Global Market Quick Take: Europe – September 8 2023

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

Equities: US stocks are heading for a weekly loss amid rising bond yields and speculation the Fed is not yet done hiking rates. In addition, Apple shares declined for the second day due to China’s iPhone restrictions, shredding 2.9% and exerting downward pressure on the Nasdaq 100, which dropped by 0.7%. Qualcomm tumbled 7.2% as the chipmaker could be hit by both a potential loss of iPhone sales in China and any tightening of US curb on chip export to China. Equity futures are pointing to a positive start to the trading session.

FX: The dollar weakened slightly in Asia after reaching a fresh six-month high yesterday. USDCNY rose to 7.3297, the highest since 2007, despite better-than-expected trade data while USDCNH was just shy of August record highs near 7.35. USDCAD rose back towards 1.37 as oil prices took a breather and BOC Governor Macklem hinted that the tightening cycle might be over. Lower Treasury yields brought USDJPY below 147.30 but EURUSD reached 1.07 handle on weakness in German industrial output although a clear break is not yet seen

Commodities: Oil prices eased after reaching overbought territory but remain on track for weekly gains after production cut extensions announcements from Saudi Arabia and Russia artificially tightening the market. Brent crude was back below $90 despite EIA reporting another drop in US stocks to a December low. Copper weakened amid a near record offshore yuan low, EU gas jumps 11% after workers at Chevron Australia LNG begin their strike after pay talks failed, while a drop in Treasury yields supported gold’s effort to hold above its 200-day moving average at $1919.

Fixed-income: US 10-year yields jumped to 4.3% on Thursday after strong jobless claims figures reinforced the FOMC’s higher for longer case before falling back to 4.21% as US megacap stocks sold off. The 2-year yield plunged back to 4.92% after failing to hold above 5%.

Volatility: The news that China is restricting the use of iPhones in government agencies is putting a lot of volatility on its stock price resulting in more than double of options volume compared to normal. The 177.50 and 180 calls seem to be the favourites. Other notable stock is Nike which has relatively a lot of puts trading while its stock price is getting close to this year’s low. VIX futures are flat as of now, equity futures point to a green start of the day.

Macro: US initial jobless claims fell to a seven-month low of 216k (prev. 229k, exp. 233k), with the figures possibly distorted by holiday factors, coming a week before Labour Day, and Hurricane Idalia. Fed speak from Lorie Logan, John Williams and Goolsbee hinted at a September pause but not an end to the tightening cycle yet. Japan’s wages again missed expectations with July nominal wages up 1.3% y/y vs. 2.4% expected and 2.3% previous.

In the news: Saudi push for $100 oil brings new headache for Biden administration – full story on FT Apple Becomes the Biggest U.S.-China Pawn Yet – full story on WSJ, ECB’s Hike-or-Pause Dilemma Going Down to the Wire, Poll Shows – full story on Bloomberg

Technical analysis: S&P 500 in bear trend, key resistance at 4,540, key support at 4,340. DAX in downtrend has key support at 15,482. US 10-year yield has key resistance at 4.28 but could move to 4.48 after a minor correction. EURUSD could bounce from support 1.0685. GBPUSD could bounce from 200- moving average. Crude oil correction unfolding

Macro events: US Wholesale Inventories (Jul) est. -0.1% vs –0.1% prior

Earnings events: Kroger reports before the US market open FY24 Q2 (ending 31 July) with est. EPS $0.90 vs 0.89 a year ago, revenue growth expected at -1% y/y.

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