Global Market Quick Take: Europe – 25 June 2024

Key points:

• Equities: European equities indicated 0.6% lower. Focus on US technology stocks and FedEx earnings
• Currencies: Dollar runs out of steam with focus on JPY and CAD
• Commodities: Crude higher on multiple geopolitical risks
• Fixed Income: Bonds remain steady with today’s U.S. Treasury 2-year auction in focus.
• Economic data:  US Consumer Confidence

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

In the news: Nvidia slides 13% in three days after briefly becoming most valuable company (CNBC), Stocks mixed, yen in focus after flirting with key level (Investing), How Lilly is joining Novo in the crusade to circumvent Medicare's block on weight loss drugs (Yahoo), New Polls Show French National Rally Forging Ahead of Macron (Bloomberg), Oil Holds Gain as Traders Weigh Escalating Geopolitical Tensions (Bloomberg)

Equities: Another good session in Asia with Japanese equities rallying 1.1% to the high end of the trading range since mid-May. Futures are indicating European equities to open 0.6% lower on the back of the US technology slide yesterday. Nvidia has been the epicentre of the recent weakness in US equities declining 6.7% yesterday extending the current drawdown to 16.1% which underscores the extreme volatility in Nvidia shares. Novo Nordisk is investing $4.1bn in a North Carolina factory confirming the strong outlook for obesity drugs. Key earnings focus today is FedEx reporting after the US market close.

Macro: Germany’s IFO index showed that business outlook worsened for the first time in five months, signaling that the gradual recovery in Europe may be facing headwinds. The current assessment index was unchanged at 88.3, although beneath expectations, while expectations index slipped to 89.0 from 90.3 in May. Overall business climate index was softer at 88.6 from 89.3 in May. Fed speakers remained data-dependent, emphasizing that more work needs to be done on inflation. Mester said that the Fed should keep an open mind to active mortgage bond sales as part of its effort to reduce the size of its balance sheet. Mary Daly said that pre-emptive cutting is something you do when you see risks, but right now the labour market is good.

Macro events (times in GMT):  US consumer confidence (June) exp. 100 vs 102 prior (1400), Can CPI (May) exp core 2.6% YoY vs 2.6% prior (1230), US sales of USD 69 bln 2-year Notes 1700), APIs Weekly Crude and Fuel Stock report (2030)

Earnings events: Today’s key earnings release is FedEx reporting after the US market close with analysts expecting 1% YoY revenue growth and EPS of $5.34 up 8% YoY. Expectations going into this earnings release are low as FedEx is undergoing a transformation optimizing its logistics network while trimming its cost structure.

• Today: FedEx, Alimentation Couche-Tard, Carnival, TD Synnex
• Wednesday: Vantage Towers, Micron Technology, Paychex, General Mills
• Thursday: Walgreens Boots Alliance, Nike, H&M, McCormisk
• Friday: Geely Automobile

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

Fixed income: The bond market experienced a relatively quiet day yesterday, with German yields closing slightly higher by approximately 1 basis point across the curve. This movement followed the Ifo survey, which indicated ongoing struggles for the largest European economy to recover. In the U.S., the yield curve bull flattened as 30-year yields dropped by 3 basis points to 4.36%, while 2-year yields decreased by 1 basis point to 4.71%. Today's focus is on the 2-year U.S. Treasury auction. As investors are uncertain about the direction of the U.S. economy and the Federal Reserve’s policy moves, investors’ demand for the upcoming auction might not be strong. Today’s 2-year auction sets the stage for tomorrow’s 5-year and Thursday’s 7-year note sale.

Commodities: The sector received broad support from a lower dollar, led by crude oil which received additional support from peak summer demand and multiple geopolitical risks from fresh EU sanctions on 17 ships hauling Russian oil, Russia blaming the US for Ukrainian missile strike on Crimea, Houthi rebels ramping up attacks on commercial ships in the Red Sea, and not least the upcoming election in Iran, given the risk of a more hardline president. Copper trade steady near support, held down by China demand worries, while gold remain rangebound, but well above key support, with focus on Friday’s key US PCE inflation print.