back
Details Cookies
Switzerland
Important margin product information
CFDs and forex spot transactions are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor lose money when trading CFDs and/or forex spot with this provider. 0.56% of retail clients trading in leveraged products experience a negative account balance after a stop out occurred. You should consider whether you understand how CFDs, forex spot transactions or any of our other products work and whether you can afford to take high risk of losing your money.
Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Global Market Quick Take: Europe – May 15, 2023 Global Market Quick Take: Europe – May 15, 2023 Global Market Quick Take: Europe – May 15, 2023

Global Market Quick Take: Europe – May 15, 2023

Macro 9 minutes to read
Saxo Strategy Team

Summary:  Another mixed session in the US equity market on Friday as both bulls and bears are frustrated by the lack of fresh momentum. US treasury yields snapped back higher as the preliminary University of Michigan sentiment survey saw long term inflation expectations suddenly at a new cycle high. The rise in yields saw the JPY trading weakest again among the major currencies.


What is our trading focus?

US equities (US500.I and USNAS100.I): another week of low volatility?

The energy and momentum continue to fizzle out of the US equity market with the VIX Index still around 17 on the Friday close and S&P 500 futures still in their tight trading range boxed in between the 4,100 and 4,200 level. This week’s main events that could impact equities are US April retail sales tomorrow, G7 meeting on Friday and into the weekend, and finally earnings from Home Depot and Walmart.

Chinese equities (HK50.I & 02846:xhkg): rally led by China Internet names

The Hang Seng Index rallied 1.3% as a busy earnings week which kicks off with Meituan  (03690:xhkg) reporting today, followed by other mega-cap China Internet companies, including Tencent (00700:xhkg), Alibaba (09988:xhkg), and Baidu (09888:xhkg). Meituan and Tencent surged nearly 4%. While the People’s Bank of China kept the benchmark 1-year Medium-term Lending Facility Rate unchanged at 2.75% at the fixing today, China’s central bank injected RMB125 billion in liquidity via the facility, RMB 25 billion more than the amount matured. In A-shares, the CSI300 Index advanced 0.8%.

FX: Dollar bid on safe-haven flows and pause from other central banks

The USD safe-haven bid found extra fuel on the US University of Michigan sentiment survey on Friday on the weakening of expectations and a jump in the long-term inflation expectations (more below). The resulting jump in treasury yields also short-circuited the JPY comeback as USDJPY bobbed back above 136.00 overnight from below 134.00 last Thursday. NZD was the underperformer on Friday after NZ inflation expectations eased to 2.8% in Q2 from 3.3% in Q1, coming within the bank's target of 1-3%. Sterling has traded weakly in the wake of the Bank of England meeting last week, with GBPUSD testing the important 1.2450 area on Friday and overnight.

Crude oil: fourth weekly decline amid demand concerns

While the growth outlook for the US isn’t yet taking a steep turn for the worse, sentiment indicators are easing to suggest that consumers could pull back on spending amid the banking sector concerns and debt ceiling risks. Michigan survey on Friday drove out some of the rate cuts from the pricing for Fed this year. But more importantly, China economic data last week poured water on the reopening trade, adding to the demand concerns. Meanwhile, low refining margins for diesel and gasoline continues to suggest weakening industrial demand. WTI prices slid to $70/barrel while Brent reached $74. The decline has remained somewhat in check due to supply issues mounting last week from wildfires in Canada to Iraq’s exports. OPEC increased its outlook for China’s 2023 oil demand, thereby supporting expectations for a rise in global demand of 2.33mb/d, a prediction that contradicts the current downward trend in oil prices. If IEA also confirms this demand outlook, then that will reflect a clear gap between the market’s and forecasters’ demand expectations. 

US Treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) jolted by Michigan inflation expectations

The sudden jump in longer term inflation expectations in the preliminary May US University of Michigan sentiment survey sent yields sharply back higher (more below) although this merely took the 2-year and 10-year yields back to the middle of the range of the last two months.

What is going on?

US Preliminary Michigan survey brings double whammy of worries on growth and inflation

The prelim UoM survey for May saw sentiment fall to 57.7 from 63.5, well beneath the expected 63.0, printing the lowest since July 2022. Current conditions and forward-looking expectations also disappointed falling to 64.5 (exp. 67.0, prev. 68.2) and 53.4 (exp. 59.8, prev. 60.5), respectively. Meanwhile, 1yr inflation expectations slightly fell to 4.5% (prev. 4.6%), but the longer term 5-10yr rose to 3.2% (prev. 3.0%), the highest since 2011. Survey results reflected consumers’ concerns about the economy and the tightening in lending standards due to the recent stress in the banking system, as well as worries on the debt ceiling. Meanwhile, inflation concerns seem to be easing only for the short-term, which suggests that consumers may be pulling back on spending. It is perhaps worth noting that a prior, similar jump in long-term inflation expectations last year in June to 3.3% was revised lower to 3.1% in the final survey for that month.

