Key points:

  • Equities: Futures are pointing to a positive opening. Focus on Powell’s speech
  • Currencies: Yen climbs as more hikes are signalled
  • Commodities: Gold dips, crude struggles near support and wheat tanks
  • Fixed Income: European and U.S. bond yields rise amid strong PMI data
  • Economic data:Fed Chair Powell’s Jackson Hole speech

     

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

    In the news: Fed Officials Argue for Gradual Pace of Cuts Starting Soon (Bloomberg), Quantitative Tightening Goes Global for the First Time, in Test for Markets (Bloomberg), Japan core CPI rises as expected in July, but underlying inflation weak (Investing), Baidu posts flat second-quarter revenue as sluggish economy slowed advertising spending (Yahoo), Alibaba swaps its listing status in Hong Kong, clears the way for mainland investments (SCMP), Harris Accepts Historic Nomination Vowing Fight for Middle Class (Bloomberg)

    Macro:

  • Fed US Initial jobless claims for the week that coincides with the BLS’ August payrolls report, rose to 232k from 228k, as expected, with the four-week average unchanged at 236k. Meanwhile, continued jobless claims rose to 1.863mln (prev. 1.859mln), but beneath the expected, 1.870mln. Focus turns to Chair Powell speaking at the Jackson Hole Symposium today, and we previewed that in this article.
  • US S&P Global Flash Manufacturing PMI surprisingly declined to 48.0 (exp. 49.5, prev. 49.6), while Services rose to 55.2 (exp. 54.0) from 55.0, leaving the Composite ticking slightly lower to 54.1 (prev. 54.3), but surpassing the forecasted 53.2.
  • Eurozone PMI also exhibited similar trends with manufacturing weaker at 45.6 in August from 45.8 with both Germany and France’s at 42.1, but services PMI boosted by France’s coming in at 55 due to the Olympics boost. Eurozone’s services PMI, as a result, rose to 53.3 from 51.9.
  • UK PMI offered more good news for the economy with growth remaining strong while price pressures are slowing. Composite PMI rose to 53.4 in August from 52.8 prior with services boosted by a BOE rate cut and coming in at 53.3 from 52.5 and manufacturing also in expansion at 52.5 from 52.1 in July.
  • Japan’s July CPI was higher than expected on the headline at 2.8% YoY, matching the June print. The core print rose to 2.7% YoY from 2.6%, as expected while the core-core measure slid back below the 2% target for the first time since September 2022 to come in at 1.9% in July from 2.2% previously.

Macro events (times in GMT):  US New Home Sales (Jul) exp 623k vs 617k prior (1400), Fed Chair Powell speaks on Economic Outlook (1400)

Earnings events: Intuit reported better-than-expected earnings results yesterday and announced a guidance for the coming fiscal year that was above consensus. In addition, the company boosted its dividend per share to $1.04 and approved a new $3bn buyback program. Intuit shares were down 3% in extended trading. Workday lifted its fiscal year guidance yesterday for operating margin and lifted its FY27 operating margin target to 30% from previously 25%. Shares rose 9% in extended trading.

  • Today: Dollar Tree, Williams-Sonoma

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

Equities: Japanese equities are up despite hawkish comments from BOJ Ueda saying the central bank is on track to raise policy rates strengthening the JPY. Futures are pointing to a slightly higher open in Europe and 0.3% up for US equities. S&P 500 was down 0.9% yesterday in the cash session as strong US August PMI figures and another set of strong initial jobless claims scaled back the market’s bets on US policy rates by year-end. The key event today is Powell’s speech at 14:00 GMT at the Jackson Hole Economic Symposium which will potentially give investors additional information about the Fed’s thinking on the policy trajectory towards the neutral rate as inflation has eased enough to warrant the beginning of the Fed’s rate cut cycle.

Fixed income: European sovereign markets fell on Thursday as stronger-than-expected euro-area PMI figures led to a reduction in expectations for rate cuts from the ECB. German 10-year yields increased by 5bps, trading their narrowest weekly range since 2021 as it awaits Powell’s speech at Jackson Hole. The market now expects slightly fewer rate cuts from both central banks by year-end. In the U.S., Treasuries declined following comments from Kansas City Fed President Jeffrey Schmid (not a voter), who indicated a preference to wait for more economic data before supporting any interest rate cuts. Contributing factors included a rebound in crude oil prices and mixed S&P Global US PMI data, with stronger-than-expected services and composite readings. European PMI data also added pressure to Treasuries earlier in the day. By the afternoon, yields were higher by 5 to 7 basis points by the end of the day, leading to a flatter yield curve. The 10-year yield ended the day around 3.855%, and market expectations for rate cuts in September decreased.

Commodities: The Bloomberg Commodity Total Return Index trades flat on the week, with an energy sector loss being offset by gains across industrial metals, led by aluminum. Gold is heading for a small weekly loss after dipping on Thursday as the greenback and Treasury yields rose ahead of Powell’s speech, and after the rally to a fresh record earlier in the week looked exhausted. Anything but signalling the beginning of a rate-cutting cycle next month may unsettle a few bulls, but overall, the reasons behind gold’s strong performance have not gone away. Crude oil is heading for a weekly loss as falling product prices point to soft demand, potentially made worse by the prospect of an expected pickup in supply from OPEC+ and non-OPEC producers ahead of year-end. So far, however, both WTI and Brent have managed to find support ahead of key levels around USD 71 and USD 75, respectively. The December CBOT wheat futures hit contract lows on Thursday as low prices for Black Sea wheat and a stronger dollar undercut the competitiveness of U.S. grains. Chicago corn and soy futures also fell as results from the Pro Farmer crop tour reinforced expectations of bumper U.S. production.

FX: The US dollar snapped four days of losses to reverse higher as US economic data continued to rule out the case for a larger rate cut from the Fed to kickstart the easing cycle in September. Focus is very much on Chair Powell’s speech today at the Jackson Hole but with more data such as August jobs report and CPI due ahead of the Fed’s September meeting, it may remain hard for him to signal rate cuts that match the market’s pricing. The stronger US dollar weighed on other currencies, but British pound remained the most resilient, reaching a 13-month high. The euro faltered but held the support at 1.11 against the US dollar. The Japanese yen climbed after BoJ Govenor Ueda before parliament said that rates can go higher if the economy and inflation are in line with expectations.

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