Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of FX Strategy
Key points:
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The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: Fed Chair Powell’s pushback to rate hike expectations helped NASDAQ 100 and Rusell 2000 to be the outperformers among the US equity indices, while Dow and S&P 500 also closed higher. Tech momentum also held up ahead of Apple earnings, which reported stronger-than-expected numbers last quarter and unveiled a bumper $110B stock buyback along with an increase in dividend, despite headwinds in China. Apple stock price was up 7% in after-hours trading.
The next key test for the markets comes from the NFP jobs report today, where leading indicators have been showing some signs of a slowdown but hard data has remains strong. Dovish repricing risks remain large given market’s stretched expectations.
Meanwhile, Hong Kong’s Hang Seng index continued to build on its recent momentum despite onshore China markets closed. HSI was up 2.5% yesterday, and the Hong Kong Tech index was up 4.5%
FX: The dollar trend seems to be turning as market faces dovish repricing risks. DXY index is the lowest in three weeks and heading for its second consecutive weekly decline. AUD and JPY outperformed on dollar weakness, with AUDUSD heading back higher for another test of the 100DMA at 0.6583. USDJPY slipped to fresh lows of 152.88 as suspected intervention and lower yields are lending support to the yen. With NFP due out today and Japan markets closed for a four-day weekend, there remains risk of further intervention, which can bring the pair down closer to 150-handle. USDCHF fell below 0.91 handle on higher Swiss CPI, testing key support in the 0.9088 area, break of which will clear the path to 0.90. GBP and EUR lagged, with GBPUSD still wobbling around 1.25 and EURUSD around 1.07.
Commodities: Copper traded lower again as the recent rally to two-year highs faces a correction risk and Head of Commodity Strategy, Ole Hansen, discusses the reasons and levels to watch in this article. Gold slipped as well despite cooling in yields, as high-for-longer rates continued to be a concern. Crude oil prices were little changed as the market contemplates the geopolitical backdrop and demand outlook.
Fixed income: Treasury markets continued to digest Powell’s comments that did not meet the high bar set by the market expectations, and short-end was relatively better bid. Focus now turns to US jobs data for April due today.
Macro:
Macro events: Chinese Market Holiday (Labor Day), Japan Market Holiday (Constitution Memorial Day), EZ/UK/US Services and Composite Final PMIs (Apr), US Jobs Report (Apr), US ISM Services PMI (Apr), Norges Bank Policy Announcement
Earnings: Novonesis, Danske Bank, Credit Agricole, Societe Generale, Intesa Sanpaolo, MercadoLibre, Monster Beverage. Weekend: Berkshire Hathaway
News:
For all macro, earnings, and dividend events check Saxo’s calendar.
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