Global Market Quick Take: Europe – 31 January 2024 Global Market Quick Take: Europe – 31 January 2024 Global Market Quick Take: Europe – 31 January 2024

Global Market Quick Take: Europe – 31 January 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US economic data remained firm with JOLTS job openings and consumer confidence both rising. Eurozone GDP was lackluster although a technical recession was avoided. US equity futures trade lower following weakness in after-hours on Wall Street being driven by disappointing earnings from big tech with Microsoft and Alphabet both dipping while chip-maker AMD also gave a disappointing outlook. Apart from month-end flows, the FOMC announcement will be the main focus today and disinflation will likely remain the key theme.


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

Equities: Chinese equity futures are down 1.4% as data shows China’s manufacturing sector contracted for the fourth straight month and Nasdaq 100 futures are down 0.8% weighed down by negative after-market reactions to earnings from Microsoft (-0.2%), Alphabet (-6%), and AMD (-6%). European equity futures are generally flat with key focus on Novo Nordisk reporting a better-than-expected Q4 revenue, but obesity care revenue missed estimates by 5% and the FY24 revenue guidance in constant FX (18% to 26%) is slightly below analyst expectations. On the macro side preliminary January inflation reports from France and Germany will set sentiment and ECB rate cut expectations in today’s session.

FX: The dollar remains bid ahead of the FOMC decision later today, with overnight weakness being led by the AUDUSD which broke below its 200DMA at 0.6577 as Q4 CPI miss prompted a dovish RBA repricing. AUDJPY slid sharply as well in Asia as risk sentiment took a beating, and central bank divergence was highlighted with BOJ summary of opinion tilting hawkish. The EURUSD holds above 1.08 after the Euro-area avoiding a technical recession after Q4 GDP came in at flat. Focus shifts to BOE with CPI giving reasons for a less hawkish outcome that can bring GBPUSD to give up the 1.27 handle. Tight supply of Robusta coffee from Vietnam and cocoa from West Africa continue to support prices near multi-decade highs.

Commodities: Oil prices remain choppy ahead of month end as the geopolitical risk premium ebbs and flows. Saudi Aramco dropped their expansion plans as the demand outlook is being questioned, potentially a decision that may keep prices supported for longer. Gold’s technical upside break briefly took prices towards $2050 before reversing lower with FOMC meeting ahead and NFP data to follow on Friday. Gold may be on course to close lower for the month, but only marginally given a strong dollar and reassessment of Fed cut bets, and we see range-trading until the rate cut path is clearer. For more details, read this article.

Fixed income: The US yield curve bear-flattened on the back of higher-than-expected JOLTS data yesterday, pushing rate cut-expectations further out in swaps. Today, the focus is on the quarterly refunding announcement (QRA) and the FOMC meeting (to access our preview, click here). If the Treasury decides to increase the size of next week's 10-year bond issuance, it might match the COVID pandemic high or even break it. As the Reverse Repurchase facility (RRP) drains out, demand for T-Bills may diminish, forcing the Treasury to increase coupon issuance regardless. We expect the FOMC meeting to tilt hawkish due to voting Federal Reserve bank presidents rotating. However, disinflationary trends, the end of the Bank Term Funding Program (BTFP) in March, and an increase in US Treasury coupon issuance call for easier monetary policies supporting bond valuations throughout the year's first half. It doesn't matter whether that comes in the shape of rate cuts or QT tapering; the message that it would send is the same: the Fed has entered an easing cycle, ditching its tightening bias altogether.

Macro: US JOLTS job openings rose to 9.026mn in December, up from the prior 8.925mn (which was revised up from 8.79mn), despite expectations for a decline to 8.75mn. Data again confirms the divergence in hard and soft data, which could mean that the Fed remains focused on the path of disinflation for now. Read our full preview here. US Consumer Confidence for January rose to 114.8, the highest since December 2021, from 108.0 but was short of the expected 115.0. Present Situation and Expectations rose to 161.3 (prev. 147.2) and 83.8 (prev. 81.9), respectively. The Eurozone avoided a technical recession but remained in stagnation as Q4 GDP came in flat from -0.1% in the third quarter. China’s NBS manufacturing PMI increased from 49.0 to 49.2 in January, a smaller improvement than the consensus forecast of 49.3. The non-manufacturing PMI increased to 50.7 from 50.4. The construction sub-index fell to 53.9 from 56.9. Meanwhile, the service sub-index rebounded to 50.1 in January, after falling below the 50-mark in the previous two months.

Volatility: Volatility continued its downward trend, with the VIX dropping to $13.31 (-0.29 | -2.13%), mirrored by declines in associated indices like the VVIX and SKEW. In a divergence from typical market behavior, both the S&P 500 and Nasdaq 100 closed in the red, with declines of -2.96 (-0.06%) and -119.56 (-0.68%) respectively. The cautious stance of the S&P 500 reflects the market’s anticipation of the FOMC statement and reactions to major earnings reports from tech giants like MSFT, GOOGL, and AMD, which were released post-market yesterday. The after-market reaction was tepid, with the mentioned stocks seeing negative responses. VIX futures edged up to 14.150 (+0.155 | +1.12%), and both S&P 500 and Nasdaq 100 futures retreated, signaling a potentially turbulent session ahead. The expected move for the SPX today is a significant +/- 33.8 (+/- 0.69%), suggesting heightened volatility and an active trading day in response to the confluence of earnings results and economic updates.

In the news: IMF Lifts World GDP Outlook on US Strength, China Fiscal Support (Bloomberg), AMD revenue forecast misses estimates, shares slide (Reuters), Google parent Alphabet ad revenue sputters, capex up; shares sink 6% (Reuters), Microsoft touts AI strength, but shares dip as market digests costs (Reuters), Samsung Electronics' Q4 profit falls 34% amid weak consumer demand (Reuters), Starbucks earnings disappoint as U.S. boycott, ‘cautious’ China weaken sales (CNBC), China EV price war spreads to gas-fueled cars, denting foreign brands (Nikkei Asia), Chinese vice-premier urges support for listed firms to help stabilise battered stock market (SCMP).

Macro events (all times are GMT): France Harmonized CPI (Jan, preliminary) exp –0.1% & 3.6% vs 0.1% & 4.1% prior (0645), Germany Unemployment (Jan) exp 11k vs 5k prior (0755), Germany Harmonized CPI (Jan, preliminary) exp –0.2% & 3.2% vs 0.2% & 3.8% prior (1200), US Employment Cost Index (Q4) exp 1% vs 1.1% prior (1230), US Chicago PMI (Jan) exp 48 vs 46.9 prior (1345),  US Fed FOMC Decision (1800)

Earnings events: Key earnings releases this week. With earnings out from Microsoft, Alphabet, AMD, and Novo Nordisk, the market will start focusing on tomorrow’s earnings from Apple, Amazon, and Meta. Read our earnings review note from this Monday for more insights and what the key focus points are in each earnings report.

  • Today: Novo Nordisk, Qualcomm, Mastercard, Novartis, Thermo Fisher Scientific, Boeing
  • Thursday: Apple, Roche, Amazon, Meta, Merck, Shell, Honeywell, Sanofi
  • Friday: Keyence, ExxonMobil, AbbVie, Chevron, Regeneron Pharmaceuticals, Bristol-Myers Squibb

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

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