Financial Markets Today: Quick Take – September 15, 2022

Financial Markets Today: Quick Take – September 15, 2022

Macro 6 minutes to read
Saxo Strategy Team

Summary:  Yesterday’s session was a muted affair as the market picked up the pieces in the wake of Tuesday’s huge slide in the market after a hot US August CPI number. Tomorrow sees the expiry of options on trillions of notional value in equities and futures, which may have added to the volatility this week. The US dollar remains strong as surging US treasury yields threaten new multi-year highs ahead of the US August Retail Sales release later today.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)

US equities are scratching around after the enormous sell-off triggered by the hot US CPI release on Tuesday. Some of the scale of the volatility on Tuesday could be due to options exposures, as options of trillions of dollars on notional equities and futures expire on Friday. If the US August Retail Sales release today leads to even higher yields, stocks could find themselves under renewed pressure. The technical focus is on the recent pivot lower just below 3,900 in the S&P 500 and the 12,000 area low in the Nasdaq 100 index.

 USD strength continues, threatens cycle highs

A bit of consolidation yesterday in USD pairs after the huge comeback strengthening move in the US dollar in the wake of the Tuesday US August CPI release, but the USD rallied anew from late yesterday and overnight, with the action pinned near the cycle highs in some USD pairs, such as USDSEK, USDNOK and NZDUSD, but elsewhere with a bit of range left to play with. The August Retail Sales release today should garner attention as a strong number could underline the risk of higher US yields and a Fed tightening cycle that extends longer and higher than currently expected if US consumers are getting a second wind after the shock of higher gasoline prices has eased notably since the beginning of the summer. USDJPY has rebounded from yesterday’s lows as traders treat JPY crosses with care, knowing that new highs in the key USDJPY pair are likely to bring actual market intervention from the Bank of Japan/Ministry of Finance.

Gold (XAUUSD)

Gold trades below $1700 and close to an area around $1680 that has provided support on several occasions during the past two years. The yellow metal turned lower after Tuesday’s CPI shocker raised the prospect of a one percent rate hike next week and a terminal Fed Funds target rate around 4.5% (up 2% from the current level) before March next year. Developments and speculation that continue to underpin the dollar while undermining dollar denominated commodities, such as precious and industrial metals.

Crude oil (CLV2 & LCOX2)

Crude oil trades sideways with the stronger dollar and expectations for higher US rates hurting the prospect for future demand being offset by news that China’s Chengdu, locked down for weeks, plans to ease measures. The impact of China’s zero-Covid tolerance strategy this year has led to the biggest drop in oil demand in more than three decades according to the IEA. In their latest monthly oil market report, they predicted a continued slowdown in global demand ahead of year-end before accelerating to rise by 2.7 million barrels a day in 2023. Oil market tightness at the beginning of 2023 would be led by a potential 1.9 million barrels Year on year drop in Russian production by February due to sanctions.

US natural gas

US natural gas trades back above $9 per MMBtu and up 13% on the week as a looming rail strike (see below) would reduce supplies of coal, forcing power generators to rely more heavily on natural gas at a time where demand for cooling remains elevated due to expectations for hotter-than-normal weather across the Midwest and Eastern parts of the US.

US Treasuries (TLT, IEF)

US 10-year yields are now pinned at the highs for the cycle near 3.50% ahead of today’s US August Retail Sales release. Interesting to see how the market treats a strong data point – with a deepening inversion as the market prices a more aggressive Fed (as happened on the surprisingly strong CPI release Tuesday) or with the entire curve lifting. Exceptionally weak data would also be interesting as it would challenge the rising yields trend/narrative.

What is going on?

U.S. inflation remains broad-based

The producer price index (PPI) dipped 0.1 % month-over-month in August. This reflects cheaper gasoline prices (minus 13 % in August compared to July) and to a lesser extent lower freight costs. However, less volatile elements of the index rose more than expected. The core price index was up 0.4 % on a monthly basis. The numbers like those seen in Tuesday’s US CPI report confirm that U.S. inflation is still broad-based and inflation pressures are unbroken. This opens the door to a new interest rate hike by the U.S. Federal Reserve next week. The majority of the market expects a 75 basis point hike but a minority (between 10 % and 20 % of market participants depending on which indicators we monitor) bet on a 100 basis point hike in the cards.

Chinese cities move to boost housing demand

Local governments across China have moved to encourage property demand after the Chinese central government called for measures to ease the crisis. Some 120 have loosened restrictions on funds for property purchases. This news supported beleaguered Chinese developers’ stocks in trading on Thursday.

Ethereum Merge

The second-largest cryptocurrency, Ethereum, is very close to its expected Merge, scheduled to be within the next hour. Ethereum will go through a major upgrade which fundamentally changes the way that transactions are validated on the blockchain, and it will reduce the energy consumption for running the network with around 99.95%.

What are we watching next?

Looming rail worker strike in the United States

The two largest railroad trade unions said they will strike if the ongoing negotiations with employers about higher salaries and better work conditions fail. The strike could start as early as tomorrow and could have a very negative impact on the U.S. economy. Estimates suggest this could cost the economy nearly $2bn per day. In the United States, rail freight represents almost a third of the total domestic freight.

Shanghai Cooperation Organization meeting today and tomorrow

This is the first time since 2019 that Asian leaders are meeting in person in a bigger strategic forum. Xi Jinping and Vladimir Putin are officially joining the summit in Samarkand, Uzbekistan and India’s Modi is expected to join as well. Given the recent Ukrainian military success against Russia, the pressures are mounting on Russia and Putin, which will test a Russian-China "friendship” that at a meeting of Xi and Putin during the Beijing Olympics and just ahead of Russia’s invasion of Ukraine was declared to be “entering a new era” and “without limits”.

 Earnings to watch

Today, focus is firmly on Adobe’s earnings report today after the close. The company has seen a wild ride in recent years, pumped to remarkable heights by late 2021 due to its steady solid growth and high profitability with a backdrop of seemingly ever falling yields, only to see the share price crushed in half since its 2021 peak, first due to the seismic shift higher in yields, but compounded by faltering growth rates for the company starting two quarters ago.

  • Today: Polestar Automotive, Adobe

Economic calendar highlights for today (times GMT)

  • 0900 – Eurozone Jul. Trade Balance
  • 0915 – ECB's Guindos to speak
  • 1230 – US Weekly Initial Jobless Claims
  • 1230 – US Sep. Empire Manufacturing
  • 1230 – US Aug. Retail Sales
  • 1430 – EIA's Natural Gas Storage Change 

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • 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

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses 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.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

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.