Global Market Quick Take: Europe – 2 January 2024

Global Market Quick Take: Europe – 2 January 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  The first trading day of 2024 got off to a bumpy start in Asia with Hong Kong and China shares falling by more than 1% after China’s official PMI data pointed to a continued contraction in both manufacturing and service sectors. US and European equity futures meanwhile trades close to flat with traders wondering if the end of year positive momentum can be maintained. Bitcoin jumped above 45k ahead of a hotly anticipated ETF approval/launch and USD trades mixed following its worst annual performance since 2020 with gold and crude oil both higher on fresh Middle East concerns after Iran dispatched a warship to the Red Sea. A short but busy data week awaits with focus on US and EU PMI’s today, FOMC minutes on Wednesday and Friday’s US job report.


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

Equities: Equity futures are pointing higher on the first day of trading in the US and Europe while Chinese equities slipped 1.9% in Honk Kong trading following a less optimistic New Year speech from Xi Jinping and fresh data suggest factory activity declined in December. In European trading, ASML will be in focus as the US President pushed ASML to cancel shipments of equipment to China before new export rules go into effect suggesting 2024 will be another year of friction between the US and China over semiconductor technology. The first couple of weeks of the new year will reveal investor positioning and give clues about what the market thinks about 2024.

FX: The Bloomberg dollar index has opened its 2024 account trading a tad firmer following its worst annual performance since 2020.  Gains in thin trading were led by yen weakness against most of its major peers after a powerful earthquake hit 315 kilometres northwest of Tokyo on Monday. Prior to that, the anticipation of a reversal in policy divergence between the US and Japan in 2024— with the Fed cutting rates and the BoJ abandoning its ultra-loose policies—propelled the Yen to strengthen to nearly 140.00 against the dollar last week. For now, USDJPY remains anchored within the 140-145 range.

Commodities: The Bloomberg Commodity TR index suffered a 7.9% setback last year, led by losses in natural gas, nickel, wheat and corn, and only partly offset by strong weather-related gains in softs and a 13% gain in gold on Fed cut optimism. The 2024 account has opened with gains in energy with US natural gas up 5% while crude oil and fuel products have received a geopolitical boost after Iran sent a destroyer to the Red Sea in response to to US Navy sinking three Houthi militants’ boats. Gold meanwhile trades just below the December 27 record closing high at 2077.5 with focus on geopolitical developments and US data releases later this week. Copper trades back above $3.90 following mixed but overall weak signals from the China’s manufacturing sector

Fixed income: Treasuries finished mixed last Friday, with the 2-year yield falling 3bps to 4.25% while the 10-year yield adding 4bps to 3.88%. Returning from the holidays, investors this week are most likely to focus on the series of labor market data releases in order to gauge how soon the Fed will start cutting rates, starting with the JOLTS job openings data (consensus: 8,863k; prior: 8,733k) on Wednesday, followed by initial jobless claims (consensus: 215k, prior 218k) and ADP private employment (consensus: +115k; prior: +103k) on Thursday, and then finally the most-watched nonfarm payrolls (consensus: +170k; prior: +199k), unemployment rate (consensus: 3.8%; prior: 3.7%), and hourly earnings (consensus: 0.3% M/M or 3.9% Y/Y; prior: 0.4% M/M or 4.0% Y/Y) on Friday. We maintain our call for the first cut to come in Q1 and the tendency for the yield curve to steepen.

Macro: The manufacturing and service sectors both remain in contraction in China in December. China’s official NBS manufacturing PMI unexpectedly declined to 49.0 in December from 49.4 in November, softer than 49.6 forecasted by economists. The decline brought this key barometer of manufacturing activity to its seven-month low and marked its third month of contraction after a brief rebound back into expansion in September. Non-manufacturing PMI increased to 50.4 in December from 50.2 in November, modestly below the 50.5 expected. However, the service sub-index remained at 49.3, signalling contraction while the construction sub-index increased to 56.9 from 55.0.

Technical analysis highlights: S&P 500 uptrend stretched, RSI divergence, support 4,697. Nasdaq 100 short term correction likely, support 46,552. DAX top and reversal pattern, support at 16,528 and 16,060. EURUSD rejected at 1.1130, testing 1.10 support. USDJPY below 141.70 support trying to get back above, could rebound to 144. GBPUSD rejected at 1.28 resistance. Gold potential to 2,100 but uptrend stalling and could slide lower. 10-year Treasury future rejected at 113 8/32 expect correction to 111 12/32, yields back to 4%

In the news: Powerful quake rocks Japan, nearly 100,000 residents ordered to evacuate (Reuters), Oil Rises as Iran Warship Enters Red Sea Following Boat Attacks (Bloomberg). ASML Holding NV canceled shipments of some of its machines to China at the request of US (Bloomberg), Ant Completes Process of Removing Jack Ma’s Control (Bloomberg). BYD likely overtook Tesla in Q4 2023 as the world’s largest battery EV maker (Bloomberg).

Macro events (all times are GMT): Italy, France and German Manufacturing Dec PMI’s, Eurozone Manufacturing PMI (Dec), exp 44.2 (0800), UK Manufacturing PMI (Dec), exp 46.4 (0830), US Manufacturing PMI (Dec), exp 48.4 vs 48.2 prior (13:45)

Earnings events: Next important earnings releases are on Thursday from RPM International, Walgreens Boots Alliance, Conagra Brands, and Lamb Weston.

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

Quarterly Outlook

01 /

  • 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...
  • 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 ...
  • 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.