Market Quick Take - August 2, 2021

Macro 6 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  Asian stocks, as well as U.S. futures rose in Asia as some concerns over China's regulatory crackdown eased and progress on a U.S. infrastructure plan helped sentiment. In addition, a Covid-19 spike in China has raised some growth concerns spurring bets on monetary easing driving lower both Chinese and U.S. Treasury yields overnight. The dollar trades steady following an end of week squeeze on recently established longs. Crude oil trades lower on China growth and Delta worries while gold remains stuck despite strong tailwinds from lower yields and dollar. Focus on Friday's U.S. job report and further news from China after July Manufacturing weakened amid export weakness and supply disruptions.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) – US equity futures are starting the week on a positive note with Nasdaq 100 futures up 0.5% driven by strong earnings across the board and positive sentiment coming out of Square’s $29bn acquisition of Afterpay, and of course the lower US 10-year yield which is compressing real yields and supporting valuations. S&P 500 futures are also following Nasdaq 100 up higher highlighting that today’s rally is broad-based.

Bitcoin (BITCOIN_XBTE:xome) and Ethereum (ETHEREUM_XBTE:xome) - Bitcoin is falling below 40,000 this morning as regulatory pressures continue to darken the news sentiment. The latest worries for crypto traders are a new bill in the US Congress aiming to tax crypto profits to fund the US infrastructure deal and a new bill that aims to require US firms in the crypto industry to send a form 1099 to their customers; in the case a customers choose to remain anonymous it will per definition be regarded as US tax evasion.

AUDUSD – despite weaker than expected Chinese PMI figures AUDUSD is not extending its declines from last week showing the market is not selling commodity currencies on weak news despite CFTC data shows that the non-commercial futures positions increased their net short position for the fifth straight week. Maybe traders are betting that China will soon swing into stimulus and revert some of that recent negative sentiment over the economy and its markets.

Arabica coffee (COFFEENYSEP21) continues to see the biggest price swings since 2014 after weather worries in Brazil, the world’s largest producer and exporter of coffee, last week sent prices to a 2014 high at $2.15/lb, before dropping to $1.80 on Friday after reports the recent cold spell may have been less devastating than expected. It is still too early to estimate production losses, as more cold weather may emerge, and with that in mind we expect continued volatility with some underlying support emerging soon.

Gold (XAUUSD) remains stuck close to $1800 following an end of week roller-coaster which saw the metal reverse sharply lower after once again finding resistance above the 200-day moving average, currently at $1820. These developments have created a double top which has led to fresh tactical short selling. Having just returned from my summer holiday, the first thing that springs to mind is golds continued inability to respond positively to the July collapse in US 10-year real yields to a record low. Overall, the metal remains stuck in a 50-dollar range with a continued recovery in silver (XAGUSD) from a recent six-month low against gold needed to support precious metals in general. Focus on Friday’s U.S. job report.

Crude oil futures have given back some of last week's gains overnight in response to weaker China data and continued worried about the spreading of the delta coronavirus variant. The market meanwhile is also watching rising tensions between the U.S. and Iran as Washington on Sunday warned about an “appropriate response” after blaming Tehran for last week’s drone attack on an Israel-linked oil tanker. Brent crude oil has settled into a range around $75 with Delta demand worries offsetting the current tight supply outlook. Focus on Iran developments and EIA’s weekly stock report with Cushing levels currently trailing the five-year average by close to 30%.

US Govt Bonds (SHY:xnas, TLT:xnas, IEF:xnas) - The US 10-year yield is trading below 1.23% this morning continuing its push lower as investors demand safe assets driven by increased worries over the economy driven by a Chinese economy slowing down (PMI figures disappointed today). New data is also showing that Japan’s GPIF (public pension fund) has reduced its US Treasury holdings to 35% down from 47% previously highlighting that foreign investors are increasingly worried about the real yields offered by US bonds.

What is going on?

Bullard leans more hawkish than Powell in recent speech. On Friday Federal Reserve Bank of St. Louis President James Bullard said Federal Reserve policy makers should begin tapering of asset purchases in the fall and wind up the process by March 2022 in light of U.S. inflation running much higher than expected. Furthermore, he said “My preference would be to get a decision in September and start sometime after that”.

Square is buying Afterpay in $29bn acquisition. The Australian-based Afterpay is the most successful story within the buy now and pay after industry, with revenue growing 93% in 2020. With today’s acquisition announcement Afterpay gets a takeover value to revenue metric of 42x which is most likely the highest in modern equity markets for an acquisition of this size.

Protests in South Africa cloud the outlook, shake the Rand. Violent protests against the jailing of former South African president Jacob Zuma have resulted in several deaths, road closures and widespread business closures as more than 200 shopping centres were looted in what current president Ramaphosa described as “opportunistic looting”. AT the same time, the country is in the midst of a fresh and deadly Covid resurgence.

What are we watching next?

SEC blocking of Chinese IPOs. The US regulators are scrutinizing Chinese IPOs and blocking them until demanding better risk disclosures are met. This is another step in the ongoing tensions between the US and China and follows China’s own crackdown on for-profit education companies and technology firms relying on user data. The news has got Chinese-listed technology firms to rally today.

Earnings to watch this week. The Q2 earnings season has so far been strong with few signs of companies being hit by rising commodity prices. However, some companies such as Unilever are out saying that it is beginning to impact margins and thus the rising commodity prices could be a theme to watch for Q3 or Q4. This week almost 200 companies are reporting earnings with the most important listed below:

  • Today: Heineken, HSBC, Mitsubishi UFJ, AXA, Ferrari
  • Tuesday: Amgen, Alibaba, Eli Lilly, Fidelity National Information, BP, ConocoPhillips, BMW, Infineon Technologies, Activision Blizzard
  • Wednesday: Toyota Motor, Sony, General Motors, Booking, Uber, CVS Health, Sampo, Siemens Energy, Intesa Sanpaolo, SoftBank, JDE Peet’s, Roku, Etsy
  • Thursday: Zoetis, Siemens, Merck, Deutsche Post, Becton Dickinson, Cigna, Duke Energy, Square, Illumina, Novo Nordisk, Moderna, Adidas, Credit Agricole, Zalando, Continental, Semiconductor Manufacturing, Nintendo, Glencore, Regeneron Pharmaceuticals, Cloudflare
  • Friday: Allianz, NTT, AP Moller – Maersk,
  • Saturday: Berkshire Hathaway

Economic Calendar Highlights for today (times GMT)

  • 0800 – Markit Eurozone Manufacturing
  • 1400 – US Construction Spending
  • 1400 – US ISM Manufacturing

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

Apple Sportify Soundcloud Stitcher

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

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 (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-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 www.home.saxo/en-hk/about-us/awards.

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.