Saxo Spotlight: What’s on investors and traders radars this week?
Macro

Saxo Spotlight: What’s on investors and traders radars this week?

APAC Research

Summary:  It’s a huge week; US Inflation data due is poised to show inflation slowed in May, before running up again this year, ushering in the new term of 2022; 'higher for longer'. Plus, utility bills are poised to get higher for households, giving central banks room to rise rates further than mapped out. So all eyes are on the ECB meeting this week. In other eco news consumer confidence data remains at record lows; this week’s reading will probably show further signs the consumer is stretched. And can the Chinese economy show further signs of growth? Down under, Australia's central bank is poised to aggressively rise rates to combat higher than expected inflation. Meanwhile, in equities, Commodities and Defence remain the best performers this year, receiving the most flow of funds in anticipation of further earnings growth in 2022.

US May CPI to re-affirm higher for longer. CPI rose 8.3% y/y in April, slightly slowing from March’s 8.5% y/y. Consensus expects a slight slowdown to 8.2% y/y in May, but we believe that talk of inflation slowing down from the peak is a stretched. US core PCE data came in as expected at 4.9% y/y and 0.3% m/m for May, but slower than last month's 5.2% y/y and have prompt further talk of inflation peaking out. While PCE is the preferred Fed metric, what cannot be ignored right now is that food and energy prices still have more room to run on the upside suggesting that inflation will remain higher for longer, and Fed needs to stay hawkish even beyond the couple of 50bps of rate hikes that remain the baseline for now.

ECB meeting to prepare for July lift-off. The European Central Bank (ECB) is scheduled to meet this week on Thursday. While expectations are broadly set for a lift-off in July, eyes will be mainly on the Bank’s inflation forecasts and any hints of an earlier-than-expected 50bps rate hike moves. May CPI rose to a fresh record high of 8.1% y/y from 7.5% y/y previously, and ECB tightening expectations have picked up since the report. We expect more of the policymakers to tilt hawkish in the coming weeks, which will likely bring forward the expectation of the 50bps move to Q3 rather than in December.

University of Michigan sentiment. While the sentiment has been generally positive over the last week, recent Fed surveys have been suggesting a loss in momentum in the US economy. The University of Michigan consumer sentiment index is due next on Friday, after it was revised lower to 58.4 in May, well below April’s 65.2. The index is a combination of the current assessment and expectations for the near future, and consensus expect the preliminary June reading at 58.9. Consumer confidence in the US is running at record lows, but spending continues to hold up. An increase in the reading would suggest consumers are more confident, a positive for stocks if that confidence translates into spending.

Threat of a global food crisis. Agricultural commodities have more and more supply issues to deal with. After the war and unfavourable weather conditions, rising protectionism has threated the supply of key crops as Indonesia banned palm oil exports, India announced curbs on wheat exports and Malaysia staled chicken exports. Threat is now seen for India’s rice exports (which if initiated can also be followed up by other rice exporters like Vietnam) or shortage of eggs. Palm oil concerns also continue despite Indonesia removing the ban, amid smaller reserves and China demand coming back. China’s first batch of trade data for May, including soybeans, edible oils and meat imports, will be released Thursday, while the USDA’s World Agricultural Supply and Demand Estimates are scheduled to be published on June 10. The Food and Agriculture Organization (FAO) of the United Nations also publishes its biannual Food Outlook next week, and would be key to watch for developments affecting the global food and feed markets.

