Global Market Quick Take: Europe – 22 February 2024 Global Market Quick Take: Europe – 22 February 2024 Global Market Quick Take: Europe – 22 February 2024

Global Market Quick Take: Europe – 22 February 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  Nvidia’s earnings beat boosted sentiment and eased concerns over stretched valuations, providing room for the AI theme to continue to drive markets. US equity futures jumped higher, while supporting Japan’s world-beating stock rally which saw the Nikkei rally 2.2% to reclaim its 1989 peak. China and HK stocks also continued the rally on Wednesday with policy measures seen expanding. FOMC minutes did not add any extra hawkish fears, and dollar traded sideways, but JPY weakness has become more pronounced on the crosses. Commodities trade higher on the week with gains led by energy and industrial metals.


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

Equities: Gains across all equity futures this morning with Nikkei 225 futures up 2.2% in Asia, and in Europe, STOXX 50 futures are up 0.9%, and in the US, Nasdaq 100 futures are up 1.6%. The big event overnight lifting equity sentiment was the much better-than-expected FY24 Q4 earnings from Nvidia with EPS $5.15 vs est. $4.64 and sales of $22.1bn vs est. $20.6bn. The sales guidance for the current quarter is $24bn vs est. $21.9bn as generative AI has hit “tipping point” according to Nvidia indicating strong future demand. Nvidia shares rose 9% in extended trading. The worsening outlook in the electric vehicles industry was underscored yesterday as Rivian fiscal year production was guided at 57K vs est. 80K leading the EV maker to cut 10% of workers. With Nvidia’s earnings result out of the way and gaining on strong outlook we expect the momentum in equities to continue in the weeks to come.

FX: Dollar traded sideways with lack of that extra hawkish bias in FOMC minutes but sustained exceptionalism of the US economy providing support. Higher Treasury yields following the 20-year auction did not move the dollar, but yen weakness extended further with USDJPY reaching 150.40 overnight with EURJPY reaching a November high at 162.90, and with NZD momentum continuing ahead of next week's RBNZ meeting, NZDJPY above 93 is at the highest since 2015 - note we expect a hawkish bias. CHF, however, seems to have reversed some of the weakness for now with USDCHF back below 0.88 and EURCHF testing 0.95.

Commodities: Crude oil prices were firmer with signs of tight market conditions despite another rise in US crude stocks with the short-term focus shifting to whether a new hostage deal could be signed in the Middle East. Iron ore held steady after slumping to a November low while industrial metals are having a better week amid expectations that Chinese demand would pick up and after President Biden said that the US plans to unveil a major sanctions package against Moscow on Friday, the latter potentially supporting nickel and aluminum. Gold trades steady near $2032 resistance despite the run higher in yields again as recent heavy ETF selling show signs of slowing down.

Fixed income: Following BOE Governor Andrew Bailey’s comment that inflation doesn’t need to fall to 2% before cutting rates, Gilts rallied, driving sentiment in European sovereigns and US Treasuries. The US yield curve twist steepened with front-term yields dropping by a little over three basis points, while the ultra-long part of the yield curve moved slightly up from Friday’s close. The FOMC minutes and the 20-year US Treasury bond auction today will be in focus, together with the ECB account of the January meeting tomorrow. Overall, we continue to see scope for duration extension up to 10 years but remain wary of ultra-long maturities (for more information, click here). Cocoa futures hit a fresh all-time high on lower supply from West Africa

Macro: The minutes of the FOMC minutes continued to highlight that most policymakers were more concerned about easing too soon rather than maintaining an overly restrictive stance for too long. Wall Street Journal's Nick Timiraos said that the minutes show unease over premature rate cuts. However, that pushback wasn’t any more than what we have heard from policymakers in recent weeks and did not worry markets. BOE’s Dhingra, the only voter who has been voting to cut rates, said that UK consumption remains below pre-pandemic in contrast to US and eurozone, and that overtightening could mean hard landing. In contrast to what the Fed minutes hinted, she said that for the BOE, evidence to err on the side of overtightening is not compelling.

Technical analysis highlights: Hang Seng broken bullish likely move to 17K.S&P 500 uptrend but RSI divergence indicating trend exhaustion, key support at 4,920. Nasdaq 100 uptrend stretched but intact, closed few cents above support at 17,478. DAX uptrend struggling for momentum. Could slide back, key support at 16,821. EURUSD likely rebounding to 1.0865. USDJPY above key resistance at 149.75, next at 152. EURJPY uptrend potential to 163.30 – 164.20. AUDJPY above 2022 peak could move to 99.40. Gold likely testing 2,035 resistance, possibly 2,048. WTI oil rejected at key resistance at 79.77. 10-year T-yields range bound 4.20 – 4.33, likely bullish move to 4.44

Volatility: Wednesday's trading session saw a slight dip in the VIX to $15.34 (-0.08 | -0.52%), with market attention riveted on Nvidia's post-market earnings announcement. The anticipation for Nvidia's results was evident, as evidenced by the unusual spike in the VIX1D to $17.83, surpassing the VIX and highlighting expectations for short-term market movements. Nvidia's stock experienced a downturn of 2.85% during regular trading hours ahead of its earnings release. The publication of the FOMC minutes brought no significant surprises, leaving market volatility largely unaffected. However, Nvidia's earnings report, surpassing expectations, acted as a catalyst for positive futures market movement. VIX futures dropped to $14.870 (-0.480 | -3.12%), while futures for the S&P 500 and Nasdaq 100 significantly increased, to 5035.00 (+38.75 | +0.77%) and 17801.00 (+264.25 | +1.51%) respectively, suggesting a bullish market open. Nvidia's stock soared in after-hours trading, up 9.07% to $735.95. Top 10 most traded (stock) options on Wednesday, in order: TSLA, NVDA, AAPL, PANW, AMZN, AMD, INTC, PLTR, RIVN and META.

In the news: Nvidia Surges After AI Boom Shows No Signs of Letting Up (Bloomberg), China Tightens Grip on Stocks With Net Sale Ban at Open, Close (Bloomberg), HSBC's shares slide as record profit marred by $3 billion China hit (Reuters), Hong Kong developers urge government to remove all property cooling measures (SCMP), China starts drafting bill to boost private sector and tackle sluggish post-Covid economy following major setbacks (SCMP)

Macro events (all times are GMT): EZ Manufacturing PMI (Feb) exp 47 vs 46.6 prior, Services exp. 48.8 vs 48.4, composite exp. 48.4 vs 47.9 prior (0800), ECB Minutes (Jan) EZ, UK PMI (Feb exp 52.9 vs 52.9 prior (0830), US Manufacturing PMI (Feb) exp 50.7 vs 50.7 prior, Services 52.32 vs 52.5 prior & Composite 51.8 vs 52 prior (1345), US Existing Home sales (Jan) exp 3.97m vs 3.78m prior (1400), EIA Natural Gas Storage Change (1430), DOE Weekly Crude and Fuel Stock Report (1500)

Earnings events: Big day ahead on earnings with the key earnings to watch being Nestle (bef-mkt), MercadoLibre (aft-mkt), Nu Holdings (aft-mkt, Nubank), Mercedes-Benz (bef-mkt), and Rolls-Royce (bef-mkt).

  • Today: Fortesque, Zurich Insurance, Nestle, AXA, Booking, Copart, Intuit, MercadoLibre, EOG Resources, NU Holdings, Mercedes-Benz, Iberdrola, Pioneer Natural Resources, Danone, Anglo American, Wolters Kluwer, Rolls-Royce
  • Friday: Allianz, Deutsche Telekom, BASF
  • Saturday: Berkshire Hathaway

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.