Market Quick Take - May 7, 2021 Market Quick Take - May 7, 2021 Market Quick Take - May 7, 2021

Market Quick Take - May 7, 2021

Macro 6 minutes to read
Saxo Strategy Team

Summary:  The broader US equity market recovered its mojo yesterday, with the S&P 500 Index closing near its all-time high, while the info-tech heavy Nasdaq 100 has only partially retraced the recent deep sell-off. Risk sentiment was supported by a weak US dollar and another big drop in US weekly jobless claims. Elsewhere, a weak USD helped gold burst above $1,800 per ounce for the first time since late February.

What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) – US equities pulled higher yesterday on strong jobless claims and value stocks driving the market action in the broader market taking the S&P 500 futures to the highest close since 29 April and briefly moving beyond 4,200 in early European trading. The flipside of yesterday’s move in the broader equity market was the breakdown of technology pockets such as bubble stocks, green transformation, e-commerce, biotechnology, and crypto-related stocks for the third straight session highlighting increasing nervousness over valuations and rising inflation.

Euro STOXX 50 (EU50.I) - European equities are opening higher today and briefly touched the 4,000 level in the STOXX 50 futures in early trading driven by positive earnings releases from Adidas and Siemens. In addition, German industrial production in March was stronger than expected m/m and Chinese exports numbers for April are also stronger than expected bolstering sentiment in Europe being China’s largest trading partner.

Bitcoin (BITCOIN_XBTE:xome) and Ethereum (ETHEREUM_XBTE:xome). Bitcoin had a go yesterday at the key 59k area pivot but failed and dropped back near 56k this morning. The price action is in limbo between that range high and perhaps 51.6k, a downside swing level. Elsewhere, the momentum is coming out of Ethereum as another new record high near 3,600 failed to hold and the price action slipped back well below 3,500. Possibly worth watching over the weekend, frequent Dogecoin touter Elon Musk will be hosting live American comedy show Saturday Night Live late tomorrow and could trigger volatility if he makes any comments (perhaps even if he doesn’t).

EURUSD – with strong sentiment and orderly treasury markets (no sell-off despite strong jobless claims data), the USD wilted, giving some solid separation for EURUSD from the 1.2000 level, an encouraging development for the bulls, who will want the pair to close north of 1.2100 today after the US jobs report to close out a strong week as an indication that a new attack on the cycle highs above 1.2300 is up next. A USD rally on jobs data today, meanwhile, that sees price action back below 1.2000 will could keep the pair in a range-bound muddle for now, where the next significant levels lower are perhaps 1.1950 and then the 1.1875 level, the 61.8% retracement of the recent rally.

EURCHF and EURJPY the divergence in these two pairs is a head-scratcher, as one would normally expect a rough correlation, with recent EURJPY upside linked to a steepening yield curve in Europe and sense of optimism on the economic outlook as Covid lockdowns are set to end soon. Further upside support there if the German Bund sells off and takes its yield to the cycle highs that have recently been in focus between –20 and –15 bps. That same development has not supported a EURCHF, rally, and that pair has broken down below the prior range established above 1.1000, although a more thorough breakdown would require the price action to retreat into the old range below 1.0900.

Gold (XAUUSD) finally broke above $1800 yesterday as real yields and the dollar both softened. The break however needed the pull from in-demand silver (XAGUSD), one of the best performing commodities this week, which after reaching the upper limit of its channel at $27.55 trades a tad softer this morning. In gold, buy stops from long-term trend following shorts has yet to be challenged, so now comes the hard work of staying above support at $1795. The next level of upside interest is $1851, the 200-day moving average and 61.8% retracement of the January to March sell-off. Focus today the US job report and the Treasury market reaction to any surprises.

Nonfarm payrolls hold the keys of US Treasuries (IEF, TLT). The bond market is going to watch the nonfarm payroll closely today. Yesterday, US weekly jobless claims fell below 500k for the first time since March last year signaling that the job market is quickly recovering heading towards the FED full employment target. Strong nonfarm payrolls may mean the Fed will need to taper earlier than expected, potentially driving the bond market into a tantrum. Despite US Treasuries yields are not moving now, we still believe that the yields should rise to try 2% by summer as inflationary and economic data continue to strengthen.

