Global Market Quick Take: Europe – 4 March 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US stocks rose sharply on Friday after softer than expected economic data drove Treasury yields lower, and once again the optimism was fueled by AI and semiconductors, with Nvidia, AMD, Broadcom, Marvell Technology, and other semiconductor names all surging more than 4%, lifting the Nasdaq 100 Index by 1.4% and the S&P 500 Index by 0.8%. Asia traded broadly higher overnight with the Nikkei surpassing 40,000 while Chinese stocks fluctuated ahead of a critical week of annual parliamentary meetings, which investors are watching closely for signals on economic stimulus. OPEC+ meanwhile extended their production curbs until midyear while gold raced higher to record its highest close ever. Focus this week on Fed Chair Powell’s testimony before congress, Friday’s US jobs data as well as ECB meeting


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

Equities: Quiet start to the new week with small moves across Asian equity markets and flat equity futures across Europe and the US. Key events to track this week are investors’ appetite for US equities with equity valuations being quite stretched, Super Tuesday tomorrow with the most US states holding primary elections ahead of party nominations, earnings from Sea Ltd (today), JD.com (Wed), Dassault Aviation (Wed), and Costco (Thu). Interesting single stock news are Super Micro Computer is set to enter the S&P 500 Index as generative AI fever keeps transforming equity indices, and Bank of America analysts saying Eli Lilly can rally another 30%.

FX: The dollar traded broadly lower with Treasury yields in Friday’s session as ISM manufacturing and the revision to University of Michigan sentiment numbers garnered a dovish reaction. Despite a softer greenback, however, yen underperformed as Governor Ueda retained a dovish narrative with USDJPY rising back above 150. Activity currencies were the top gainers amid dollar weakness, with NOK outperforming followed by SEK, AUD and NZD. The EURUSD meanwhile remains stuck with a 1.08 handle with firm resistance at 1.09 ahead of this week’s ECB meeting, and GBPUSD stays above 1.26 with focus on the UK budget.

Commodities: Gold closed at a record high on Friday after a softer dollar and Treasury yields triggered a strong technical buying reaction, thereby strengthening the yellow metal’s buy-on-dip credentials following a month that should have seen it trade lower amid lower rate cut expectations, dollar and yield strength as well as continued selling from investors in ETFs. Instead, strong physical demand and low short-selling appetite at a time of heightened geopolitical tensions have supported. Crude oil prices trade near this year's high after OPEC+ agreed to extend output curbs into mid-year amid non-OPEC supply and risk of demand disruptions. Industrial metals will focus on China’s rubber-stamp Congress this week where growth and inflation target as well as policy direction will be announced.

Fixed income: Last week, markets increased expectations of interest rate cuts for this year, following a downside surprise in the US February manufacturing ISM and the University of Michigan survey below estimates. Waller’s speech also boosted US Treasuries as he commented about Quantitative Tightening (QT), mentioning that he would like to see MBS holding to zero and US Treasury holdings towards a larger share of shorter-dated securities. Such a comment led the US yield curve to bull-steepen, with 2-year yields dropping by 9bps on Friday and 16bps over the week to 4.53%, and ten-year yields dropping by roughly 7bps on Friday to 4.18%. In Europe, flash inflation data for February came higher than expected, with core inflation remaining above the 3% mark. Thus, markets pared back on expectations of ECB rate cuts, pricing for the first time since October less than 25bps rate cuts by June. This week, the focus shifts onto US Services ISM, Super Tuesday, Powell’s congressional testimony, and nonfarm payrolls on Friday. In Europe, the attention turns to the UK budget and the ECB meeting on Thursday, where inflation projections are expected to be revised downward, boosting European sovereigns (for a preview, click here).

Macro: US ISM manufacturing PMI for February unexpectedly fell to 47.8 from 49.1, against the forecasted rise to 49.5. Prices paid remain in expansionary territory but encouragingly dipped to 52.5 (prev. 52.9, exp. 53.0), while new orders fell into contractionary territory to 49.2 from 52.5. Employment and production declined to 45.9 (prev. 47.1) and 48.4 (prev. 50.4), respectively. Focus now turns to services ISM PMI due on Tuesday although markets may be in a wait mode ahead of the NFP jobs numbers due on Friday. Eurozone disinflation continued in February, even though the headline print came in higher than expected at 2.6% YoY vs. 2.5% exp and 2.8% prior. Core inflation eased to 3.1% YoY from 3.3% in January, coming in above expectations of 2.9%. This could mean that an April ECB rate cut remains off the table for now, but ECB meeting this week will be key to assess the staff projections on GDP and CPI for 2024 and Lagarde’s take on wages and inflation. Read Saxo’s ECB preview here. Focus on China this week with the National Committee of the Chinese People’s Consultative Conference (CPPCC) from March 4 to March 10 and the National People’s Congress (NPC) starting on March 5 and concluding on March 11, potentially bearing substantial implications for China's economic trajectory. Read our preview here

