Global Market Quick Take: Europe – 6 December 2023

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

Equities: Positive sentiment coming out of the Asian session with Nikkei 225 futures up 2% and Hang Seng futures up 0.7% as the market is intensifying its bets on rate cuts next year. US macro figures yesterday with ISM Services showed better than expected improvement in November while worse than expected JOLTS job openings figures suggest the steam is coming off the labour market also contributed to the positive sentiment. European and US equity futures are slightly up in early trading hours. Today’s key macro figure to watch is the US November ADP employment change released 1315 GMT. In single stocks news NIO is planning to spin off its battery manufacturing unit according to Reuters which could be the beginning of more publicly listed battery manufacturers – we also waiting for IPO of Northvolt in 2024 and a Hong Kong listing of CATL.

FX: The dollar gained further on Tuesday as it continued to recover from the declines of last three weeks and downside surprise from JOLTS data was somewhat reversed by ISM upside. DXY index could target 104.50 as focus turns to ADP data today ahead of NFP on Friday. AUD was the underperformer yesterday, sliding below 0.6560 after RBA fell short of expectations for a hawkish hold before recovering today on a less worrisome Q3 GDP print. EURUSD also made its way below 1.08 but yen was flattish against the USD and gained more on the crosses. USDCAD is rising back towards 1.36 and eyes on BOC rate decision today.

Commodities: Commodities extended their December decline with all sectors apart from grains in the red, amid concerns about the global economic outlook into 2024. China respiratory illness spreading and debt also weighing after Moody’s outlook cut, temporary weighing on industrial metals with copper trading lower despite supply concerns. Crude oil prices also slipped further with Brent near the November low at $76.7 with OPEC+ supply cuts being offset by softening economic data and data showing US exports heading for a record 6mln b/d. Gold is showing signs of stabilising after a premature rally forced a major round of long liquidation. This after finding demand ahead of key support in the $2008 area and after weak JOLTS data reinforced speculation the Federal Reserve will cut interest rates next year to prevent a recession.

Fixed income: lower than expected JOLTS openings, added to speculations that the Federal Reserve is done and that it will begin to cut rates aggressively next year to prevent a recession. Ten-year yields broke below 4.2% yesterday, and they will not find support until 4.05%. Today the attention turns to the MBA mortgage applications, ADP employment change and the U.S. trade balance. In Europe, Schnabel said that she sees further rate hikes unlikely, causing a widespread rally across European sovereigns. However, the BTP-Bund spread failed to tighten further, indicating that investors are considering risk carefully.

Macro: US JOLTS Job Openings fell to 8.733mln in October from 9.35mln in September, well beneath the expected 9.3mln and the lowest since March 2021. Quits rate remained flat at 2.3% but the ratio of openings to unemployed workers fell to 1.34 from 1.47, the lowest level since August 2021 but still above pre-pandemic levels. Headline US ISM Services PMI for November accelerated to 52.7 from 51.8, above analyst forecasts of 52.0. Business activity increased to 55.1 from 54.1 while new orders saw further expansion at 55.5, matching the October figure. Employment accelerated to 50.7 from 50.2, while prices paid eased to 58.3 from 58.6. Australia Q3 GDP came in unchanged at 2.1% YoY but slowed on a MoM basis to 0.2% from 0.4% earlier. Expectations were for 0.5% MoM and 1.9% YoY.

Technical analysis highlights: S&P 500 eyeing 4,800. Nasdaq 100 short term correction likely, support at 15,744. DAX record close, uptrend very stretched. EURUSD strong support 1.0760 and 1.07. USDJPY downtrend, minor support at 146.30 strong at 145. GBPUSD rejected at 1.2745, support at 1.2545 & 1.2445. Gold likely to bounce from support at 2.009.  WTI Crude oil below support at 72.65, Brent testing support at 77.00. 10-year T-yields below support at 4.20 could drop to 4.07

In the news: Moody’s Cuts China Credit Outlook to Negative on Rising Debt (Bloomberg), Japan manufacturers' mood jumps, second straight month of gains - Reuters Tankan (Reuters), Worsening China Earnings Are Giving Bears More Reasons to Sell (Bloomberg), Rio Tinto plans to spend $30bn over next 3 years (FT), Joe Biden ‘not sure’ he would seek re-election if Trump were not running ($FT)

Macro events (all times are GMT): EZ Retail Sales (Oct) exp 0.2% & -1.1% vs –0.3% & -2.9% prior (0900), US ADP (Nov) exp 130k vs 113k prior (1215), BoC Policy Announcement (1400), EIA Weekly Crude and Fuel Stock Report (1430)

Earnings events: Earnings releases today from TUI, GameStop and ChargePoint. With EV being the big theme this year our focus is on ChargePoint reporting FY24 Q3 (ending 31 Oct) tonight after the US market close with analysts expecting negative 3% y/y and another quarter of losing money.

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