Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Summary: Quiet start to the week with stocks building on recent gains but FX in tight ranges ahead of key events and earnings later in the week. Bank of Japan announcement will be the key focus in Asia session today, with Governor Ueda’s comments and quarterly inflation outlook on watch. Any JPY strength will likely be faded if there are no hawkish hints. New Hampshire Primary likely to take focus from there, as well earnings from J&J, P&G and Netflix, which is expected to report a strong subscriber growth.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The Dow Jones Industrial Index achieved a historic milestone, gaining 0.4% to reach 38,002. Simultaneously, the S&P 500 Index and Nasdaq 100 closed at record highs, rising by 0.2% to 4,850 and 0.3% to 15,360, respectively. Small-cap stocks notably outperformed, with the Russell 2000 rising by 2%. The surge is attributed to optimism surrounding a Goldilocks US economy and positive earnings surprises in the ongoing earnings season. Johnson & Johnson and Procter & Gamble are set to report before the U.S. market opens on Tuesday, with Netflix scheduled after the market closes. Saxo’s Head of Equity Strategy, Peter Garnry, anticipates a positive Q4 for Netflix, potentially boosting sentiment in technology stocks. For additional insights on this week’s earnings, refer to Peter's note.
Fixed income: In the absence of comments from Fed officials during the blackout period ahead of the January 30-31 FOMC meeting, and with no major economic data to move the market, Treasuries finished a lackluster session mixed, with the 2-year yield 1bp higher at 4.39% and the 10-year yield falling by 2bps to 4.11%.
China/HK Equities: Persistent concerns about the Chinese economy, coupled with waning anticipation of near-term stimulus measures, exerted downward pressure on stocks. The Hang Seng Index plummeted by 2.3% to 14,961, while the CSI300 dropped 1.6% to 3,219. Chinese banks keeping loan prime rates unchanged and reports of selling from overseas institutional investors added to investor pessimism. In the near term, prevailing pessimism regarding the economy, policy efficacy, and reduced allocation to China by global and Asian equity funds persists. Bargain hunters remain on the sidelines, and technical rebounds might face selling pressure until more information emerges from the Third Plenum potentially in February and the Two-session meetings in March, shedding light on the trajectory of the Chinese economy.
FX:Tight ranges in the FX market to start the week as traders focused on key events later in the week, including the Bank of Japan meeting and New Hampshire Primary today, followed by Bank of Canada on Wednesday and ECB on Thursday along with US GDP data followed by PCE on Friday. Support for DXY index at 103 remains key, while EURUSD continues to find it tough to stay above 1.09. USDJPY wobbles around 148 with 100DMA coming in at 147.46 providing support for now. Lack of hawkish hints at the BOJ announcement today could propel the pair back towards 150 and intervention threat could become louder. GBPUSD still above 1.27 as AUDUSD reverses from a test of 0.66 and NZDUSD dips below 0.61.
Commodities: While markets focused on Mideast tensions, geopolitical risks escalated on another front after Ukrainian drone attacks against oil facilities on Russia’s Baltic coast, raising the stakes in the two-year long war. Tensions in Red Sea also continue to escalate with US and UK making fresh strikes, but overall risk sentiment was positive with markets starting to price in a better economic outlook in the wake of recent strong data. Gas prices however continue to tumble, as market price in an end of the winter season. Gold still supported as markets push back Fed rate cut expectations, but Silver saw a sharp slide testing the 76.4% fibo retracement level at $21.89.
Macro:
Macro events: BoJ Policy Announcement, New Hampshire Primary, US Richmond Fed (Jan)
Earnings: Verizon Communications, Netflix, Texas Instruments, Intuitive Surgical, Johnson & Johnson, Procter & Gamble, General Electric, RTX, Lockheed Martin
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.
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