Key points:

  • Equities: Chinese equities bounce back. DSV jumps after successful share sale
  • Currencies: Stronger than expected ISM services lifted the US dollar
  • Commodities: Crude oil jumps on Biden’s remarks that Israel may hit Iran’s oil assets
  • Fixed Income: U.S. Treasury yields rise on strong economic data.
  • Economic data: US September Nonfarm Payrolls

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

Saxo’s Q4 Outlook

  • Macro: The US rate cut cycle has begun
  • Equities: Will lower rates lift all boats in equities?
  • Fixed Income: Bonds hit reset. A new equilibrium emerges
  • Forex: USD in limbo amid political and policy jitters
  • Commodities: Gold and silver continue to shine bright

In the news:

  • Oil surges after Joe Biden’s comments on Israeli retaliation (FT)
  • US port workers and operators reach deal to end East Coast strike immediately (Reuters)
  • EU Set to Vote on Tariffs Targeting Electric Vehicles From China (Bloomberg)

Macro

  • NFP preview: US jobs data is always key to track, but even more so now as the Fed has shifted its focus to labour market with cyclical disinflation giving them some comfort. Consensus expects headline payrolls growth of 150k from 142k in August with unemployment rate steady at 4.2%. Leading indicators for the payrolls have been mixed, with employment sub-index of ISM PMIs leaning weaker while JOLTS jobs openings and August ADP survey data have been higher. Good data can be bad data for the markets, as there has already been some pushback to easing expectations priced in by markets from Chair Powell this week and markets may have to adjust hawkish further. Weaker data, however, will increase the odds of a 50bps rate cut at the November Fed meeting. Market is still split with 35bps of easing priced in.

Macro events (times in GMT): US September Nonfarm Payrolls est. 150k vs 142k (12:30)

Earnings events: Constellation Brands shares were down 5% yesterday on results that were in line with expectations.

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

Equities: The positive sentiment came back in Chinese equities today gaining 2.2% in Hong Kong. Futures are indicating a flat open in Europe and the US. Today’s key event is the US September Nonfarm Payrolls which is expected show modest employment gains in the US economy reflecting the recent slowdown in activity. DSV shares are up 8% this morning in Europe after successfully closing its €5bn share sale to finance its acquisition of DB Schenker that will make DSV the world’s largest freight forwarder. Accenture was traded on higher-than-normal volume yesterday after it announced a new partnership with Nvidia to accelerate AI corporate use.

Fixed Income: U.S. Treasury yields rose on Thursday, hitting their highest levels since early September. This was driven by a stronger-than-expected ISM services report, signaling robust economic activity, and a surge in oil prices due to concerns over Middle East supply risks. The 10-year Treasury yield climbed to around 3.85%, with yields across maturities increasing by 5 to 7 basis points. Most of the movement occurred after the ISM report was released, although its employment component declined, adding to the anticipation around today’s September jobs data. European sovereign bond yields ended the day mixed today. UK gilts dropped as traders increased bets on Bank of England rate cuts following dovish comments from Governor Andrew Bailey. Meanwhile, German bunds fell due to rising inflation expectations driven by higher oil prices and geopolitical tensions. French bonds underperformed on budget concerns.

Commodities: Gold remain bid amid geopolitical tensions in the Middle East and expectations of lower policy rates over the next 9 months which will lower real yields. Crude oil jumped 5% yesterday on Biden’s remarks that Israel might go after Iran’s oil assets in retaliation for Iran’s missile attack on Israel. The broad Bloomberg Commodity Index is back to levels not seen since late June on geopolitical risks and China’s efforts to stimulate the economy.

FX: The US dollar extended its gains further with the ISM services data coming in much stronger than expected and lingering geopolitical risks also underpinning. The British pound underperformed, after the dovish comments from BoE Governor Bailey. He said the bank could be a "bit more aggressive" in cutting rates provided the news that inflation continues to be good. Other cyclical currencies like kiwi dollar and Aussie dollar were also down, with 0.8% and 0.65% respectively, as momentum in Chinese stocks listed in HK started to deflate with onshore China markets on holiday and questions around whether current stimulus measures could prove enough to address the structural headwinds. The euro was the most resilient, while Japanese yen and Swiss franc were down modestly.  

Volatility: Volatility is expected to rise today as critical employment data is released. The VIX jumped to 20.49 (+8.41%) ahead of the Nonfarm Payrolls report, with forecasted job growth of 147K, along with updates on the unemployment rate and average hourly earnings. Expected moves based on options pricing are elevated, with the S&P 500 projected to shift around 54 points (~0.95%) and the Nasdaq 100 by approximately 237 points (~1.20%)—up or down. Geopolitical risks are also weighing on the market, with talks of potential retaliation from Israel toward Iran, which could impact global oil supplies. In the options market, Nvidia, Tesla, and Apple remain the most active, while Palantir Technologies, AMD, and Alibaba are also drawing significant attention. High implied volatility (IV) ranks for several of these names reflect market uncertainty. Looking ahead, next week kicks off the new earnings season with major reports from PepsiCo, followed by financial giants JPMorgan, Wells Fargo, and Bank of NY Mellon on Friday. Expect more market action as investors assess the latest data and geopolitical developments.

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