Global Market Quick Take: Europe – 2 December 2024

Global Market Quick Take: Europe – 2 December 2024

Key points

• Equities: US markets hit record highs last week, Asia mixed with strong Chinese PMIs.
• Volatility: Short-term caution lingers ahead of upcoming economic data
• Currencies:  USD resurgent in Asian session to start the week as Friday’s JPY strength also fades despite hawkish Ueda comments
• Commodities: Gold weaker on dollar strength. Crude looks to China and OPEC+ for support
• Fixed Income:  Treasury and Bund yields dip as traders eye key economic data
• Macro events: US Nov. ISM Manufacturing, US Fed Voters Waller and Williams to speak

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

Macro data and headlines

• China Nov. Caixin Manufacturing survey out at 51.5 vs. 50.6 expected and 50.3 in October
• China failed to release any “readout” of the proceedings from the November politburo meeting as President Xi Jinping may have missed the meeting. Investors are focusing next on the December meeting, which will be held before the Central Economic Work Conference mid-month as observers look for policy hints.
• China’s 10-year bond yield fell below 2% for the first time since 2002.
• France’s leader of the National Rally party Marine Le Pen declared an end to discussions with Prime Minister Michel Barnier after asking for further concessions on the 2025 budget he proposed, threatening a no-confidence vote in the fragile minority government by Wednesday.

Macro events (times in GMT): US Nov. ISM Manufacturing (1500), US Fed voter Waller to deliver keynote speech (2015), US Fed Vice Chair Williams to speak (2130). CFTC’s Weekly COT report (delayed from Friday)

Earnings events

• Today: Prosus, Zscaler
• Tuesday: Salesforce, Marvell
• Thursday: Kroger, Lululemon, Veeva Systems, Samsara

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

Equities

• US: The S&P 500 and Dow Jones reached record highs last Friday, advancing 0.6% and 0.4%, respectively, driven by semiconductor stocks like Nvidia (+2.2%), Applied Materials (+2%), and Lam Research (+3.2%). Black Friday sales boosted retail stocks, with Walmart (+0.7%), Target (+1.7%), and Costco (+1.1%) posting gains. For November, the S&P 500 posted its best month since February (+5.6%), the Dow surged 7.5%, and the Nasdaq climbed 4.9%, reflecting optimism over pro-business policies under the incoming administration.
• Asia: Asian markets began the week on a mixed note. Chinese equities led gains as the CSI 300 rose 0.5% and the Shanghai Composite added 0.8%, buoyed by stronger-than-expected PMI data signaling an uptick in manufacturing activity. Japan's Nikkei 225 and TOPIX indices fell 0.3% and 0.2%, respectively, as the yen strengthened, dampening sentiment. South Korea’s KOSPI slid 0.2% due to weak industrial data, while India’s Nifty 50 inched higher on interest in cyclical sectors. Markets remain cautious amidst President-elect Trump’s threats of 100% tariffs on BRICS nations that challenge the U.S. dollar.
• Europe: European stocks were mixed on Friday, with the STOXX 50 edging down 0.2% and the STOXX 600 finishing flat. Stellantis gained 1.51% after reporting plans to streamline its operations despite weak sales. The company’s CEO Carlos Tavares resigned, adding uncertainty to its leadership trajectory, but markets appeared reassured by restructuring efforts. Inflation figures for November remained steady, with Eurozone core inflation at 2.7%, keeping ECB policy bets unchanged. For November, the STOXX 600 added 0.3%, while the STOXX 50 slipped 1.4%.

Volatility

Volatility remained subdued, with the VIX at 13.51 (-2.81%) as markets adjusted to Thanksgiving holiday trading patterns. Shorter-term volatility, reflected by the VIX9D, ticked up slightly (+1.3%) to 10.89, hinting at nervousness ahead of key data releases this week, including the ISM manufacturing report and payroll figures. Futures implied expected moves for the S&P 500 at ~65.10 points (~1.08%) and for the Nasdaq 100 at ~309.36 points (~1.48%), highlighting elevated sensitivity to macro developments.

Fixed Income

European sovereign bonds and US Treasuries ended the week on a strong note. US Treasuries saw a rally, with yields falling sharply across maturities, supported by month-end rebalancing and light holiday trading. Yields on 5-, 10-, and 30-year bonds dropped below their 200-day moving averages, signaling potential momentum shifts. Meanwhile, European sovereigns also experienced a bull steepening, particularly in German Bunds. In the upcoming week, key factors influencing the markets include Fed Chair Jerome Powell and ECB’s Christine Lagarde speeches. Pivotal economic data such as the US monthly payrolls report and Eurozone GDP are even under more scrutiny. Additionally, geopolitical events like Biden’s trip to Angola and OPEC’s rescheduled meeting may sway market sentiment.

Commodities

• The sector ended November on a sour note with most major commodities, except a few food commodities, most notable coffee, and natural gas ending higher on a week, shortened by US Thanksgiving holiday. Some weakness was seen in early Monday trading as the dollar regained some strength, and US Treasury yields rose.
• Crude oil, being the exception, trading higher on signs of a slow recovery in China’s economy, while Thursday’s OPEC+ meeting remains the main event of the week.
• Gold slipped as the dollar rose overnight, highlighting its current rangebound behavior while we await fresh US economic data input and guidance on the pace and timing of additional US rate cuts.  
• Arabica coffee futures ended lower on Friday as profit taking emerged after prices failed to break the 1977 record at USD 3.3750 per pound, but still ended up 30% on the month on Brazil production concerns

Currencies

• The action in currencies suggests that the moves on Friday may have been more about end-of-month fixing and portfolio adjustments as the US dollar jumped stronger to start the week in the Asian session overnight as US treasury yields likewise rebounded after closing at a local low on Friday. This also coincided with a sharp JPY weakening overnight after USDJPY finished last week well south of 150.00, only to rebound to north of 150.50 in early trading in Europe this morning, despite Japanese yields jumping to open the week after Bank of Japan governor Ueda said interest rate hikes are “nearing”.
• The week ahead features important US data, starting with the November ISM Manufacturing today and finishing Friday with the November labor market report. The key EURUSD chart point at 1.0600 (major prior 2024 low) held last week as resistance.