What is going on?

The Bank of England failed to meet hawkish expectations, although it did “taper” the rate of asset purchases from GBP 4.4B per week to 3.4B per week (odd that the de facto taper was explicitly called “not a taper” by Governor Bailey in the press conference, but the overall size of the QE target was left unchanged) as largely expected. The economy was forecast to grow 7.25% this year, a strong upgrade to February expectations as the BoE remarked on the strong performance of the economy. The part of the statement discussing inflation is perhaps what saw future rate expectations lowered slightly and the pound a shade weaker, as the bank mimicked the Fed in seeing any near term inflation spike as likely transitory. The guidance on future policy moves was vague and allows maximum flexibility: “The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”.

A Fed Financial Stability report warns on stretched asset valuations and “significant declines” if risk appetite falls – but the market seemed thoroughly deaf to this report. The recent Archegos meltdown was mentioned in the report, which fretted that more oversight might be needed because of hidden leverage in the financial system.

US weekly initial jobless claims posted their best reading since pre-pandemic at 498k yesterday, far better than the 538k expected and 590k of the previous week (worth noting that revisions have been large to these numbers, even if the trend is quite clearly lower of late).

The commodity rally continues to gather steam, thereby inadvertently raising the risk of a sharp correction. The Bloomberg Commodity Spot index rising for the fifth straight week to reach its highest level since 2011. Spurred on by multiple factors from a vaccine-led rebound in global growth, transportation bottlenecks crimping supplies, weather concerns in key growing regions and rising inflation concerns and speculative frenzy triggering increased investment demand. All the major commodities traded higher this past week led by Iron Ore, Arabica coffee and corn. Metals of all colors rallied as well with copper reaching a record high and gold breaking above $1800. Yesterday the UN FAO published its Global Food Price index for April, and it was grim reading with the year-on-year rise exceeding 30%.

What are we watching next?

The vote count in Scottish parliamentary elections. Yesterday’s vote in the Scottish parliamentary elections will be counted today and tomorrow and the results announced over the weekend. It is anticipated that the Scottish National Party, which is in favour of an independent Scotland, will gain an outright majority of the Scottish Parliament for the first time. This could lead to the SNP (and any Greens that are also pro-independence) to move for another independence referendum after the 2014 vote failed, although UK Prime Minister Boris Johnson has vowed not to allow any new referendum. Polls suggest that the vote is still very divided, with a narrow majority in favour of Leave (although a strong majority of youth are in favour of leaving).

US April Nonfarm Payrolls Change and Average Hourly Earnings data today is expected to show payrolls growth of a million jobs in the US after last month’s +916k. Average Hourly earnings are expected to decline –0.4% year-on-year due to the year-ago large stimulus check, but will bear watching over the summer months for signs that companies are having to bid up wages for workers as there are widespread stories of difficulty in filling positions.

Earnings reports this week. Adidas reports better-than-expected Q1 results this morning with operating results hitting €704mn vs est. €580mn and upgrading its revenue growth outlook for 2021 to high-teens rate, which is significantly above current market expectations of 8% y/y. Siemens is also reporting strong earnings this morning with revenue beating expectations and raising guidance for 2021.

  • Today: Siemens, BMW, Cigna, Enbridge, Credit Agricole, Adidas

Economic Calendar Highlights for today (times GMT)

  • 1000 – ECB President Lagarde to speak
  • 1230 – US Apr. Change in Nonfarm Payrolls
  • 1230 – US Apr. Unemployment Rate
  • 1230 – US Apr. Average Hourly Earnings
  • 1230 – Canada Apr. Net Change in Employment
  • 1230 – Canada Apr. Unemployment Rate
  • 1400 – Canada Apr. Ivey PMI

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

Apple Sportify Soundcloud Stitcher

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 07

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
  • The rise of populism: Far-right parties will influence the future

    The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

    Read article
  • Investing in China: Navigating Q1 amid economic challenges

    Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

    Read article

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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 (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.