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Global Market Quick Take: Europe – 28 November 2023

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  Markets are generally quiet this week with implied volatility coming down with the VIX Index trading below the 13 level. Equity futures are slightly lower with Hang Seng futures down the most as sentiment remains negative on the Chinese economy. The market’s bets on rate cuts next year advanced as an article published by Econostream stated that an ECB insider said that the next most likely move of the central bank is a rate cut. Despite later in the day Lagarde said that the PEPP program’s reinvestments will be soon discussed, yields tumbled with Italian BTPS outperforming peers.

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

Equities: Hang Seng futures are down another 1.1% in today’s session as investors are worried that the troubling real estate sector will continue to weigh on the economy. Equity futures in Europe and the US are slightly lower. French consumer confidence is better than expected this morning providing further evidence that the European economy is stabilising. In European equity markets, Argenx is the biggest decliner down 15% as one of its pipeline drugs are failing a primary endpoint in its recent trial.

FX: Dollar bearish sentiment continued to extend into the new week, but month-end corporate demand could bring some level of tactical support for the dollar. USDNOK closed below 200DMA at 10.66 and was seen extending the decline in the Asian morning with expectations of a Norges Bank rate hike supporting NOK. USDJPY seen extending declines to sub-148.50 in early Asian trading. NZDUSD moved above 200DMA around the 0.61 handle before reversing later and AUDUSD also made strides above the 0.66 handle despite yuan being marginally weaker as China’s industrial profit growth disappointed. EURUSD struggling to push above 1.0960 resistance and GBPUSD also crawling slowly above 1.26 as month-end nears. 

Commodities: Crude oil unable to find a clear direction with the OPEC+ cuts in focus, while the Israel-Hamas war also extended its truce. Gold prices meanwhile managed to clear the October peak of $2010 barrier as it climbed to a six-month high amid lower yields and a weaker dollar. Our technical analyst sees the next barrier at $2039 but there is room up to previous peak of around $2070-78. Copper slipped on China’s industrial profit miss but supply issues continue to underpin.

Fixed income: sovereign bonds advanced on both sides of the Atlantic as Bank of England’s Bailey said that the UK growth outlook is the worst he has ever seen, and an article in Econostream reported that a ECB insider said that a rate cut is the central bank’s most likely next move. Italian BTPS outperformed peers despite Lagarde saying that the PEPP program will be soon discussed. The rally was sustained through the auctions of a total of $109 billion  2- and 5-year notes. Today, the Treasury is selling 7-year notes, if demand remains resilient, it will add to positive sentiment.

Volatility: The VIX index commenced yesterday's session with a slight uptick but gradually lost momentum throughout the day, closing at $12.69, an increase of 0.23% or 1.85%. In this uneventful trading day, the "fear" index remained relatively muted, prompting stock markets to hover within a narrow range, ending marginally below last Friday's closing levels. The S&P 500 and Nasdaq 100 indices closed at $4550.43, a decline of 0.20% or 8.91 points, and $15961.98, a decrease of 0.13% or 20.03 points, respectively. The markets' indecisiveness is evident, as they appear to be seeking direction. Will we witness a rally, consolidation, or correction? The futures market offers little clarity: VIX futures are trading at $13.90, a decline of 0.38% or 0.055 points, while S&P 500 and Nasdaq futures stand at $4564.00, an increase of 0.07% or 3.00 points, and $16012.00, an increase of 0.02% or 3.25 points, respectively. The release of various economic indicators throughout the week is anticipated to introduce some volatility into the markets.

Technical analysis highlights: S&P 500 likely to push to 4,607, expect correction, support at 4,458. Nasdaq 100 short term correction likely, support at 15,744. DAX resist at 16,060, expect correction, strong support 15,575. EURUSD at resist at 1.0945 and 0.618 retracement. USDJPY below support at 149.00, next 147.32. GBPUSD bullish resist at 1.2745. Gold uptrend, likely move to 2,040-2,070.  WTI Crude oil range bound 72.65-79.77, Brent 77.24-83.97. 10-year T-yields key support at 4.36

Macro: US new home sales for October fell 5.6% to 679k, beneath the expected 723k and the previous 719k. US new home sales are still higher compared to a year ago when interest rates were much lower. ECB president Lagarde said the ECB will ‘probably’ discuss the reinvestment of its near EUR 1.7tn PEPP holdings. She also told European lawmakers that the labor market shows signs of weakening.

In the news: EU regulator warns of lack of competition if Amazon is allowed to acquire iRobot (FT). Chinese fast retailer Shein files for US IPO (Reuters). Reshoring efforts by US and European companies are having a negative impact on China’s economy (Reuters). Investors are increasingly betting on the Fed cutting interest rates next year (WSJ).

Macro events (all times are GMT): US Nov Conference Board Consumer Confidence (15:00) est 101.0 vs 102.6 prior, US Nov Richmond Fed Manufacturing Index (15:00) est 1 vs 3 prior, US Nov Dallas Fed Services Activity (15:30) no est vs -18.2 prior.

Earnings events: Today’s key earnings releases are CD Projekt, NetApp, Crowdstrike, Splunk, Workday, Intuit, Azek, and HP Enterprise. Our focus is on cyber security firm Crowdstrike reporting FY24 Q3 earnings (ending 31 October) after the US market close with analysts expecting revenue growth of 34% y/y and EBITDA of $184mn vs a loss of $31mn a year ago.

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


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