Global Market Quick Take Europe - 23 January 2025

Global Market Quick Take: Europe – 23 January 2025

Key points

• Equities: US rally led by tech, Europe DAX at record highs, Asian tech profit-taking
• Volatility: VIX 15.10, reduced short-term fears but elevated tail-risk signals
• Digital Assets: Bitcoin $102K, SEC task force; BlackRock’s Fink bullish
• Currencies: US dollar rebounds after key test of support. JPY weak ahead of BoJ.
• Commodities:  Crude drops amid ample supply; Trouble brewing in the EU gas market
• Fixed Income: US treasury yields continued their rebound. Short Japanese yields near cycle high.
• Macro events: US Weekly Jobless Claims, Eurozone Consumer Confidence

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

Macro data and headlines

• Ukrainian President Zelensky emphasized that the US must participate in any peacekeeping efforts, aiming for the war's conclusion to benefit President Trump, not Putin. Trump noted on Truth Social his positive relationship with Putin but warned that without a timely deal, he would impose significant taxes, tariffs, and sanctions on Russian goods sold to the US.
• Chinese shares gained after officials asked insurers and mutual funds to boost stock investments. But some investors see only a short-term bounce from the measures.
• Elon Musk questioned the ability of companies to follow through on their promises to invest in AI infrastructure through the $500 billion Stargate project, specifically SoftBank's claim to have secured $10B. Sam Altman, CEO of OpenAI, disputed Musk's characterization, saying it was wrong and suggesting Musk was upset because the pact could rival his own AI efforts.

   

Macro events (times in GMT)

Norges Bank Rate Decision (0900), US Weekly Jobless Claims (1330), Eurozone Jan Consumer Confidence (1500), EIA’s Natural Gas Storage Change (1530), EIA’s weekly crude and fuel stock report (1700)

Earnings events

• Thursday: Intuitive Surgical, GE Aerospace, Texas Instruments, Union Pacific, Christian Dior, CSX
• Friday: American Express, Verizon, NextEra Energy

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

Equities

• US: US stocks closed higher on Wednesday, with the S&P 500 gaining 0.61%, the Nasdaq climbing 1.33%, and the Dow rising 0.3%. Optimism around President Trump’s economic policies and strong earnings fueled gains. Netflix surged 9.7% on record subscriber growth, while Oracle jumped 6.7% following its involvement in a $500 billion AI infrastructure initiative with SoftBank and OpenAI. Smaller caps lagged, with the Russell 2000 down 0.61%, reflecting concerns over potential tariffs. Futures were flat early Thursday as markets await jobless claims data and further earnings updates.
• Europe: European equities advanced on Wednesday, with the STOXX 600 gaining 0.4% and Germany's DAX rising 1% to new record highs. Strong corporate earnings offset concerns about potential US tariffs. Adidas jumped 6% after reporting robust holiday sales, while Siemens Energy added 6.5% on optimism over AI infrastructure investments. Despite tariff threats from the US, investor appetite for European stocks remained high, driven by attractive valuations and easing bond yields. The ECB's dovish tone further supported sentiment, with markets pricing in additional rate cuts next week.
• Asia: Asian markets were mixed on Thursday. Japan's Nikkei 225 gained 0.5% ahead of a Bank of Japan meeting, where a 25 bps rate hike is expected. Chinese stocks rebounded, with the CSI 300 rising 1.2% as Beijing announced measures to bolster equities, including encouraging state insurers to increase investments in A-shares. However, concerns over Trump’s proposed 10% tariff on Chinese imports lingered, weighing on broader sentiment. Hong Kong’s Hang Seng Index rose 0.3%, while tech stocks in the region faced profit-taking after Wednesday's AI-driven rally.

Volatility

The VIX edged up slightly to 15.10 (+0.27%), while VIX futures rose to 16.85 (+0.64%). Short-term volatility measures (VIX1D, VIX9D) dropped significantly, signaling reduced near-term nervousness. However, the SKEW index surged to an unprecedented 180, indicating heightened uncertainty around potential tail risks. While the low VIX suggests calm, the elevated SKEW serves as a reminder to reassess hedging strategies. Options activity highlights significant interest in Nvidia, Palantir, and other AI-related names, reflecting the market's focus on this sector.

Digital Assets

Bitcoin retreated 0.84% to $102,833, losing ground as optimism over Trump’s crypto policies faded. The launch of $TRUMP memecoin added volatility, dropping 13.7% to $37.41. Broader crypto markets also declined, with Ether falling 0.66% and Solana down 2.86%. Regulatory developments offered mixed signals; the SEC announced a task force for crypto regulation, but no details were provided. BlackRock CEO Larry Fink’s comments on Bitcoin’s potential as a global asset offered some positive sentiment, although risk appetite remains subdued amid broader market uncertainty.

Fixed Income

• Ahead of the BoJ meeting on Friday, yields on Japanese government bonds rose back toward recent cycle highs with the 2-year JGB benchmark trading near 0.70% as the market is pricing about 95% odds for the BoJ to hike rates 25 basis points to take the policy rate to a 0.50%, which would be the highest since 2008.
• The US Treasury’s auction of 20-year treasury notes saw strong demand as US long yield treasury yields rebounded further after the 10-year  benchmark bottomed on Tuesday above the important 4.50% level, closing yesterday at 4.61%.

Commodities

• Gold held near the October record high, with traders seeking a haven against a potentially escalating trade war, which could lead to slower growth following Trump’s latest tariff threats against China and the European Union. In addition, a softer dollar has been supporting demand, while an overall bullish gold outlook continues to attract buyers for fear of missing out.
• Oil prices fell further, as the early January rally driven by Russian sanctions continues to deflate. Speculators have turned net sellers, focusing on the potential damaging impact on global demand from a broadening trade war. Furthermore, a rush of Canadian oil into the US ahead of potential sanctions, along with the API reporting another weekly rise in crude and fuel stocks, also weighed on prices.
• European natural gas prices for 2025 summer delivery have risen to an unprecedented premium of EUR 4.27/MWh over next winter, due to supply tightness and discussions of subsidies to traders for refilling storage sites in Germany. Paying “high” prices during the refilling summer period, only to sell at “lower” prices during the winter demand period, has so far discouraged traders from engaging in this much-needed trade.

Currencies

• The US dollar survived a test of key support in places as EURUSD fell back toward 1.0410 after testing above local resistance at 1.0437 yesterday and GBPUSD likewise dipped back to the 1.2300 area at its lowest overnight after testing above 1.2350 yesterday as the USD bears are likely reluctant to stick their necks out too far until more details shape up on US trade policy.
• The JPY is weak despite increasing conviction that the BoJ will hike rates at tonight’s meeting, with USDJPY trading near the highs for the week above 156.50 this morning and many JPY crosses trading in the upper portion of their recent range.