Global Market Quick Take: Europe – 6 March 2024

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

Equities: Momentum in US equities has come to a halt in the short-term with S&P 500 futures down 1% yesterday driven by losses across the Magnificent Sevent stocks. In the Asian session, Hang Seng futures bounced back by 2% after the recent weakness. NIO reported Q4 earnings last night after the US market close with Q4 revenue beating estimates while gross margin and earnings disappointed as the EV price war is taken its toll on profitability. CrowdStrike also reported Q4 earnings last night beating expectations on both revenue and EPS on top of Q1 guidance beating estimates pushing shares up 24% in extended trading. In today’s session will focus on whether US equities will continue to roll, JD.com earnings (before US market opens), and in the Europe with expect focus on technology stocks.

FX: Forex markets remain subdued, with action only seen in non-traditional FX pairs reflecting Gold and Bitcoin that touched record highs but pared some gains subsequently. Bitcoin (XBTUSD) set a record high at 69k+ before retreating but positive momentum returned in the Asian session today. Gold (XAUUSD) still seen close to $2130 after record highs of $2140+ in the NY session. Yen strengthened as well with yields slipping on soft ISM services data, but USDJPY could only go down a notch below 150. Chair Powell’s testimony will be in focus today, and any downplay of hot inflation prints could be a dovish reading. EURUSD made another failed attempt to challenge resistance in the 1.09-area following ISM release before returning to mid-range around 1.0850. CAD struggled ahead of Bank of Canada announcement today, where a dovish surprise, although less likely without the Fed changing course, could bring the 61.8% fibo retracement at 1.3623 in USDCAD in focus.

Commodities: Gold momentum extended further, taking XAUUSD to a fresh record high, and although the rush from momentum traders to rebuild longs have slowed, any dovish hints from Powell today could mean further gains may be on the radar. huper Tuesday confirming Trump’s Republican nomination could also support Gold as geopolitics become a big focus and central bank buying will be expected to ramp up further. Oil prices ended the day lower as China’s GDP growth target remained modest and none of the announcements so far have been able to spark optimism. Private US crude inventories also rose by 400,000 barrels last week with focus on official EIA numbers later today.

Fixed income: US Treasuries gained following mixed data. The February ISM services missed estimates, although remaining above 50, indicating expansion, and priced paid and employment components surprised on the downside. As data showed signs of a weakening economy, the US yield curve bull flattened, with long-term yield dropping to 7bp and front-term yields adjusting 5bp lower. Ten-year yields ended the day around 4.15%. Today, Fed Chair Powell will testify before the House Financial Services Committee and in front of the Senate Banking Committee tomorrow. Markets will be looking at whether Powell will validate the expectations of three rate cuts, as shown in the December dot plot, as a new dot plot will be released in a couple of weeks. As explained in this piece, we bear in mind last week’s Waller comments and expect the Federal Reserve to taper Quantitative Tightening at the next FOMC. In Europe, the focus today is on the UK, with Chancellor Jeremy Hunt announcing the economic plans and changes to fiscal policy. The announcement will be key for bondholders. It could be bearish for Gilts if it shows signs of stimulating the economy, hence inflation. A preview ahead of the ECB meeting tomorrow can be found here.

Macro:  US ISM Services fell to 52.6 in February from 53.4 and beneath the expected 53.0. Internally, prices paid encouragingly fell to 58.6 from 64.0 and business activity lifted to 57.2 (prev. 55.8). Employment dipped back into contractionary territory (48.0 from 50.5) while new orders rose to 56.1 (prev. 55.0). Super Tuesday saw President Joe Biden and former President Donald Trump dominate across the country, piling on the delegates with notable victories in California and Texas. Trump rolled to victory in at least 12 of tonight's Republican races, although his sole GOP rival, Nikki Haley, foiled a possible clean sweep by winning the Vermont primary. Biden isn’t facing any major competition in the primary cycle and won all but one of the Democratic contests, as he gears up for a likely rematch with Trump.

Technical analysis highlights: S&P 500 top and reversal unfolding, minor support at 5,048, strong support at 4,920. Nasdaq 100 testing support at 17,808, a close below likely move to 17,300. DAX top and reversal, expect correction unfolding, support at 17,326. EURUSD range bound 1,0790-1,09. USDJPY range bound 149.20-150.90. EURJPY testing uptrend potential to 164.30, support at 161. GBPUSD likely to break resistance at 1.27 with a move to 1.2775. Gold spiked to new highs but expect minor correction before likely new highs towards 2,200. US10-year T-yields testing minor support at 4.11

Volatility: On Tuesday, the VIX rose to $14.46 (+0.97 | +7.19%), with the VVIX also up to 83.91 (+4.50 | +5.67%), reflecting increased market nervousness, especially within the tech sector. The SKEW index slightly dropped to 144.90 (-1.04 | -0.71%). Market focus is now on Fed Chair Powell's congressional testimony and key employment data, which could introduce more volatility. CrowdStrike's stock leapt over 23% after-hours, driven by strong Q4 results and positive forecasts. VIX futures are at 14.610 (-0.095 | -0.63%), with S&P 500 and Nasdaq 100 futures showing modest gains at 5089.75 (+3.75 | +0.07%) and 17974.50 (+44.25 | +0.25%). Tuesday's top traded stock options were: TSLA, AAPL, NVDA, SOFI, AMD, MARA, MSFT, INTC, GOOGL, and NIO. Bitcoin's volatility was also on display, hitting a new high of $69,000, then falling 14%, and rebounding 11% in less than a day.

In the news: UK government to deliver crucial pre-election budget announcements with economy in recession (CNBC), China makes science and tech a budget priority with 10% jump in spending (SCMP), Japan stock rally spreads beyond chip sector to construction (Nikkei Asia), Trump wins Virginia as he seeks knockout blow to Haley on Super Tuesday (Reuters), Meta's Facebook, Instagram back up after global outage (Reuters), NYCB Bounces After Two-Day Rout Brought Shares to 1996 Level (Bloomberg)

Macro events (all times are GMT): US ADP employment change (Feb) exp 150k vs 107k (1215), Bank of Canada rate decision, exp unchanged 5% (1345), Fed Chair Powell testifies before Congress (1400), US Jolts openings (Jan) exp 8850k vs 9026k (1400), EIA’s weekly crude and fuel stock report (1430),

Earnings events: Today’s earnings focus is Chinese e-commerce retailer JD.com as a look into the health of the Chinese consumer. Analysts are expecting Q4 revenue growth of 1.5% YoY and EBITDA of $9.5bn up from $8.4bn

• Today: Deutsche Post, Brown-Forman, JD.com, Legal & General, Dassault Aviation
• Thursday: MTR, Techtronic Industries, Prada, Merck KGaA, Costsco, Broadcom, Marvell Technology, MongoDB, Samsara, Kroger, Continental, Vivendi, DocuSign
• Friday: Oracle, China Unicom Hong Kong, ZTE

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