Details Cookies
Cookie Policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Global Market Quick Take: Europe – May 4, 2023 Global Market Quick Take: Europe – May 4, 2023 Global Market Quick Take: Europe – May 4, 2023

Global Market Quick Take: Europe – May 4, 2023

Macro 9 minutes to read
Saxo Strategy Team

Summary:  The FOMC meeting produced a downshift in forward guidance, but avoided pre-committing to a pause in tightening, deferring to incoming data. Alas, the market decided that the backdrop supports the idea of the Fed pausing here cutting rates more than 75 basis points by year-end. Equity markets ended the day lower, perhaps spooked by the ongoing downdraft in bank stocks and concerns for the economic outlook, but rebounded partially in a choppy overnight session. ECB on tap today.

What is our trading focus?

US equities (US500.I and USNAS100.I): will the market twist Fed’s arm?

Fed Chair Powell indicated a rake hike pause for now after hiking the policy rate by 25 basis points and the market quickly pushed expectations for the policy rate this year lower post the FOMC event as consensus is still looking for a recession to drive interest rates lower. A recession is based on real economic growth, but if the nominal growth remains high then the Fed may not deliver what the market wants this year, and this will be the ultimate tug of war for the rest of the year. S&P 500 futures declined yesterday, but this morning the index futures are attempting a rebound trading around the 4,109 level which is above yesterday’s close, so the market is locked in the trading range established since early April.

Chinese equities (HK50.I & 02846:xhkg): muted trading in A-shares and a moderate rally in Hang Sang Index

Mainland China returned from the Labor Day holiday and a mixed bag of economic data. Similar to the official NBS manufacturing PMI released earlier, today’s Caixin China manufacturing PMI fell below the expansion-contraction threshold to 49.5. On the other hand, travel and consumption data for the five days during the 5-day holiday period indicated a strong pick-up in consumption. Trading in mainland A-shares was muted and lacked directions, ticking down modestly in the early Asian afternoon. Hong Kong’s Hang Seng rallied around 1%, driven by gains in China insurance companies, banks, and pharmaceuticals.

FX: Broad dollar weakness with JPY outperforming

The US dollar weakness extended following the Fed rate decision as Treasury yields plunged at the front of the yield curve after a choppy reception of the policy statement and Powell press conference. The Japanese yen outperformed, with USDJPY near 134.50 this morning from 136+ levels yesterday recovering much of the gains since Friday’s dovish BOJ meeting. The ECB meeting in focus today and any dovish bent could mean a big reversal for EURUSD which is getting in close sight of 1.11 for now. GBPUSD also heading up towards 1.26, having reached its highest levels since June 2022. Commodity currencies were the weakest led by CAD as crude oil prices plunged further.

Crude oil: Today’s price action could be key

Crude oil prices trade higher after initially continuing yesterday’s slump into the Asian session. The combination of no liquidity and algorithmic sell signals briefly saw WTI sink as much as 7.2% to $63.64 before recovering. Whether it was the final capitulation of longs remain to be seen but today’s price action may be crucial to determine where we go next. Brent meanwhile only dropped 1.45% on the opening before recovering to trade higher on the day. The price action this week shows that short sellers are firmly back in control as the macroeconomic outlook continues to challenge expectations that 2H23 will see rising demand. Adding insult to injury, the EIA reported a big drop in gasoline demand while fuel stocks rose.

Gold reaches one-year high on Fed pause, but beware of looming shooting star

Gold prices hit their highest levels since March 2022 after reaching $2063 on the Asian open. Even as interest rates were raised further by the Fed last night, and Fed chair Powell poured cold water on expectations for rate cuts, the shift in tone nevertheless managed to buoy the market in anticipation of peak rates now being followed by cuts later this year. The Jun-Dec SOFR futures spread now points to an 83-bps cut this year followed by another 145-bps next year. In addition, raised geopolitical tension after an alleged drone attack on the Kremlin also adding some support. The path for Gold can be much choppier from here if inflation concerns return to challenge the mentioned rate cut expectations. Also in focus, the risk of a technical shooting star candle formation raising the risk of a technical pullback back towards the key $2k area.

