Global Market Quick Take: Europe – 13 March 2024

Global Market Quick Take: Europe – 13 March 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US equities rose again on Tuesday with the S&P 500 reaching a new closing high despite signs US inflation is reaccelerating. Following the report, both gold and the Japanese yen fell against the dollar while Treasuries sold off moderately with short-term interest rate futures reducing the chance of a June FOMC rate cut to 62%. Nvidia rebounded with a 7.2% gain with focus on its much-anticipated GTC developer conference commencing on March 18 while Oracle jumped 11.8% on strong AI-related demand. Range bound crude trades higher after an industry report showed an across-the-board drop in US crude and fuel stockpiles.


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

Equities: Despite a US February inflation report showing core services inflation increasing to 5.8% YoY and the US 10-year yield increasing 6bps during the session, the US equity market continued its ascent. Nasdaq 100 futures reached a new high gaining 1.4% and today Nasdaq 100 futures have pushed beyond the 18,500 level reflecting strong sentiment, but also worrying signs of speculative fever. Inditex has reported earnings in Europe this morning with Q4 revenue and EBIT in line with estimates. The Spanish fast fashion retailer is raising 2023 dividends to €1.54 per share up 28%. Adidas is disappointing in its Q4 earnings release with a 2024 outlook on operating profit at €500mn vs est. €856mn.

FX: The dollar struggled to hold onto gains seen following the hot CPI report, leaving it only small up on the week with pockets of strength seen primarily against the NOK, GBP and JPY. The Japanese yen weakened again on the rise in US yields, and USDJPY rose for the first time after five days of declines, but with a sustainable wage growth cycle taking hold, traders will likely bet on more yen upside in anticipation of an imminent move from the Bank of Japan. GBPUSD reversed back towards 1.28 after touching lows of 1.2746 after wage data showed some signs of cooling, creating scope of a les hawkish BOE next week.

Commodities: Gold traded lower following the US CPI print (see below) and as the recent surge was driven by momentum-driven speculators, a period of consolidation can now be expected ahead of next week’s FOMC meeting. ETF investors reduced holdings by 1.2 tons bringing the YTD reduction to 114 tons. Range bound crude received a boost after the API reported an across-the-board inventory reduction, but upside capped with the EIA seeing US production rising faster than previously expected and OPEC said Iran was producing 200k b/d over its limit. Industrial metals reached a YTD high with copper supported by supply issues and China smelters discussing cutting production to lift processing charges.

Fixed income: Higher-than-expected US headline and core CPI showed that inflation continues to be persistent, and it will be carefully considered at next week’s FOMC meeting. The dot plot shows three rate cuts for this year. While two cuts can be delivered in November and December, the Fed is unlikely to start cutting rates during the US election campaign in September. If the dot plot continues to show three rate cuts for this year, it means the Fed will need to begin cutting rates in July or June. With inflation remaining persistent, the bond market would see the Fed committing a policy mistake and demanding a higher return for holding US Treasuries. On the back of the CPI report US Treasuries sold off with 2-year yields up by 5bps and 10-year yields up by 5.4bps. To contribute to the bear-steepening of the yield curve was a mediocre 10-year US Treasury auction, which showed weakness in demand, and tailed by 0.9bps. Today’s focus is on the 30-year auction, which will provide a better insight into appetite for duration extension. To learn more about it click here.

Macro: US CPI was modestly hot again for February. Headline CPI rose 3.2% YoY vs. 3.1% expected and previous and was up 0.4% MoM as expected and 0.3% prior. Core rose 3.8% YoY from 3.9% previously but was higher than 3.7% forecast. Core MoM also exceeded consensus expectations to come in at 0.4%. The annualised measures rose, with the core CPI 3mth annualised rate ticking up to 4.1% from 3.9%, and the 6mth rising to 3.8% from 3.5%. These numbers have dismissed the argument that January’s hot print was a one-off seasonal effect and raised concerns on the disinflation trend. But the beat wasn’t strong enough to bring a hawkish shift in Fed expectations with the first rate cut only due in June/July and plenty of data to chew on before that. UK labor market data for the three months ending January showed that labor market is cooling, even as it remains tight by historical standards. Wage growth, excluding bonuses, came in softer than expected at 6.1% YoY (vs. 6.2% exp) in the three months to January. In the same period, Average Earnings growth, including bonuses, eased to 5.6% from the prior reading of 5.8% and expected growth of 5.7%. The unemployment rate also increased to 3.9% unexpectedly in the three months to January.

