Global Market Quick Take: Europe – 27 November 2023

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

Equities: Negative sentiment has gripped equity markets in Asia to start the week as Chinese statistical report showed industrial companies’ profits are still growing at a slower than expected pace suggesting a fragile Chinese economy. Hang Seng futures are down 0.4%. S&P 500 futures are trading slightly lower around the 4,555 level with little macro figures or earnings to move the market. This week’s key earnings releases are Crowdstrike (Tue), Snowflake (Wed), Pure Storage (Wed), Salesforce (Wed), Marvell Technology (Thu), and UiPath (Thu).

FX The dollar saw its first back-to-back weekly loss last week since July, despite higher Treasury yield, and it continued to slide further in Asia today, with the JPY trading back below 149 while the euro is attempting another challenge at key resistance at 1.0960, the 61.8 Fibo of the July to October correction. The Yuan meanwhile trades lower after industrial profits disappointment; however, the currency has gained in November and December for six straight years as exporters sell dollars ahead of year-end and Lunar New Year. Further advancement for the AUD has so far been prevented by resistance at the 200-day MA level, currently at 0.6585.

Commodities: Oil prices trade softer with Brent near $80 ahead of OPEC’s delayed Thursday meeting which was delayed due to a dispute over quotas, compliance and the overall level of production. A softer dollar saw gold briefly rally above $2010 resistance in Asia before trading back below while copper trades softer on lower-than-expected China industrial profits but overall, the price holds near key resistance at the 200-day moving average. Friday’s COT report delayed until today.

Fixed income: today the US Treasury is starting the week with a double coupon auction, selling $109 billion between 2- and 5-year notes. Tomorrow it will continue by selling $39 billion 7-year notes. That could continue to put upward pressure on yields. In terms of economic data, the focus is on US consumer confidence on Tuesday, core PCE index on Thursday and ISM manufacturing index on Friday. Key will be also the Eurozone CPI figures on Thursday.

Volatility: Market volatility has subsided to levels not seen since before the COVID-19 pandemic, with the VIX closing last week at $12.46, down from $13.80 the previous week. This week, however, could witness renewed volatility as a slew of key macroeconomic data, including GDP, CPI, PCE, and jobless claims, is scheduled for release. Expected moves for the S&P 500 and Nasdaq 100 this week are +/-37.21 (+/-0.82%) and +/-214.50 (+/-1.34%), respectively. VIX futures opened positively, trading at $14.05 (+0.2 | +1.45%) following their overnight session. Meanwhile, S&P 500 and Nasdaq futures dipped to 4554.75 (-13.50 | -0.30%) and 15953.00 (-68.00 | -0.42%), respectively.

Technical analysis highlights: S&P 500 likely to push to 4,607, expect correction. Nasdaq 100 short term correction likely, support at 15,744. DAX resist at 16,060. EURUSD at resist at 1.0945 and 0.618 retracement, likely setback. USDJPY hovering testing support at 149.00. GBPUSD above resistance at 1.2545, next 1.2745. Gold uptrend, resistance at 2,010, break above likely move to 2,040-2,070.  WTI Crude oil range bound 72.65-79.77, Brent 77.24-83.97. Copper at strong resistance at 382. 10-year T-yields bouncing from key support at 4.36.

Macro: US S&P manufacturing PMI fell back into contraction territory at 49.4 from 50.0, while services pushed a little further above 50 to 50.8 from 50.6. German IFO showed small improvements, suggesting stability rather than an upturn in the economy. Business climate improved to 87.3 from 86.9, coming in below 87.5 expected. Current assessment was at 89.4 from 89.2 previous and 89.5 expected while expectations rose to 85.2 from 84.8 previous and 85.8 expected. German Q3 final GDP confirmed the -0.1% q/q earlier estimates. ECB’s Lagarde was on the wires and suggested a wait-and-see approach. She said that “We have already done a lot,” and will be speaking again today. De Guindos and De Cos sounded the recession warning. Australia’s government will introduce a bill this week that would give the RBA’s independent expert members more responsibility for setting interest rates with a new specialist monetary policy board. Furthermore, the bill would implement the recommendations of the RBA review announced in April including switching to fewer meetings in a year and a dual mandate of price stability and full employment.

In the news: Rapid rise in exports from Turkey to Russia of military-linked components is putting Turkey in EU’s spotlight (FT). Mexico’s city Monterrey feels the effects of reshoring in a historic boom (FT). Beijing stock exchange tells major Chinese shareholders (above 5% ownership) to not participating in selling shares to avoid derailing a rebound in Chinese equities (Reuters). Black Friday Shoppers Set Online Spending Record, Adobe Says (Bloomberg), Nvidia delays launch of new China-focused AI chip (Reuters), China says respiratory disease surge driven by mix of pathogens, calls to ‘minimise personnel movement and visits (SCMP), The Yuan has gained in November, December for 6 straight years (Bloomberg)

Macro events (all times are GMT): ECB President Lagarde speaks in EU Parliament (14:00), US Oct New Home Sales (15:00) 723k vs 759k prior, US Nov Dallas Fed Manf Activity (15:30) -16.0 vs -19.2 prior.

Earnings events: Zscaler reporting FY24 Q1 (ending 31 October) earnings after the US market close with analysts expecting revenue growth of 33% y/y and EBITDA of $87mn up from negative $55mn a year ago.

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