Summary: Equities were mixed and mostly in a holding pattern ahead of the US CPI release on Thursday and bank earnings on Friday. Dollar was the strongest of the major currencies, with CHF the weakest and yen weakening as well. The false announcement of Bitcoin ETF approval caused some choppiness, with actual announcement due today. In commodities, crude oil recovered some of Monday’s losses while Copper could not built up on early gains with China’s RRR cut still awaited.
Saxo’s Q1 2024 Outlook titled “What happened to the future” is now out. You can read it here.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The Nasdaq 100 climbed 0.2% to 16,679. Nvidia extended its gains, reaching as high as $543.25 before settling at $522.53, up 1.7% on Tuesday. Alphabet rose 1.4% to $142.56. However, Tesla shed 2.3% as the EV maker lowered driving-range estimates on some models. Meanwhile, the S&P 500 slid 0.2% to 4,557. Juniper Networks surged 21.8% after Hewlett Packard Enterprises announced it would pay $40 a share in cash for the internet infrastructure solutions provider.
Fixed income: Treasury yields slid 1-2 bps across the curve, with the 10-year yield settling at 4.01, down 2 bps from Monday. Trading was lackluster within narrow ranges as traders awaited the CPI data scheduled for Thursday.
China/HK Equities: While the CSI300 Index modestly rebounded by 0.2% from its lows, the Hang Seng Index extended its decline by 0.2% to 16,190 in a streak of six consecutive days of losses. Tencent fell 1.5% after announcing the imposition of a 16-hour limit on underage users over the Winter holidays. JD.COM lost 3.2% after revealing that the company is investigating potential overstatements of revenues in its unit. Lenovo rose 4.5% after announcing its plan to unveil over 40 AI devices and solutions at the Consumer Electronics Show this week. Xtep gained 3.5% after reporting Q4 results in line with previous guidance while expressing caution about sales growth in 2024.
FX: The dollar pared Monday’s decline after 102 level held up in DXY, with little data and focus remaining on the US CPI release due on Thursday. AUD lagged, reversing the post-retail sales gains from the Asian session. AUDUSD fell below the 0.67 handle to re-test last 2 days of lows at 0.6677. USDJPY rose back to 144.50, extending gains with the miss in labor cash earnings this morning, and 10-year JGB auction will be on the radar today. EURUSD tested support at 1.0910 with German data disappointing. GBPUSD also reversed to test the 1.27 handle support but bounced higher.
Commodities: Oil prices recovered some of Monday’s losses with WTI back above $72 and Brent back near $78. API inventories showed a fall in inventories by 5.2mn barrels last week. Meanwhile, EIA’s STEO raised the forecast for 2024 world oil demand growth by 50k barrels per day, outrunning supply by a modest 120k barrels per day. Geopolitical and supply concerns continued. Copper rallied initially on hopes of China’s RRR cut but could not sustain the momentum and slid 1.4%.
Macro:
Macro events: US Wholesale Inventories (Nov, final), China Aggregate Financing (Dec; to be released between Jan 10-15), France Industrial Production (Nov), Italy Retail Sales (Nov)
Earnings: J Sainsbury, KB Home
In the news:
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.
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.
