Global Market Quick Take: Europe – 30 January 2024

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

Equities: Chinese equity futures are down 2% in today’s session as the Chinese 10-year yield declined to a two-decade low at 2.47% as investor sentiment remains weak as the real estate crisis continues to drag down the economy. US and European equity futures are flat in early trading hours as the market awaits three intense sessions of key earnings releases from Microsoft (Tue, aft-mkt), Alphabet (Tue, aft-mkt), Novo Nordisk (Wed), Apple (Thu), Amazon (Thu), and Meta (Thu). In single stocks names it is worth noting that Renault has pulled its IPO of its EV division Ampere on subdued demand for EV shares.

FX: The dollar started the week edging higher on escalating geopolitical concerns, but gains were cut short with the drop in yields following the Treasury refunding announcement. NZDUSD jumped higher but was capped by resistance at 0.6150, AUDUSD also broke above 0.66 touching the top of the recent range. The Yen also had reasons to cheer with the drop in yields, and USDJPY dropped to 147.20 lows. GBPUSD was still stuck around 1.27 and EUR struggled despite the weaker USD, with EURUSD testing 1.08 with the 100DMA at 1.0779 still in focus for EURUSD with GDP data on tap today, as well as US JOLTS job openings. For more details on FX momentum and positioning, as well as our weekly FX views, read this article.

Commodities: Crude prices fell back from a 12-week high on Monday after Iran denied having anything to do with the weekend attack on a U.S. base in Jordan. Tensions are likely to remain as markets wait for the US response, which however is likely to be measured and potentially focusing on sanctions to avoid a further escalation and with that the potential for higher fuel prices in an election year. Supported by lower bond yields, following the Treasury refunding announcement (see below), both gold and not least silver trade higher. Read our weekly COT report here for more details about how recent aggressive selling from funds may start support some individual commodities.

Fixed income: The US yield curve bull-flattened after news that the Treasury reduced its estimate for Federal borrowing this quarter. That doesn’t mean that the Treasury will not decide to increase coupon sizes this quarter. As the Reverse Repurchase facility (RRP) drains out, demand for T-Bills may diminish, forcing the Treasury to increase coupon issuance regardless. We will know more about it tomorrow at the Quarterly Refunding announcement, where the Treasury will announce the composition and breakdown of T-bill, notes and bonds issuance ahead of the FOMC meeting (to access our preview click here). We expect the FOMC meeting to tilt hawkish due to voting Federal Reserve bank presidents rotating. However, disinflationary trends, the end of the Bank Term Funding Program (BTFP) in March, and an increase in US Treasury coupon issuance are accommodating for easier monetary policies supporting bonds valuation throughout the first half of the year.

Macro: Treasury announced it expects to borrow $760bln in net marketable debt for the January-March period, down $55bln from its October 2023 estimate of $816bln "largely due to projections of higher net fiscal flows and a higher beginning of quarter cash balance", assuming an end-of-March cash balance of $750 billion. It also expects to borrow a much smaller $202bln in the April-June period, assuming an end-June cash balance of $750bln. US Dallas Fed’s manufacturing index fell much more than expected in January, to -27.4 from a revised -10.4. ECB member Kazimir said that the Bank will not rush into cutting rates, and he sees June more probable than April. Mario Centeno added that he prefers to act sooner than later and be more “gradual’ when easing policy. Euro-area Q4 GDP up next today, and a negative print will confirm a technical recession.

Volatility: Volatility experienced a noticeable uptick with the VIX reaching an intraday high of $15.35 before closing at $13.60 (+0.34 | +2.56%). The VVIX followed suit, climbing to 83.40 (+1.20 | +1.46%). Despite the rise in volatility indicators, both the S&P 500 and Nasdaq 100 finished the session up by +0.76% and +1.01%, an unusual pattern that suggests investors are cautiously optimistic about forthcoming major events, including the FOMC Statement and key earnings announcements, yet are still preparing for potential uncertainty. As of this morning, VIX futures are relatively unchanged (+0.020 | +0.13%), and futures for the S&P 500 and Nasdaq 100 are slightly down, at 4948 (-6.50 | -0.13%) and 17684 (-22 | -0.13%).

In the news: Elon Musk's Neuralink implants brain chip in first human (Reuters), China EV price war spreads to gas-fueled cars, denting foreign brands (Nikkei Asia), Middle East situation ‘incredibly volatile’ after deadly attack, Blinken warns (FT)

Macro events (all times are GMT): Ger 4Q GDP exp. 0.2% YoY vs 0.1% prior (0800), UK mortgage approvals (Dec) exp 53k vs 50.1k prior (0830), Eurozone 4Q GDP exp –0.1% vs –0.1% QoQ & 0.1% vs 0% YoY (0900), US consumer confidence (Jan) exp 114.5 vs 110.7 prior (1400), US JOLTS job openings (Dec) exp 8750k vs 8790k prior (1400), API’s weekly crude and fuel stock report (2030)

Earnings events: Key earnings releases this week with the market focusing on earnings from Microsoft, Alphabet, Novo Nordisk, Apple, Amazon, and Meta. Read our earnings review note from this Monday for more insights and what the key focus points are in each earnings report.

• Today: Volvo, Stryker, Mondelez, Microsoft, Alphabet (Google), AMD, Starbucks, Chubb, Danaher, Pfizer, UPS
  
  
• Wednesday: Novo Nordisk, Qualcomm, Mastercard, Novartis, Thermo Fisher Scientific, Boeing
  
  
• Thursday: Apple, Roche, Amazon, Meta, Merck, Shell, Honeywell, Sanofi
  
  
• Friday: Keyence, ExxonMobil, AbbVie, Chevron, Regeneron Pharmaceuticals, Bristol-Myers Squibb

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