Weekly Commodities Update Weekly Commodities Update Weekly Commodities Update

Global Market Quick Take: Asia – March 3, 2023

Macro 6 minutes to read
APAC Research

Summary:  Despite U.S. bond yields continuing to climb and the 10-year going above 4% in yield, U.S. stocks managed to rebound nearly 1% on Fed Bostic comments. Hong Kong and China stocks slid and gave back some of the gains from the previous session in the absence of notable headlines ahead of the “two sessions” meeting starting this weekend. The US dollar gained broadly against major currencies. Crude oil continued to climb with WTI crude finishing Thursday at USD78.2.

What’s happening in markets?

Nasdaq 100 and S&P 500 rebounded on Fedspeak

The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) clawed back early losses after dovish comments were made by the Fed’s Raphael Bostic  - seeing the indices gain 0.9% and 0.8% respectively. All sectors in the S&P 500 except consumer discretionary and financial advanced.

Salesforce (CRM:xnys) shares rose 11.5% on a Q4 earnings beat and upbeat guidance – making it the top gainer in the S&P500. Kroger (KR:xnys) rose 5.4% after the grocery chain reported sales and earnings beat. Tesla (TSLA:xnas) fell 5.9% as investors were somewhat disappointed with the EV giant’s Investor Day held on the prior day.

US Treasury curve bear steepened, 10-year yield at 4.06%

US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off across the curve in the morning following an upward revision of Q4 unit labour costs to 3.2% from the previously reported 1.1% and initial jobless claims continued to come in below 200K. After Atlanta Fed Bostic’s comments in favour of a 25bp hike at the March meeting and the Fed could pause by mid to late summer saw yields on the 2-year paring much of the loss from an intra-day high yield of 4.94% to finish at 4.89%.

Yields on the belly of the curve however remained 6bps higher by the time of closing, with the 5-year yield at 4.31% and 10-year at 4.06%. The Treasury Department announced the auction of USD40 billion of 3-year notes, USD32 billion of 10-year notes, and USD18 billion of 30-year bonds next week.

Hong Kong’s Hang Seng Index and China’s CSI300 retreated after yesterday’s sharp gains

Hang Sang Index (HSI.I) dropped 0.9% and CSI300 (000300.I) slid 0.2% on Thursday after rising sharply the day before. China Internet names led the decline with Alibaba (09988:xhkg) falling 4.7% without notable news. Bilibili (09626:xhkg) plunged 7.8%.  After the Hong Kong market close, the online entertainment platform reported Q4 earnings beating the consensus estimate.

Nio (09866:xhkg) tumbled 13.2% on a Q4 margin miss and a weaker-than-expected Q1 2023 guidance. Container liners outperformed, with Orient Overseas (00316:xhkg) rising 6.7% and COSCO Shipping (01919:xhkg) up 4.1% on an improved outlook of China’s exports.

In A-shares, telcos and communication equipment makers advanced, following the news that the Ministry of Industry and Technology said that China will accelerate the rolling of 6G infrastructure.

Australian equities (ASXSP200.I) trade lower for the fourth week  - markets prices out rate cuts – PMIs rise  

So far this week - Monday to Friday the market is trading lower - marking its fourth straight week of losses. It comes as the Australian share market prices out rate cuts this year – and looks ahead to the RBA interest rates decision and commentary next week - with another 25bp hike expected. Today - hotter Australian and manufacturing prints showed PMIs rose back to expansionary phase, pushing Australian bond yields higher, up 6 bps to 3.92% - that’s near YTD highs of 4%, which is a cautionary signal given this is a better return than the average yield for the Australian share market.   

FX: GBP edges below 1.2000 on dovish Bailey

The US dollar was broadly in gains on Thursday as yields continued to surge higher despite supposedly dovish comments from Fed member Bostic. SEK was the underperformer on the G10 board amid risks of a deepening recession in Sweden. GBPUSD continued to tumble further below the 1.20 handle after dovish comments from BOE governor Bailey this week attempting to engineer a pause in market expectations. EURUSD also gave up some of its post-regional CPI gains to inch below 1.06. AUDUSD still in close sights of 0.67 as risk sentiment deteriorates while pickup in metals prices remains unconvincing for now.

