Global Market Quick Take: Europe – 29 November 2024

Key points

• Equities: Asian down on geopolitical risks, Europe rose on softer semiconductor curbs
• Volatility: VIX steady at 13.90, VIX futures dipped slightly
• Currencies: JPY surges on Tokyo CPI data, USD under pressure into month-end fixing.
• Commodities: Mixed month with coffee and natural gas seeing the biggest gains
• Fixed Income: French bonds rally amid Barnier’s budget deal and dovish ECB comments
• Macro events: Germany Nov. Unemployment, EuroZone Flash Nov. CPI, US markets close early for Black Friday.

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

Macro data and headlines

• Germany’s inflation remained steady at 2.4% YoY in November, undershooting expectations of a rise to 2.6% YoY. Spain’s inflation however rose as expected, coming in at 2.4% YoY from 1.8% prior. These prints increase the likelihood of a 25bps rate cut from the ECB at the 12 December meeting, given market was starting to price in more than a 25bps rate cut. Currently, 30bps of easing is priced in for the year end.
• Japan’s Tokyo CPI for November jumped higher to 2.6% YoY from 1.8% prior and 2.2% expected, stoking expectations of another BOJ rate hike in December. The core measure also came in above expectations and the core-core metric was higher at 1.9% YoY from 1.8% previously as expected. Shunto wage talks are also hinting at solid wage increases again this year, further cementing the case for BOJ to continue policy normalization.

Macro events (times in GMT)

Germany Nov. Unemployment Change/Rate (0855), UK Oct Mortgage Approvals (0930), EZ Nov Preliminary CPI (1000), Canada 3Q GDP (1330)

Earnings events

• Next week: Salesforce, Prosus, Marvell, Kroger, Lululemon, Zscaler

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

Equities

• US: U.S. markets were closed on Thursday for the Thanksgiving holiday. Futures suggest a positive open for the shortened trading session, with most investors still away from desks. Technology stocks remain in focus after Wednesday's pullback, where Nvidia (-1.2%), Tesla (-1.6%), and Microsoft (-1.2%) led the decline, while Dell and HP tumbled over 12% each on weak earnings guidance.
• Asia: Most Asian markets traded lower on Friday amid geopolitical tensions and mixed economic signals. Japan's Nikkei 225 fell 0.5%, and the TOPIX dropped 0.3%, as strong Tokyo inflation data stoked expectations of a BOJ rate hike. South Korea's KOSPI lost 2%, led by declines in Samsung (-1.8%) and SK Hynix (-0.7%), while China's CSI 300 edged 0.79% lower as semiconductor tensions weighed on sentiment. Hong Kong's Hang Seng index slipped 0.2%, extending its monthly decline to nearly 5%.
• Europe: European stocks saw solid gains on Thursday, with the Eurozone's Stoxx 50 adding 0.6% and Germany's DAX rising 0.9%. Optimism stemmed from softer-than-feared U.S. semiconductor restrictions, boosting ASML (+2.6%). Airbus jumped 4.2% after confirming critical jet engine deliveries from CFM. Inflation data was mixed, with Germany's annual rate hitting 2.2% and Spain meeting expectations at 2.4%.

Volatility

With U.S. markets closed on Thursday, the VIX remains at 13.90. VIX Futures dipped slightly, reflecting calm sentiment, while expected moves remain muted for the S&P 500 (+ or - 0.37%) and Nasdaq 100 (+ or - 0.58%).

Fixed Income

French sovereign bonds outperformed their euro-area counterparts after Prime Minister Michel Barnier made a significant budget concession to secure National Rally’s support for the spending bill, a move welcomed by investors. Greek 10-year yields, in a historic moment, briefly matched those of France. Italian bonds, along with other peripheral markets, rallied following dovish comments from ECB’s François Villeroy, who suggested that rates might need to fall to stimulate growth. This bolstered expectations for monetary easing, with money markets now pricing in 150 basis points of rate cuts by the end of 2025. In the UK, gilts gained for the second day, particularly in the belly of the yield curve, but underperformed German bunds as traders maintained expectations for modest BOE rate cuts starting in December. Meanwhile, US Treasury markets remained quiet due to the Thanksgiving holiday, with futures implying a 10-year yield of 4.26%.

Commodities

• The Bloomberg Commodity Index shows a 0.7% gain for the month. Losses in precious metals—led by silver and platinum—and grains, led by wheat, as well as softer industrial metal prices, were offset by a strong month for energy, primarily due to surging natural gas. Additionally, there was a 13.7% jump in softs, driven by a 32% rise in coffee prices.
• Oil prices traded steady as traders awaited more details on OPEC+'s production plans after a meeting was delayed until December 5, when the group will decide whether to increase supplies or extend cuts into 2025 to avoid oversupply, and the risk of further price weakness.
• Gold trades higher for a fourth day, reaching USD 2666 overnight, supported by a softer dollar as the JPY rose, and continued focus on Ukraine tensions as well as the 60% odds for a December rate cut. Already up by 29% this year, investors wonder whether we will witness an eight consecutive December rally.

Currencies

• The Japanese yen powered higher again overnight, reaching new local highs versus the other major currencies and particularly against a softer US dollar as Japan’s Nov. Tokyo CPI data came in far hotter than expected overnight. USDJPY traded below 150.00 in the late Asian session for the first time in well over a month.
• The US dollar traded soft into the end-of-month fixing period, with the critical 1.0600 resistance level in EURUSD at 1.0600 not that far away from the trading levels in early European trading today. The 1.0600 area was the prior significant low for 2024 before it was broken early this month.

For a global look at markets – go to Inspiration.