Head of FX Strategy
Summary: Tech recovery helped US stocks to rebound after heavy losses last week, and focus turns to earnings today with Tesla’s results on tap. Risk sentiment recovered amid lack of an escalation in the Mideast, and commodities and havens pared some of the recent gains. Silver was down 5% and gold slipped over 2.5%, with both testing key supports. Japanese equities opened higher, and momentum in HK stocks also on watch as China supports. USDJPY rose to fresh 34-year highs, with BOJ and intervention risks still on the radar.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: US equity futures pointed slightly lower at the Asia open after a rebound was seen on the Wall Street on Monday as risk sentiment recovered amid lack of escalation in Mideast tensions. The S&P 500 closed back above 5,000 as it rose 0.9% and NASDAQ 100 was up 1%. Market darling Nvidia climbed 4.4% as it bounced from a 14% slump last week and the semiconductor index SOXX was up 1.7%. Earnings season will take the focus from here in this big week where several big tech companies are reporting, starting with Tesla today. Read this article to know more about the expectations around the technology earnings this week.
Japan’s Nikkei 225 was up 1% on Monday and a rally in tech shares and a retreat in crude oil prices overnight could bring in more gains today. HK’s Hang Seng index was up 1.8% on Monday as China’s market regulator unveiled a series of market reforms aimed at enhancing the city’s status as a financial hub.
FX: The US dollar index (DXY) rose to 106.40 at the US open but pared the gains and retreated back towards 106 subsequently with lack of key data and Fed speakers and focus on corporate earnings. USDJPY traded to a fresh 34-year high of 154.85 and BOJ meeting on Friday remains in focus. Even as commodities were softer with geopolitical concerns not escalating over the weekend, activity currencies were the front runners on Monday with the positive risk sentiment pulling equities out of a deep slump for now. NZDUSD rallied to 0.59+ levels, AUDUSD tested 0.6450 while USDCAD slipped all the way to the 1.37 handle. EURUSD traded around 1.0650 despite some dovish ECB comments (see below). The sell-off in GBPUSD was sharper as pair tested lows of 1.23 but recovered as US equities turned higher. As noted in this Weekly FX Chartbook, sterling has a high correlation to equity sentiment and still-long positioning could make it vulnerable in the face of further USD strength.
Commodities: Easing geopolitical risk prompted some profit-taking in the recent high-flying commodities. Particularly, Silver was down over 5%, reaching lows of $27.11, and focus will be on the support at $27.05 and $26.41 next. Gold also retreated back from $2,400 as haven demand was subdued but found support at fibo retracement level of $2,322 for now. Keeping $2,288 and $2,255 on the radar. Crude oil prices also saw modest losses with concerns around Iran’s retaliation easing but Mideast tension still remain elevated with Israel returning to focus on its war with Hamas.
Fixed income: Treasuries were sold off earlier on Monday as safety bid retreated, but weakness was pared with a decline in crude oil prices and ahead of auctions this week. Read this article to know more about the Treasury auctions and their potential impact on yields.
Macro:
Macro events: EZ/UK/US Flash Manufacturing PMI (Apr), US Richmond Fed (Apr)
Earnings: PepsiCo, Danaher, Visa, Tesla, Texas Instruments, Novartis, General Electric, Phillip Morris, Deutsche Boerse
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.
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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.
