Fresh spike in oil after the hospital bombing in Gaza – Saxo Bank MENA Weekly Market Report


Summary:  Equities were under pressure with a run higher in Treasury yields following hot retail sales and industrial production data in the US which brought Fed rate hike bets higher. Selling in chip stocks, led by Nvidia, also underpinned while bank earnings were more mixed. Fresh spike in oil in early Asian hours after the hospital bombing in Gaza, and the focus also turns to China’s GDP and activity data today.

US Equities: US equities were on the back foot again amid the sharp rise in Treasury yields, even as the Dow eked out a small gain. NASDAQ 100 ended the day 0.3% lower as Fed rate hike bets picked up following the strong retail sales and industrial production. Bank earnings were mixed, as Goldman Sachs missed expectations on real estate losses while Bank of America beat estimates. J&J and Lockheed Martin also delivered earnings beats but could not eke out gains. Nvidia fell over 4%, leading broader declines in the chip sector, after a Bloomberg report that the U.S. is restricting the sale of semiconductors that the chipmaker designed for the Chinese market.

Fixed income: Treasury yields broke to new cycle peaks at the front and belly after hot US retail sales and industrial production data. 2-year yield rose 11bps to 5.21% and 10-year yield rose nearly 13bps to 4.83%. 20-year auction on tap for today.

China/HK Equities: Diplomatic push to contain the Middle East conflict and expected Biden visit to Israel helped contain the sentiment on Tuesday. HK stocks finished 0.75% higher and CSI 300 closed 0.35% higher. China also held talks with Russia about a humanitarian ceasefire between Israel and Hamas. Focus turns to Q3 GDP data due today, as well as monthly activity data where expectations for a pickup in retail sales will be key to watch.

FX: The dollar spiked higher on the strong retail sales print overnight, but retreated later and finished the day a notch lower. While data was strong, reduced risk aversion may have underpinned Biden’s scheduled visit to Israel, but the fresh escalation overnight with an attack on a Gaza hospital and cancellation of Biden’s summit with Arab leaders may brew fears again. AUDUSD was the best performer on the G10 board, rising to 0.6380 highs after hawkish RBA minutes kept the November meeting live while NZDUSD still struggling at the 0.59 support. A jump in Treasury yields brought USDJPY higher to 149.80+ levels and UK wage data pushed GBPUSD back below 1.22.


US retail sales were strong across the board. Headline retail sales were 0.7% MoM vs. 0.3% expected, and the core control measure which feeds into GDP was 0.6% MoM vs. 0.1% expected. August data was also revised higher. Also beating was industrial production (0.3% MoM vs. 0.0% expected). Atlanta Fed’s GDP Now for Q3 stands at 5.4%, well up on its 5.1% of last week. Higher-for-long holds up as US data remains strong, and odds of another rate hike by year-end are now close to 50%.

UK weekly average earnings slowed more than expected to 8.1% 3M YoY from 8.5% prior, and September payrolled employees also came in at -11k vs. 3.k expected suggesting BOE may remain on hold.


  • Ole Hansen, Head of Commodity Strategy, Saxo Bank
  • Traders and other insiders at last week’s LME Week gathering in London offered a somewhat subdued short-term outlook for the sector 
  • Growth concerns in China and the rest of the world together with an uneven green transition rollout weighing on the sector
  • Current uncertainty and rising cost of financing will drive investment uncertainty, raising the risk of insufficient future supply.

At the annual LME week held in London last week traders and other insiders offered a somewhat subdued outlook for the sector, and since then we have seen copper futures in London and New York drift lower towards key support amid concerns about the short –to medium-term outlook for demand growth in China and the rest of the world Overall, the Bloomberg Industrial Metal Total Return Index has suffered a near 15% decline this year, and with its 16% weighting in the overall Bloomberg Commodity Index, it remains the sector together with grains (14% weighting and down 12%) that is currently weighing the most on the overall commodity sector performance. 

The table below also shows how copper despite months of China’s recovery concerns, not least related to its beleaguered property sector has managed to limit its losses for the year to around 4.5%. However, in recent weeks we have seen a rise in exchange-monitored stocks pointing to ample supply – a view being supported by a rising contango, and together with the current renminbi weakness, the short-term outlook looks challenged.

Last week the London Metal Exchange held its annual LME Week and while the London West End was buzzing with meetings and cocktail parties, the mood inside the main seminar was somewhat sombre with participants wondering whether a better-than-expected demand situation in China this year can be sustained into 2024 as the risk of slowdown across the world continues to rise amid high-interest rates putting a brake on economic activity. On the other hand, there were also signs that the developed market cycle is getting close to a thorough following months of destocking whilst a peak in US rates would also help support sentiment. 

The energy transition is real, and it will create a significant amount of demand for some metals which in turn is leading companies to look where they can reduce the dependency on these. On the other hand, the current uncertainty and rising cost of financing will drive investment uncertainty, raising the risk that sufficient supply will not be developed in time, potentially forcing up prices for in-demand metals with copper, the so-called king of green metals, once again being singled out given the focus on wind, solar, EV’s and subsequent power-grid related demand. 

While the short-term outlook for copper remains somewhat challenged, the lack of big mining projects to ensure a steady flow of future supply in the coming years continues to receive attention from long-term focused investors as it supports our structural long-term bullish outlook, driven by rising demand for green transformation metals and mining companies facing rising cash costs driven by higher input prices due to higher diesel and labour costs, lower ore grades, rising regulatory costs and government intervention, and not least climate change causing disruptions from flooding to droughts.

Our copper monitor above highlights some of the current headwinds, not least the recent rise in exchange-monitored stock levels, some of which, however, can be explained by higher rates increasing the cost of holding metal, with traders pushing it onto exchanges instead. Rising inventories have also supported a rising contango, normally associated with an oversupplied market where spot prices are cheaper than deferred amid ample supply looking for a home. 

A recent surge has seen inventories at LME-monitored warehouses reach a two-year high while cash copper is close to the biggest discount (contango) to the benchmark three-month price since the 1990s. In addition, the ebb and flow of the Chinese renminbi remains another driver and until the recent weakness is halted or reversed a weaker yuan may weigh on copper prices. Speculators in HG copper futures meanwhile remain undecided following months of sideways action, currently holding a small net short position following a couple of weeks of short covering. 

Earlier today, the HG Copper futures contract briefly traded below key support in the $3.54/55 per pound area, but with LME copper still holding above its support line at $7870 per ton the selling appetite has so far been muted. That can however change with a clear break below $3.50, the 50% retracement of the 2020 to 2022 rally, potentially fuelling a sell-off towards the $3.24/14 area.