The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Equities: Better than expected economic activity levels coming out of China are improving sentiment in Asia with Hang Seng futures up 2.4%. Chinese data will put additional pressure on the market’s pricing of rate cuts this year as a Chinese recovery period could add to inflationary pressures and keep the economy going. Today’s key macro event is German CPI for March expected to slow on YoY but remain resilient on MoM. US equity futures are down 0.1% in early trading while European equity futures are up 0.2% as Europe has the biggest trade relationship with China and thus will benefit the most from higher growth in China. We expect a quiet session and on earnings the week is the least active in several months as the market awaits the Q1 earnings season start next week with major US financials such as JPMorgan Chase kicking off.
FX: The dollar rose sharply at the start of the new quarter after closing Q1 as the strongest G10 currency yet again. The laggards in Q1 were JPY and CHF, although GBP resilience prevailed. Yesterday’s strong ISM data coupled with the latest Fed commentary turning less dovish brought Treasury yields to jump higher and USDJPY rose again to 151.80 despite threat of intervention. USDCNH remains north of 7.26 despite firmer China PMIs and PBOC’s efforts to bring it back lower. The relative GBP underperformance theme is also catching up, with GBPUSD down one big figure to 1.2540 on firmer US data, testing key support. Other activity currencies also fell with AUDUSD below 0.65 and NZDUSD around 0.5950. EURUSD could test 1.07 with German CPI on the radar today, especially if it follows the trend seen in French and Italian CPI from Friday which underperformed expectations.
Commodities: Oil prices trade near five-month highs as geopolitical tensions remain rampant after an Israeli airstrike on Iran’s embassy compound in Syria killed a top military commander, and after Mexico said it would temporarily halt exports. The OPEC+ JMMC meeting on Wednesday will likely reaffirm its current tight supply policy. Gold’s strong run towards our USD 2300 target continues with underlying demand and technical momentum being strong enough to offset the normal negative impact of dollar and yield strength. Copper bouncing from key support below $4 with focus on upbeat factory data from China. Cocoa hits a fresh record despite continued selling from hedge funds who now holds the smallest net long in 17 months.
Fixed income: Last Thursday, Christopher Waller suggested that economic data might lead to fewer rate cuts or delay the beginning of the rate-cutting cycle in the US. The next day, strong personal and spending data came in while markets were closed due to the Easter Holidays, and Powell delivered a speech maintaining a cautious stance on rate cuts. In response to these developments, traders adjusted their expectations for monetary easing this year as of Monday. However, the likelihood of rate cuts dropped below 50% later in the day when the US manufacturing PMI indicated expansion for the first time since 2022. This news prompted a bear-steepening of the US Treasury yield curve, with yields climbing across the board; 2-year yields went up by 9 basis points (bps) and 10-year yields by 12.5 bps to 4.325%. Attention is now turning to this Friday's non-farm payroll data, anticipated to be 205k, the lowest since last October, though the unemployment rate is projected to stay under 4%. If price pressures remain sustained, a bond bull rally is unlikely to form. We still favor the front part of the yield curve while we remain cautious about ultra-long maturities.
Macro: US ISM manufacturing rose back to expansionary territory as it came in at 50.3 for March from 47.8 previously and 48.4 expected. Prices metric was hotter than forecast at 55.8 from 52.5 (exp. 52.7), showing an acceleration of prices in March from February ahead of the March CPI data due March 10th, with the upside stemming from commodity inflation. Employment PMI rose but remained in contraction and focus will be on the NFP report due this Friday. The probability of Fed rate cuts was pared, with June odds now priced at 63% vs. 67% at the end of last week. Fed officials, including key members Powell and Waller, have all dialed back the idea of three rate cuts this year. Caixin China manufacturing PMI ticked up to 51.1, better than the anticipated 51.0 and the prior month’s 50.9.
Technical analysis highlights: Nasdaq 100. Top and reversal intact, key support at 17,808. Needs to close above 18,417 to cancel. DAX higher, eyeing 19K, indicators supporting higher levels.
EURUSD downtrend likely to drop to 1.07, possibly 1.06. GBPUSD likely to test support at 1.25. USDJPY range bound 151.95 – 150.85. EURJPY correction to 162.17. AUDUSD testing support at 0.6485, could drop to 0.64. Gold uptrend could reach 2,276-2,295. Copper correction over, pushing towards 4.20-4.30. Crude oil uptrend has more legs to go, 3-5% . US 10-year T-yield likely to test resistance at 4.35 once again.
Volatility: On Monday, the VIX experienced an uptick to $13.65 (+0.64 | +4.92%), highlighting increased market volatility. Notably, the VIX1D saw a sharp decline to 8.14 (-2.19 | -21.20%), contrasting with the VIX9D's significant rise of +2.06 or +19.51%, indicating expected volatility in the coming two weeks. This week's economic calendar is packed with potential volatility triggers, including JOLTs Job Openings, ADP Nonfarm Employment Change, Fed Chair Powell's testimony, and additional employment data towards the week's end. Although this week lacks major earnings announcements, anticipation is building for next week's Q1 earnings season start, featuring key reports from BlackRock, JPMorgan, Wells Fargo, and Citigroup. Expected market movements remain similar to the previous week, with the SPX at +/- 47.85 (+/- 0.91%) and the Nasdaq 100 at +/- 240.28 (+/- 1.31%). VIX futures rose to 14.600 (+0.100 | +0.67%), while S&P 500 and Nasdaq 100 futures are slightly down at 5287 (-8.25 | -0.15%) and 18466.75 (-30.50 | -0.16%). Monday's most active stock options were TSLA, NVDA, AMD, AAPL, MU, AMZN, PLTR, GOOGL, AMC, and MSFT.
In the news: Australian Manufacturing Activity Deteriorates At Fastest Pace Since Early 2020 (WSJ), Nikkei dividend index hits a record high for third straight year (Nikkei Asia), Investors Are Unwinding the ‘Buy India, Sell China’ Stocks Trade (Bloomberg), Disney Winning Proxy Fight Against Trian With More Than Half of Votes Cast (WSJ), Iran says Israel bombs its embassy in Syria, kills commanders (Reuters), India wants to become the top manufacturing alternative to China. But first it needs to beat Vietnam (CNBC).
Macro events (all times are GMT): UK Mar House prices, exp. 0.3% & 2.4% vs 0.7% & 1.2% prior (0700), Manufacturing PMI (Mar final) from Italy, France, Germany and Eurozone, Germany March CPI, exp 0.5% & 2.2% vs 0.4% & 2.5% prior (1300), EU CPI (Mar) exp. 0.7% & 2.4% vs 0.6% & 2.7% prior (1300), US JOLTS job openings (Feb, exp 8730k vs 8863k prior (1500), US Factory Orders (Feb), exp 1% vs –3.6% prior (1500).
Earnings events: Quiet earnings week ahead before the Q1 earnings season starts next week with major US financials such as JPMorgan Chase, Wells Fargo, and Citigroup reporting.
For all macro, earnings, and dividend events check Saxo’s calendar
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Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
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Chief Investment Strategist
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Chief Investment Strategist
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Head of Commodity Strategy
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Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy