Global Market Quick Take: Europe – 19 January 2024 Global Market Quick Take: Europe – 19 January 2024 Global Market Quick Take: Europe – 19 January 2024

Global Market Quick Take: Europe – 19 January 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US equity futures trade higher led by the tech-heavy Nasdaq 100 index which rallied 1.5% on Thursday on optimism about the semiconductor and AI space after Taiwan’s TSMC, the main supplier of chips to Apple and Nvidia said it saw return to solid growth this quarter. Overall, it’s been a week that has seen both the dollar and US Treasury yields trade sharply higher as better-than-expected macro data prompted a rethink of the timing, pace and depth of US rate cuts. The dollar trades broadly stronger on the week with the USDJPY rising to fresh highs while commodities trade mixed with focus on weak China data and geopolitical tensions.


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

Equities: The Nasdaq 100 rallied 1.5% as optimism about the semiconductor and AI space rose following Taiwan Semiconductor Manufacturing Co beat estimates in its Q4 results and said it expected a return to solid growth and increase in capital spending. The company which is the main supplier of chips to Apple and Nvidia saw its ADR jump 10% during the US session, supporting a fresh record close for the Nasdaq. Lam Research and Qualcomm surged over 4% while Nvidia gained 1.9%. Apple added 3.3% on an analyst upgrade.

FX: Dollar followed the mixed trajectory of bonds amid the decline in jobless claims prompting a re-think of the Fed path while market remains firm in its expectations. AUDUSD failed the test of 0.66 as iron ore prices reversed trajectory in Asia today, and NZD also slumped to drop back below the 0.61 handle. Yen, meanwhile, continued to weaken. USDJPY rose to fresh highs of 148.72 as BOJ policy normalization hopes continue to fade ahead of the meeting next week. GBPUSD broke above 1.27 and retail sales data will be on watch today. EURUSD found support at 200DMA around 1.0850 and reversed higher to 1.0890.

Commodities: Crude oil prices rallied once again with Middle East tensions in focus and after US stockpiles showed a surprise drop as exports rebounded and harsh winter disrupted production. Base metals also had a strong day with copper rising from a two-month low with supply concerns in focus, even as expectations of further China stimulus were doused with comments from Chinese Premier, Li Qiang. Gold trades down on the week, driven by USD and economic data strength, but has managed to bounce after finding support near $2000 with silver also holding above its key support at $22.50.

Fixed income: Fixed income: The 10-year Treasury yield extended its rise by 4bps, reaching 4.14% after initial jobless claims unexpectedly fell to 187k, the lowest level since September 2022. The sign of a resilient labour market caused investors to pare somewhat expectations of the size and pace of the Fed’s rate cuts this year. The 10-year TIPS auction stopped through by 1bps awarding the lowest auction yield since July at 1.81%. Today the focus turns on the University of Michigan survey, particularly on inflation expectations. We continue to see the first cut coming this March, contributing to a bill steepening of the yield curve.

Macro: US jobless claims fell to 187k from 203k, coming in the lowest since Sept 2022 despite expectations of a rise to 207k. Continued claims, for the week prior, eased to 1.806mln from 1.832mln, despite expectations for an increase to 1.845mln. These numbers could question the assumption of over five Fed rate cuts priced in for this year. Fed’s Bostic urged caution on rate cuts amid geopolitical risks, but Harker said that he expects inflation to continue to slide towards target. The Philly Fed Business Index improved to -10.6 in January (prev. -12.8) easing some concerns from the NY Fed survey earlier this week but was still below expectations at -7.0. Internally, New Orders and Employment printed -17.9 (prev. -22.1) and -1.8 (prev. -2.5), respectively, with Capex Index rising to +7.5 (prev. -7.5) and Shipments lifting 5 points to -6.2. ECB minutes showed little support among members of the Governing Council for reducing interest rates before June. Japan’s inflation cooled in December but remained above target. Headline CPI rose 2.6% YoY, softer than 2.8% YoY in November but a notch above expectations. Other measures met expectations, with core at 2.3% YoY from 2.5% previously and core-core at 3.7% from 3.8% previously. UK December retail sales m/m dropped 3.2%, compared to a -0.5% estimate. On a yearly basis, sales fell 2.4%, compared to an estimate for a gain of 1.1%.

Volatility: Volatility dipped as the VIX closed at $14.13 (-0.66 | -4.46%), a decrease of 4.46%, amid gains in tech and AI sectors influenced by positive news from TSMC and an Apple upgrade. The SPX and NDX ended up by 0.88% and 1.47%, respectively. VIX futures are down this morning to 14.900 (-0.105 | -0.69%), aligning with slight increases in S&P 500 and Nasdaq futures: 4814 (+2.75 | +0.06%) and 17159 (+49 | +0.29%) respectively. Today's market is expected to be relatively quiet with no major economic reports or earnings releases anticipated. Investors may look ahead to next week's heavy earnings schedule, which includes MSFT, NFLX, J&J, PG, TSLA, and ASML.

  • In the news: TSMC’s Outlook Backs Hopes for Global Tech Recovery in 2024 (Bloomberg)
  • China unearths million-tonne lithium deposit, heating up global resource race as Thailand also boasts big find (SCMP)
  • Private-equity investors to return to China in search of M&A deals in 2024, Bain & Co says (SCMP)
  • Bitcoin Retreats to One-Month Low as ETF-Led Enthusiasm Wanes (Bloomberg)
  • Apple gets a big upgrade from Bank of America, which calls for more than 20% upside ahead (CNBC)

Macro events (all times are GMT): Uni of Michigan Sentiment (Jan) exp 70.1 vs 69.7 prior, and expectations exp 67 vs 67.4 prior (1400)

Earnings events: Schlumberger, Travelers, State Street, Firth Third, Huntington, Regions Financial

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

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.