Global Market Quick Take: Europe – June 1, 2023

Macro 9 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  US equity markets weakened yesterday, with the S&P 500 Index edging back below the 4,200 area that has proven a resistance level of note since February. AI-related names stumbled badly, with Nvidia tumbling over 5% on the session. Yields are steady after the US House passed the compromise debt ceiling deal and the Senate may pass the deal ahead of the weekend as the focus on the issue will switch to the US treasury and the impact on liquidity as it rebuilds its reserves. Industrial metals meanwhile rose from six-month lows after upbeat Chinese data added optimism.

What is our trading focus?

US equities (US500.I and USNAS100.I): lingering as debt ceiling deal goes to US Senate

S&P 500 futures continue to hover around the 4,200 level with no firm direction as the market is weighing economic data, the impact from the US debt ceiling that was passed in the US House, and the prospects of AI technology. As we flagged in our recent equity notes, the key risks for the US equity market remain valuation and concentration risk as this year’s rally has been led by a narrow group of technology stocks. Salesforce reported better than expected earnings results and outlook after the cash session close, but market expectations proved too high to meet with the shares down 5% in extended trading.

Chinese equities (HK50.I & 02846:xhkg): Rebound as Caixin manufacturing PMI returns to expansion

Mainland Chinese and Hong Kong equities continued their rebound as Caixin China General Manufacturing PMI surpassed expectations, rising above the threshold of 50 to reach 50.9 in May. This private survey, conducted among 650 manufacturing companies across mainland China, indicated an expansion in manufacturing activity, in contrast to the deepening contraction indicated by the official National Bureau of Statistics manufacturing PMI released yesterday. However, the sub-components were less optimistic, as respondents' confidence in the 12-month outlook reached a 7-month low, and the employment sub-index declined. During the early Asian afternoon, the CSI300 and the Hang Seng Index both advanced approximately 0.9%. China Internet stocks rallied, with Meituan, JD.Com, and Baidu gaining around 4-5%.

FX: AUD firmer on China data, Scandies turned corner?

The Aussie firmed overnight on a more upbeat Asian session, as copper prices have also been on the mend from the lows of late and after China’s Caixin Manufacturing PMI rose to 50.9, better than the 49.5 expected and the surprising downbeat number in the official PMI data the prior day. AUDNZD rose sharply to new local highs into 1.0850 and AUDUSD bounced back above 0.6500. Elsewhere, a notable reversal in both of the Scandies,SEK and NOK as Sweden posted better than expected Q1 growth data and despite, in NOK’s case, the ugly drop in crude oil prices. The NOK bounce came after the Norges Bank announced it will buy 1.3B NOK daily in June in foreign currencies to offset oil and gas company tax revenues. This was initially met with some NOK selling as one might have expected a lower number given the strain on the krone and weaker oil and gas prices. After trading back above 12.00 briefly, howeve, EURNOK sold of sharply to 11.82 into early European hours today.

Crude oil slumps ahead of OPEC+ meeting

Oil prices trade higher after a two-day slump, driven by weak Chinese economic data, took WTI back below $70 and Brent down to $71.50. The bounce apart from short-covering ahead of the weekend OPEC+ meeting was driven by progress on the debt deal, a jump in US job openings reducing the recession focus and not least after a private survey showed a surprise return to expansion of Chinese manufacturing activity in May. Lower prices ahead of the OPEC+ weekend meeting may raise the temperature in the room with Russia continuing to pump while key Middle East producers have shown constraint.

Gold bouncing from $1934 support as yields drop

Gold trades higher for a third day after selling earlier in the week ran out of steam ahead of support at $1934. A US debt ceiling deal has lowered the risk of a July rate hike while robust US data at the same time supports the view the FOMC is in no hurry to consider rate cuts. Gold managed to maintain a bid despite US JOLTS data showing that the number of available positions unexpectedly surged in April to the highest in three months. While not ruling out further rate hikes, Fed’s Jefferson support bullion after saying that skipping a June rate hike would give policymakers time to assess data. Focus on today’s ADP employment change ahead of Friday’s US job report. Resistance at $1985 followed by $1990, the 21-day moving average.

Month-end bond index rebalancing push yields lower dismissing strong JOLTS (2YYK3, 10YK3, 30YK3)

US Treasury yields dropped across the yield curve yesterday with the yield curve bull flattening. Most of the move might be attributed to the month-end bond index rebalancing. However, lower than expected inflation in Germany and Fed's members speeches contributed to decrease rate hike bets for June contributing to the bond rally. We still believe that the risk of a liquidity squeeze remains elevated as the Treasury must issue around $1 trillion to replenish its reserves. Approximately $500 billion will need to be raised in just four weeks. That would be the biggest quarterly issuance outside of a crisis such as the pandemic and the global financial crisis. Thus, we expect the bear flattening of the yield curve to resume, before rates start to drop for good. Our focus is on today's ISM survey and Friday’s non-farm payrolls. In the short term, it may be possible to see the two-year yields break above resistance at 4.63% and soar to 4.8%. Ten-year yields will rise at a slower pace but might test resistance at 4.91%. Thirty-year yields are likely to soar to 4.0%.

UK Gilts soar with US Treasuries, but headwinds are ahead (FLGM3, FLGU3)

The Gilt yield curve bull steepens as US Treasury yields drop. However, the British Retail Consortium showed on Tuesday that shop price inflation accelerated by 9% YoY, the highest on record. Therefore, there continues to be scope for yields to soar as the Bank of England prepares to hike rates further. Although 10-year yields are likely to break resistance at 4.59% and 2-year yields might soar test resistance at 4.68%, we believe rates will unlikely soar to break 5%. As yields rise towards the 5% level, the financial sector will begin to suffer, as happened last September during Truss’ mini-budget crisis. Therefore, the BOE will need to step into rescue, limiting rates’ upside to avoid a financial crisis. Yesterday, the DMO announced it will issue GBP 2.5 billion bonds with maturity 2053 next week, testing investors’ appetite for long-term debt.

