Global Market Quick Take: Europe – 5 December 2023 Global Market Quick Take: Europe – 5 December 2023 Global Market Quick Take: Europe – 5 December 2023

Global Market Quick Take: Europe – 5 December 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US equity futures lower thereby continuing the general weakness seen on Monday, especially in Big Tech after markets re-evaluated the pace of Fed rate cuts priced in for 2024, pushing Treasury yields and the dollar higher. Gold made a sharp retracement from a fresh record high but managed to hold key support. The percentage of S&P 500 stocks trading above their 50-day moving averages has surged to 84% indicating broad participation during the recent rally. In focus today we have US JOLTS jobs data and ISM services.


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

Equities: Chinese equities are in a tailspin with Hang Seng futures down another 2.7% driven by renewed weakness among real estate related stocks. The Politburo is expected to hold key meetings this month setting the policy goals for next year and these meetings will be scrutinized by investors as China is currently a drag on global growth. Yesterday’s session saw investors reversing bets on Fed policy cuts and the US 10-year yield rose cooling S&P 500 futures which are still hovering around the 4,600 level. In Europe, investors will focus on ailing Nokia which yesterday lost a deal to Ericsson on revamping AT&T’s network worth $14bn causing its shares to slide 6.5%.

FX: Dollar firmed up to start the week as Treasury yields rose and markets re-considered whether the extent of rate cuts priced in for next year could be possible. NOK underperformed amid lower oil prices, while the AUD slipped as the Reserve Bank of Australia held interest rates steady and its comments on inflation suggested a dovish tilt.  USDJPY rose back above 147 but EURJPY was steady around 159.50 as EURUSD pushed lower to test the 1.08 handle with little reaction to Lagarde’s speech. EUR bearish case is likely to build up here as noted in yesterday’s FX note.

Commodities: Broad selling seen in commodities yesterday amid a risk-off tone and dollar strength. Crude oil steadied after a three-day loss as Saudi Arabia said recent cuts would be honoured and could be extended. Yet, the market continues to move towards contango, highlighting a well-supplied market currently. Gold touched all-time highs of $2,135/oz before reversing back to $2,020 as yields and dollar rebounded, and the market took a raincheck on the number of expected 2024 rate cuts. Copper slumped but has so far managed to hold above its 200DMA a $3.8165 as supply concerns supports and China PMI beat estimates.

Fixed income: The US yield curve shifted slightly higher as markets wrapped their heads around expectations of five rate cuts next year. The Treasury sold $75 billion of three-month bills and $68 billion of six-month bills yesterday. However, the latter was poorly received by investors as it offered a yield well below the lower bound of the Fed Fund rate. The auction tailed by 1.5bps, and it recorded the smallest indirect bidders award since March. It shows that investors are not rushing to extend maturity despite bond futures indicating an imminent rate-cut cycle. Today the market will focus on services PMI, ahead of the job numbers attracting investors’ attention for the rest of the week.

Volatility: Volatility, measured by the VIX, rose $0.45 (+3.56%) to $13.08, pushing stocks lower. The VVIX rose 1.86 (+2.17%) to 87.76, showing some nervosity coming back into the markets. The Gold Volatility Index (GVZ) remained at elevated levels after the initial optimism of multiple anticipated rate cuts in 2024, to 17.13 (up from 14.24 yesterday morning). VIX futures also went slightly higher during the nightly session, up 0.150 (1.08%) to 13.950. S&P 500 and Nasdaq 100 futures continued to decline overnight to 4562.50 (-14.25 | -0.31%) and 15802.00 (-67.00 | -0.42%) respectively.

Macro: US factory orders fell more than expected in October, dropping 3.6%, flipping from a downwardly revised 2.3% gain in September. Japan’s Tokyo CPI cooled considerably with the headline out at 2.6% YoY vs. prev. 3.2% YoY and expected 3.0%. Core CPI slowed to 2.3% YoY from 2.7% previously but core-core measures, although cooled to 3.6% from 3.8%, but remained well above the BOJ’s 2% target. The Reserve Bank of Australia held interest rates steady with a neutral-to-dovish tilt in commentary amid lack of data, leaving market unimpressed as a hawkish hold was priced in. This opens the doors for dovish repricing of the RBA curve for 2024, where only one rate cut is priced in vs. Fed’s five.

Technical analysis highlights: S&P 500 eyeing 4,800. Nasdaq 100 short term correction likely, support at 15,744. DAX uptrend stretched, likely correction to 16K. EURUSD testing minor support at 1.0825, strong support 1.0755. USDJPY downtrend, minor support at 146.30 strong at 145. GBPUSD rejected at 1.2745, support at 1.2545 & 1.2445. Gold correction likely to 2,032 maybe 2,009.  WTI Crude oil range bound 72.65-79.77, Brent 77.24-83.97. Copper back below support at 382but uptrend intact. 10-year T-yields support at 4.20

In the news: Spotify to cut 1,500 jobs in third layoff round this year, shares jump (Reuters), Bitcoin Surges Past $42,000 Even as Stocks and Bonds Take a Hit (Bloomberg), COP28 Latest: Kerry Tells Big Emitters They Can No Longer Hide (Bloomberg), US funding for Ukraine set to run out by end of the year, White House warns (FT).

Macro events (all times are GMT): EZ/UK/US Composite/Services Final PMI (Nov), EZ Producer Prices (Oct) exp 0.2% & -9.5% vs 0.5% & -12.4% prior (0900), US ISM Services PMI (Nov) exp 52.3 vs 51.8 prior (1400), US JOLTS Job Openings (Oct) exp 9300k vs 9553k prior (1400)

Earnings events: Earnings releases today from Ashtead, AutoZone, Ferguson, SentinelOne, MongoDB, and Toll Brothers. Our earnings focus is on Toll Brothers reporting FY23 Q4 (ending 31 October) earnings after the US market close with analysts expecting revenue growth of -25% y/y and EBITDA of $595mn down from $735mn a year ago.

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

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.