Crude oil volatility continues

Oil fluctuated with traders weighing up a revival in demand from China, vied with inflation fears and OPEC boosting supplies. OPEC increased supplies by 120,000 b/d to 29.24 million a day in February – with Nigeria accounting for two-thirds of the increase - with its output hitting a one-year high. Meanwhile Russian seaborne diesel exports stranded at sea hit new records. This comes all while nations such as Turkey are trimming purchases of Russian crude.

What to consider?

Fed officials hinting at a higher dot plot

The biggest headlines today are referring to Fed member Bostic’s (non-voter) comments as dovish, while he said he is firmly in favour of a 25bps hike path (to reduce the possibility of a hard outcome) and even said we could be in a position to pause by mid-to-late summer which appears to be exactly in-line with current market expectations. If his comments suggest 25bps rate hikes each at the March, May and June meetings, we still may end up in the 5.25-5.50% terminal rate which is higher than what the December dot plot suggested.

Waller (voter) also hinted at an upwards shift in the dot plot, more clearly so, saying that Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if the incoming job and inflation data does not pull back from strong readings for January.

US labor market strength sustains, focus shifting to ISM services

US initial jobless claims fell by 2k to 190k last week from 192k prior and 195k expected, continuing to signal a tight labor market. Unit labor costs climbed an annualized 3.2% in the fourth quarter from the initial 1.1% read, well above expectations for a rise to 1.6%. Increased labor costs keep concerns of a wage-price spiral alive, and will likely keep the Fed on its toes in tightening policy. ISM services for February will be on watch later today, and is expected to ease to 54.5 from a big jump to 55.2 last month, but still remain comfortably in expansion. Attention will also be on the prices paid component after a similar component from the manufacturing print this week created jitters and services prices are likely to be more sticky.

Worrying inflation prints in the Eurozone

Yesterday, the eurozone core inflation rose to 5.60% year-over-year in February with both core goods (6.8%) and services (4.8%) reaching new record highs. This is much higher than expected (5.3%). We pay more attention to core inflation as it can show how entrenched inflation is. As a matter of that, it appears the inflation headache will remain an issue for most of the year. All the country prints which were released earlier this week came in above expectations: Germany 9.3% vs 9.0% exp. France 7.2% vs 7.0% exp. Spain 6.1% vs 5.7% exp.

In these circumstances, talks about a potential monetary policy pause are ill-timed. From a monetary policy perspective, we think the ECB is unlikely to slow the pace of tightening until we see the first signs of underlying inflation peaking. Expect at least two other 50 basis point hikes in March and in May (there is no meeting in April). The market consensus forecasts that another 25 basis point hike could happen in June. It will depend on the evolution of inflation, of course.

China and Australian trade relations are improving – adding to our optimist view that the commodity bull run could resume in Q2

China and Australia resumed diplomatic and economic discussions to stabilize and improve bilateral relations. It comes as China’s Foreign Minister Qin Gang met with counterpart Penny Wong at the G-20 summit in India. This is supporting commodity prices today – with the Iron Ore (SCOA) price trading higher for the fourth session following on from stronger-than-expected Chinese manufacturing data - showing overall Chinese orders are back at 2017 levels. Despite this the Aussie dollar vs the USD (AUDUSD) is little changed on the day and week at 0.6729 after losing 0.5% on Thursday. Downside is still in play with the Aussie trading below the d

Qantas hires 8,500 workers – underscoring the aviation industry’s growth trajectory

Qantas Airways (QAN) plans to hire 8,500 more workers in the next decade - which is about the same number it cut during in the pandemic. This highlights the aviation’s growth trajectory less than a year after the crisis. The hires include pilots, cabin crew and airport staff – with about 300 new aircraft arriving in the next 10 years – and Qantas also planning to open an engineering academy to help maintain its feet. For more on the travel sector, refer to Saxo’s Asia Pacific Travel equity theme basket

