Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 29 January 2018 at 8:01 GMT

Morning Markets: A big week of multiple triggers and earnings reports

Senior Editor / Saxo Bank




  • US: Personal income and outlays (13:30 GMT)
  • Japan: Household spending (23:30 GMT)

Welcome to a busy week and a calendar of events that includes Donald Trump’s State of the Union address, US nonfarm payrolls, Janet Yellen's final Fed meeting and a raft of corporate earnings reports. Besides this, we've got an increasingly fractious relationship between the UK and the EU and rising political turmoil within UK prime minister Theresa May's conservative party.

First, though, to the latest market activity which saw stocks retreating in China today, on concerns that recent gains may be overblown. The Shanghai Composite took a dive, and the slide spread to Hong Kong as well, where the Hang Seng index slipped into the red in a reversal of its recent and seemingly unstoppable gains. However, though European stocks may react in similarly limp fashion today, it is still far too early to call time on the incredible equity bull rally of early 2018.

In terms of risk events, Trump's inaugural State of the Union address on Tuesday is the key focus and observers expect a slightly more aggressive tone than the president displayed in Davos last week where he sought to ease fears about US protectionism. However, we can also also expect lashings of boasting with Trump taking the credit for all and any positive economic development in the US and worldwide in the past year.

Janet Yellen's final Fed meeting is another major attraction of the week. Here, expectations are for unchanged interest rates as well as a possibility of a slightly more hawkish tone. In equities, we've got a bumper crop of top-tier corporate earnings with a very tech-heavy schedule including reports from Amazon, Apple, Alphabet, Facebook and Microsoft. All in all, this is a week that requires us to stay tuned and on alert.

Market signals

Asian session

  • Some Asian markets headed higher today, mirroring gains on Wall St on Friday
  • South Korea's Kospi was up by a hefty 1.03% to 2,601.23 at 0508 GMT
  • Australia's S&P/ASX200 closed up 0.42% at 6,075.40
  • But the Shanghai Composite was down by a hefty 1.33% to 3,510.88 at 0643 GMT
  • Hong Kong's Hang Seng headed into the red as well, after giving up early gains
  • The weak USD has buoyed crude, while a rise in the US rig count is weighing on prices
  • Mexico and Canada rejected a proposal to remake an arbitration system within NAFTA
  • Japan's Coincheck will reimburse $423mln to the victims of cryptocurrency theft
  • A US court has overturned punitive tariffs imposed on aerospace firm Bombardier
  • Markets will watch for any policy signals in Trump's State of the Union speech on Tuesday
  • A dip in prices for iron ore and copper weighed on Australian miners

Forex ahead

  • Trump may give further hints on the USD in his State of the Union speech on Tuesday
  • The Australian dollar slipped back below 0.81; CPI data on Wednesday could impact AUD

From the Floor

Trump tantrum? "People are wondering if we'll see an aggressive turn against China or a more conciliatory tone as we saw in Davos," says Hardy.

Tech numbers. "It's a monster week for earnings with the focus firmly on US tech companies," says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

FOMC initiative
The FOMC meeting this week is expected to be a non-event. But with financial conditions loosening, the Fed may want to re-take the initiative in its forward guidance, writes Max McKegg.

Boost for black gold 
Oil just got an extra tailwind from the weakening US dollar, and this month is shaping up to be the best January for black gold in 12 years, says Saxo Capital Markets Australia.

Techno boost
Asian markets were up in early trade, tracking Wall St's strength, with the Kospi rising 1.05% following solid gains in the technology sector, says Saxo APAC Sales Trading.

Yellen to hike rates?
Janet Yellen may push through a 50 basis point hike when she presides over her final FOMC meeting this week, says Kay Van-Petersen in his regular Macro Monday column.

 This month is shaping up to be the best January for black gold in 12 years. Photo: Shutterstock

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