Technical analysis highlights: S&P 500 & Nasdaq 100 Bearish top and reversal pattern. Key support for S&P 500 and 17,808 for Nasdaq 100. DAX still uptrend key support at 17,620. Below expect sell-off to 17,326-17,118.
EURUSD rejected at 0.618 retracement at 1.0970, expect minor correction but likely to push higher. USDJPY bouncing but must break above 148.20 to resume uptrend. EURJPY rebounding from 0.618 retracement at 160.23, resuming the uptrend. GBPUSD uptrend but minor correction, potential to 1.2945-1.30. AUDJPY is likely to resume an uptrend, close above 98.20 will confirm.  Gold correction unfolding could test support at 2,134, possibly 2,115. Silver rejected at resistance at 24.60, could see setback to 24 before resuming uptrend. US 10-year T-yields back above 4.10, expect range bound between 4.00-4.30 

Volatility: Yesterday, in the aftermath of hotter-than-expected CPI figures, the VIX notably decreased to $13.84 (-1.38 | -9.07%), highlighting a significant reduction in market volatility. This was paralleled by a huge (expected) drop in the VIX1D to 10.45 (-8.74 | -45.54%). The VVIX also saw a notable decrease to 83.76 (-5.21 | -5.86%), while the SKEW index remained almost unchanged at 142.23 (-0.04 | -0.03%), indicating ongoing concerns about potential outlier events despite the general volatility drop. Contrastingly, VIX futures experienced a rebound overnight, climbing to 15.200 (+1.240 | +8.88%), pointing to anticipations of higher volatility ahead. Meanwhile, S&P 500 and Nasdaq 100 futures showed marginal adjustments, to 5244.00 (+2.75 | +0.06%) and 18487.00 (+9.75 | +0.05%) respectively, indicating a wait-and-see approach in equity markets. Tuesday's options trading was led by, in order: TSLA, NVDA, AAPL, AMD, META, ORCL, BA, PLTR, AMZN, and MSFT.

In the news: A focus at the next Fed meeting will be whether most officials continue to expect three cuts this year—or fewer (WSJ), BOJ to offer guidance on bond buying pace upon ending YCC – sources (Reuters), How TikTok Was Blindsided by U.S. Bill That Could Ban It (WSJ), IBM is slashing jobs in marketing and communications (CNBC)

Macro events (all times are GMT): UK Industrial production (Jan) exp flat & 0.8% vs 0.6% & 0.6% prior (0600), Eurozone industrial production (Jan) exp. -1.8% vs 2.6% prior (0900), EIA’s weekly crude and fuel stock report (1330)

Earnings events: In Europe, the key earnings to watch today are Inditex and Adidas, while in the US session focus is on UiPath as the company is part of the AI cluster of stocks. Analysts expect UiPath to report FY24 Q4 (ending 31 Jan) revenue growth of 24% YoY and EBITDA of $82mn up from $-27mn a year ago.

  • Today: Inditex, Foxconn, Snam, Geberit, Lennar, Volkswagen, Adidas, E.ON, Dollar Tree, Williams-Sonoma, UiPath
  • Thursday: AIA Group, East Money Information, Ping An Bank, Hapag-Lloyd, Verbund, Adobe, Ulta Beauty, Wheaton Precious Metals, Bollore, Dollar General, RWE, Swiss Life, Rheinmetall
  • Friday: CATL, Vonovia, Jabil
For all macro, earnings, and dividend events check Saxo’s calendar

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.