Key points: 

 

  • Equities: China surges as Japan slumps, US trades steady

  • Currencies: Japanese yen jumps as Ishiba’s nomination wrong-foots market

  • Commodities: Crude edges higher on Mideast tensions; copper hit four-month high

  • Fixed Income: Market eyes key U.S. job data this week

  • Economic data: UK House prices, German CPI and Chicago PMI

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

In the news: China to cut existing mortgage rates by the end of October (CNBC), Costco Posts Major Earnings Beat, But Misses On These Metrics (IBD), European shares close at record high; luxury giants rally on China stimulus (CNBC), China stocks rally 6% as manufacturing contracts less than feared; Japan’s Nikkei falls more than 4% (CNBC)

Macro events (times in GMT): UK Nationwide House prices (Sep) exp 0.3% & 2.7% vs –0.2% a& 2.4% prior (0600), UK Mortgage Approvals (Aug) exp 63.9k vs 62k prior (0830), Ger CPI (Sep) exp 0.1% & 1.7% vs –0.1% 61.9% prior (1200), US Chicago PMI (Sep) exp 46 vs 46.1 prior (1345), USDA Quarterly Stocks and Wheat Production Reports (1600)

Earnings events: Costco shares declined 1% in extended trading hours despite the US retailer beat expectations indicating that the market expectations were clearly above analyst expectations. Accenture rose 5%after a strong earnings report and a 15% jump in dividends indicating a positive outlook from the consultancy firm. H&M is still struggling declining 5% yesterday as fiscal Q3 earnings missed expectations due to cold June weather.

 

  • Monday: Carnival

  • Tuesday: Nike, Paychex, McCormick

  • Wednesday: Vantage Tower, JD Sports Fashion, RPM International

  • Thursday: Constellation Brands, Tesco

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

Equities: EU and US equity futures point to a steady opening, while plenty of action was seen overnight in Asia where the Chinese markets extended their best week in 16 years to rally by more than 6% after manufacturing contracted by less than feared while developers surged after three major cities eased rules on housing purchases. Japanese stocks meanwhile slumped after the victory of Shigeur Ishiba wrong footed investors and helped send the yen sharply higher. In the US, stocks finished mixed on Friday after the August PCE index showed a mild 0.1% increase, suggesting cooling inflation and raising expectations for a potential Fed rate cut. US consumer sentiment reached a five-month high, supporting hopes for inflation to reach the Fed’s 2% target by 2024

Fixed Income: U.S. Treasuries rose on Friday, supported by softer-than-expected inflation data from August’s PCE report. Additionally, personal income and spending figures missed estimates. This, combined with geopolitical concerns after Israel bombed Hezbollah’s headquarters in Beirut, led to a "risk-off" sentiment, boosting demand for safe-haven assets like Treasuries. Short-term yields led the rally, causing a steepening in the yield curve. By the end of the day, 10-year Treasury yields dropped to around 3.75%. During the week ahead, markets will focus on key data and events. In the U.S., jobs data, including nonfarm payrolls and JOLTS, are expected to indicate labor market resilience. Inflation figures from the eurozone for September might show a dip below 2% for the first time since 2021. Additionally, manufacturing data from the U.S. (ISM index) and Japan (Tankan survey) will provide insights into industrial activity, with mixed signals anticipated.

Commodities: The Bloomberg Commodity Index trades at a two-month high, primarily supported by gains across the metal sectors following the first US rate cut and several stimulus measures being rolled out in China to support the world’s second-largest economy. Grains and softs have also performed well recently, with gains being partly offset by a struggling energy sector where escalating tensions in the Middle East are being ignored given the limited risks of contagion. Instead, the market is focusing on the prospect of increased supply following a Libyan deal that could boost exports and Saudi Arabia's commitment to easing OPEC+ production curbs. Copper’s rally extended in Asia on property market optimism, while gold continues to consolidate following another record-breaking week. Focus today is on Middle East developments and a US quarterly grains stock report.

FX: The US dollar ended lower for a fourth week, mostly on the back of gains in the Japanese yen on Friday after the nomination of Ishiba as the ruling party leader. Ishiba’s support for further policy normalization from the Bank of Japan sent a strong tremor of hawkish wave in the market. General risk-on also prevailed in the market on the back of stimulus measures from China, and commodity currencies kiwi dollar and Aussie dollar outperformed on the week, while the euro ended flat as markets continue to assess the ECB’s rate cut path. Germany’s flash inflation due today could bring further pressure on the single currency if they are softer than expectations.

Volatility is creeping back, with the VIX up to 16.96 (+10.34%) ahead of a busy week packed with economic releases. The VIX1D is also showing a strong rise, up over 25%, indicating short-term market jitters. Fed Chair Powell is set to speak later today, and several key data points, including Chicago PMI and U.S. Manufacturing PMI, are expected to provide clues about the economy's direction. The Hang Seng Index continues to surge, up another 3.88% today, extending last week's gains. U.S. futures, however, are mixed, with S&P 500 futures holding flat and Nasdaq 100 futures down slightly. Expected moves based on options pricing suggest a busy week ahead, with the S&P 500 potentially moving around 84 points (~1.46%) and the Nasdaq 100 by 399 points (~1.99%)—up or down. In the options market, Nvidia, Tesla, and Nio continue to dominate trading activity. Notably, Tesla, Nio, and Alibaba each maintain a maximum IV Rank of 100%, signaling significant expectations for price movement. As the week unfolds, keep an eye on Powell’s remarks and the various economic indicators, which could further elevate market volatility. As China’s markets soar and U.S. data rolls in, this week promises to be anything but dull. Expect heightened volatility as investors digest a slew of critical economic and corporate updates.

For a global look at markets – go to Inspiration.