Global Market Quick Take: Europe – October 26 2023 Global Market Quick Take: Europe – October 26 2023 Global Market Quick Take: Europe – October 26 2023

Global Market Quick Take: Europe – October 26 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  Overnight, the MSCI Asia Pacific Index tumbled to its lowest in nearly a year while US futures extended declines as sentiment soured amid a batch of poor corporate earnings, led by Meta and Alphabet. The dollar trades near a one-year high against its major peers with traders on Bank of Japan intervention alert after the yen weakened beyond 150 while US Treasury yields hold most of Wednesday’s surge which was triggered by poor auction demand for five-year Notes. Gold trades near 2k, once again showing its credentials as an alternative investment amid rising financial risks as yields surge and investors worry about developments in the Middle East.


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

Equities: With yesterday’s big move in the US 10-year yield of 13 bps pushing the yield back above 4.95% equities sold off with the S&P 500 futures declining 1.4% closing just above the 4,200 level. This morning risk-off has continued with S&P 500 futures trading down at the 4,183 level. One driver seems to be the market recalibrating technology valuations amid rising real yields and that cycle could go on for a while. Meta reported Q3 earnings yesterday beating estimates, but investors were disappointed about the Q4 outlook with the revenue guidance range mid-point slightly below consensus estimates, Meta shares were down 3% in extended trading.

FX: Dollar extended gains with the run higher again in Treasury yields and a pickup in geopolitical worries. DXY still remains below 107 and US GDP data today could still bring further upside even as the positioning is stretched. USDCAD made its way above 1.38 despite higher oil prices and BOC keeping a hawkish bias. EURUSD testing 1.0540 and US GDP and ECB decision due today could bring it lower to test 1.05. USDJPY meanwhile is back above 150 printing fresh YTD highs of 150.48, raising intervention alert as noted in our FX note from today.

Commodities: Crude oil prices fell on Wednesday after the EIA reported a rise in stocks and soft demand, before surging on renewed Middle East concerns. The war premium will continue to ebb and flow with focus on whether Israel will start a ground operation inside Gaza. Gold trades higher towards $2k, once again defying rising yields and a stronger dollar as investors seeks shelter against the rising risk of a credit event caused by surging yields and market illiquidity. Copper closed lower and may be heading for a test of $3.55 support again despite China’s stimulus boost, suggesting it continues to fall short to lift sentiment.

Fixed income: The yield on US 10-year notes surged back towards 5% following hotter-than-expected US new home sales data with losses widened after a poorly received $52 billion 5-year auction heightened investors’ concerns about next week’s quarterly refunding (3-year notes, 10-year notes, and 30-year bonds) announcement. The yield of the current 2-year notes increased to 5.12%.

Volatility: While the VIX retreated for the last two days from a 7-month high, yesterday it rose back up to end at $20.19. Supported by its own volatility index (VVIX) going back above 100, markets continue to face elevated volatility and turmoil. S&P500 and Nasdaq futures also had a rough overnight session, declining -0.68% and -1.11% respectively, fueling the fear that the end is not yet in sight. Alphabet, Google’s parent, took a beating (-9.51%) after earnings. However, options volume signals that the market sees it as a buying opportunity, with considerable higher volume in calls compared to puts: 601,571 calls over 397,504 puts (P/C ratio 0.66). The Put/Call Open Interest (P/C OI) ratio of 0.80 is even more bullish than most other big tech companies.

Technical analysis highlights: S&P 500 below support at 4,195, can drop to 4,050. Nasdaq 100 downtrend likely to drop below 14K. DAX sliding lower, next support at 14,500. EURUSD resuming downtrend. USDJPY broken resistance at 150.16, next 152. Gold testing 1,985 resistance, still possible correction to 1,945-1,925. Copper once again bounced from key support at 354.50. US 10-year T-yields resuming uptrend, resistance at 5%

Macro: US new home sales surged 12.3% in September to 759k (prev. 676k), way above the expected 680k. Bank of Canada left rates unchanged at 5% as expected while it maintained guidance that it is prepared to hike rates further if needed and acknowledging that inflationary risks have increased. Germany IFO survey delivered a positive surprise, the IFO expectations index climbed to 84.7 from 83.1 in September. WSJ reported that Israel has agreed to delay its ground attack in Gaza in order for the US to assemble air defences to protect its troops in the Middle East, although Israeli PM later in a speech said that Israel is preparing for a ground invasion in Gaza, where the timing of such would be "reached by consensus" without giving further details; said Israel was doing everything possible to bring hostages home.

In the news: ECB’s Lagarde Says Fight Against Inflation Isn’t Over Yet (Bloomberg), U.S mortgage rates soar to highest in more than 23 years (Reuters), Israel Agrees to Delay Gaza Invasion to Allow U.S. to Prepare Defenses (WSJ), Trump ally Mike Johnson elected House speaker three weeks after McCarthy ouster (CNN), Japan's government is considering spending around $33 billion for payouts to low-income households and an income tax cut in a package of measures to cushion the blow to households from rising living costs (Reuters), Country Garden’s failure to pay interest on the note within a grace period that ended last week “constitutes an event of default,” according to a notice to holders from trustee (Bloomberg).

Macro events (all times are GMT): ECB Refinancing Rate exp 4.50% vs. 4.50% prior (1215), US GDP Advanced (Q3) exp 4.5% YoY vs. 2.1% prior (1230), EIA’s Weekly Natural Gas Storage Change (1430)

Earnings events: Amazon reports Q3 earnings today (aft-mkt) with analysts expecting revenue growth of 11.4% which will mark the third consecutive quarter of rising growth and EBITDA of $25.6bn up from $15bn a year ago driven by lower investments and cost cutting. Intel reports Q3 earnings today (aft-mkt) with analysts expecting revenue growth of -11.7% y/y, but the second consecutive quarter of revenue growth q/q as the personal computing market is stabilizing.

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.