Global Market Quick Take: Europe – 15 July 2024

Key points:

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

In the news: Biden asks Americans to 'cool it down' after Trump shooting (Reuters), Donald Trump calls for unity in face of “evil” after assassination attempt (FT), Institutions snapping up Chinese treasury bonds are shorting the economy, state media says (Reuters).

Equities: Small Cap Index Russell 2000 continued its positive tone Friday after Thursday’s rally adding another percent. S&P 500 and Nasdaq recouped some of their losses but technically still drawing top and reversal patterns. In Asian session Nikkei was unchanged and Hang Seng closed down 1.4%. Pre-market US Equites are indicated to open a tad higher despite the dramatic event over the weekend. Alphabet in Talks to Buy Wiz in $23 Billion Cyber Deal (Bloomberg). Their biggest deal ever. Astra-Zeneca completes take-over of Amalyt Pharma. Burberry's Q1 retail sales missed estimates at GBP458M. FY25 dividends suspended. CEO Akeroyd steps down; Schulman takes over. Trading slowdown continued into July. Expects FY25 profit below consensus, wholesale revenue down 25% in 1H and 30% for FY25. German wind turbine maker Nordex AG announced robust order intake of 3.4 GW in first half 2024 (NewsEdge).

Macro: Following Saturday’s assassination attempt on the former president Trump, the dollar strengthens, and T-note futures drop amid a renewed "Trump trade". WTI crude futures trade around $82.40, gold is stable around $2,410, and Bitcoin rose above $62,500. S&P and Nasdaq futures contracts rise. The New Zealand dollar underperforms among G-10 currencies, while the yen stabilizes around 158. Asian equities decline for a second consecutive day. Japanese markets are closed for a public holiday.

Macro events (times in GMT): CPI readings for Finland, Slovakia, Poland, Bulgaria, Eurozone Industrial Production (11:00), UK Rightmove House Prices, U.S. Empire Manufacturing Index (14:30), Fed’s Powell and Daly speak.

Earnings events: This week earning reports from ASML, Danske Bank, AbbVie, Goldman Sachs, Netflix and American Express will be in focus. JPMorgan Chase, the largest bank in the U.S., and Wells Fargo both announced a decline in second-quarter profits on Friday. Conversely, Citigroup reported an increase in profit, partly due to cost-cutting measures, although it also increased provisions for potential losses in its credit-card division. Higher interest rates have squeezed banks’ profits and made it more challenging for consumers to repay higher borrowing costs. Today’s Goldmans Sachs’ earnings are in focus.

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

Fixed income: As bond futures dipped during the Asian session, with bond cash markets closed for a bank holiday in Japan, investors seem to be focusing on the "Trump trade" following the weekend assassination attempt. A Trump victory would likely lead to tax cuts, higher tariffs, and looser regulations. Ten-year U.S. Treasury yields closed at 4.18% on Friday, a crucial support level prior to the weekend's events. If yields fall below this level, the next support lies at 3.78%. Conversely, there is potential for yields to rise to 4.47% before encountering resistance. The U.S. yield curve is expected to continue steepening, primarily driven by a decline in short-term rates as anticipation of an upcoming rate-cutting cycle grows. The assassination attempt on Trump may hasten a July Fed rate cut, especially if market volatility spikes. The FOMC meeting will occur shortly after the June PCE data release; if these data mirror the deflationary trends seen in recent CPI numbers amidst rising political uncertainty, a rate cut becomes more likely. Investors will also be closely monitoring this week's key economic data, including Eurozone CPI and the ECB meeting, as well as the UK's CPI and jobs data, all of which will provide further indicators for global economic directions and policy responses.

Commodities: Gold remains near a record high, trading around $2,410, in the wake of an assassination attempt on former President Trump, coupled with declining bond and stock prices. The uncertainty surrounding the U.S. political and economic landscape, along with concerns about the sustainability of the U.S. deficit, is expected to bolster gold prices over the long term. WTI hovers around $82 and Brent around $85.

FX: The US dollar opened higher at the start of new week following the assassination attempt on former President Donald Trump over the weekend. Markets have increased the probability of a second Trump presidency, and the Republican Convention will be in focus this week. China’s GDP data disappointed, raising the stakes for its Third Plenum meeting that kicked off today, and focus would be on any reform announcements. The Chinese yuan, however, reversed its early weakness. The British pound remained resilient despite dollar strength after hawkish BOE comments last week and UK CPI and jobs data will be on the radar this week. For more on our FX views, read Saxo’s Weekly FX Chartbook.

Volatility: The VIX closed at $12.46 (-0.46 | -3.56%) on Friday. Expected moves for the week, based on options pricing, show the S&P 500 with an expected move of +/- 56.15 points (1.00%) and the Nasdaq 100 at +/- 299.91 points (1.48%). European markets also show notable expected moves, with the DAX at +/- 181.46 points (0.97%) and the CAC 40 (PXA) at +/- 37.38 points (0.48%). This week's key economic events which will impact market volatility include Core Retail Sales (MoM) (Jun), Retail Sales (MoM) (Jun), Initial Jobless Claims, and the Philadelphia Fed Manufacturing Index (Jul). In the new earnings season we have a slew of notable releases in the financial sector from Goldman Sachs, BlackRock, UnitedHealth, Bank of America, Morgan Stanley, and Charles Schwab. S&P 500 and Nasdaq 100 futures are up after their first session of the week, with the S&P 500 futures at 5,679.25 (+14.50 | +0.26%) and Nasdaq 100 futures at 20,611.00 (+87.00 | +0.42%). Friday's top 10 most traded stock options were Nvidia, Tesla, Apple, Advanced Micro Devices, Rivian Automotive, Amazon, Meta Platforms, Intel, Lucid Group, and Marathon Digital Holdings.

For a global look at markets – go to Inspiration.