Global Market Quick Take: Europe – 21 October 2024

Key points:

• Equities: Dow at record high (again), Netflix +11% on earnings, Chinese stocks +0.7% after PBOC rate cut.
• Currencies: USD strength eases, JPY firms on lower global bond yields.
• Commodities: Silver and platinum outshine record-breaking gold
• Fixed Income: Global bond yields steady as investors eye key economic reports.
• Economic data today: US Sep. Leading Index

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

Macro:

• US Presidential election polls have tightened further and are at their closest since mid-summer, with aggregator fivethirtyeight.com showing that Harris now only leads Trump by 1.8%. It should be noted that a very close popular vote points to a Trump victory due to the US electoral college system for choosing the president. In 2016, Trump won the election despite trailing Clinton by 2.1% in the overall vote. The betting odds site polymarket.com has Trump odds of winning at 61% vs. 39% for Harris, though the Wall Street Journal ran an article late last week noting a handful of accounts have been placing large bets of similar amounts near $30 million in crypto in favour of Trump winning.
• Chinese banks cut benchmark rates as part of a series of measures aiming at reviving economic growth and halting a housing market crash. The one-year loan prime rate was lowered to 3.10% from 3.35%, while the five-year LPR was reduced to 3.60% from 3.85, both by 5 basis points more than was expected.
• Fed’s Bostic (2024 voter) said the Fed needed to move the policy rate because risks had shifted, and that the neutral policy rate is in the 3-3.5% range. The tone has shifted to be more cautious with still a lot of uncertainty on prices and consumer spending, and the job on inflation is not done and need to stay vigilant.

Macro events (times in GMT):  Ger PPI (Sep) exp –0.2% & -1.1% vs 0.2% & -0.8% prior (0600), US Conference Board Leading Index (Sep) exp –0.3% vs –0.2% prior (1400), Fed speakers: Logan (1255), Kashkari (1700), Schmid (2105)

Earnings events: Focus this week on Wednesday when Tesla, Coco-Cola, IBM and ServiceNow all report

• This week: Tesla, Coca-Cola, IBM, ServiceNow, Boeing, SAP, Logitech

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

Equities: U.S. stocks rose on Friday, led by tech gains after Netflix’s strong Q3 results. The S&P 500 climbed 0.3%, and the Dow reached another record high, while the Nasdaq 100 gained 0.7%. Netflix surged 11% on earnings and subscriber growth, exceeding expectations. Apple added 1.2% on reports of strong iPhone sales in China. In contrast, Procter & Gamble fell slightly after missing sales forecasts, and American Express dropped 3.1% due to lower revenue. Boeing saw stability as it reached a tentative agreement with its union, potentially ending strikes with a 35% wage increase plan.

In Asia, markets traded within narrow ranges, except in China, where the CSI 300 and Shanghai Composite gained 0.7%. This followed the PBOC's larger-than-expected loan prime rate cut, part of Beijing’s ongoing stimulus efforts.

Volatility: Volatility eased as the VIX fell 5.65% to 18.03, with the VIX9D (9-day volatility) also dropping 10.61%. Despite this decline, volatility remains higher than earlier in the year, as markets hover around all-time highs and U.S. election uncertainty looms. This week’s earnings include Tesla, Coca-Cola, and IBM, which could influence market sentiment. Options pricing indicates a slightly lower expected weekly move, with the S&P 500 showing a 1.03% swing and the Nasdaq 100 at 1.48%, both reflecting potential up or down fluctuations.

Fixed Income: Last week, U.S. Treasury yields remained stable, with the 10-year yield dipping to 4.08% after weeks of volatility driven by inflation concerns and Federal Reserve rate decisions. Despite the small drop, U.S. economic resilience suggests the Fed may keep rates elevated longer. In Europe, 10-year bond yields in Germany and the U.K. also saw slight declines, influenced by global factors like an ECB rate cut, lower oil prices, and geopolitical tensions. Crude oil prices fell due to Middle East diplomacy and weaker Chinese demand, easing inflation concerns. Investors are now focused on upcoming economic reports and policy decisions from the Bank of Canada, IMF, World Bank, and U.S. Federal Reserve.

Commodities: Gold continues to hit fresh record highs, but with industrial metals recovering amid focus on Chinese stimulus efforts, it is currently silver and platinum that shine the brightest, rising 7.3% and 2.4% in the last two trading sessions. Middle East tensions, growing concerns about a rising US debt pile, and the closest US election in generations all support the current momentum. Copper and iron ore both rose overnight after Chinese banks cut key lending rates by more than expected. Crude oil slumped again last week amid reduced demand forecasts from OPEC and the International Energy Agency (IEA) and China's slowing economic growth, with Middle East tensions having a limited positive impact on prices.

FX: The US dollar strength eased on Friday, while the JPY gained broadly as bond yields dipped. The Canadian dollar remains near its weakest levels versus the US dollar since the pandemic outbreak ahead of Wednesday’s Bank of Canada meeting, as the Canadian central bank is seen outpacing the Fed in its rate-cutting regime, expected to ease the policy rate there by another 50 basis points to 3.75%, taking the policy rate a full 100 basis points, at least until the November 7 FOMC meeting.

For a global look at markets – go to Inspiration.