China has a busy economic calendar this week.  May Caixin Services PMI came this morning at 41.4, much weaker than expectation and staying firming in the contractionary zone.  May trade data is scheduled to release on Thursday June 9.  Container throughput data in the first 20 days of May suggests recovery in trade growth from the previous month as disruption to logistics and production eased.  Bloomberg consensus is calling for exports and imports to rise 8% YoY and 2.5% YoY respectively. May PPI (Friday June 10) is expected to fall 6.5% YoY (Bloomberg consensus) from April’s 8.0% as energy and raw materials prices having plateaued and due to base effect.  May CPI is scheduled for Friday and is expected to inch higher to 2.2% (Bloomberg consensus) from April’s 2.1%.  During the month, China added to its state reserves of pork and triggered a rise in pork prices.  Pork has a weight of approximately 4.8% in CPI.  China is expected to release the aggregate financing, loan and money supply data between June 9 and 15 (the exact date is not made known).  New aggregate financing is expected to rebound somewhat to RMB1,975bn in May (Bloomberg consensus) from RMB910bn in April and it implies the growth rate of outstanding aggregate financing remains subdue at 10.2% YoY. 

For equities, across the Baskets we track at Saxo; Commodities and Defense remain the best performers this year and the only two baskets in positive territory. Ahead of the US Fed starting to reduce its balance sheet next week (June 15), it could be worth considering adding Commodities and Defense securities to your portfolio, as the market expects these sectors to see greater earnings growth in 2022.

The RBA is tipped to get aggressive with rate rises, with the second hike in a decade due tomorrow. Rate are tipped to rise from 0.35% to 0.6% as the RBA seeks to curb inflation and stabilize eco’ growth. Last week Aussie GPD and export income rose more than expected, ahead of Shanghai’s reopening. So as the economy is growing stronger than expected, and Labor’s new policy will see employment rise and wage pressure rise too, the RBA will have more room to rise rates across the year. The RBA Cash Rate Futures expect Australia’s interest rates to hit 2.8% this year. This will likely cause delinquency rates to rise across 2022, and could hurt some Australian banks as well, who are already facing margin (profit) compression, as borrowing rates have been steadily declining. At Saxo we’ve been hawkish, expecting higher for longer inflation, and now new research today from Bloomberg suggests more sustained and higher than expected inflation could linger in utilities too, with the Australian Energy Regulator suggesting prices could rise 4 to 14% from July, due to energy market disruptions. This supports our view that interest rates could possibly get close to potentially 3% in Australia this year.

Key economic releases this week

Monday 6 June

South Korea, Switzerland, Norway, New Zealand Market Holiday
Hong Kong S&P Global PMI* (May)
China (Mainland) Caixin Services PMI* (May)
Thailand CPI (May)

Tuesday 7 June

Japan All Household Spending (Apr)
Philippines CPI (May)
Australia RBA Cash Rate (Jun)
Germany Industrial Orders (Apr)
Taiwan CPI (May)
United Kingdom S&P Global / CIPS Services PMI* (May)
United States International Trade (Apr)
Canada Trade Balance (Apr)

Wednesday 8 June

South Korea GDP Growth (Q1, revised)
Japan Current Account (Apr)
Japan GDP (Q1, revised)
India Repo and Reverse Repo Rate (8 Jun)
Switzerland Unemployment Rate (May)
Germany Industrial Output (Apr)
United Kingdom Halifax House Prices* (May)
Norway Manufacturing Output (Apr)
Thailand 1-Day Repo Rate
Taiwan Trade (May)
United Kingdom S&P Global / CIPS Construction PMI* (May)
Eurozone GDP (Q1, revised)
United States Wholesale Inventories (Apr)

Thursday 9 June

United Kingdom RICS Housing Survey (May)
China (Mainland) Trade (May)
Eurozone ECB Deposit and Refinancing Rate (Jun)
United States Initial Jobless Claims

Friday 10 June

China (Mainland) CPI, PPI (May)
China (Mainland) M2, New Yuan Loans, Loan Growth (May)
Malaysia Industrial Output (Apr)
Norway CPI (May)
United States CPI (May)
Canada Capacity Utilization (Q1)
Canada Unemployment Rate (May)
Canada Manufacturing Sales (Apr)
United States UoM Sentiment (Jun, prelim)



Quarterly Outlook 2024 Q4

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

    Head of FX Strategy

    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

    Head of FX Strategy

    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 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/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. 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

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.