EU 1142x160

Global Market Quick Take: Europe – 16 January 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  US equity futures trade lower, thereby replicating losses in Europe on Monday after ECB comments pushed back against bets on early and extensive rate cuts. The weakness being driven by a part reversal of Friday’s drop in US and European bond yields and the dollar trading at a one-month high. Focus on a speech from Fed’s Waller later today and whether he also chooses to push back against bets that US rates will be cut by more than 1.5% this year. Brent crude oil prices hold steady while European gas prices slumped to a five-month low amid ample supply to meet current winter demand. In focus today we have bank earnings from Morgan Stanley and Goldman Sachs


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

Equities: The US equity market was closed on Monday for a holiday. So far today, the S&P 500 and the Nasdaq 100 futures trade around 0.4% from their Friday close. This dip followed weakness on Monday in European markets, attributed to ECB officials pushing back on investors' rate cut expectations. Notably, Morgan Stanley and Goldman Sachs are set to report their results before the US market opens on Tuesday.

FX: The Bloomberg Dollar index climbed to a one-month overnight, building on Monday’s gains as Treasury futures slipped at the Tokyo open after rallying strongly last week, thereby following in the footsteps of a selloff in European debt after ECB’s Holzmann said the bank may struggle to lower interest rates this year amid lingering inflation. High beat currencies were the worst performers, with AUDUSD sliding below 50DMA and approaching a test of 0.66 support. NZD also slid to test the 50DMA at 0.6159. USDJPY rose above 146 despite escalation in the Middle East conflict, with firmer Japan PPI report this morning and CPI data on watch this week. EURUSD slid below 1.0920 despite the hawkish rate comments.

Commodities: Brent crude remains stuck below $80 showing limited reaction to another ramp up in geopolitical tensions after Houthis hit a US vessel and Iran’s IRG launched missiles at targets in northern Iraq and Syria. In North America extreme cold has reduced production of crude and demand for fuel. European gas futures fell to a five-month low amid high inventories despite reports that Qatar could pause LNG shipments through the Red Sea. Traders will be focusing on comments out of Davos along with geopolitical developments, and oil market reports from OPEC and IEA due Wednesday and Thursday. Gold failed to break key resistance in the $2060 area before trading softer amid rising yields.

Fixed income: Returning from the Martin Luther King Day holiday, Treasuries were sold in Asian trading on Tuesday, with yields approximately 6bps higher than their Friday New York closing levels. The 2-year Treasury notes are trading at 4.21%, and the 10-year Treasury notes are at 4.0%, influenced by the weakness in European government bonds following hawkish comments from ECB Governing Council member Holzmann. The focus turns to Davos, and the ZEW survey for the Eurozone today. Tomorrow US retail sales, industrial production and the import price index will be released before a 20-year US Treasury bond auction.

Macro: At the Davos meetings, ECBs Holzman and Nagel said that rate cuts were still a way off. Holzman said that the market should not count on rate cuts at all this year. Nagel was a bit more open saying it is too early to talk about rate cuts. WSJ's Timiraos wrote Fed officials are to start deliberations on slowing but not ending (QT) as soon as their policy meeting this month. Japan’s December PPI came in firm at 0.3% MoM, unchanged from last month but higher than flat expected. YoY was flat vs. +0.3% previous and -0.3% expected. This could fuel some talk of BOJ exit, but any gains in yen could be erased.

Volatility: Volatility took a brief hiatus as U.S. markets observed Martin Luther King Jr. Day, but the undercurrents were active. VIX futures rose to $14.900, a 3.01% increase, hinting at some apprehension. The S&P 500 and Nasdaq futures dipped, at 4997.75 (-18.75 | -0.39%) and 16877.00 (-92.25 | -0.54%) respectively, potentially setting a cautious tone for the trading day ahead. Today's spotlight is on Morgan Stanley and Goldman Sachs, with their earnings reports anticipated to be significant yet unlikely to stir major volatility, as reflected by their relatively low IV Rank. Interestingly, both firms saw a post-earnings IV Rank increase last quarter, bucking the common trend of post-earnings volatility contraction.

In the news: Fed Tiptoes Toward Dialing Back Key Channel of Monetary Tightening (WSJ), Apple to Pull Blood-Oxygen Tool From Watches to Avoid US Ban If Appeal Fails (Bloomberg), Microsoft Expands Office AI Copilot to Consumers, Smaller Companies (Bloomberg), Communist Party must ‘win the hearts’ of people in Hong Kong, Macau and Taiwan: Xi (SCMP), Alibaba, TikTok woo US with AI and live-streaming e-commerce at CES trade show (SCMP), Republicans Battle for Runner-Up as Trump Leads Iowa Caucuses (Bloomberg), Donald Trump wins landslide in Iowa with Ron DeSantis a distant second (FT)

Macro events (all times are GMT): Germany ZEW (Jan) exp 11.7 vs 12.8 (0900), US NY Fed Empire State Manufacturing (Jan) exp –5 vs –14.5 prior (1230), Canada CPI (Dec) exp –0.3% & 3.4% vs 0.1% & 3.1% prior (1230), Fed’s Waller speaks on economic outlook and monetary policy (1500)

Earnings events: Morgan Stanley and Goldman Sachs are set to report their results before the US market opens

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

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

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)

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.