Head of Commodity Strategy
Summary: The report covered a week where the prospect for a Phase One U.S.-China trade deal received a knock from the Senate vote on Hong Kong. The dollar was bid while stocks climbed, bonds saw 10-year yields drop to 1.78% and the yield curve flattening.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
Buying of dollars accelerated in the week to November 19 with the non-commercial long against ten IMM currency futures rising by $2.6 billion to $17.1 billion, a four-week high. All but two currencies were sold with CAD, EUR and AUD seeing the bulk of the activity.
Despite gaining some ground during the reporting week the EUR net-short nevertheless increased to 62,503 lots, the largest in four weeks. The AUD short rose by 16% to 47,240, its biggest since mid-October.
With just four full weeks of trading left before the markets wind down for yearend, leveraged funds held a near record long in Fed Funds futures while being the most bearish the S&P 500 Index since September 2017. The non-commercial net short in the Cboe VIX future meanwhile continued to rise and last week it reached a fresh record of 218,362 lots, i.e. $218 million per each 1% change in volatility. The selling is driven by the very steep forward curve where the spot VIX at 12.55% currently trades some 4% below the second futures month of January. Short sellers will earn the time decay as long the market remains calm and doesn't suddenly spike higher.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
