Key points:

  • Equities: S&P 500 up 0.5%, Dow Jones up 337 points to a record high, Morgan Stanley up 6.5% after earnings beat.
  • Currencies: Persistent USD strength continues, but JPY firm ahead of CPI, AUD boosted on strong jobs.
  • Commodities: Gold holds near record highs, copper and iron ore drop
  • Fixed Income: US 10-year yield holds at 4.0%, UK Gilts yields plunged post inflation data
  • Economic data today: ECB rates decision, US retail sales

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

Macro:

  • Japan's trade balance shifted to a deficit of JPY 294.24 billion in September 2024, compared to a surplus of JPY 60.56 billion in the same month the previous year. This marked the third consecutive month of a trade deficit and was worse than market forecasts of a JPY 237.6 billion shortfall. Exports unexpectedly fell by 1.7% to JPY 9,038.20 billion, the first decline since November 2023, missing the expected 0.5% rise. Meanwhile, imports grew by 2.1% to JPY 9,332.55 billion, marking the sixth consecutive month of growth but falling short of the 3.2% forecast.
  • Australia’s employment rose 64,100 last month, more than double estimates, and the jobless rate held at a downwardly revised 4.1%, while both the employment-to-population ratio and participation rate climbed to records, indicating more people were seeking and securing work. The report supported the AUD while sending bond yields higher on speculation the RBA may delay its first rate cut until Q1 2025.

Macro events (times in GMT): ECB rate decision, exp –0.25% to 3.25% (1215), US Retail Sales (Sep) exp 0.3% vs 0.1% prior (1230), US initial jobless claims, exp. 258k vs 258k prior (1230), US Philadelphia Fed survey, exp 3.0 vs. 1.7 prior (1230), ECB Lagarde’s press conference (1245), US Industrial Production (Sep) exp. -0.2% vs 0.8% prior (1315), US Oct. NAHB Housing Market Index (1400), EIA’s weekly Crude and Fuel Stock Report (1500), EIA’s Natural gas storage change (1430) Japan Sep. National CPI (2330), exp. +2.5% YoY vs. 3.0% prior, ex Fresh Food & Energy exp. 2.0% vs. 2.0% prior.

Earnings events:

  • Today: ABB, Investor, Elevance Health, Netflix, Intuitive Surgical, Blackstone, Marsh & McLennan, Truist Financial, Travelers, Nordea, Nokia, Schindler
  • Friday: CATL, Zijin Mining, Volvo, American Express, Schlumberger, Procter & Gamble

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

Equities: U.S. stocks posted modest gains on Wednesday, partially rebounding from the previous session's losses. The S&P 500 rose 0.5%, while the Dow Jones advanced 337 points to a new record high. The Nasdaq 100, however, saw only a slight increase of 0.1%, with chip stocks continuing to lag. Morgan Stanley was a standout, surging 6.5% after beating earnings and revenue expectations. United Airlines was the strongest member of the S&P 500, jumping over 12% on an earnings beat. Abbott also gained 1.5% on stronger-than-expected quarterly results. Conversely, Intel slipped 1.4% after receiving scrutiny from the Chinese cyber association. Nvidia bounced back 3.1% after its sharp 4.5% drop the day prior, driven by ASML's reduced sales forecast. Today's focus shifts to Netflix, the biggest name on the earnings calendar, along with TSMC, which is expected to provide more insights into the chip sector’s current state. On the economic front, all eyes are on U.S. retail sales data due later today.

Volatility: Volatility eased on Wednesday, with the VIX dropping 5.14% to 19.58, reflecting a calmer market tone following Tuesday's selloff. Futures on the VIX edged up slightly to 19.25, suggesting some caution heading into today’s earnings and economic data releases. While Nvidia and Tesla remained the most traded options, significant activity was also seen in Super Micro Computer, with options volume rising sharply. Palantir Technologies, AMD, and Coinbase also saw high trading volumes, reflecting increased interest in the tech and crypto spaces. The S&P 500’s implied volatility points to a 0.44% expected move, while the Nasdaq 100 may see swings up to 0.72%. Retail sales data, along with Netflix’s earnings later today, could inject fresh volatility into the market.

Fixed Income: US Treasury yields trade firmer after a two-day decline, supported by lower oil prices and weaker-than-expected UK inflation. The 10-year found support around 4%. UK bonds outperformed as traders adjusted expectations for Bank of England policy easing after the CPI data, anticipating a ~24-basis-point rate cut next month and ~42-basis-point cuts by year-end. Meanwhile, in Australia, the yield on the policy-sensitive three-year government bonds jumped to the highest since 31 July, following another strong job report.

Commodities: Gold holds near record highs, supported by worries about fiscal instability, safe-haven appeal, geopolitical tensions, de-dollarization, uncertainties surrounding the US presidential election, and incoming rate cuts lowering the cost of holding bullion. Silver briefly traded above USD 32, supported by an LBMA poll predicting a 40% rally in the next 12 months. Crude oil remains rangebound as demand worries, especially in China, a country at the forefront of electrification, and the prospect of increased OPEC+ supply offsetting a potential threat to Middle East supplies. Copper trades near key support levels, while iron ore tumbled to a three-week low after a housing briefing in China left investors in doubt about whether enough was being done to shore up the property sector.

FX: Broad USD strength persisted into this morning as the dollar pushed well below 1.09 in EURUSD ahead of today’s ECB meeting and below the pivotal 1.30 area in GBPUSD after yesterday’s weak UK CPI figures. The USDJPY exchange rate was one exception in the general picture of USD strength, as the psychologically important 150 area looms there with its risk of intervention if Japan’s government feels the yen is getting too weak. As well, tonight’s September Japan CPI figures will weigh. The AUD rose overnight on strong labor market data that justified the RBA’s stance on maintaining the policy rates even as central banks elsewhere continue cutting.

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