Global Market Quick Take: Europe – 10 January 2025

Global Market Quick Take: Europe – 10 January 2025

Key points

• Equities: US jobs report in focus; Europe up; Asian inflation data weighs; TSMC sales jump
• Volatility: VIX at 18; focus on payrolls
• Digital Assets: Bitcoin $94,191; Ethereum $3,273; liquidation >$500M; DOJ Bitcoin sales pressure; weekly losses 4.4%
• Currencies: USD remains firm, PBOC halts bond purchases to support CNH as its capping of USDCNH holds back broader USD strength
• Commodities: Strong start to the year lead by metals and energy
• Fixed Income: German and Japanese 10-year yields jumped to new cycle highs yesterday.
• Macro events: US Dec. jobs report, Canada employment data

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

Macro data and headlines

• China told president-elect Donald Trump that it will send a top-level envoy to his inauguration on January 20, an unusual move after the president-elect invited Chinese president Xi Jinping himself for the event. According to the FT, the level of the official could be seen as important by Trump’s team as a signal of China’s willingness to engage in diplomacy with the US.
• The 30-year fixed mortgage rate increased to 6.93% as of January 9th, the highest since July, due to inflation concerns and a hawkish Federal Reserve. High home prices and limited entry-level supply are impacting affordability, especially for first-time buyers.
• Japan's household spending decreased by 0.4% year-on-year, less than expected. It marked the fourth consecutive monthly decline but was the smallest. Spending fell in areas like food and furniture but increased for housing, medical care, and education. Monthly spending rose by 0.4%, beating expectations.
• UK gilt yields surged, with 10-year at 4.81% and 30-year at 5.37%, due to concerns over the government’s escalating debt burden and persistently high inflation leading to expectations of fewer BoE rate cuts. The speed of the moves, which also included a weaker sterling, has seen comparisons drawn to the fallout from Liz Truss’ ill-fated mini budget in 2022, and the 1976 debt crisis that saw the UK ask the IMF for a bailout.

Macro events (times in GMT)

Norway Dec CPI (0700), France Nov Industrial Production (0745), Canada Dec Unemployment (1330), US Dec Nonfarm Payrolls and Unemployment Rate (1330), US Jan. Preliminary University of Michigan Consumer Sentiment (1500)

Earnings events

• Friday: Constellation Brands, Delta Airlines, Walgreens Boots
• Next week: JPMorgan Chase, Taiwan Semiconductor Manufacturing, UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Goldman Sachs, Blackrock, Citigroup, Schlumberger

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

• US: Futures Decline Ahead of Key Jobs Report - US stock futures dropped on Friday as markets awaited the December nonfarm payrolls report, expected to provide insights into the strength of the labor market and Fed policy. A stronger-than-expected reading could signal fewer rate cuts in 2025, adding pressure to equities. Minutes from the Fed's December meeting highlighted inflation concerns, reinforcing expectations of cautious policy easing. Key earnings reports from Constellation Brands, Delta Air Lines, and Walgreens Boots are also on the radar.
• Europe: European Stocks Edge Higher Amid Mixed Sentiment - European equities rose slightly on Thursday, with the STOXX 50 up 0.2% and the STOXX 600 gaining 0.4%, driven by strength in mining and healthcare stocks. Bavarian Nordic gained 4.8% on a share buyback announcement, while Moller-Maersk fell 5.8% amid a sell-off in shipping stocks after a tentative US labor deal. Stabilized Treasury yields offered some relief, but inflation concerns and Trump’s potential trade tariffs kept markets cautious.
• Asia: Asian Stocks Struggle Amid Inflation Concerns - Asian equities ended the week mixed. Japan’s Nikkei 225 dipped 0.6% as strong wage data fueled speculation of a potential BOJ rate hike, while the Hang Seng Index edged down 0.2% amid declines in financial and property sectors. Weak Chinese inflation data weighed on sentiment, with the Shanghai Composite losing 0.3%. However, TSMC reported a 57.8% surge in December sales, buoying Taiwan markets.

Volatility 

• US Treasury yields stayed in range in a short session yesterday, pulling back higher after a dip intraday yesterday to close almost unchanged near the highs of the cycle, in the case of the 10-year benchmark, which trades near 8-month highs at 4.7%, while the steepening yield curve has the 30-year above 4.94%, near 15-month highs.
• Japanese government bonds sold off overnight despite weak household spending data, with the 10-year JGB benchmark posting a new high for the cycle at 1.20%. Corporate borrowers in Japan have sold the most US-dollar bonds ever at the start of the year this week, issuing nearly USD 9 billion in debt.
• In Europe, 10-year German bund yields rose well clear of 2.50%, posting a new cycle-high since the summer of last year at 2.57%.

Commodities

• The Bloomberg Commodity Index is up 2.4% this month, driven by strong gains across major commodities, including platinum, copper, silver, gold, U.S. natural gas, and crude oil. In contrast, losses have been concentrated in the agriculture sector, with setbacks led by cocoa and wheat. Additionally, EU natural gas has declined, retracing elevated levels seen at the end of the previous year.
• While caution is warranted when interpreting market trends in the early weeks of a new trading year, a notable theme has emerged: despite the headwinds from dollar and Treasury yield strength, investors are turning to tangible assets to hedge against persistent inflation risks and mounting fiscal debt concerns, and the risk of tariffs uprooting normal trading dynamics. This trend is further supported by increased hoarding of physical metals by Chinese traders, who are wary of potential further depreciation of the yuan.

Currencies

• The US dollar remains firm, if rangebound and showing little volatility yesterday. One critical exchange rate holding back further volatility is USDCNH, as China continues to hold the line at 7.375, the twice-touched level of 2022 and 2023. Overnight, the People’s Bank of China announced it will halt purchases of government bonds, a move that will ease pressure on plummeting Chinese bond yields and a support to the currency.
• AUDUSD has traded near 2022 lows of 0.6170 as traders likely focus on whether China will allow the yuan to depreciate further, which could unleash a further plunge.