve interest rate reduction within the year.

April's data indicated that the central bank's favored inflation gauge remained unchanged at an annual rate of 2.7%. Yields on government bonds, spanning various maturities, receded by a minimum of five basis points, touching the week's nadir, as market participants modestly increased their bets on a Federal Reserve rate cut of 25 basis points, possibly by September. Both two-year and five-year Treasury yields dipped to the day's lowest points in late New York trading, propelled by month-end purchasing that bolstered the bond market.

Yields on two-year Treasury notes declined to sub-4.87%, marking the lowest point in over a week. Earlier last week, yields on these shorter-term securities neared the 5% threshold, driven by waning anticipation of Fed rate reductions that had previously dampened demand for newly issued notes and bonds. On Friday, the yield on the 10-year Treasury note dropped below 4.5%, retreating from its weekly high which had surpassed 4.63%.

Macro:

  • US PCE, the Fed’s preferred inflation metric, sent a dovish signal to markets. We had previously highlighted the asymmetric risks going into the release, and in-line prints were a relief for markets waiting for more signals on the Fed’s first rate cut. Headline PCE rose 2.7% YoY and 0.3% MoM, same as expected and prior. But core PCE cooled to 0.2% MoM from 0.3% previously while remaining unchanged on a YoY basis at 2.8%. Personal spending was weaker-than-expected at 0.2% MoM in April and March print was also revised lower to 0.7% from 0.8% earlier. The market currently expects 60% odds of a September rate cut, and further signs of inflation cooling could increase this further. The Fed starts a quiet period this week ahead of the meeting next week.
  • Eurozone inflation for May surprised to the upside, coming in at 2.6% YoY from 2.4% prior and 2.5% expected. Core inflation jumped higher to 2.9% YoY, suggesting that the narrative at the ECB meeting this week may be more neutral despite the well-telegraphed rate cut likely to be seen.
  • OPEC+ meeting over the weekend ended with a decision to extend its oil production cuts well into 2025, while also setting a timeline for gradually winding down some of those curbs later this year. The OPEC+ agreement prolongs roughly 2 million barrels a day of cuts, which have played a key role in supporting crude prices above $80 a barrel this year but were set to expire at the end of June. The curbs will continue in full in the third quarter then be gradually phased out over the following 12 months, according to a statement from the Saudi Energy Ministry. The UAE received an upward adjustment to 300k to its baseline which is now 3.5 million bpd.

Macro events: China Final Caixin Manufacturing PMI (May), EZ/UK/US Final Manufacturing PMIs (May), US ISM Manufacturing PMI (May)

Earnings: SAIC, GitLab, HealthEquity, Bark, Lavoro

News:

  • India Stocks, Bonds Set to Gain as Polls Show Landslide Modi Win (Bloomberg)
  • Nvidia Announces Next-Generation Rubin AI Platform for 2026 (Bloomberg)
  • US futures muted as markets digest in-line inflation, rate cut bets (Investing)
  • 10-year Treasury yield hovers near 4.5% after inflation data roughly matches expectations (CNBC)
  • Japan confirms first currency intervention since 2022 with $62 billion in spending (CNBC)
  • Dow has best daily gain for year; indexes up sharply for May (CNBC)
  • European stocks close higher as investors digest euro zone inflation; up 2.3% for the month (CNBC)
  • RBA seen as the only other major central bank at risk of hiking (BT)

 

For all macro, earnings, and dividend events check Saxo’s calendar.

For a global look at markets – go to Inspiration.


Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

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

Disclaimer

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)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

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.