Chief China Strategist
Summary: USDJPY bounced to 142.60 ahead of the Bank of Japan's monetary policy decisions. The BoJ is expected to maintain current policies, and traders await signals if there will potentially be a January move. Brent crude rose 1.9% to $78.0 as BP halted Red Sea transits due to Yemeni militant threats. The S&P 500 gained 0.5%, and the Nasdaq 100 added 0.6% to 16,730, led by major tech stocks. However, Apple slid 0.9% after announcing a U.S. sales suspension of some Apple Watch models due to patent issues.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The S&P 500 gained 0.5%, extending its rise to 4,741. The Nasdaq 100 added 0.6% to 16,730, driven by mega-cap technology stocks. Meta, Amazon, Alphabet, and Nvdia each gained over 2%. However, Apple slid 0.9% after announcing to suspend sales of Apple Watch Series 9 and Ultra 2 in the U.S. by an import ban due to patent issues. U.S. Steel soared 26.1% after agreeing to the takeover ty Nippon Steel.
Fixed income: Treasuries consolidated with yields bouncing off lows slightly after the dramatic post-FOMC movements last week. The 10-year yield rose by 2bps to 3.93%, while the 2-year yield remained flat. All eyes are on today’s BoJ meeting and the US PCE inflation data which is due Wednesday.
China/HK Equities: The Hang Seng Index declined by 1% to 16,629, and the Hang Seng Tech Index dropped by 1.3%. XPeng plummeted 6.7% after Taobao, a subsidiary of Alibaba, disclosed its plan to trim its stake in the EV maker to 7.5% from 10.2%. COSCO Shipping surged 7.5% and Orient Overseas rose 4.2%. This came after the world’s largest liners, Maersk, Hapag-Lloyd, CMA CGM, and MSC suspended Red Sea and Suez voyages due to risks of attacks off Yemen. The Shanghai Containerized Freight Index gained 5.9% last Friday from a week ago as spot Europe-Asia freight rates increased. In the mainland, the CSI300 slid 0.4%. Shipping stocks gained, while new energy names tumbled.
FX: Ahead of the conclusion of the BoJ monetary policy meeting this Asian morning, USDJPY bounced modestly to 142.60. The market in general, is expecting the BoJ to keep policies unchanged. Traders’ focus is on whether the BoJ will pave the way for a potential January move in its communication from the meeting. Meanwhile, EURUSD gained 0.3% to 1.0920, and AUDUSD was little changed, trading at around 0.6700.
Commodities: The Brent crude oil price rose by 1.9% to $78.0 after BP stopped its oil tankers from transiting the Red Sea due to risks of attacks on vessels by Yemeni militants. WTI crude oil gained 1.5% to $72.50. Gold ticked up 0.4% to $2,027.
Macro: The event of the day is the conclusion of the Bank of Japan meeting. For a more in-depth discussion, please refer to Charu Chanana’s note.
Macro events: Bank of Japan decisions, S housing starts & building permits (Nov), US Manheim used vehicles index (Dec).
Earnings: Accenture, FedEx
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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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.