Siemens Energy lifts outlook

Siemens Energy, the world’s largest manufacturer of gas turbines and electrical grid equipment, report better than expected FY23 Q2 earnings (ending 31 March) this morning lifting the fiscal year outlook on comparable revenue growth to 10-12% from previously 3-7%. Q2 orders are €12.3bn vs est. €8.9bn as the company is seeing “enormous demand for grid building in Europe”.

Australia’s Newcrest agrees to takeover by Newmont to create gold giant

Australian gold miner Newcrest Mining (NCM:xasx) said it would back Newmont Corp's (NEM:xnys) A$26.2 billion ($17.8 billion) takeover offer in one of the world's largest buyouts so far this year. The deal will lift Newmont's gold output to nearly double its nearest rival, Barrick Gold (GOLD:xnys), further solidifying Newmont's position as the world's biggest gold producer. In addition, it will also boost Newmont’s copper resources. Newcrest shareholders would receive 0.400 Newmont share for each share held, with an implied value of A$29.27 a share, higher than a previous exchange ratio of 0.380 that Newcrest's board rejected in February. Newmont is also offering a franked special dividend of up to $1.10 per share on the implementation of the deal.

Turkish election likely headed to a run-off

In the Turkish election, the incumbent President Erdogan was just shy of the 50% needed to avoid a run-off election with the chief opposition candidate, Kilicdaroglu, who trailed Erdogan by some 5% and more than 2 million votes. A run-off will be held in two weeks if the final count still shows Erdogan short of 50%. The Turkish lira traded near its weakest of the cycle in spot terms, although in carry adjusted returns is has outperformed the USD this year by over 10% (the official policy rate in Turkey has little to do with the forward market in TRY).

What are we watching next?

G7 meeting set for Friday and into the weekend

The G7 nations are set to meet this Friday and into the weekend in Niigata, Japan, with considerable anticipation that the meeting could produce major geopolitical signals related to the nature of the nations’ relationship with China, especially after the US last week called for G7 members to move against China’s “economic coercion”. US Treasury Secretary Yellen also said last week that the US is working on a new set of specific investment restrictions in China for key technologies. As well, Reuters cites unnamed officials who revealed that G7 leaders will move to tighten sanctions on Russia, especially on the country’s energy and other exports.

Today’s Technical Highlights:

  • S&P 500 range bound 4,050-4,195
  • Nasdaq 100 looks toppish. Uptrend weakened
  • Silver. Bounced from 0.382 retracement at 23.75.
  • Copper closed below support at 372. Downside risk to 360-356.,
  • Platinum collapsed to test rising trendline.  Finding support at 1,050. Uptrend intact
  • EURUSD below support at 1.0900. Finding some supp at 55 Moving Average.  Strong supp at 1.0744
  • Dollar Index bounced to 0.382 retracement at 102.50
  • USDJPY rebounds from rising trendline. Could move to re-test 137.85 resistance
  • GBPUSD below rising trendline. Support at 0.382 Fibo retracement at 1.2344
  •  US 10-year Treasury yields seem to move higher. Falling trend line test?

Earnings to watch

Our focus this week in terms of earnings releases is on Trip.com, Home Depot, and Siemens. The Chinese reopening continues to be mixed and one key indicator that might provide some signal is the outlook from Trip.com, one of China’s largest travel services companies. Analysts are expecting Trip.com to report later today with analysts expecting Q1 revenue growth of 96% y/y and EBITDA of CNY 1.6bn up from CNY -132mn a year ago. Home Depot reports Tuesday before the market opens with expectations for FY24 Q1 (ending 30 April) revenue growth is -2% y/y and EBITDA of $6.2bn down from $6.7bn a year ago as growth in home improvement has disappeared in the short-term as households are diverting spending elsewhere due to inflation. Siemens report FY23 Q2 (ending 31 March) earnings Wednesday morning with analysts looking for solid revenue growth of 10% and EBITDA expanding to $3.8bn up from $2.3bn a year ago.

  • Monday: Constellation Software, Siemens Energy, Meituan, Bridgestone, NU Holdings, Trip.com

  • Tuesday: KBC Group, Vodafone, Nibe Industrier, Sonova, Home Depot, Baidu

  • Wednesday: Siemens, Munich Re, Commerzbank, Tencent, Experian, Cisco, TJX, Target, Sea Ltd

  • Thursday: KE Holdings, National Grid, Walmart, Alibaba, Applied Materials

  • Friday: Deere

Economic calendar highlights for today (times GMT)

0900 – Eurozone Mar. Industrial Production

1130 – US Fed’s Bostic (non-voter) to speak

1215 – Canada Apr. Housing Starts

1230 – US May Empire Manufacturing

1315 – US Fed’s Kashkari (Voter 2023) to speak

1600 – UK Bank of England’s Pill to speak

1800 – US Fed’s Bostic (non-voter) to speak

0030 – Australia May Westpac Consumer Confidence

0130 – Australia RBA Minutes

0200 – China Apr. Industrial Production / Retail Sales

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)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zurich
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.