Global Market Quick Take: Europe – 29 August 2024

Key points:

• Equities: Nvidia shares down 7% in extended trading despite strong outlook
• Currencies: Dollar bounce loses steam; NZD hits January high
• Commodities: Crude steadies and gold climbs
• Fixed Income: Austria halts 2086 bond sale amid weak demand
• Economic data: EZ Consumer Confidence & US Jobless Claims

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

In the news: Nvidia's outlook fails to impress growth-hungry investors, shares fall (Reuters), CrowdStrike cuts forecasts as Windows outage weighs on new deals (Yahoo), Salesforce beats quarterly estimates on cloud demand, says CFO to step down (Yahoo), Super Micro stock plunges 19% after company delays annual report following short-seller report (Yahoo), Fed's Bostic: it is 'time to move' on rate cuts, but wants to be sure (Yahoo), Warren Buffett's Berkshire Hathaway just hit a $1 trillion market cap (Quartz), EU new car sales flat in July as battery-electric slumps, industry body ACEA says (Reuters)

Macro:

• Atlanta Fed President Bostic said that there is some distance to go on inflation while labour market is quite strong by historical standards. But he thinks that inflation has come down too fast and unemployment has risen too fast which could mean that time may have come to cut rates next month, but he’s still looking for more data.
• Australia’s July inflation came in higher-than-expected at 3.5% YoY but disinflation was confirmed from prior month’s 3.8%. Core inflation measures provide a clearer picture of disinflation. Trimmed mean CPI declined to 3.8% YoY from 4.1% in June and CPI excluding volatile items and travel decreased to 3.7% YoY in July from 4.0%.
• New Zealand business confidence surged to a 10-year high in August after the central bank began cutting interest rates, according to an ANZ Bank survey. A net 50.6% of respondents expect the economy to improve in the next year, up from 27.1% in July, that’s the highest reading since May 2014. A gauge of how businesses view their own activity climbed to a seven-year high. The RBNZ cut the Official Cash Rate on Aug. 14, much earlier than it had previously signaled.

Macro events (times in GMT): Eurozone Consumer Confidence (Aug final) exp 5.2 vs 4.8 prior (0900), Germany CPI (Aug) exp 2.1% YoY vs 2.3% prior (1200), US Initial Jobless Claims exp 232k vs 232k prior (1230), US Continued Claims exp 1870k vs 1863k prior (1230), US Pending Home Sales (Jul) exp 0.2% MoM vs 4.8% prior (1400), EIA’s Weekly Natural Gas Storage Change, exp. 33 bcf vs 35 bcf prior (1430), US to sell USD 44 bln 7-year Treasury Notes (1700)

Earnings events: Nvidia reported better-than-expected FY25 Q2 revenue and earnings and issued Q3 revenue guidance above the median consensus estimate. Nvidia has added a bit more colour on the new Blackwell chip and what had gone wrong in the design process indicates that costs could be a bit higher than normal during production of a new chip. Nvidia also stated that they are seeing great indications of demand for the new Blackwell chip which will begin production in the fiscal Q4 which ends in January 2025. Despite good results, Nvidia shares declined 7% in extended trading. Read our quick take on Nvidia from last night here. Salesforce shares rose 4% in extended trading as profitability improved yet again on strong cost focus with the lower FY EPS guidance raised from $9.86 to $10.03. CrowdStrike shares fell 3% in extended trading after the much anticipated earnings result after the disastrous fallout of its cyber security platform in July causing huge problems for many companies related to their Internet services. Despite the market reacting negatively to the results the fiscal year guidance on revenue was also reduced by 3%, which is not dramatic, while the downward revision for earnings was larger at 12%. The bearish investors on CrowdStrike would say that the company did not provide enough clarity about the fallout means for the business longer term.

• Today: Dell Technologies, Marvell Technology, Pernod Ricard, Lululemon, Autodesk

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

Equities: The 7% decline in Nvidia shares after its results took US equity futures lower overnight, but they have already recovered 0.7% and now indicating a flat open relative to yesterday case session closing price. Futures are pointing to a 0.3% higher open in Europe. Today’s focus in the US session will be on Nvidia, Salesforce, and CrowdStrike after their respective earnings results after the US market close. H&M is a heavily traded stock in the European session today after its weak earnings result two days ago.

Fixed income: Yesterday, Austria's decision to step back from a syndicated sale of a 2086 maturity bond due to insufficient demand at current yield levels was notable. At the same time, eurozone bank lending remained muted, and a survey indicated that German firms are increasingly planning to reduce headcount. This news triggered a flight to safety, resulting in a bull flattening of the German yield curve. Markets kept expectations for ECB rate cuts steady, with investors awaiting upcoming inflation data from Germany and Spain. Across the Atlantic, U.S. Treasury yields closed higher, with long-term yields rising by up to 2 basis points. The price movements lacked a clear catalyst during the U.S. session, as investors anticipated NVIDIA's earnings report. Mixed pressures on yields emerged from declining oil prices and the impending $44 billion 7-year note auction. Earlier, the 5-year note auction saw solid demand, with a notable decrease in direct bidders offset by a rise in indirect bidders. However, the auction tailed by 0.3 basis points, leaving Treasuries slightly softer overall. By the end of the day, yields were slightly higher across the curve, with the 10-year yield closing at 3.83% and the 2-year yield at 3.86%.

Commodities: Crude oil has steadied after a two-day drop as supply concerns over Libya offset the soft demand focus and a smaller-than-expected draw in US crude stocks. The failure to break above the 200-day moving average on Monday, when Libya’s eastern government announced a production and export halt, led to technical selling, which is now showing signs of fading. Gold’s ability to hold onto recent gains continues, with prices moving up following yesterday’s stronger dollar-driven setback, which saw fresh demand emerge just below USD 2,500, well ahead of key support. Silver, meanwhile, suffered a bigger correction after being rejected above USD 30 and as the recent industrial metal rally paused, with copper leading the metals lower on lingering concerns over demand after BHP, the world’s biggest miner, cut its forecast for Chinese demand this year and warned of a modest surplus.

FX: The US dollar recovered strongly on Wednesday before stumbling overnight as a risk-off mood took hold as Nvidia slumped after failing to meet lofty expectations. The star performer in Asia today was the Kiwi dollar which reach a January high, extended its post August 14 rate cut rally after an ANZ Business survey showed confidence jumping to a ten-year high. The Australian dollar was also one of the outperformers with Australia’s July inflation report yesterday potentially ruling out an RBA pivot in September before more key quarterly inflation data is reported in October. We discussed the impact of the Aussie inflation report on Australian dollar in this article. The Canadian dollar also reversed lower from over five-month highs, as we discussed in this article that the rally remains at odds with fundamentals. The euro had most to lose on a stronger US dollar after its recent gains, and focus will be on CPI from Spain and German states ahead of the Eurozone print due on Friday.

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