Blockbuster make or break week; Fed rate hike decision, key inflation data, 30% of S&P500 companies report, gold finds support Blockbuster make or break week; Fed rate hike decision, key inflation data, 30% of S&P500 companies report, gold finds support Blockbuster make or break week; Fed rate hike decision, key inflation data, 30% of S&P500 companies report, gold finds support

Blockbuster make or break week; Fed rate hike decision, key inflation data, 30% of S&P500 companies report, gold finds support

Equities 7 minutes to read
APAC Strategy Team

Summary:  APAC equities trade cautiously ahead of Fed’s anticipated rate hike and a slew of earnings, while traders and investors get respite in gold, which has found support. We run through the scenario of why the USD could strengthen and see another run in the USDJPY. Microsoft (MSFT) and Alphabet (GOOGL) kick off mega-cap tech earnings on Tuesday in this make of break week. Where the S&P500 and Nasdaq could succumb to pressure if earnings are weaker than feared. The key themes of a slow down in spending, and pressure from a higher US dollar will remain front and center. And is this the bottom for iron ore?

What’s happening is markets?


APAC equities trade cautiously ahead of Fed’s anticipated rate hike and a slew of earnings

Japan’s Nikkei (NI225.I) led the losses in the region at the start of the new week, down about 0.9% amid worries of Fed action and recession concerns. July’s Tokyo CPI is due later this week, and will likely reaffirm inflationary pressures remain above the Bank of Japan’s target. Meanwhile, Singapore’s STI (ES3) was in gains of about 0.7% ahead of the June inflation report which is expected to show Singapore’s inflation running to record highs of ~6% as food and fuel price gains underpin and demand gathers pace as well with the reopening in the region. While Australia’s ASX200 (ASXSP200.1) trades flat amid mixed Australian corporate quarterly earnings results. That being said, the biggest drag on the ASX is the energy sector today, down 1%, after the WTI oil price fell almost 2% to $94 a barrel on fears of demand softening. Meanwhile, mining companies are keeping the market up, with heavy weight miners like BHP and Rio trading up 1.4% and 0.8% after the iron ore price rose for the second day, up 2.2% today, and now trades at $106.15, its highest price in almost three weeks.

Chinese stocks retreat on downward earning revisions and dimming prospect of additional stimulus in near term

Stocks traded in Hong Kong and the mainland bourses retreaded modestly this morning. The mortgage repayment boycott by buyers of stalled properties in recent weeks has triggered concerns about worsening sentiment and demand for properties in China and potential hits to earnings in developers as well as banks.  The prospect of additional stimulus measures has dimmed further after Premier Li’s remark last week that China will not roll out massive stimulus , such as issuing an excessive amount of money or overdrawing the future for an overly high growth target this year.  Economists have been revising down this year’s GDP forecasts for China and analysts have been lowering earnings forecasts for Chinese companies.  Among them, Goldman Sachs trimmed their 2022 EPS growth forecast for MSCI China from 4% to 0%, much below the street consensus of 8%.   

USDJPY watching the Fed this week

Following a contraction in US PMIs on Friday, Treasuries rallied and USDJPY slid to 2-week lows of 135.57. UST yields will be on watch this week, with the Fed expected to go for a 75bps rate hike. While there are some expectations that the pace of rate hikes will slow from here, the inflation problem will possibly make the Fed stay hawkish. That could mean USD gains could return, and another run higher in USDJPY.

Crude oil prices lower as USD ascent continues

Oil prices fell on Friday on a weakening global demand outlook and the resumption of some Libyan crude oil output as well as Russia’s gas flows to Europe. Further weakness was seen in the Asian morning as WTI futures slid below $95/barrel and Brent futures were below $104. With the FOMC meeting scheduled for this week, expectations are that the Fed will continue to guide for aggressive rate hikes to bring inflation under control, suggesting more room for USD gains and further fears of demand destruction.


What to consider


US PMI enters contraction territory

US flash July PMIs largely disappointed, despite manufacturing coming in above expectations at 52.3 (exp. 52.0, prev. 52.7), as services printed 47.0 (prev. 52.7), well beneath the expected 52.6 and also fell into contractionary territory for the first time since May 2020 as the post-pandemic rebound faded. The composite dropped to 47.5 from 52.3, its first contraction in 26 months. Together with the weakness in Philly Fed survey and initial jobless claims seen last week, there are hints that economic weakness will only gather pace into the third quarter.

European PMIs hint at recession risks

The eurozone economy looks set to contract in the third quarter as business activity slipped into decline in July. Manufacturing PMI slid to 25-month lows of 49.6 in July from 52.1 previously, with producers reporting increases in inventory levels due to lower sales. Services PMI was also substantially weaker at 50.6 in July from 53.0 in June with composite PMI tumbling to 49.4 in July. Business expectations have also fallen to record lows, as energy crisis continues to strain the economy. ECB’s 50bps rate hike last week, and another hike expected in September will also weigh on the economic outlook.

Concerns around Monkeypox outbreak

The World Health Organization (WHO) has declared the monkeypox outbreak a public health emergency of international concern. With the key concern being the lack of response to the disease, international concern paves the way for stepped-up global cooperation. The US — which may also declare an emergency — can contain the disease with a combination of testing and vaccinations, White House official said. Currently, the US is reporting over 2,800 probable or confirmed monkeypox cases in 44 states, and there are over 16,500 cases reported in 74 countries globally.

With key political events ahead, it’s unlikely to have new Chinese stimulus being rolled out before things settle

The Politburo of the Chinese Communist Party (CCP) is scheduled to meet this week.  The market will be looking for hints and signals about China’s economic policy in the second half of the year from the readouts and statements coming out from the meeting.  President Xi and other senior CCP officials are expected to go to Beidaihe, a seaside summer resort 300km east of Beijing, after the Politburo meeting to meet up with retired party elders to discuss about party leadership arrangement and other matters in preparation of the national congress of the CCP this late October or early November.   It is unlikely to have major policy measures being announced before these important political events.

Microsoft and Alphabet kick off big tech earnings. A make or break week

This is the busiest week of earnings season as we reported in our week ahead (Saxo Spotlight). Microsoft (MSFT) and Alphabet (GOOGL) kick off mega-cap tech earnings on Tuesday and we are likely to see pressure from weaker PC demand, a slow down in spending, and pressure from a higher US dollar, while the Alphabet’s business, YouTube is expected to fare better than other social media platforms like Twitter and Snap. Meta (META) reports on Wednesday. Apple (AAPL)  and Amazon (AMZN) follow on Thursday with a slowdown of hiring and rising costs pressure to be a key theme.

Trading ideas


US yields and USD on watch this week

The reaction of US yields to Fed policy will be key to watch this week after a run lower on Friday after the PMIs disappointed and raised recession concerns. If Powell stays more hawkish than expected, which is needed to bring inflation back down, it could mean another run higher in yields and the US dollar, weighing on risk assets and also commodities. The possibility of weaker signals on economic growth in the week also possibly hints at further yield inversion in the week.

Gold to hold range due to softening dollar

We’ve observed a pickup in buying in gold stocks and the underlying precious metal today in the APAC session today, despite the price of gold falling in recent weeks. We think the fade of the US dollar as European rates finally rise for the first time in 11 years, we could see some support for gold. This mean the precious metal could close near its current levels as the end of the year approaches. This is something to consider given it offers safe haven exposure in an asset allocation.


For a weekly outlook – tune in to our Saxo Spotlight.


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 (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.