Market Quick Take - November 3, 2021 Market Quick Take - November 3, 2021 Market Quick Take - November 3, 2021

Market Quick Take - November 3, 2021

Macro 6 minutes to read
Saxo Strategy Team

Summary:  US and European equity markets continue to show broad strength, with this week producing strong gains for European indices in particular, while Asia ex Japan is in a rather different place with a weak session overnight as China concerns weigh. Today brings an FOMC meeting at which the Fed is expected to kick off a slowing, or tapering, of its QE, with uncertainty on the pace of the reduction and the degree of flexibility in the process.

What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities are powering ahead each day to new all-time highs shrugging off concerns in the bond market with high implied volatility and increased uncertainty over the FOMC’s decision on monetary policy tonight. The VIX forward curve is still in steep contango suggesting strong short-term momentum for equities and the earnings season has delivered enough for equity investors to not feat current high valuations. Tonight, during the FOMC decision, it is Nasdaq 100 that will be in focus as US technology stocks are more sensitive to interest rates. Nasdaq 100 has natural resistance level at 16,000 and 15,813 as the first big support level from the recent high yesterday.

USDJPY and JPY crosses – as US long treasury yields (10-30 year yields) have remained lower over the last week even as volatility at the short end of global yield curves has picked up to an almost historic degree in recent weeks, the Japanese yen has flexed its muscles in places, pushing back against the prior weakness that took it just above the huge 114.50 level in USDJPY before consolidation set in, with the pair trading in a tight 113.25-114.70 range for over two weeks. We'll watch USDJPY and JPY crosses closely if bond market volatility also picks up at the long end of the curve over tonight’s FOMC meeting and through the Friday US jobs report, as the JPY is traditionally one of the most sensitive to US data surprises and their effect on US yields.

AUDUSD – the Aussie is suddenly in a bit of funk since the Tuesday RBA meeting this week was a dovish surprise relative to the market’s extreme uncertainty ahead of the meeting on the central bank allowing yields beyond the cash rate to rise above its prior policy of capping yields out to the April 2024 Australian government bond at 0.1%. As well, the price for Australia’s largest export, iron ore, has been in a freefall in China as power cuts there have reduced steel production and the outlook is uncertain for the country’s enormous property sector. The retreat away from now clearly defined resistance at 0.7556 has a bit more room to run before the pair runs the risk of a full reversal – the 61.8% retracement of the rally from 0.7170 to the recent top comes in at 0.7319.

Crude oil futures trade lower, but within its established range, with the market focusing on the stronger dollar ahead of today’s FOMC meeting and after the US once again piled pressure on OPEC + to raise output. In addition, the API ahead of today’s EIA stock report said crude oil stocks rose by 3.6 million barrels last week. The OPEC+ meets on Thursday and in addition to agreeing production levels for December they must also consider what to do with Nigeria and Angola which trail their combined quota by more than 400,000 barrels per day due to various problems. In today’s EIA report the market will also focus on Cushing and whether stock levels there has started to stabilise after slumping to a three-year low.

Gold (XAUUSD) and not least silver (XAGUSD) remain on the defensive ahead of today’s FOMC meeting with the firmer dollar triggering additional long liquidation. Total holdings held by investors in ETF’s has seen a steady decline all year, and at 3051 tons, it is currently at the lowest level in 18 months. The market will be focusing on the level of taper and whether the bank support the markets belief interest rates could start to rise already by mid-2022. Silver, feeling the added pressure from industrial metal weakness has so far managed to find support at the 50-day MA at $23.38 ahead of $23.12.

US treasuries (TLT, IEF, SHY). Powell is facing a difficult press conference today. Consensus expects tapering to start as early as mid-November at $15 billion a month. Investors will be looking for signs of whether tapering can be more or less aggressive depending on economic conditions.  However, details concerning earlier interest rate hikes might affect more trading sentiment. Volatility might arise regardless of what the Fed Chair says. If the Fed looks open to earlier hikes, the front part of the yield curve might move higher. However, if the Fed pushes back on this notion, breakeven rates might resume soaring. Investors must be cautious. Short interest on TLT hit a record high. Any surprise might provoke a short squeeze that could provoke a sudden drop in long-term yields. Thus, more flattening of the yield curve can be expected today.

Italian BTPS (BTP10). The BTP-Bund spread tightened considerably yesterday as investors returned to the offices after All Saints long weekend and looked at higher yield as a buying opportunity. By the end of the day, the Italian Treasury announced that it will buy back EUR 5 billions bonds on the 4th of November. The news should further improve sentiment in Italian sovereigns and more spread tightening can be expected today. In the long-term, we are still constructive for the spread to tighten especially if a traffic light coalition will lead the next German government.

What is going on?

Money managers controlling some $130 trillion commit to tackle climate change - as the COP26 climate summit continues in Glasgow, Scotland, a coalition of international finance companies known as The Glasgow Financial Alliance for New Zero (GFANZ) - said that it could commit $100 trillion to addressing climate change with the transition to net zero carbon emissions in the coming thirty years. Questions linger on how significant this commitment may prove, as companies signing up with the alliance are not even required to eliminate financing for coal-linked projects.

