Global Market Quick Take: Europe – 20 December 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US stock futures trade steady following fresh advances on Tuesday after robust housing starts print added to the optimism of a resilient US economy while moderation in inflation may allow the Fed to cut rates, despite policymakers saying they are in no hurry to start that process. Stocks in Asia rose along with Treasuries, led by the Nikkei hitting a 33-year high with exporters enjoying the benefits of low rates and a competitive (weak) yen. With just a few days of trading left the positive momentum is likely to be maintained with focus on Thursday's US third quarter gross domestic product print and Friday's personal consumption expenditures - the Fed's preferred measure of inflation.


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

Equities: Mixed sentiment out of the Asian session with Nikkei 225 futures being the winner up 1.4% as the JPY gave back gains yesterday on remarks from BoJ Governor Ueda saying the market was wrong on its expectations for the central bank to lift policy rates into positive territory. FedEx shares declined 10% in extended trading hours as the company lowered its revenue guidance for FY24 and said that peak holiday season volume was like last year. Liquidity is coming down in equities with S&P 500 futures volume already around half of normal levels so expect little action with equity futures in Europe and the US cruising into the new year.

FX: After the BoJ kept its monetary policies unchanged, the post-Monetary Policy Meeting communication was deemed somewhat more dovish than anticipated. There were no hints of leaning towards ending its ultra-loose monetary policy in Q1 2024. As a result, USDJPY surged to a high of 144.96 before retracing to trade around 143.70 in Tokyo today.

Commodities: Crude oil extended its rally with the driver being the elevated risks posed by potential attacks from Yemen’s Houthi rebels on tankers passing through the Red Sea, a vital route between Europe and Asia. Brent crude oil trades near $80 with the rerouting of ships causing delays while raising supply concerns. Gold trades above $2040 and near the upper end of its current range with support at $2021 as the market continues to price in a succession of rate cuts in 2024, potentially starting as early as March. Coffee surged above $2 per pound for the first time since April on concerns about El Niño related heat damage in Brazil at a time where stocks are at a 24-year low.

Fixed income: Treasury yields finished the Tuesday session nearly unchanged, before falling a couple of basis points overnight. This stability occurred amid robust housing starts data, mixed messages from Fed officials regarding rate cut anticipations, and a dovish-leaning Bank of Japan. The 2-year yield trades at 4.42%, while the 10-year yield trades softer to sit just 2 bps above last week’s low point at 3.89%

Macro: As anticipated, the BoJ maintained short-term interest rates at minus 0.1% and 10-year JGB yields around zero per cent, with a 1% reference rate serving as the soft upper bound of the range The next BoJ Monetary Policy Meeting is scheduled for January 22-23. During the press conference on Tuesday, Governor Ueda noted that the BoJ would incorporate new information in its policy decision and could not completely rule out a policy surprise. Therefore, the January meeting remains a ‘live’ meeting." US housing starts increased 14.8% M/M to 1,560k in November, surpassing the median forecast of 1,360k. Building permits fell 2.5% M/M to 1,460k, slightly below the 1,465k projected. The surge in housing starts is largely due to an 18% increase in the single-family component.

Technical analysis highlights: S&P 500 uptrend extended, likely to test all-time high at 4,818. Nasdaq 100 testing all-time highs, likely to be taken out. DAX top and reversal pattern correction likely, support at 16,528 and 16,060. EURUSD likely to testing key resistance at 1.10 once again. USDJPY rebounding likely to 145.40, support at 141.55. AUDJPY above key resist at 96.10, uptrend resumed. Gold potential to 2,070.  WTI Crude oil rebounding could move to 77, Brent to 82. US 10-year T-yields below support at 3.95 next support at 3.83

In the news: Fed’s Bostic Says He Doesn’t See Urgency to Cut Interest Rates (Bloomberg), FedEx shares tumble 9% after weaker demand hit revenue outlook (CNBC), Oil rises 1% as Red Sea shipping concerns unnerve traders (Reuters)

Macro events (all times are GMT): UK CPI (Nov) exp 0.1% & 4.3% vs 0% and 4.6% prior (0600), US Existing Home Sales (Nov) exp. 3.78m vs 3.79m prior (1400), US Consumer Confidence (Dec) exp 104.5 vs 102 prior (1400), EIA’s Weekly Crude and Fuel Stock Report (1430),

Earnings events: Earnings releases today from Aurubus, General Mills, Toro, and Micron Technology. Our key focus is Micron Technology which reports FY24 Q1 earnings (ending 30 November) after the US market close with analysts expecting revenue growth of 11% y/y as consumer electronics demand is coming back and prices are improving for memory chips.

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

Quarterly Outlook

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

    Chief Investment Strategist

    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

    Chief Investment Strategist

    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.