US Treasuries rally (TLT:xnas, IEF:xnas, SHY:xnas) well bid from the front end to the belly to bull steepen

After a well-telegraphed 25-bp rate hike and the removal of the phrase “additional policy firming may be appropriate” and the implied tightening bias, the initial reactions in the Treasury market were muted. The market subsequently faded Powell’s remark that the Fed was not going to cut rates given the inflation forecasts the Fed had and saw yields lower. The coupon curve steepened with the 2-year through the 5-year notes being well-bid. The 2-year yield fell 16 bps to close at 3.80% while the 10-year yield shed 9bps to 3.34%, steepening the 2-10-year curve by 7bps to -47.

The announcement of USD96 billion refunding in total for the 3-year notes, 10-year notes, and 30-year bonds was as expected, The Treasury Department also announced a Treasury securities buyback program would be launched sometime next year. The Treasury has conducted consultation and issued reports over the past several months on its intention to do buybacks, aiming at improving liquidity and market functioning.

What is going on?

FOMC: Fed downshifts guidance on odds of further tightening

The Fed raised rates by 25bps to a range between 5-5.25%, as was widely expected, and opened the door to a potential rate pause for now, but adjusted the language to avoid any indication of pre-committing to a course of action. The prior language from its statement - “the Committee anticipates that some additional policy firming may be appropriate” was replaced it with this: “the extent to which more firming is needed will depend on economic data.” While Chair Powell hinted at the risk of a mild recession, he also reaffirmed that inflation is still well above its goal and there is a long way to go to bring it down. Market pricing turned dovish, with almost 80 bps in rate cuts priced for this year from just over 60bps ahead of the meeting despite Powell dismissing the likelihood of rate cuts this year.

Strong European earnings this morning

A lot of European companies are reporting earnings this morning. Equinor is beating on Q1 net income at $3.5bn vs est. $3.3bn driven by strong margins; the company says Europe is in a good position on gas. AB InBev is reporting Q1 organic EBITDA growth of 14% compared to 5% expected underscoring that consumer staples companies broadly can pass on inflation to consumers. ArcelorMittal reports Q1 EBITDA of $1.8bn vs est. $1.7bn as pricing conditions remain favourable and the steelmaker is still seeing 5% growth in shipments this year compared to 2022. Volkswagen and BMW are both reporting this morning with operating margins beating estimates with Volkswagen indicating likelihood of bullish guidance ahead. Novo Nordisk beats easily on both revenue and net income in Q1 against estimates with all drugs beating except for the highly demanded obesity drug Wegocy which is seen as the biggest growth driver ahead. Revenue growth is currently constrained by production capacity, but Novo Nordisk recently said that capacity should soon increase here in Europe. Maersk beats on Q1 EBIT and maintains guidance on FY EBIT of $2-5bn vs est. $3.3bn. Maersk sees FY container volume of –2.5% to +0.5%. Shell beats on Q1 profits and announces a $4bn buyback programme.

US data: Hot ADP Payrolls number, ISM Services steady at low levels

The US ISM services survey rose to 51.9 from 51.2 in April, marginally above the expected 51.8, which was largely due to a large increase in new orders to 56.1 (prev. 52.2). Employment remained in expansionary territory but fell to 50.8 (prev. 51.3), and prices paid ticked slightly higher to 59.6 (prev. 59.5). Labor market strength was also reaffirmed as April ADP showed jobs increased by 296k, above the expected 148k and March's addition of 142k. Initial claims data due today before the focus shifts to Friday’s non-farm payroll.

