Global Market Quick Take: Asia – August 5, 2024

Global Market Quick Take: Asia – August 5, 2024

Macro 6 minutes to read
Saxo Be Invested
APAC Research

Key points:

  • Equities:  NIkkei 225 is down more than 20% from the highs.
  • FX: Japanese yen continues to lead the gains
  • Commodities: WTI and Brent crude fell over 3%
  • Fixed income:  2 year and 5 year Treasury yield lowest since May 2023
  • Economic data: US ISM services

------------------------------------------------------------------

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.

0805 

Disclaimer: Past performance does not indicate future performance.

 

In the news:

  • Stocks shaken by US recession fears, bonds price for rate cuts (Investing)
  • Morning Bid: Goodbye soft landing, hello emergency landing (Yahoo)
  • Warren Buffett's Berkshire sold nearly half of its Apple stake (Yahoo)
  • Stock Market News: Nasdaq Enters Correction Territory (Barron’s)
  • Exxon earnings beat as production in Guyana and Permian sets a record (CNBC)
  • Chevron reports Q2 earnings miss on weak refining margins (BT)

Macro:

  • US jobs report for July sent shivers to the market about a possible recession and the Fed being behind the curve, sparking a massive risk off sentiment. Headline payrolls fell to 114k from 179k, beneath the expected 175k, with BLS noting Hurricane Beryl had no discernible impact for the July data, and response rates were within normal ranges. Unemployment unexpectedly rose to 4.3% from 4.1% (exp. 4.1%), invoking the Sahm rule, which historically indicates the economy is in recession. Average earnings for both M/M and Y/Y declined to 0.2% (exp. & prev. 0.3%) and 3.6% (exp. 3.7%, prev. 3.8%), respectively. Markets have now priced in nearly 45bps of easing at the Fed’s September meeting, and over a 100bps of rate cuts by December. Fed’s Barkin and Goolsbee spoke after the jobs report on Friday discounting the data but not ruling out multiple Fed rate cuts in the coming months. Focus turns to ISM services today.

Macro events: China Caixin Services PMI Final (Jul), UK/EZ/US Services & Composite PMI Final (Jul), US ISM Services PMI (Jul), EZ Producer Prices (Jun)

Earnings: Palantir, BioNTech, Tyson, Lucid

Equities: US stock futures dropped significantly on Monday, continuing last week's selloff amid growing fears of a US economic downturn. The Dow fell 2.1% last week, ending a four-week winning streak. The S&P 500 and Nasdaq 100 also declined by 2.06% and 2.38%, respectively, marking their third consecutive weekly drops. The Nasdaq 100, heavily weighted with tech stocks, is now down over 10% from its record high last month, entering correction territory. In Japan, the Nikkei 225 is also down a further 7%, having already fallen more than 20% from the highs. Disappointing July job data on Friday heightened concerns that the Federal Reserve might be too late in cutting interest rates, potentially pushing the economy into recession. Investors are now focused on US services PMI data and a speech by San Francisco Fed President Mary Daly for more insights. Additionally, markets will watch Apple closely after Warren Buffett’s Berkshire Hathaway sold nearly half its stake in the company.

Fixed income: On Friday, Treasury debt saw its largest gain of the year after July's employment data came in weaker than expected, causing traders to anticipate additional Federal Reserve rate cuts both this year and next. Leading Wall Street banks adjusted their forecasts, with some predicting a half-point rate reduction at the September meeting, or possibly sooner. Fed-dated OIS contracts showed a higher probability of a 50 basis point cut in September over a 25 basis point cut, closing the session with 44 basis points of easing priced in. Interest rate futures volumes surged, especially in fed funds futures, as traders bet on more Fed rate cuts, including the possibility of action before the next scheduled policy announcement on September 18. Yields plummeted, pushing the 2-year and 5-year yields to their lowest levels since May 2023, while the 10-year yield dropped to 3.79%, its lowest point since December. Yield premiums on Asian investment-grade dollar bonds widened by 6.4 basis points on Friday, their largest one-day increase since the US mini-banking crisis in March 2023. Similarly, US investment-grade credit spreads widened by a comparable margin, nearing their year-to-date high reached in January.

Commodities: Gold fell by 0.12% to $2,443 per ounce, reversing from earlier highs due to midday selling pressure. Initially, prices had risen due to a drop in Treasury yields and the US dollar, influenced by expectations of aggressive rate cuts. Oil prices also declined, with WTI crude dropping by 3.66% to $73.52 per barrel, and Brent Crude falling by 3.41% to $76.81 per barrel, amid concerns over slowing demand. Nymex natural gas prices decreased by 4.10% this week, settling at $1.9670 per mBtu.

FX: The US dollar slumped on Friday, closing the week down by over 1%, with the Federal Reserve keeping the door to a September rate cut open as US economic data continued to weaken. Gains were led by the Japanese yen which was up 4.7% in the week on the back of a hawkish BOJ pivot complementing the Fed’s dovish tilt. Other safe-havens such as Swiss franc and Gold also gained. Meanwhile, activity currencies Australian dollar and British pound were the weakest in the G10 FX space, with the latter also impacted by the Bank of England’s rate cut which was not fully priced in by the markets. US ISM services data out today will be in focus after the manufacturing PMI and jobs data last week resulted in risk-off moves.

 

For all macro, earnings, and dividend events check Saxo’s calendar.

For a global look at markets – go to Inspiration.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • 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

Content disclaimer

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Please refer to our full disclaimer and notification on non-independent investment research for more details.
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-ch/legal/disclaimer/saxo-disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.