Summary: NASDAQ 100 reached a fresh record high as tech gained, underpinned by TSMC’s solid earnings and an analyst upgrade for Apple. Slower gains in jobless gains however kept the bond markets questioning the pace of Fed rate cuts this year, and dollar remained mixed as well. Commodities were generally strong, with oil pushed higher by geopolitics and inventory drawdown and base metals supported by supply concerns.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The Nasdaq 100 rallied 1.5% as optimism about the semiconductor and AI space rose following Taiwan Semiconductor Manufacturing Co beat estimates in its Q4 results and said it expected a return to solid growth and increase in capital spending. Lam Research and Qualcomm surged over 4% while Nvidia gained 1.9%. Apple added 3.3% on an analyst upgrade.
Fixed income: The 10-year Treasury yield extended its rise by 4bps, reaching 4.14% after initial jobless claims unexpectedly fell to 187k, the lowest level since September 2022. The sign of a resilient labour market caused investors to somewhat pare expectations of the size and pace of the Fed’s rate cuts this year. We continue to see the first cut coming this March.
China/HK Equities: The Hang Seng Index rebounded by 0.8% while the mainland CSI 300 reversed sharply to finish 1.4% higher. The rally in A-shares was most notably in brokerage, new energy, electric equipment, and food and beverage names. Large buying of CSI300 ETFs, emerged in the afternoon. Commentators suspected that it was the 'national team,' referred collectively to some state-backed investment funds and securities firms, buying to stabilize the market.
FX: Dollar followed the mixed trajectory of bonds amid the decline in jobless claims prompting a re-think of the Fed path while market remains firm in its expectations. Australian jobs print was downbeat yesterday, but a surged in iron ore prices fueled a recovery in Aussie. AUDUSD rose to highs of 0.6580 and a test of 0.66 may be on the way. GBPUSD broke above 1.27 and retail sales data will be on watch today. USDJPY around 148 while EURUSD found support at 200DMA around 1.0850 and reversed higher to 1.0880. EURCHF rose to over 3-week highs.
Commodities: Crude oil prices rallied with Middle East tensions escalating and a drop in US stockpiles as exports rebounded and harsh winter disrupted production. Base metals also had a strong day with supply concerns in focus, even as expectations of further China stimulus were doused with comments from Chinese Premier, Li Qiang. Gold was mixed as a resilient labor market could curb the Fed’s appetite for cutting interest rates, but a weaker USD supported.
Macro:
Macro events: Germany Producer Prices (Dec), EZ HICP Final (Dec), US Existing Homes (Dec), Uni. of Michigan (Jan), Germany Ifo (Jan), EZ Flash Consumer Confidence (Jan)
Earnings: Schlumberger, Travelers, State Street, Firth Third, Huntington, Regions Financial
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
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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.
