Summary: In today’s five minute video we bring you up to speed with what traders and investors in Australia at Saxo, have been doing this week. It reflects the two major drives of markets, higher for longer interest rates in US and a potential recession. On the other side, some clients are somewhat excited about China’s major cities easing restrictions, and dangling the carrot to ease further. We explore if upside is sustainable in metals, such as iron ore and why buying is picking up in the US dollar, with the USD index seeing its strongest gain in 12 weeks.
Investors and traders are bunkering into the theme of higher for longer interest rates in the US, and a potential recession
- This is the major theme that's driving markets and pushed global equities lowers this week. So we’ve been seeing profit taking, a little more selling and options put on tech companies, including Tesla, Google, and Apple - more so than the last few weeks.
- And buying of the US dollar picked up again; with the DXY set for its biggest gain in 12 weeks, ahead of US CPI next week and the final Fed decision for 2022.
There is pent up investor demand for investing in China’s reopening theme
This is the second major driver of markets of late. It comes as five major cities have eased restrictions and dangled the carrot to ease further. As well as potentially scrapping mask wearing.
- Commodities buying picked up on the platform at Saxo, given there are hopes for China to fast track economic growth next year.
- Buying in lithium stocks; Pilbara Minerals, Allkem picked up
- Buying in Fortescue Metals also picked up. This is because the commodity Fortescue makes 90% of its revenue from, iron ore (SCOA) the key steel making ingredient, rose 3.6% this week, taking its gain from the October low to 44%, with the price of the iron ore hitting $110.20, a new four month high. The price of iron ore has been rallying as China is easing restrictions and today the market heard whispers that Chinese property developers will get more support, which would support demand for iron ore rising.
- However it looks like buying volume in iron ore slowed for now. So perhaps until we see more concrete announcements or further easing of restrictions, iron ore and iron ore miners could maybe see a bit of profit or buying fade next week, especially as iron ore stocks were this weeks best performers. Once we get more hopes, the iron ore price might be supported higher along with upside in iron ore majors shares; Fortescue Metals, Champion Iron, BHP and Rio. Also, next week, iron ore majors may see share price upgrades from buy and sell side brokers.
- Buying in China Tech picked up; given there are favourable interest rates in China, pent up demand, and restriction are easing. As such buying in Alibaba picked up.
- In energy markets, buying in coal stocks picked up; with Whitehaven Coal buy orders rising.
- And lastly, buying in airlines shares picked up as well. Especially in those air companies that travel in and out of Hong Kong, Such as Cathay Pacific. Qantas also saw increased buys.