China's Labor Day holiday sees a strong recovery in tourism and consumption

China's cultural and tourism industry recovered strongly during the 2023 Labor Day holiday. The Ministry of Culture and Tourism estimated a total of 274 million domestic tourist trips, marking a 70.8% Y/Y increase and a 119.1% recovery compared to before the pandemic in 2019. Domestic tourism revenue also surged by 128.9% YoY and just above 2019 levels.  Key retailers and catering providers reported a sales growth of 18.9% Y/Y, according to the Ministry of Commerce's monitoring of high-frequency data. Sales of petroleum products and automobiles saw a surge of 24.4% and 20.9% respectively. The sales of jewelry and clothing grew by 22.8% and 18.4% Y/Y, respectively. Communication equipment sales increased by 20.1% Y/Y while home appliances sales increased by 13.9%.

What are we watching next?

ECB could downshift to a 25bps

The ECB announcement is due today, and consensus is looking for a downshift to a 25bps rate hike while the market is pricing in only slightly higher (29bps). Data this week on inflation remaining firm continues to make a case for another 50bps rate hike, as has also been hinted by several ECB speakers over the last few weeks, but the weakness in Q1 bank lending survey may warrant some caution as it highlights weakening credit demand.

Geopolitics on watch

Russia accused Ukraine of attempting to assassinate Russian President Putin via a drone attack, although they were shot down by Russia. Volodymyr Zelenskiy denied Russian allegations, while the US says to take the report with a "shake of salt", and they cannot validate reports. This brings risks of a step-up in conflict, and Deputy Chair of the Russian Security Council Medvedev has said the only response to such action is to eliminate Ukraine President Zelenskiy and his "clique".

What does ECB deliver today?

EURUSD is pinned at the cycle highs just below 1.1100 this morning ahead of the ECB meeting, which is expected to deliver a 25-basis point hike (a minority of observers expect a 50-bp move, with 29 basis points the current market pricing) followed by guidance for some further tightening. The forward curve prices the ECB to move another one or two hikes higher through the July or September meeting before pausing the tightening cycle. The current rate of QT, started in March, is EUR 15 billion/month, with a review set for June, meaning that it is likely too early for any signaling on QT plans.

Earnings to watch

Today’s US earnings focus is Apple, Booking, Fortinet with all three companies reporting after the US market close. Apple is expected to report FY23 Q2 (ending 31 March) revenue of $92.6bn down 5% y/y and EBITDA of $30.2bn down from $32.7bn a year ago. Booking is expected to Q1 revenue of $3.7bn up 39% y/y and EBITDA of $627mn up from $321mn a year ago as travel activity and future bookings continue to look strong. Fortinet is expected to report revenue of $1.2bn up 26% y/y and EBITDA of $312mn up from $175mn a year ago as the war in Ukraine continues to underpin the demand for cyber security.

  • Thursday: National Australia Bank, Anheuser-Busch InBev, Shopify, Novo Nordisk, Maersk, Volkswagen, BMW, Infineon Technologies, Uniper, Rheinmetall, Zalando, Shell, ArcelorMittal, Equinor, Apple, ConocoPhillips, Booking, Regeneron Pharmaceuticals, Zoetis, Becton Dickinson, EOG Resources, Ferrari, Fortinet
  • Friday: ANZ, Macquire Group, Enbridge, Canadian Natural Resources, Adidas, Intesa Sanpaolo, CaixaBank, Cigna Group

Economic calendar highlights for today (times GMT)

0715-0800 – Eurozone Final Apr. Services PMI
0800 – Norway Norges Bank
0900 – Eurozone Mar. PPI
1130 – US Apr. Challenger Job Cuts
1215 – ECB Rate Decision
1230 – Canada Mar. International Merchandise Trade
1230 – US Mar. Trade Balance
1230 – US Weekly Initial Jobless Claims
1400 – Canada Apr. Ivey PMI
1430 – EIA's Weekly Natural Gas Storage Change
1705 – Canada Bank of Canada Governor Macklem to speak
1815 – Canada Bank of Canada Governor Macklem to speak
0130 – Australia RBA Statement on Monetary Policy
0145 – China Apr. Caixin Services PMI


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

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 (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

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.