Global Market Quick Take: Europe – 27 February 2024 Global Market Quick Take: Europe – 27 February 2024 Global Market Quick Take: Europe – 27 February 2024

Global Market Quick Take: Europe – 27 February 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  European and US equity futures trade lower for a second day after the tech mega-cap led rally on Wall Street fizzled as Google’s Gemini AI-powered image generator came under criticism, and as investors prepare for a full slate of economic data and comments from a several Federal Reserve members in the coming days. In Japan, the prospect for an exit from the central bank’s negative rate policy rose after inflation beat expectations while the dollar softened despite a small pickup in US Treasury yields driven by auction pressure and focus on core PCE inflation data. Gold holds steady near resistance with crude oil rangebound.


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

Equities: Strong session in Chinese equities with Hang Seng futures up 0.7% while equity futures in the US and Europe are flat this morning. The big mover among single stocks yesterday was Li Auto that reported better-than-feared Q4 results despite an intense price war pleasing investors, but the outlook was muted, however, investors were relieved sending shares 16% higher. Zoom Video reported earnings yesterday after the US market close that beat estimates and 2025 revenue guidance was in line with consensus; shares were 9% higher in extended trading hours. The successful fast fashion retailer Shein is rumoured to soon announce an IPO in London as US regulators are making resistance against an US listing. Sweden’s adoption into NATO yesterday could also create a positive tailwind for some of its defence stocks such as Saab.

FX: The dollar was under some pressure to start the week, with gains in SEK and EUR while the antipodeans reversed some of last week's gains. Yen in focus after Japan’s January CPI beat fueled BOJ pivot bets again but for now USDJPY remain stuck above 150. EURUSD moved above the 200DMA and tested 1.0850 as comments from President Lagarde were more mixed after Friday’s dovishness and German bunds saw steeper losses than the Treasuries, boosting EUR. Losses in Gilts also outpaced, but GBPUSD found resistance at 1.27.

Commodities: Crude oil’s range bound behaviour continues and following a three-dollar drop buyers returned after once again finding support around $76 in WTI and $81.50 in Brent. Underpinned by strengthening time spreads which point to healthy spot demand with refineries in China and the USA singled out. Copper fell on Monday on signs inventories in China have risen following the Lunar holiday while gold remains stuck near key resistance with focus on US core PCE inflation and a slew of Fed speakers due this week. The cocoa squeeze continues with the 65% YTD gain being driven by tight supply, while month long slump in the grains sector has driven the speculative short to a record.

Fixed income: The bond market had to weather a large slate of corporate bond issuance and two record-size auctions yesterday. The US Treasury sold $63bn 2-year notes and $64bn 5-year notes, the most for these tenors ever. Both auctions tailed by 0.2bps and 0.8bps, respectively, while bidding metrics remained solid, showing that investors demand a higher yield to hold these securities. That might be a problem for the upcoming US Treasuries coupon issuance in the second quarter of the year, as the TBAC recommendation indicates that the Treasury might be preparing to break another record by issuing $69bn and $70bn 2- and 5-year notes. Treasury yields drifted higher yesterday, from 2bp to 4bp across the yield curve. In Europe, Lagarde said there is still work to be done on getting inflation sustainably back to target, triggering a rise in yields across European sovereign bonds. Today, the focus shifts to the 7-year US Treasury note auction, a tenor usually not liked by markets. In Europe, Germany is selling €1 bn 0% 2050 bonds, while Italy will continue selling BTP Valore, targeting retail investors.

Macro: The ECB faces tougher challenges than the Fed, with a fragmented banking system and the debt crisis’s legacy, said Yannis Stournaras, who sees a first rate cut in June. Christine Lagarde said the central bank isn’t there yet on inflation but noted that the current disinflationary progress is set to continue. Japan’s January CPI came in higher-than-expected, although it cooled from last month. Headline was at 2.2% YoY (vs. 1.9% exp, 2.6% prior) while core was at 2.0% (exp 1.9%, prior 2.3%) and the core-core measure (excluding fresh food and energy) rose 3.5% YoY (vs. 3.3% exp, 3.7% prior). While disinflation has continued, the higher-than-expected prints could add fuel to BOJ pivot bets – which remain misplaced in our opinion. The RBNZ rate decision is due Wednesday, with consensus pointing to unchanged at 5.5% while a 25 bps cannot be ruled out as the central bank keeps the door open for further tightening.  For more, read this article. Besides inflation data from the Eurozone and US PCE inflation, the market will be watching a slew of Fed speakers this week.

