Global Market Quick Take: Europe – 30 May 2024 Global Market Quick Take: Europe – 30 May 2024 Global Market Quick Take: Europe – 30 May 2024

Global Market Quick Take: Europe – 30 May 2024

Macro 3 minutes to read
Saxo Strategy Team

Key points:

  • Equities: Negative sentiment with Hong Kong equities dropping 1.8%. Salesforce earnings tonight.
  • Currencies: USD is reversing earlier losses as Fed speakers and data continue to lean hawkish
  • Commodities: Gains led by silver, coffee, and crude oil
  • Fixed Income: The selloff in global sovereign bonds intensifies as concerns over supply and inflation come into focus.
  • Economic data: German CPI

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

Equities: The negative sentiment has increased a bit in the short term with a negative Asia session seeing Japanese equities down 0.8% and Hong Kong equities down 1.9%. US and European equity futures are down 0.4% and 0.1% respectively. Today’s key event is German May preliminary CPI figures expected to show an increase in the YoY figures but MoM staying low at 0.2%. Tonight, after the US market close Salesforce will report earnings expected to show solid revenue growth and improved profitability. The ECB rate decision coming up next Thursday is expected to deliver a rate cut by the market, but it will be interesting if Germany’s inflation surprises to the upside and credit continues to improve in Europe as the recent ECB monetary developments report has shown. Nobel laureate Paul Romer is out in an interview warning about AI expectations potentially turning into a bubble.

FX: The US dollar reversed its earlier losses on Tuesday as hawkish vibes continued from US data and Fedspeak, as we had highlighted in our Weekly FX note. Higher yields on the back of hot consumer confidence and weak 2-year and 5-year Treasury auctions lifted USDJPY to 157.40 overnight. Meanwhile, CHF outperformed, with USDCHF down to sub-0.9090 before higher yields brought the pair back to 0.9120+. AUDUSD trades around 0.6650 after April CPI came in hotter than expected at 3.6% reducing the prospect for rate cuts. EURUSD saw sharp gains to 1.0890 earlier but reversed back to 1.0850 subsequently with Germany CPI on the radar today. GBPUSD also unable to break above 1.28 while EURGBP continues to hover just above key support around 0.85.

Commodities: The sector has more than reversed last week's small loss with gains so far this week being led by silver, coffee and crude oil. Gold’s three-day bounce has run out of steam amid higher US yields following Tuesday’s weak auctions and ahead of Friday’s key US PCE print. Silver surged back above $32 and close to last week's 11-year high at $32.52 as it continues its outperformance compared to benchmark gold prices, driven by the favorable macroeconomic conditions for precious metals and increased physical silver purchasing for industrial applications. Crude futures extended their gains, supported by simmering geopolitical risks and expectations OPEC+ will keep current production curbs. Cocoa futures traded back to near $9k resistance while coffee futures jumped more than 5% amid supply concerns, most notable from Vietnam

Fixed income: Treasuries ended Tuesday lower after May consumer confidence was reported at 102, higher than the expected 96. This decline was further exacerbated by remarks from Fed's Kashkari, who stated that interest rate hikes cannot be completely ruled out, and saying that more than two rate cuts this year are unlikely. Following these developments, the U.S. Treasury sold $69 billion in 2-year notes and $70 billion in 5-year notes, both drawing low demand. The 2-year auction tailed by 1 basis point, with a 16.6% primary dealer award, the highest since December, as indirect bidders dropped to 57.9%, the lowest since November. Similarly, the 5-year auction tailed by 1.3 basis points, despite the selloff into the auction, as bidding metrics weakened similarly to the 2-year auction. Attention now shifts to today’s $44 billion 7-year note sale, which will test investors' appetite for longer-duration bonds. For a full preview of this week’s U.S. Treasury auctions, click here. U.S. 10-year yields ended the day roughly 10 basis points higher than Friday’s close, at around 4.55%. European sovereign bonds also fell, with Italian BTPs underperforming peers amid a busy primary issuance slate. Overnight, Australian CPI rose to 3.6% versus the expected 3.4%, triggering a significant selloff in Australian sovereign bonds and pushing Asian yields higher, with 10-year Japanese Government Bonds (JGBs) rising to 1.06%, the highest level since 2011. Today's focus includes German CPI numbers for May, Euro area M3 money supply for April, the US Richmond Fed's manufacturing index for May, and the Fed's Beige Book. Additionally, key central bank speakers for the day include ECB's Villeroy and Fed's Williams.

