Global Market Quick Take: Europe – 12 December 2023

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

Equities: Positive sentiment in most Asian equity markets overnight with US and European equity futures pointing slightly higher in early trading hours. Today’s key events are German December ZEW Survey (1000 GMT) expected to show stabilisation in Europe’s largest economy and most important the US November CPI (1330 GMT) figures because the market’s current rally is pinched on the idea of further declines in inflation without slipping into a recession. The VIX Index closed at 12.63 yesterday signalling calm expectations for the rest of December. Oracle reported earnings last night hitting estimates which was not enough to please investors sending its shares down almost 9% in extended trading.

FX: The dollar traded sideways on Monday but was weaker in Asia today with renewed JPY weakness being offset by gains across the other major peers, most notably AUD and NZD on expectations China stimulus announcements from key policy meeting underway.  USDJPY rose back above 146 after the BOJ said that it sees little need to end negative rate in December after traders had started to pile into hawkish BOJ bets. Markets await the US CPI today and Fed announcement on Wednesday

Commodities: Brent crude found support at $75 before bouncing after an attack on a tanker in the Red Sea from Houthi-controlled Yemen raised fears of disruptions to shipping due to the ongoing Israel-Hamas war. Also focus on monthly oil market reports from EIA today followed OPEC and IEA later in the week. Gold briefly plunged below $1980 as speculators, the main drivers behind the recent rally, cut longs amid a short-term deterioration in the technical outlook with all eyes on US inflation data and Fed announcement. Meanwhile, Copper declined despite concerns of a supply deficit going into 2024, as China’s deflation and underwhelming fiscal stimulus underpinned and focus turns to growth target and other announcements from Central Economic Work Conference today along with the US CPI.

Fixed income: Yesterday’s 3-year and 10-year auctions caused a selloff across maturities in the yield curve. Bidding metrics in the 3-year auction were extremely weak, with primary dealers being left with 26.2% of the issuance, the most since October 2022. Demand for the 10-year benchmark was better, but the auction tailed by 1.4 basis points. Today, the U.S. Treasury is selling 30-year bonds on the back of the U.S. CPI release. It can be a volatile week for sovereigns across the Atlantic, with the Federal Reserve, the European Central Bank, and the Bank of England meeting for the last time this year.

Macro: NY Fed survey showed cooling inflation expectations, with one seen at 3.4% vs. 3.6% prior, the lowest since April 2021. The three-year ahead was unchanged at 3% and the five-year ahead was unchanged at 2.7%. RBA Governor Bullock said this morning that Australia is not falling behind other countries in the fight against inflation, and that the bank will take a cautious approach with policy, keeping data on the radar. The 2023 Central Economic Work Conference, currently underway in China, will set the policy agenda for 2024 — a critical year that could determine the medium-term growth path. The annual year-end conference will address many familiar issues — like how to support growth, confidence and the property market — but the pressure will likely be more intense compared to prior meetings.

Technical analysis highlights: S&P 500 no resist until 4,818, support at 4,458. Nasdaq 100 uptrend eyeing 16.750, support at 15,744. DAX uptrend very stretched, support at 16,469. EURUSD strong support at 1.0760-1.0730. USDJPY resistance at 147.50, still in downtrend. EURJPY strong resist at 157.70, support at 155.52. GBPUSD rejected at 1.2745, support at 1.2445. Gold broken rebounding from 1,975.  WTI Crude oil support at 67. Brent support at 71.93. 10-year T-yields could bounce to 4.35 resistance

In the news: Hasbro to lay off 900 more employees amid weak toy sales (Reuters), New COP28 draft text does not mention phase out of fossil fuels (Reuters), Semiconductor giants race to make next generation of cutting-edge chips (FT), The world’s copper supply is suddenly looking scarce (Mining.com), Google’s Epic Legal Defeat Threatens $200 Billion App Store Industry (Bloomberg), Cruise missile from Yemen strikes tanker ship - US military (Reuters)

Macro events (all times are GMT): UK Employment (0600), EZ & German ZEW (0900), US NFIB (1000), US Nov CPI (tune in to our Macro podcast to know more) exp. 0% MoM, 3.1% YoY & 4% core vs 0%, 3.2% & 4% (1230), EIAs Short-term Energy Outlook (1600), Japanese 4Q Tankan Report (2200)

Earnings events: Key earnings releases today from Carl Zeiss Meditec (pre-mkt) and Johnson Controls International (bef-mkt).

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