Technical analysis highlights: S&P 500 uptrend stretched a correction could unfold, key support at 4,920. Nasdaq 100 uptrend stretched, key support at 17,478. DAX uptrend potential to 17,506, support at 17,326. EURUSD could test key strong resistance at 1.09. GBPUSD testing resistance at 1.27, next 2.2775. USDJPY above resistance at 149.75, eyeing 152. EURJPY uptrend potential to 164.30. AUDUSD testing key support at 0.6520. Gold a close above 2,035 could push to 2,065, below 2,015 bearish trend. 10-year T-yields range bound 4.35-4.20.

Volatility: The VIX remained virtually unchanged at $13.74, showing a minimal decrease of -0.01 (-0.07%), suggesting stable market volatility levels. Meanwhile, the VVIX saw a slight increase to 80.50 (+1.64 | +2.08%), indicating a minor uptick in volatility expectations. The absence of significant earnings releases today shifts the focus to broader market sentiment, with the markets appearing somewhat fatigued. This raises questions about whether we're experiencing a temporary pause or the onset of a broader market reversal. Overnight futures movements were nearly flat, mirroring a holding pattern in anticipation of clearer market directions. Top 10 most traded (stock) options on Monday, in order: TSLA, NVDA, GOOGL, AAPL, MARA, HOOD, PANW, COIN, AMD and AMZN. Notably, PANW options experienced a significant volume increase after Nancy Pelosi revealed she had purchased options in the company.

In the news: Zoom Gains After Sales Top Estimates on Enterprise Customers (Bloomberg), Workday beats quarterly profit estimates, expects macro concerns to continue in fiscal 25 (Reuters), Domino’s Pizza Jumps as US Same-Store Sales Beat Estimates (Bloomberg), China jobs: returning migrant workers battling low salaries, lack of openings as economic realities hit home (SCMP), U.S. aims to make 20% of world's leading-edge chips by 2030: Raimondo (Nikkei Asia), China Is Stockpiling for Next Phase of the Chip Wars (WSJ).

Macro events (all times are GMT): German GfK (Mar) exp –29 vs –29.7 prior (0600), US Durable Goods (Jan) exp –5% vs 0% prior (1230), Consumer Confidence (Feb) exp. 115 vs 114.8 prior (1400), API’s weekly crude and fuel stocks report (2030). Speakers: Fed’s Schmid and Barr, BoE's Ramsden & ECB's Elderson. Bond auctions: US to sell $42bn 7-year Notes (1700).

Earnings events: Interesting earnings day coming up with key earnings releases from ASM International, Coupang, and First Solar. ASM International is part of the roaring semiconductors industry manufacturing the machines that process silicon wafers. Analysts are not particularly optimistic on Q4 earnings results so everything will be about the outlook for 2024 with consensus expecting 9% revenue growth. First Solar is riding the massive adoption wave of solar modules, and particularly the incentives created by the Biden Administration for domestic US production. Analysts expect revenue growth of 32% YoY and EPS of $3.15 up from $0.17 a year ago.

  • Tuesday: Bank of Nova Scotia, Bank of Montreal, Sempra, Constellation Energy, Republic Services, Lowe’s, Munich Re, AutoZone, American Electric Power, Woodside Energy, ASM International, Alcon, Coupang, Splunk, eBay, First Solar

  • Wednesday: Oversea-Chinese Banking, Holcim, Royal Bank of Canada, TJX, Salesforce, Snowflake, Monster Beverage, Universal Music, Reckitt Benckiser, Moncler, Amadeus IT, Baidu, HP, Pure Storage

  • Thursday: Alimentation Couche-Tard, Anheuser-Busch InBev, CRH, NetEase, Canadian Imperial Bank, Dell Technologies, Autodesk, London Stock Exchange, Argenx, Saint Gobain, Beierdorf, Leonardo, Haleon, Zscaler, Elastic

  • Friday: Canadian Natural Resources, Kuehne + Nagel

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

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