Technical analysis highlights: Top and reversal pattern in US Indices, correction in the cards: S&P500 support at 5,194. Uptrend extended if closing above 5,342.  Nasdaq 100 support at 18,464. Uptrend extended if closing above 18,908. DAX toppish, correction could unfold down to 18,250. EURUSD rejected at resistance at 1.0885, a break above next 1.0930 and 1.10 GBPUSD rejected at resistance at 1.28. USDJPY uptrend potential to 158.45, but short-term correction could be seen. EURJPY potential to 171 but uptrend stretched, expect correction. AUDJPY likely to pushing to 105.  EURGBP key support at 0.85. Gold rebounding from support at 2,326. Silver uptrend potential to 32.50 and strong resist at 34.40. Platinum rebounding from 1,015 support, uptrend potential to 1,130, minor resist at 1,065 Copper bouncing from 474.50 key support, resuming uptrend. US 10-year T-yield above resist at 4.53, could push to 4.65

Volatility: The VIX rose yesterday, closing at $12.92 (+0.56 | +4.53%), with the VIX9D also increasing to 11.51 (+2.32 | +25.24%), signaling anticipated short-term volatility leading into next week. Markets remain indecisive, with rising volatility suggesting a potential breakout in either direction. Today, there are no significant economic reports due for release. Notable earnings reports today include Salesforce and HP, both scheduled to release their results after the market closes. VIX futures are currently at 14.000 (+0.275 | +2.00%), while S&P 500 and Nasdaq 100 futures indicate a lower opening, at 5303.25 (-21.50 | -0.40%) and 18871.00 (-69.50 | -0.36%) respectively. Yesterday's top 10 most traded stock options, in order: Nvidia, Tesla, Advanced Micro Devices, Apple, GameStop, AMC Entertainment, Amazon, Marathon Digital Holdings, Pinduoduo, and DraftKings.

Macro: US consumer confidence came in firmer-than-expected with inflation expectations also jumping higher. Headline index rose to 102 in May from 97.5 in April with both present situation and expectations jumping higher. Consumers’ average 12-month inflation expectations ticked higher to 5.4% MoM from 5.3% previously. Fed’s Kashkari, a non-voter but one of the most hawkish members of the Fed committee, said that he would not be penciling in more than two rate cuts this year. He also kept a rate hike on the table, although he thought that it is unlikely that a rate hike will be needed and higher-for-longer should get inflation lower. Australia’s April inflation came in hotter than expected in April, suggesting price pressures remain stubbornly strong and bolstering the case for the Reserve Bank to keep interest rates at a 12-year high next month. The monthly CPI climbed 3.6% from a year earlier, exceeding economists’ estimate of 3.4%, while the core measure held at 4.1%. South Africans vote in an election on Wednesday that looks set to reshape a political landscape dominated for three decades by the party that Nelson Mandela led to power. The African National Congress has won every vote since the end of White-minority rule in 1994, but its support slipped from a peak of almost 70% in 2004 to 57.5% in 2019, and most opinion polls point to it losing its parliamentary majority for the first time in a country where unemployment stands at over 33%.

In the news: 10-year Treasury yield rises above 4.5% following weak auction (CNBC), Fed’s Kashkari wants to see ‘many more months’ of positive inflation data before a rate cut (CNBC), Dollar rebounds as yields rise, consumer confidence improves (Reuters), Oil: Five reasons for market resilience to supply shocks (Yahoo), AI darling Nvidia's market value surges closer to Apple (Yahoo), South Africans vote in most competitive election since end of apartheid (Reuters)

Macro events: German Flash CPI (May) exp 0.2% & 2.7% vs 0.5% & 2.2% prior (1200), US Richmond Fed Manufacturing Index (May) exp –6 vs –7 prior (1400), South African Election, Fed’s Beige Book (1800). Speakers: Fed’s Bostic

Earnings events: Today’s key earnings focus will be Salesforce expected to report revenue growth of 11% YoY and EPS growth of 169% YoY as the software application maker continues to rein in costs.

  • Today: Bank of Montreal, National Bank of Canada, Salesforce (aft-mkt), Agilent Technologies, HP, Pure Storage, Nutanix, Okta, U-Haul, Dick’s Sporting Goods, Viking
  • Thursday: Canadian Imperial Bank of Commerce, Royal Bank of Canada, Costco Wholesale, Cooper Cos, Dell Technologies, Marvell Technology, Veeva Systems, MongoDB, Zscaler, NetApp, Ulta Beauty, Dollar General, Hormel Foods, Best Buy, Burlington Stores

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

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