Technical analysis highlights: S&P 500 uptrend extended, likely to 5,176. Nasdaq 100 spiked higher, short-term potential to 18,593-18,763. DAX uptrend could have exhausted, Monday trading could be key. EURUSD range bound 1.08-1.09. USDJPY dipped below support at 149.75 but closed above, could be caught range bound 149-151. EURJPY uptrend intact after correction. Likely to resume bullish move. GBPUSD range bound 1.2535-1.27. USDCHF rejected at key resist at 0.89. Gold broken key resistance at 2,065 short-term potential to 2,135-2,150.  WTI oil closed above key resistance at 79.77 confirming uptrend with potential to 87-90, resistance at 82.56. 10-year T-yields below key support at 4.20, next 4.11 and 4.00

Volatility: On Friday, the VIX further declined to $13.11 (-0.29 | -2.16. The VVIX increased to 77.68 (+0.23 | +0.30%), the SKEW index edged up to 150.42 (+0.59 | +0.39%), suggesting cautious sentiment about potential outlier events. The expected market moves for the upcoming week are projected at +/- 55.94 (+/- 1.09%) for the S&P 500 and +/- 292.32 (+/- 1.60%) for the Nasdaq 100, mirroring last week's volatility expectations. The coming week is packed with economic reports including ISM Non-Manufacturing PMI, ADP Nonfarm Employment, Fed Chair Powell's Testimony, JOLTs Job Openings, Initial Jobless Claims, and Nonfarm Payrolls, any of which could be catalysts for market volatility. Noteworthy earnings from CrowdStrike, Oracle, and MongoDB are also on the horizon. VIX futures have slightly decreased to 14.00 (-0.050, -0.34%), with S&P 500 and Nasdaq 100 futures showing minor adjustments to 5141.75 (-4.25 | -0.08%) and 18357.00 (+19.00 | +0.10%). Friday's most active stock options were, in order: NVDA, TSLA, AMD, AAPL, META, PLTR, AMZN, MARA, NYCB, MSFT.

In the news: Fed policy report warns on possible financial sector risks (Reuters), OPEC+ members extend oil output cuts to second quarter (Reuters), China to Unveil GDP Target, Avoid ‘Bazooka’ Stimulus at Meeting (Bloomberg), China needs 10 times its solar and wind power to be carbon neutral, study finds (SCMP), U.S. seeks to revive idled shipyards with help of Japan, South Korea (Nikkei Asia)

Macro events (all times are GMT): Switzerland Feb CPI YoY est. 1.1% vs prior 1.3% (07:30), Eurozone Mar Sentix Investor Confidence est. -10.6 vs prior -12.9 (09:30), Japan Tokyo Feb CPI YoY est. 2.5% vs prior 1.8%.

Earnings events: Key earnings releases this week are listed below. Our key focus is Sea Ltd today on temperature on Southeast Asia e-commerce demand, JD.com on Wednesday for insights into the Chinese consumer, Dassault Aviation on Wednesday for an update on military spending in Europe, and finally Costco on Thursday as one the largest US retailers.

  • Monday: Archer-Daniels-Midland, China Tower, Sea Ltd
  • Tuesday: Thales, Lindt, Bayer, Ferguson, Ross Stores, Franco-Nevada, Crowdstrike, Target, Ashtead, NIO
  • Wednesday: Deutsche Post, Brown-Forman, JD.com, Legal & General, Dassault Aviation
  • Thursday: MTR, Techtronic Industries, Prada, Merck KGaA, Costsco, Broadcom, Marvell Technology, MongoDB, Samsara, Kroger, Continental, Vivendi, DocuSign
  • Friday: Oracle, China Unicom Hong Kong, ZTE

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

Quarterly Outlook 2024 Q4

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

    Head of FX Strategy

    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

    Head of FX Strategy

    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.