Summary: US equities closed mixed after PCE data, with attention on US employment figures. Tech stocks outperformed. Hong Kong and China saw moderate losses post mixed NBS PMI data. Dollar strengthened due to EUR weakness from ECB comments. Crude oil surged 2% due to Russian export cuts. Yields dipped 1-3 basis points in quiet trade, awaiting employment report. US claims and PCE data showed a cooling economy. EZ inflation persisted, but ECB rate hike odds lowered. China adjusted mortgage rates and down payment ratios to spur housing demand. Upcoming: China Caixin Manufacturing PMI, US NFP, US ISM Manufacturing.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: Key indices ended Thursday mixed in a choppy session after inline PCE prints as the focus has shifted to today’s US employment data. Technology stocks outperformed seeing Seagate, Broadcom, Salesforce, Juniper, and Micron gain around 3%. For a discussion on Nvidia’s share buybacks, read on here.
China/HK Equities: The Hong Kong market is closed for a typhoon while mainland bourses are open today. Markets finished moderately lower on Thursday after a mixed set of China NBS PMI data that generated no fanfare.
FX: Month-end flows and EUR weakness driven by dovish ECB comments drove the dollar higher in the US session. EURUSD hit a low of 1.0835 from 1.0940 with September rate hike bets being pared. GBPUSD also sold-off but found support at 1.2650 with BOE chief economist Pill saying further hikes might not be necessary. PBoC’s announcement to cut forex deposit reserve ratio from 6% to 4% brought gains in CNH in the Asian morning. USDCNH slid below 7.25 from 7.2750, while NZD and AUD rallied. Focus turns to NFP jobs data in the day ahead, USDJPY remains below 146 and could see gains if data is strong.
Commodities: Crude oil extended gains as Russia agreed to further OPEC+ oil export curbs and more steps will be announced next week. Russia had cut crude exports by 500k barrels a day in August, reduced that to 300k in for September and October decision will be on watch next week. Saudi Arabia is also expected to extend its 1mn barrels a day cut to October. Gold on watch as well as it retreated to $1940 but a softer jobs data can bring a fresh push higher.
Fixed income: Yields slid 1 to 3 basis points across the curve on quite trading, with all eyes on the employment report today.
Macro: China’s PBoC announced a cut to FX RRR from 6% to 4% from September 15. Little new information in US claims and July PCE data. Jobless claims 228k (exp 235k, prev 232k) and core PCE +0.2% MoM, 4.2% YoY as expected. Both reaffirmed economy is cooling but not fast enough. Core services ex-housing rose 0.46% MoM (prev 0.3%), which could concern some Fed officials. EZ inflation remained stubborn with both headline and core up 5.3% YoY, vs. previous 5.3% and 5.5% respectively. However, comments from ECB's Schnabel on the slowing economy were later echoed by DeGuindos, leading to a repricing lower in the odds of an ECB rate hike in September.
In the news: China announced to lower interest rates charged on outstanding mortgages in a move to slow the wave of prepayment and boost consumption. Simultaneously, China standardizes the down payment requirements for home purchases across the country aiming at boosting housing demand. For more details, read on to our article here. Cybersecurity firms CrowdStrike, Okta shares jump after better-than-expected earnings – Full article in CNA.
Macro events: China Caixin Manufacturing PMI (Aug) exp 49.0 vs 49.2 prior (0945 SGT), US NFP (Aug) est 170k vs 187k prior (2030 SGT) – preview included in FX Watch. US ISM Manufacturing (Aug) est 47 vs 46.4 prior (2200 SGT)
Earnings events: Broadcom dropped by nearly 5% in the extended trading hours after giving a downbeat revenue guidance for Q4.
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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.