We are in the early inning of the comeback of European equities

European equities have previously outperformed US equities over long periods of time, but the relentless bull market in US technology stocks over the past 13 years has erased our memory of European equities being an interesting market. But since October last year, European equities have significantly outperformed US equities and clients are most interested than ever. In an article yesterday, Peter Garnry, Saxo’s Head of Equity Strategy, provides an overview of how Europe's equity market is constructed and how it differs from the US equities, and also why they are more interesting for investors amid the comeback of the physical world.

His three main points are:

  1. Europe lost the digital technology race to the US with a 13-year-long period of significant underperformance, but since October 2022 things have turned around and maybe we are in the early inning of Europe’s comeback.
  2. European equities have 20 super-sectors and the diversification of European equities is much better compared to US equities.
  3. European equities are cheaper relative to US equities and they have recently improved their operating margins while US equities have seen a significant margin compression.

China’s Caixin Services PMI is expected to rise to 54.5

Caixin Services PMI is expected to confirm the continuous expansion of activities in the services sector as indicated in the official NBS PMI survey. According to Bloomberg, Caixin Services PMI is expected to rise to 54.5 in February from 52.9 in January.

China’s “Two Sessions” meeting commences this weekend

China is holding the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, which together are known as the “Two Sessions, this weekend. Premier Li will deliver the Government Work Report on 5 March, in which the focus will be on the GDP growth target for 2023. The weighted average of provincial GDP targets released was around 5.6% and economists are expecting a national target of between 5% and 5.5% for 2023. Investors will also pay attention to the fiscal deficit target and quota for bond financing. In addition, investors will pay close attention to the leadership reshuffle at the State Council and other top government bodies. It is widely expected that Li Qiang will be the new Premier and He Lifeng will be one of the Vice Premiers and given the portfolio of economic and financial affairs.

Japan’s Tokyo CPI for February hinting at sticky prices

Japan’s Tokyo-CPI for February came in at 3.4% YoY for the headline, softer than last month’s 4.4% but still hotter than the 3.3% expected. The slower print is partially a result of PM Kishida’s latest stimulus announcement to support utilities prices which included a 20% discount on household electricity rates. Core CPI at 3.3% YoY matched estimates while the core-core measure (ex-fresh food and energy) was a notch higher at 3.2% YoY vs. 3.1% expected. Inflation continues to be sticky and above the BOJ’s 2% target although the incoming Governor Ueda is unlikely to rush into any monetary policy moves at this point.

Bilibili earnings beat, non-GAAP net loss narrowed as operating margin improved

Q4 Revenues in Bilibili rose 6% Y/Y to RMB6.14 billion, slightly higher than the RMB6.12 billion expected. Non-GAAP net loss came in at RMB1.31 billion, better than the consensus of RMB 1.43 billion and 20.6% smaller than in Q4 last year. Mobile games revenue falling 12% Y/Y and advertisement revenue falling 5% Y/Y  were weaker than expected. Revenues from E-Commerce and others grew 13% Y/Y and those from Value-added Services rose 24%, both above consensus estimates. The number of monthly active users increased 20% Y/Y to 326 million.

India’s Adani Group gets foreign interest as prices drop

After a drop of over $100 billion in market value, Adani group stocks got a respite with US boutique investment firm GQG Partners purchasing shares worth $1.87 billion in four Adani group companies. The deal shows investor interest may be returning to Adani after record drops in its share prices, and any further interest from foreign investors could potentially put a floor to near-term pressures for the conglomerate. This week, the group told bondholders it had secured a $3bn credit line from investors including a sovereign wealth fund.


For what to watch in the markets this week – read or watch our Saxo Spotlight.

For a global look at markets – tune into our Podcast.



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/en-gb/legal/disclaimer/saxo-disclaimer)

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

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 is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo 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 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.

©   since 1992