Summary: The S&P 500 dipped 0.4% due to rising Treasury yields, while the Nasdaq 100 eked out a 0.1% gain, thanks to strong tech company performance. Airbnb surged 7.2% ahead of its S&P 500 inclusion, and Tesla rose 4.7% on robust sales growth in the Chinese market. In China, sentiment dropped as the Caixin Services PMI fell to 51.8, highlighting Chinese economic challenges. The US dollar hit 6-month highs on higher Treasury yield, while WTI crude oil reached a new yearly high, up 1.3%, after Saudi Arabia and Russia extended production cuts. The 10-year Treasury yield hit 4.26%, driven by corporate bond issuances and oil price surges.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The S&P 500, down 0.4%, was weighed down by an extended surge in Treasury yields, while the Nasdaq 100 managed to conclude the session with a modest 0.1% gain, bolstered by the strong performance of tech companies. Airbnb (ABNB:xnas) surged 7.2% due to its impending inclusion in the S&P500, set to begin on September 18. Tesla (TSLA:xnas) saw a 4.7% increase in its stock price after reporting a 9.4% Y/Y and a 30.9% M/M sales growth in August in the Chinese market. Beyond EV manufacturers, Saxo’s Peter Garnry delves into exciting opportunities within the EV charging and battery recycling sectors in his latest research note.
China/HK Equities: Market sentiment plummeted in reaction to a larger-than-anticipated decline in the Caixin Services PMI, which dropped to 51.8, underscoring the hurdles confronting the Chinese economy. The Hang Seng Index dropped by 2.1% while the Hang Seng Tech Index plunged by 2.6%. Southbound flows exhibited a net buying activity of HKD12 billion. The CSI 300 also dipped by 0.7%. Northbound flows reverted to a net selling trend, with overseas investors offloading RMB4.6 billion worth of A shares.
Fixed income: Treasury yields saw an 8bps increase across the curve, driven by approximately USD 37 billion in corporate bond issuances and a 1.3% surge in crude oil prices, reaching a new high for the year. The 2-year and 10-year notes closed at 4.96% and 4.26%, respectively.
FX: The dollar pushed to a near 6-month high as higher Treasury yields underpinned. Weak China and European data also brought relative advantage and safety bid to the dollar. USDJPY rose to fresh YTD highs of 147.80 but verbal intervention this morning from Japan’s top currency official Kanda pushed the pair slightly lower to sub-147.50 temporarily. AUDUSD was at 10-month lows of 0.6358 amid broad risk-off, miss in China PMI and RBA standing pat. Next support at 0.63. USDCAD below 1.3650 as oil prices rose but risks for BOC meeting today are tilted dovish.
Commodities: Brent crude rallied to break above the $90 mark amid the surprise on the length of the production cut from Saudi Arabia and Russia. Saudi Arabia extended its 1mb/d through to December, and Russia announced the same for its 300kb/d export reduction. Inventory data remains on watch this week. Meanwhile, gold slid back below $1930 on rising Treasury yields while silver touched $23.50 support.
Macro: China's Caixin Services PMI fell from July’s 54.1 to 51.8 in August. The output sub-index reached its lowest point for the year and the new services export orders sub-index slid into contraction territory for the first time this year. Meanwhile, final print of Eurozone services PMI for August was revised lower to 47.9. Fed’s Waller, typically a hawk, hinted at a pause for the September meeting.
In the news: Chinese developer, Country Garden, paid the coupons of two offshore USD bonds within grace periods while seeking to extend seven domestic bonds by three years – via Bloomberg. Arm targets valuation of up to $52bn in IPO – via FT.
Macro events: BoC Policy Announcement; German Industrial Orders (Jul), US ISM Services PMI (Aug) – read full preview in Saxo Spotlight.
Earnings events: Alimentation Couche (after market, Adj. EPS est. CAD1.06/USD0.78)
For all macro, earnings, and dividend events check Saxo’s calendar.
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