Global Market Quick Take: Europe – October 2 2023 Global Market Quick Take: Europe – October 2 2023 Global Market Quick Take: Europe – October 2 2023

Global Market Quick Take: Europe – October 2 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US and European equity futures followed Asian stocks higher into Friday’s session following a bruising month that saw steep declines being driven by surging long-end bond yields and the Fed’s higher-for-longer message. Central Bank speakers and jobs data, will likely set the tone ahead of the weekend.


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

Equities: S&P 500 futures are bouncing back after two weeks of downward pressure with the index futures trading around the 4,344 level in early trading. Nike earnings results after the US market call lifted sentiment (shares were up 7% in aft-mkt) as the outlook on gross margin and revenue growth were better than feared by analysts.

FX: Dollar was muted on Friday but closed nearly unchanged with CAD leading declines but NZD in strong gains. USDCAD rose from lows of 1.3417 to 1.3585 as oil prices cooled into the quarter-end. NZDUSD rose to 0.6049 amid improved risk sentiment and weaker yields, before easing to sub-0.60 handle. AUDUSD also touched the 0.65 handle but reversed lower towards 0.64 in Asia today with China PMI’s over the weekend remaining subdued. Both RBA and RBNZ announce rate decisions this week and are expected to stay on hold. EURUSD back below 1.06 while USDJPY sees little respite, and continues to trade around 149.50, despite the lower Treasury yields.

Commodities: Crude oil prices resumed their ascent at the start of the week after slumping lower on Friday but having recorded the biggest quarterly advance since early 2022, and focus turns to Adipec summit in Abu Dhabi this week. Gold slumped by close to 4% last week, having broken below $1850 amid the relentless rise in long-end yields. Wheat plunged 6.4% on Friday to a three-year low at $5.415 after the USDA said domestic production was 4.5% higher than expected. 

Fixed income: US Treasuries might be supported by a lack of coupon supply this week. However, a missed government shutdown, job data, and a lack of demand from quarterly-end portfolio rebalancing leave the door open for another selloff. Last week, US Treasuries continued to tumble despite a benign PCE print, seeing core inflation falling below 4% for the first time in two years. We therefore believe that rising yields show that markets are discounting a higher permanent terminal rate. Despite a correction that might be due following last week’s rise in yields, we still expect 10-year yields to rise to 5% as selling pressure mounts. In focus these weeks are Powell and Lagarde speeches being delivered today and on Wednesday respectively.

Volatility: The CBOE Volatility Index fell for a second day as the underlying SPX index gained 0.6% to close around 4300.  The index closed at 17.34% down from a four-month high of 19.7% earlier in the week.

Macro:

  • US headline PCE met expectations as it rose to 3.5% YoY from July’s upwardly revised 3.4%, while the MoM print was higher at 0.4% (vs. 0.2% prior and 0.5% expected). Core PCE however cooled to 3.9% YoY as expected from 4.3% prior and 0.1% MoM from 0.2% prior and expected. Core services PCE ex-housing, Fed’s key measure, also cooled. Income and spending remained robust and there were also significant revisions to historical numbers, suggesting Q3 GDP growth in the US could remain strong and higher-for-longer could have more room to run.
  • Euro-area inflation dropped to 4.3% YoY from 5.2% in August, coming in below expectations of 4.5%. Core inflation fell to 4.5% from 5.3%, also below consensus expectations of 4.8%. While base effects and energy contributions were at play, downside surprise also came in core categories, suggesting ECB could stay on hold.
  • The US Congress passed a last-minute stop gap bill to keep the government running for 45 days. The deal, which doesn't include new Ukraine funding, keeps the lights on until November 17, buying time to negotiate a longer-term spending package but risks to speaker McCarthy’s job have increased.
  • China’s PMIs were in expansion territory for September signalling preliminary signs of a bottoming out in the economy. Manufacturing PMI came in at 50.2 vs. 49.7 in August, while non-manufacturing was at 51.7 vs 51.0 in August. However, expansion in Caixin PMIs moderated with manufacturing at 50.6 from 51 in August and services at 50.2 from 51.8 suggesting that private businesses and exporters still remain under heavy pressure. 

In the news: Accelerated slump in global container shipping rates (X), Wheat Set for Worst Quarterly Run in 14 Years on Ample Supply (Bloomberg), US, China talks gather momentum, paving way for Xi-Biden Summit- WSJ via Reuters. Nike jumps as inventory glut eases, profit beats estimates (Bloomberg).

Technical analysis: US and EU stocks Bearish trend: S&P500 rejected at 4,328 resistance. Nasdaq 100 below 100 Moving Average. DAX bearish rejected at 15,483. EURUSD bouncing from support at 1.05, could move to 1.0665. GBPUSD rebound possibly to 1.2353. USDJPY uptrend intact, eyeing 152. Crude oil correction? Brent key support at 91.80. 

Earnings events: No important earnings releases today.

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

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
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.