EU 1142x160 EU 1142x160 EU 1142x160

Global Market Quick Take: Europe – 11 January 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  A positive tone on Wall Street led by gains in Meta, Nvidia and Microsoft spread to the Asia overnight where the Nikkei, which flew past a 34-year high on Monday, added another 1.8% while stocks in China and Hong Kong reversed higher following recent weakness. The SEC approved several spot bitcoin ETFs for the first time for trade starting Thursday. The general level of risk sentiment also received a boost from a softer dollar, crude remains rangebound with gold in wait-and-see mode ahead of today’s US inflation data which will help clarify questions about the timing and the pace of incoming Fed rate cuts. Also focus on earnings season with leading US banks reporting Friday.


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

Saxo’s Q1 2024 Outlook titled “What happened to the future” is now out. You can read the executive summary here

Equities: Equity futures are generally positive today with Nikkei 225 and Hang Seng futures up 2.3% and 1.5% respectively. Equity futures are also higher in Europe (+0.7%) and the US (+0.2%). Fed’s Williams said yesterday that the US policy rate is high enough to cool inflation back to target at 2%, but also indicated that the Fed needs more data before significantly reducing policy rates. Japanese fashion retailer Fast Retailing (parent of Uniqlo brand) beat expectations on both operating income and revenue driven by strong results in international markets. South Korean LG Electronics said in a Q4 preliminary earnings statement where the company beat on revenue that it intends to sharply increase capital investment and R&D spending this year in another sign that an investment boom in technology might continue.

FX: The dollar trades lower against most of its peers ahead of US CPI data release. Overnight gains were led by AUDUSD which rose again to 0.6720+, the USDCNH dropped back below 7.17 amid another strong onshore yuan fixing. USDJPY rose to highs of 145.83 before sellers emerged ahead of 146, a level that held up last week and for much of December. Bigger moves were seen on the crosses, with EURJPY testing 160, the highest levels since the start of December, and GBPJPY remaining just shy of 186. EUR strength was also broad, and EURUSD surged to 1.0980 and 1.10 remains on watch. Bitcoin was back in the spotlight following the SEC approval of ETFs, and XBTUSD now trades around 46,500 after an initial gain to over 47,500.

Commodities: The crude oil market, in a downtrend since October, is showing signs of settling into a relatively narrow range - in Brent between $75 and $80 - as the tug-of-war between demand and supply concerns continue to create choppy but overall directionless price action. Gold also rangebound ahead of the CPI print with key support around 2010 while a break above 2045 is needed to offer fresh momentum. Copper trades higher for a second day reversing some of the early January losses on China stimulus bets and after Chile scaled back its production forecast amid declining ore quality, water restrictions and increased scrutiny of new permits. Grain traders look towards Friday’s WASDE and Quarterly Stocks reports for guidance after the sector slumped to a four-year low amid ample supply.  

Fixed income: a mediocre 10-year US Treasury auction shows that demand for the safe-haven is not increasing significantly despite the Federal Reserve getting ready to curb interest rates. The auction tailed slightly for the fourth consecutive time, while indirect bidders remained below 70%. Today’s CPI figures are in focus ahead of the $ 21bn 30-year US Treasury bond auction. Any surprise in either direction is likely to be market-moving but irrelevant for a FOMC decision this month, as by March, the central bank will have three more inflation prints to act upon. In Europe, policy makers are pushing back on interest rate cut expectations provoking a bear flattening of the German yield curve. We continue to favor sovereign bonds over other risky assets and see scope to extend duration gradually.

Macro: Fed’s John Williams (voter) said that monetary policy is tight enough to nudge inflation down to the Fed’s 2% goal but policymakers need more evidence before they can “dial back” interest rates. He noted that risks to the economy are two sided, and rate decisions will be made meeting-by-meeting and driven by the totality of data. The NY Fed President sees 2024 GDP at around 1.25% (beneath Fed median Dec SEP of 1.4%), 2024 unemployment at 4% (beneath Fed median of 4.1%), 2024 inflation at 2.25% (beneath Fed median of 2.4%) and 2% in 2025 (beneath Fed median of 2.1%).

Volatility: The VIX nudged down to $12.69, a subtle yet continued sign of market stability. The VVIX followed suit, dropping to 77.09, marking a consistent decline in volatility perceptions. However, the SKEW-index's sharper fall to 137.40 contrasts with the slight retreat in VIX futures to 14.150. Notably, the VIX1D soared to $13.82, overtaking the VIX in a rare move that underscores the market's bracing for short-term volatility spikes—likely tied to the CPI number release today. Meanwhile, S&P 500 and Nasdaq futures edged higher, suggesting optimism ahead of the CPI report. The market appears to be positioning for favorable news. In a significant regulatory shift, the SEC's approval of 11 bitcoin-spot ETFs may alleviate some of the uncertainties in the crypto sector. This event could lead to a substantial drop in implied volatilities for crypto companies, which have been elevated compared to historical standards. As the dust settles post-approval, investors will watch closely to see if these implied volatilities align more closely with their historical counterparts.

Technical analysis highlights: S&P 500 testing previous peak, eyeing 4,835 possibly higher, support at 4,682. Nasdaq 100 resuming uptrend likely to reach 17K and new highs, support 16,166. DAX likely resuming uptrend, support at 16,470. EURUSD bounced from 0.618 retracement and support at 1.0882, if breaking above 1.10 uptrend resumed. USDJPY above key resistance at 144.95 likely to test resist at 146.60 and 147.50.  EURJPY resumed uptrend, reached 0.618 retracement at 160.04, likely move to 161.90. Gold likely range bound 2,017- 2,065, could test 2K. Crude oil is struggling for upside momentum. 10-year Treasury yields could slide back to 3.90

In the news: SEC Authorizes Bitcoin-Spot ETFs in Crypto’s Breakthrough (Bloomberg), US, UK forces repel 'largest attack' by Houthis in Red Sea (Reuters), China Tensions Dominate Taiwan Election as Voters Head to Polls (Bloomberg), Xpeng to deliver flying cars 'in 2025' as China aims to lead in rule-setting (Nikkei Asia).

Macro events (all times are GMT): US CPI (Dec) exp. 0.2% MoM, 0.3% ex F&E, 3.2% YoY vs 0.1%, 0.3% & 3.1% prior (1230) (preview here), Initial jobless claims (Weekly) exp. 210k vs 202k prior (1230), EIA’s weekly natural gas inventory report (1430), US to sell $21bn 30-year bonds (1700), US Monthly Budget Statement (1800)

Earnings events: The Q4 earnings season starts tomorrow with earnings from UnitedHealth, BlackRock, Delta Air Lines, Bank of America, Wells Fargo, JPMorgan Chase, and Citigroup.

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

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.