Global Market Quick Take: Europe – 26 November 2024

Key points:

• Equities: US up, Russell 2000 leading, Asia fell on tariff fears, Europe up on luxury stocks.
• Volatility: VIX down, with tech stocks dominating options activity
• Currencies: Trump tariff threats against Canada and Mexico tank CAD and MXN to a lesser degree. JPY firm on lower yields.
• Commodities: Gold’s choppy price action points to temporary peak; crude stuck near key support levels
• Fixed Income: Global bonds rally amid political shifts and safe-haven demand
• Macro events: US Nov. Philadelphia Fed Services survey, US Sep. House Prices, US Oct. New Home Sales, US Nov. Consumer Confidence, US 5-year Treasury Note Auction, US FOMC Minutes

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

Macro data and headlines:

• US President-elect Trump threatened 25% tariffs on Canada and Mexico on day one of his new administration in January and threatened a further 10% tariff on all products from China. The Canadian dollar reacted the most to the move as Canada has not been a prominent target in Trump’s tariff threats previously.

Macro events (times in GMT): Bank of Canada’s Mendes to speak (1320), US Nov. Philadelphia Fed Services survey (1330), US Sep. House Prices (1400), US Oct. New Home Sales (1500), US Nov. Consumer Confidence (1500), UK Bank of England Chief Economist Pill to speak (1500), US 5-year Treasury Note Auction (1800), US FOMC Minutes (1900)

Earnings events:

• Today: Analog Devices, Dell, Crowdstrike, Workday, Autodesk, HP, Best Buy

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

Equities:

• US: The S&P 500 added 0.3%, with the Dow Jones outperforming, up 0.99%, as Boeing rose 2.5% following the resolution of its strikes and United Health Group added 2.5%. The Russell 2000 surged 1.47%, leading the indices on strength in small caps, particularly cyclical and industrial stocks. Meanwhile, in after-hours, Kohl’s declined more than 3% after announcing a leadership transition.
• Asia: Most Asian markets retreated after President-elect Donald Trump’s tariff threats rattled sentiment, with Japan's Nikkei 225 falling 1.2% and South Korea's KOSPI down 0.6%. However, Chinese indices rose slightly, defying broader regional weakness, with the CSI 300 and Shanghai Composite gaining 0.3% and 0.4% respectively, buoyed by positive domestic sentiment.
• Europe: European equities saw modest gains, with the Stoxx 50 up 0.3% and the Stoxx 600 inching higher to 509, supported by gains in luxury stocks like Kering (+5%) and LVMH (+1.6%). UniCredit slid nearly 5% on news of its €10.1 billion bid for Banco BPM.

Volatility: The VIX eased to 14.60, reflecting lower immediate market risks, though the VIX9D (which measures implied volatility over the next 9 days) ticked higher to 12.31, indicating mild concerns over upcoming data and events. Expected moves (up or down) based on options pricing for the S&P 500 are 0.40%, while the Nasdaq 100 suggests a 0.64% swing today. Options activity was strong in Nvidia, Tesla, and Palantir, signaling continued investor focus on tech and speculative plays.

Fixed Income: Yesterday, German Bunds saw a twist flattening as short-end yields eased slightly from Friday’s post-PMI highs, while long-end yields fell, mirroring strength in US Treasuries. Bund yields declined by 4bps to 2.20%. French 10-year yields dropped 3bps to 3.02%, reversing an earlier OAT-Bund spread widening prompted by Le Pen’s political threat. Italian yields also fell 4bps to 3.46%, narrowing the BTP-Bund spread. UK gilts underperformed Treasuries, with 10-year gilt yields down 5bps to 4.34%, as Bank of England rate expectations remained steady. In the US, Treasuries rallied sharply after the announcement of Scott Bessent as the Treasury Secretary nominee. Yields fell 10-14bps across the curve in a bull flattening move, with the 2s10s curve inverting again. The rally was supported by a strong 2-year note auction, which saw high indirect demand. The sharp movements highlight continued demand for safe-haven assets amid economic and political uncertainty.

Commodities:

• Gold’s choppy price action—most recently Monday’s 3.5% slump following last week’s surge—points to a near-term peak in the market as traders’ convictions fade, especially with the end of the year fast approaching. However, given the challenging macroeconomic and geopolitical climate, the prospect for further gains next year exists. Trump’s radical plans on tariffs, tax cuts, and deportation all point to increased inflation and rising debt, two factors gold investors seek protection from.
• Crude prices remain stuck near key support levels as traders assess the impact of a potential ceasefire between Israel and Hizbollah, Trump’s tariffs’ impact on growth, and an OPEC+ overhang of unwanted barrels at a time when demand remains sluggish. US natural gas futures spiked again on Monday as forecasts shifted colder for most of the country, signalling increased demand for power toward heating.
• Arabica coffee surged to a 1997 high above USD 3 per pound on sustained worries about Brazil’s 2025 output after trees were hurt by a long drought earlier this year.

Currencies:

• After a choppy day, the yen remained at the strong end of the day’s range even versus a slightly firmer US dollar late yesterday, a move supported by the drop in US treasury yields yesterday, which came on the back of President-elect Donald Trump’s choice of Scott Bessent for treasury secretary. The yen’s strength was more in evidence elsewhere, as EURJPY plunged well through 161.00 at one point on Trump’s tariff threats that roiled other currencies (see below).
• Trump’s threat to slap 25% tariffs on Mexico and Canada on day one of his new administration saw CAD and MXN sharply weaker, with USDCAD even running up above 1.4150 to new multi-year highs overnight. A separate threat to add 10% of further tariffs on products from China saw CNH edge lower versus the greenback overnight.