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Global Market Quick Take: Europe – 14 June 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Key points:

  • Equities: Futures are indicating a higher opening. Adobe shares rise 14% on AI demand.
  • Currencies: Yen weakens as BOJ hesitates
  • Commodities: Strong week for energy led by gas and diesel
  • Fixed Income: US yields drop further on PPI and claims misses
  • Economic data: University of Michigan consumer sentiment for June

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

In the news: Adobe shares soar 17% on better-than-expected results (CNBC), Elon Musk wins Tesla shareholder approval for $56 billion pay package, touts his ability to 'deliver' (Reuters), OPEC sees no peak oil demand long term, secretary general says (Reuters), Nigel Farage’s Reform UK overtakes Conservatives in new opinion poll (FT).

Equities: Mixed session in Asia with Japanese equities up 0.3% and Hong Kong equities down 0.7%. Futures are indicating a higher opening in Europe (+0.4%) and US (+0.1%). The past week has been a rollercoaster with last Friday’s strong Nonfarm Payrolls figures almost eliminating all expected US rate hikes this year following by a lower-than-estimated inflation on Wednesday bring 1-2 rate cuts back into expectations. The past week has also delivered several strong earnings releases from Oracle, Broadcom, and Adobe yesterday gaining 14% in extended trading as new creating software business came in higher than estimated as customers are increasingly buying into its new AI features. Tesla will also be in focus today as shareholders approve Elon Musk’s $56bn pay package which is around 10% of the company’s market value.

Macro: The Bank of Japan left rates unchanged as expected but the yen weakened after the bank announced a delay in its normalisation of policy after delaying until its July meeting before announcing details on it pairing of bonds buying. The yen slumped as much as 0.6% versus the dollar, benchmark 10-year bonds rose, while traders paired back bets for a rate hike next month. Japanese stocks rose, defying a broader decline in Asian equities. US May PPI for finished goods fell 0.2% from the previous month, falling short of the estimated 0.1% increase. However, the year-on-year PPI for May increased by 2.2%, slightly below the estimated 2.5%. The core PPI, excluding Food & Energy, remained unchanged on the month to show a 2.3% year-on-year rise, slightly below the estimated 2.4%. Weekly jobless claims rose to 242,000 in the latest week, reaching the highest level since August 2023 and exceeding the consensus of 225,000. The 4-week moving average also increased to 227,000 in the week ending June 8, up from 222,250 the previous week. Continued claims climbed to 1.820 million in the latest week, the highest level since November 2021, surpassing the consensus of 1.798 million from the previous week. The U.S. insured unemployment rate remained unchanged at 1.2%.

Macro events (times in GMT): US University of Michigan consumer sentiment (Jun P) exp 72 vs 69.1 prior (1400), Weekly Commitment of Traders Reports from the CFTC and ICE Europe (2000)

Earnings events: No important earnings releases today.

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

Fixed income:  US Treasury yields fell further on Thursday after US PPI unexpectedly declined the most in seven months, while applications for US unemployment benefits jumped to the highest level in nine months. Adding to evidence that inflationary pressures are moderating, while raising doubts about the FOMC’s modest one rate cut projection for 2024. Overall, the US yield curve from two to ten-year has shifted lower by 17 basis points this week.

Commodities: The Bloomberg Commodity Index which tracks a basket of 24 major commodity futures spread between energy, metals and agriculture is heading for 0.8% weekly gain with gains in softs, especially sugar, and energy led by rising diesel prices more than offsetting small losses in grains, precious and industrial metals. Crude oil managed to consolidate the strong gains seen earlier in the week with OPEC slamming IEA’s forecast for global oil demand to roll over this decade as dangerous. Recent oil market reports from the two agencies showed a 1.2mbd gap in their respective 2024 demand growth forecasts. Continued weakness in copper on China demand concerns, and a 50% US tariff on Chinese imports of solar cells helped drag silver down to a one-month low below USD 29 before bouncing overnight while gold remains stuck near USD 2300

FX:  In a mixed week, the Bloomberg Dollar Spot Index has nudged up a small 0.3% increase against its major peers, with gains against JPY and EUR being partly offset by small losses against the AUD, CHF and GBP. The biggest mover overnight was USDJPY which jumped to 158 after the BoJ delayed its normalization (see above).

Volatility: The VIX ended Friday at $11.94 (-0.10 | -0.83%). Short-term volatility indicators also declined, with the VIX1D dropping to $8.69 (-2.42 | -21.78%), indicating that (very) short volatility returned to normal levels. The SKEW index, which is an indicator that measures the perceived risk of outlier moves in the S&P 500, rose to 162.25 (+11.59 | +7.69%), well above the 150 threshold point. Today there are few news releases that affect market volatility. VIX futures are currently at $14.000 (+0.035 | +0.25. S&P 500 and Nasdaq 100 futures are both showing positive movements, with S&P 500 futures at 5506.25 (+2.75 | +0.05%) and Nasdaq 100 futures at 19903.25 (+39.50 | +0.20%). Yesterday's top 10 most traded stock options were Nvidia, Tesla, Apple, GameStop, Amazon, Advanced Micro Devices, Altria Group, Super Micro Computer, Meta Platforms, and Hewlett Packard Enterprise. Notably, Nvidia led the options volume with 5,648,277 contracts traded, followed by Tesla and Apple with significant trading volumes.

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