Global Market Quick Take: Europe – 21 November 2023

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

Equities: Yesterday’s session was impacted by the events around OpenAI and Microsoft related to the employment of Sam Altman (co-founder of OpenAI). Microsoft’s open offer to all disgruntled employees at OpenAI was interpreted as positive for Microsoft sending its shares 2% higher lifting the entire US technology sector. S&P 500 futures closed at the 4,562 level, the highest close since late July, extending momentum and increasing the probability of a test of a new closing high. Today’s key event is Nvidia earnings set to be released tonight after the US market close. Zoom Video reported earnings after the US market close beating estimates on EPS and lifted fiscal year revenue guidance.

FX: The dollar extended its slide in Asia after DXY index broke and closed below its 200DMA at 103.62 on Monday and pushed lower to the current 103.30-level. Bears seem to stay in control, but RSI is reaching oversold conditions and next key support is at 103 or the 61.8% retracement levels at 102.55. A stronger than expected Yuan fixing and firmer equities also weighing on the greenback before today’s FOMC minutes will be skimmed for any further dovish hints. USDJPY pushed below 147.50 and 100DMA at 146.57 comes in focus. AUDUSD moved higher as well with RBA governor flagged the possibility of another rate hike. Pair was however capped below the 200DMA at 0.6590. EURUSD testing 61.8% retracement level at 1.0960 and break above could open doors to 1.10 but the move has been fast and remains prone to a correction first.

Commodities: The BCOM index saw broad gains on Monday with Brent crude reaching $83 on hopes of additional OPEC+ production cuts next weekend. US inventories in focus before then. Copper trades at a two-month high buoyed by continued Yuan strength, China stimulus hopes, strong demand from the renewable industry and shutdown warnings at First Quantum’s giant Panama copper mine and strikes in Peru. Coffee and soybeans the best performers on hot weather in Brazil while gold supported by another slump in the dollar is taking a fresh look at key resistance above $2k.

Fixed income: solid demand at yesterday’s 20-year US Treasury auction contributed to falling long-term yields. Yet, front-term yields ended the day slightly higher producing a twist-flattening of the yield curve. Yesterday’s 20-year notes auction benefited from a good bid-to-cover and improving indirects demand. The auction stopped through by 1bps, pricing with a High Yield of 2.58%. The rally in the long part of the yield curve was not pronounced probably because investors have been short-covering their short bond positions during the last couple of weeks. Today the attention turns to a 10-year TIPS auction, and tomorrow’s FOMC minutes. Overall, we continue to favor a bond barbell strategy.

Volatility: The VIX resumed its down course ending at $13.41 (-0.39 | -2.83%). The VVIX, the VIX’s own volatility index is at 81.81, reaching levels in the lower range of this year. The Cboe SKEW index also down a little to 143.78 (-3.10 | -2.11%). VIX futures had a quiet night as well, with the current December contracts at 14.800. S&P 500 and Nasdaq futures trending mostly sideways: -0.25 (-0.01%) and +7.75 (+0.05%) respectively.

Technical analysis highlights: S&P 500 testing resistance, likely to push to 4,607. Nasdaq 100 above 16K, potential to 16,500. DAX strong resist at 16K. EURUSD at resist at 1.0945 and 0.618 retracement . USDJPY at support at 147.30. GBPUSD uptrend resistance at 1.2545. Gold uptrend likely higher to 2,040.  WTI Crude oil bouncing from support at 72.65, Brent from 77.24. Copper testing key strong resistance at 382. 10-year T-yields bearish, key support at 4.36

Macro: The US leading index for October fell 0.8%, slightly more than the prior and expected -0.7%. Fed's Barkin (2024 voter) said it is not a big time for offering forward guidance, saying the Fed will be data dependent; said core inflation numbers are "coming down nicely", but a lot of that is for goods. FOMC minutes due in the day ahead will be dig for any further dovish hints by Fed members. BoE Governor Bailey was on the wires after the London close and said it is far too early to be thinking about rate cuts, saying returning inflation to target is "absolute priority" and will take no chances when inflation is high. The Governor further added that interest rates will have to stay high enough for long enough to make sure the bank gets all the way back to the 2% target, and the BoE must watch for further signs of inflation persistence that may require interest rates to climb again.

In the news: Nearly All of OpenAI Staff Threaten to Follow Altman to Microsoft If Board Doesn't Quit (Bloomberg), China Drafts List of 50 Property Firms Eligible for Funding (Bloomberg), Biden approval rating ticks up as voters rank stronger economy: Poll (The Hill), Chinese financial watchdog warns of risks as Premier Li takes helm (Reuters), EU Is Set to Place France on Its Fiscal Watch List (Bloomberg). TSMC is weighing a third semiconductor plant in Japan producing cutting-edge 3nm chips (Bloomberg).

Macro events (all times are GMT):  US existing home sales (Oct) est 3.9m vs 3.96m prior (1500), FOMC’s Nov 1 Minutes (1900), API’s weekly crude and fuel stock report (2130),

Earnings events: Kuaishou Technology, Sonova, Medtronic, Analog Devices, Nvidia, Autodesk, HP, Lowe’s, Baidu, and Best Buy. Our focus is Nvidia earnings tonight (aft-mkt) with analysts looking for revenue growth of 171% y/y and EBITDA of $10bn up from $1.07bn a year ago.

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