The UN Food-price index, already at a decade high after rising 32% over the past year, will be updated on Thursday, and the latest print may point to more pain with Paris wheat (EBMZ1) trading at a record and Chicago (ZWZ1) at a decade high. Driven by tight global supplies and strong export demand from key buyers in North Africa, Middle East and China. Corn (ZCZ1) has moved higher recently on strong ethanol demand and soaring fertilizer and diesel bills for farmers. Skyrocketing fertilizer prices due to soaring natural gas forcing some EU producers to halt or curtail production have raised concerns farmers may cut demand, thereby reduce yields, or shift acres into less nutrient intensive crops.

BMW reports strong Q3 earnings but disappoints on EV deliveries. The German carmaker reports Q3 EBIT of €2.88bn vs est. €2.51bn and confirms the FY outlook. The Q3 revenue at €27.5bn was much better than expected despite semiconductor supply constraints. On the negative side, BMW only delivered 9,440 EVs (all-electric) in Q3 down from 36,087 showing the difficulties for less older carmakers to commit to EVs.

China’s Premier Li warns of downward pressures. The comments from Li Keqiang are the most direct address of the current slowdown in China driven by the housing market and the country’s troubled real estate developers. Li says that the economy needs cross-cyclical adjustments and the government is looking to cut taxes for small businesses and asking banks to prioritize loans to small businesses. The recent manufacturing PMI figure dipped below 50 and the recent string of macro figures have disappointed against expectations. Chinese equities headed lower in today’s trading session.

Republicans win Virginia governor election - In a state that Biden won by 10 points in the 2020 election just a year ago, there was a huge shift in favour of the Republicans as they won with a nearly 3-percent margin, a sign that Biden’s presidency is on life support ahead of the mid-term elections next November. The Republican candidate, Glenn Youngkin, a novice politician with a background in private equity, was careful to thread the needle between accepting support from former president Trump, while avoiding a full embrace of his style.

Strong New Zealand Q3 Employment report – as the participation rate rose sharply to a near record high of 71.2% vs. 70.5% expected and 70.5% in Q2, with employment rising 2.0% QoQ and the Unemployment Rate diving all the way to 3.4% from 4.0% in Q2, close to the record low from 2007. The only slight soft spot was Q3 earnings data, which showed a slightly slower pace of wages growth than expected at +0.7% QoQ vs. +0.8% expected, while Average Hourly Earnings rose +1.2% QoQ vs. +1.5% expected. The market is split on whether the RBNZ will hike 25 or 50 basis points at its next meeting on November 24.

What are we watching next?

FOMC dead ahead – what is market expecting and how much does it trust Fed guidance? The Fed is expected to announce a slowing, or tapering of its QE purchases tonight. With the current pace at $80 billion per month of US treasuries purchases and $40 billion per month of mortgage-backed securities, the Fed laid out a base case in its meeting of reducing purchases by $10 billion in US Treasuries and $5 billion in MBS, a pace that would take the Fed eight months to reach a point at which its balance sheet is no longer growing. But some unease has crept into the Fed’s rhetoric on its confidence that the inflationary spike will remain a transitory phenomenon as that word seems to have left their dictionary. So at the dovish end of the spectrum, the Fed commits to that $15 billion per month with only vague guidance on flexibility, the base case is that the Fed allows itself considerable flexibility on possibly picking up the pace after starting with either $15B or $20 billion per month, with clear data dependency (I.e., jobs, wages and inflation outcomes proving far hotter than anticipated), and then the unlikely hawkish case that the Fed commits to a much faster pace of reductions. Then that leaves guidance on the timing or rate hikes, which the Fed will likely still attempt to put off to providing guidance at future meetings.

Earnings Watch – This week is another busy week on earnings with almost 400 earnings releases among the global universe of companies we track during the earnings season. While last week was about technology stocks this week is more diversified. Today and tomorrow are the important, with today showing earnings from some of Europe’s largest companies such as Novo Nordisk, BMW, Orsted, and Intesa Sanpaolo. Zalando is also reporting today providing insights into growth rates for fashion e-commerce post pandemic.

Wednesday: Novo Nordisk, Orsted, Vestas Wind Systems, BMW, Zalando, Intesa Sanpaolo, Qualcomm, CVS Health, Booking, Marriott International, Roku, Electronic Arts, Etsy, HubSpot

Thursday: Verbund, Barrick Gold, Societe Generale, Siemens Healthineers, Deutsche Post, Vonovia, Enel, Toyota, SoftBank, Nintendo, ING Groep, Credit Suisse, Moderna, Square, Airbnb, Zoetis, Uber Technologies, MercadoLibre, Illumina, Cloudflare, Datadog, Carvana, Pinterest, Peloton Interactive

Friday: Enbridge, TC Energy, Honda Motor, Amadeus IT Group, Siemens Gamesa, DBS Group, Alibaba, EOG Resources, DraftKings

Saturday: Berkshire Hathaway

Economic calendar highlights for today (times GMT)

0930-1040 – ECB's Lagarde and others to speak at event
Poland Central Bank Rate Announcement
1215 – US Oct. ADP Employment Change
1300 – Hungary Central Bank Meeting Minutes
1300 – ECB’s Villeroy to speak
1345 – US Oct. Final Markit Services PMI
1400 – US Oct. ISM Services
1400 – US Sep. Factory Orders
1430 – EIA's Weekly Oil and Fuel Stock Report
1600 – UK Bank of England Governor Bailey to speak
1800 – US FOMC Meeting
1830 – US Fed Chair Powell Press Conference
0030 – Australia Q3 Retail Sales
0030 – Australia Sep. Trade Balance


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

Apple Sportify Soundcloud Stitcher


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 (

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