Global Market Quick Take: Europe – September 11 2023

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

Equities: Positive equity futures in the US and Europe with S&P 500 futures up 0.3%. Key events in equities this week to watch are Arm IPO (Wednesday), Adobe earnings (Thursday), ECB rate decision (Thursday). The US inflation report on Wednesday is also a potential market mover if inflation surprises to the upside.

FX: The Bloomberg dollar index is heading for its biggest decline in two months, led by a 1.2% drop in USDJPY as ten-year JGB yields surge toward a decade high after Kazuo Ueda signaled the BOJ may soon decide on changes to its negative interest rate policy. Ueda told the Yomiuri it's possible there will be enough information by year-end to determine whether wages will keep rising. USDCNH meanwhile slumped to 7.30 from a 16-year high last week after the PBoC sent another strong signal of support through its daily fixing rate.

Commodities: Crude remains supported by strength in refined products after Russia on Friday announced plans to cut exports from is western ports by one quarter this month. Focus on $91 resistance in Brent and monthly oil market reports, starting with OPEC on Tuesday and IEA on Wednesday. Copper’s current directional dependence on the USDCNH has seen it jump overnight as the PBoC sent a strong message of support while gold continues to find support at its 200-DMA around $1919. The grain market will focus on Tuesday’s supply and demand figures from the US government.

Fixed-income: This week, the bond market will focus on inflation data and large volumes of US Treasury bills and bonds auctions. Today, the Treasury starts selling $44bn of 3-year notes, increasing the auction size by $2 billion from last month. Overall, we remain cautious, favouring the front part of the yield curve over a long duration. Bonds will gain as the economy starts to show signs of deceleration, but larger coupon auction sizes will keep long-term yields supported unless a tail event materializes. That means the long part of the yield curve might move further up even though it already offers an enticing yield to buy-to-hold investors.

Volatility: VIX ended Friday’s session at 13.84 down 0.56 (3.89%) from the day earlier. VIX futures point to even lower numbers for the upcoming session, heading to pre-Covid era levels. Volatility dropped across the board; most big tech equities had their implied volatility drop, easing the fears from earlier last week. With the upcoming earnings release of Oracle, the options volumes are rising, having a put/call ratio under 0.5 points towards more call volume, which might suggest the market is bullish on the stock. Expected move for the S&P500 for the coming week, based on the ATM options is + or - $50,- (+/-1.12%).

Macro: China's CPI moderately rebounded to 0.1% Y/Y inflation, as expected, following July's -0.3% deflation. This uptick was supported by a low base from the previous year. On a monthly basis, the CPI increased by 0.3% in August, up from 0.2% in July. Meanwhile, the PPI contracted by -3.0% Y/Y, an improvement from July's -4.4%. This was attributed to a low base from the previous year and the recovery in domestic and global commodity prices

In the news: The US, India and G20 allies unveil rail and shipping project linking India to Middle East and Europe - full story on AP, BOJ head Ueda signals a chance of ending negative rates – full story on Reuters, China Warns Traders on Yuan Speculation, Fueling Sharp Rebound – full story on Bloomberg

Technical analysis: The author is away.

Macro events: No important macro releases today.

Earnings events: Oracle reports after the US market close FY24 Q1 (ending 31 August) with est. EPS $1.15 vs 0.61 a year ago, revenue growth expected at 9% y/y.

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