What is going on?

US House passes debt ceiling bill, Senate focus next

The compromise bill was passed with a strong bipartisan vote of 314-117, and will likely clear the Senate with little further ado ahead of the weekend, requiring only Biden’s signature to put the issue to rest until the circus can possibly resume in early 2025 if both houses of Congress and the White House are not all in control by the same party. As noted below, the focus will now quickly shift to whether a blitz of US treasury issuance could drive a liquidity crunch across markets as the US Treasury rebuilds its depleted reserves.

Strong Salesforce outlook fails to satisfy investors

Salesforce reported Q1 revenue and EPS above estimates driven by a stronger than expected operating margin. Q2 revenue outlook was $8.51-8.53bn vs est. $8.49bn and the FY adjusted EPS guidance was $7.41-7.43 compared to previously $7.12-7.14. The software application maker delivered on its promised strategy of prioritizing profitability over revenue growth, but despite exceeding analyst estimates investors had even higher expectations sending the shares down 5% in extended trading.

Crowdstrike shares plummet 12% as growth disappoints

The red-hot cybersecurity industry has walked from quarter to quarter with high growth and cheerful investors, but last night earnings from Crowdstrike was a reminder that even in cybersecurity things can slow down. The company reported Q1 revenue of $693mn up 42% and its first positive adjusted EBITDA quarterly figure, but the company’s fiscal year revenue outlook of $3bn to $3.04bn, despite being a small upward revision, was not enough to satisfy investors. The revenue outlook corresponds to a 34% revenue growth rate in 2023. Shares were down 12% in extended trading.

JOLTS job openings soar by 358K to reach 10,103K in April

Contrary to analysts' projection of a 190,000 decline, JOLTS (Job Openings and Labor Turnover Survey) revealed an unexpected upswing as job openings surged by 358K to 10,103K in April. The increase was particularly notable in the retail trade, health care, and transportation sectors. The hiring rate remained steady at 3.9%, while the layoff rate declined by 0.2pp to 1.0%. Investors will have another gauge into the status of the US labor market from today’s ADP employment change, expected to slow to 170K from 296K, and initial jobless claims, expected to rise to 235K from 229K, scheduled to release today, before the most watched non-farm payrolls, average hourly earnings, and unemployment rate this Friday.

Chicago PMI Plummets to 40.4 in May, signalling sluggish business activity

While the labor market demonstrated resilience, the Chicago PMI delivered a disappointing figure of 40.4 in May. This reading fell significantly short of the anticipated 47.3, further indicating a substantial weakening from April's PMI of 48.6. The underwhelming performance of the Chicago PMI suggests a steeper contraction in business activity within the region, raising concerns about the overall economic trajectory.

Softer inflation prints in Germany and France, slightly hotter in Italy

German EU harmonized CPI inflation was 6.3% Y/Y in May (consensus: 6.7%; April 7.6%), France’s EU harmonized CPI growth also slowed to 6.0% Y/Y in May (consensus: 6.4%; April 6.9%). Italy’s EU harmonized CPI inflation declined to 8.1% Y/Y in May from 8.7% Y/Y in April but it was above the consensus forecast of 7.5%. Today, we will have the first estimate of the Eurozone CPI and core CPI, which are forecasted to slow to 6.3% Y/Y from 7.0% and to 5.5% from Y/Y from 5.6% respectively.

What are we watching next?

US data through Friday and US yields on debt ceiling deal

The US debt ceiling issue looks set to lift in coming days, possibly even ahead of the weekend if the US Senate can move the deal forward today or tomorrow. But the implications of passage may include a pressure on global liquidity as the US Treasury will need to issue a flood of new treasuries in coming weeks, including as much as $500 billion of new net issuance, which could pressure risk sentiment and raise US yields. Meanwhile, important US macro data is set for release in the coming days, with the May ISM manufacturing survey in the spotlight today, together with May ADP payrolls numbers and the latest weekly jobless claims numbers. Tomorrow, we get the US May Unemployment Rate and Average Hourly Earnings figures, as well as the Nonfarm payrolls change numbers, which have slowly lost steam on a moving average basis over the last twelve months, but with record modern lows in the unemployment rate, the fall would have to continue to below perhaps +100k/month to suggest a weakening labour market.

Earnings to watch

Today’s US earnings watch is Broadcom which is expected to report FY23 Q2 (ending 30 April) revenue growth of 8% y/y, down from 23% y/y, and EBITDA of $5.6bn up from $4.7bn a year ago reflecting the company is prioritising profitability as revenue growth is faltering. The company recently entered a strategic deal with Apple and the stock has also been trading higher on the back of the AI-fueled rally so expectations will be set high from investors when the company report earnings after the market closes.

  • Thursday: Broadcom, VMware, Lululemon Athletica, Dell Technologies, MongoDB, Zscaler, Dollar General, Hormel Foods

Economic calendar highlights for today (times GMT)

  • 0715-0800 – Eurozone Final Manufacturing PMI
  • 0830 – UK Apr. Net Consumer Credit, Mortgage Approvals
  • 0900 – Eurozone May CPI/Core CPI estimate
  • 0930 – ECB President lagarde to speak
  • 1130 – US May Challenger job cuts
  • 1130 – ECB Meeting Minutes
  • 1215 – US May ADP employment change
  • 1230 – US Weekly Initial Jobless Claims
  • 1400 – US May ISM Manufacturing
  • 1430 – EIA Natural Gas Storage Change
  • 1500 – EIA's Weekly Crude and Fuel Stock Report


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 (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


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.