Global Market Quick Take: Europe – 13 February 2024

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

Equities: The AI boom is coming to Japan with strong technology earnings sending Nikkei 225 futures up by as much as 3.4% bolstering international investors’ view to prefer Japanese over Chinese equities. US and European equity futures are slightly lower this morning ahead of the important US January CPI report today at 13:30 GMT which will provide another crucial data point for the Fed before it decides on the start of its rate cutting cycle. Key earnings to watch today are Airbnb (aft-mk), Shopify (bef-mkt), and Coca-Cola (bef-mkt).

FX: The US dollar traded with an upside bias ahead of the US CPI release later today, with Kiwi and Yen in losses. NZDUSD reversed Friday’s gains after inflation expectations came in softer and reduced the possibility of further RBNZ rate hike. NZDUSD slid to the 0.61 handle as AUDNZD jumped back to 1.0670+ levels after testing 1.06 support on Friday. USDJPY pushed above 149.50 and will be in focus if US inflation release today confirms the disinflation narrative. We see the yen weakness sending a warning signal on how much tightening expectations are priced in for the BOJ, and a risk of disappointment later. EURUSD failed yet again at the 1.08 handle, with 100DMA capping and German ZEW may be key ahead today. USDCHF moved to 2-month highs at 0.8773 yesterday and softer-than-expected Swiss CPI today could bring risks of FX selling by SNB, weaking the franc further.

Commodities: Crude oil prices were mixed at the start of the week after strong gains last week on escalating Mideast tensions, and OPEC monthly report will be in focus today. Metals however gained with China on holiday but supply disruptions being in focus. Iron ore prices edged higher as train drivers in BHP’s Pilbara iron ore operations have voted to strike later this week for better working conditions and pay in an enterprise agreement. Gold prices slipped and US CPI release today will be key. 

Fixed income: European sovereigns rose while US Treasuries remained muted yesterday ahead of today’s US CPI data. Ten-year yields remained at 4.17%, on the top of the trading range they have been trading in since mid-December. If they break and close above 4.20%, there is the chance that yields might continue to rise to 4.40%. To fuel a move up in yields might be a busy week of economic data ahead, showing that disinflationary trends may be lagging expectations. The US CPI data for January will be released today and are expected to show headline CPI dropping below 3% for the first time in more than two years. If data confirms disinflationary trends, 10-year yields may drop to 4% and will continue to trade rangebound. In focus are also the Empire State Manufacturing survey, retail sales, import price index, and initial jobless claims will be released on Thursday. In the UK, signs of a tight labor market and a pickup in average weekly earnings show that the BOE is unlikely to cut rates early, weighing on UK Gilts across maturity causing the yield curve to flatten. That puts at odds the strong demand for ultra-long sovereigns we witnessed last week (to know more about it click here).

Macro: The two most important macro figures are both being released today. Germany’s ZEW Survey for January is out at 10:00 GMT and is expected to show an improvement over December confirming the green shoots being observed in the global manufacturing sector. Recent readings show that the global manufacturing sector has approached the highest activity levels since August 2022. Later at 13:30 GMT investors will get the important US January CPI report which is expected to show that inflation continues to cool in the US economy providing more evidence for the Fed to begin its rate cutting cycle at the May FOMC meeting.

Technical analysis highlights: S&P 500 uptrend stretched but could move to 5,110, expect minor correction. Nasdaq 100 uptrend likely moving to 18,030. DAX hovering around 17K, uptrend potential to 17,255-17,41, support at 16,821. EURUSD likely to once again likely to test key support at 1.0730, below next is support 1.0660. USDJPY above key resistance at 148.80, now resist at 149.75 and 152. EURJPY testing 161 resistance. USDCHF uptrend likely move to 0.8820 resistance. Gold range bound 2,065 – 2K. 10-year T-yields key resistance at 4.20, above potential to 4.38    

Volatility: Anticipation of the CPI data release influenced market volatility, with the VIX surging to $13.93 (+1.00 | +7.73%), reflecting heightened investor caution. Notably, the VIX1D outpaced the traditional VIX, closing at $14.06 (+3.40 | +31.89%), signaling expectations for short-term fluctuations. Additionally, the VVIX saw an increase of 2.69 (+3.28%), while the SKEW index remained elevated at 152.80, indicating a continued readiness for unexpected market moves. The market's focus is squarely on the CPI announcement, with futures showing little change in a clear indication of the wait-and-see stance adopted by investors. Today's earnings reports from major companies like Coca-Cola, Shopify, and Airbnb are also in the spotlight.

In the news: Commercial real estate is still a key risk factor for the economy as investors are increasingly nervous (Reuters). Japan’s PM Kishida is seeking a summit with North Korea’s Kim Jong Un in diplomatic hope to stabilize relations (FT). UK wages grew faster than expected in Q4 underpinning BOE cautious approach (Bloomberg). Bitcoin pushes back to $50,000 for the first time since 2021 following the ETF launches (Bloomberg).

Macro events (all times are GMT): German Jan ZEW Survey est. 17.3 vs prior 15.2 (10:00), US Jan NFIB Small Business Optimism est. 92.3 vs prior 91.9 (11:00), US Jan CPI core YoY est. 3.7% vs prior 3.9% (13:30).

Earnings events: Airbnb is one of the key earnings this week reporting today. Read our earnings preview from yesterday on Airbnb and Airbus.

• Today: Japan Tobacco, Marriott, Airbnb, AIG, Coca-Cola, Shopify, Zoetis, Moody’s Ecolab
  
  
• Wednesday: CBA, Sony, Heineken, Tokio, CME, EssilorLuxottica, Cisco, Occidental Petroleum, Barrick Gold, Genmab, Norsk Hydro, Kraft Heinz
  
  
• Thursday: Schneider Electric, Stellantis, Southern Co, Applied Materials, Airbus, Deere, Safran, RELX, Pernod Ricard, Renault, Commerzbank
  
  
• Friday: Eni, Sika, Swiss Re

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