Global Market Quick Take: Europe – 16 August 2024

Global Market Quick Take: Europe – 16 August 2024

Macro 3 minutes to read
Saxo Strategy Team

Key points:

  • Equities: Japanese equities fully recoup losses
  • Currencies: Dollar in third weekly retreat
  • Commodities: Copper supported as supply disruptions rise, a rare summer withdrawal support natural gas
  • Fixed Income: Strong US retail sales data trigger global bond market declines
  • Economic data: University of Michigan sentiment, US housing stats

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

In the news: Applied Materials delivers upbeat earnings guidance as Q3 results beat estimates (Investing), Walmart beats sales, raises outlook as higher-income consumers continue to turn to the retail giant (Yahoo), Latest economic data cools US recession worries (Yahoo), Alibaba revenue edges up to US$33.5 billion but misses estimate in June quarter (Yahoo), Political uncertainty may prod BOJ to pause, but not end, rate hike path(Reuters)

Macro:

  • US retail sales surprised on the upside, easing fears about a recession that had prompted markets to expect a 50bps rate cut from the Fed at the September meeting. Headline retail sales for July rose by 1.0%, well above the expected 0.4%. The core metric, ex autos, rose by 0.4%, above the 0.1% forecast while the prior was revised up to 0.5% from 0.4%. Super core, ex gas and autos, rose by 0.4%, easing from the prior 0.8%. The Retail Control, which feeds into the GDP, rose by 0.3%, above the 0.1% forecast and but slowing from 0.9% in June.
  • US weekly jobless claims also quelled fears about a rapid cooling in the labor market. Jobless claims for the week of August 10 slowed to 227k from 234k in the previous week and 235k expected. Still, claims data can be choppy around the summer months and focus remains on non-farm payrolls for August due on September 6.
  • Fed’ Bostic (voter) said he is open to a September rate cut as inflation cools and said as price pressures ease officials also need to be conscious of their mandate of maintaining full employment. Fed’s Musalem (2025 voter) added the recent data have bolstered his confidence on inflation, and the time may be nearing for a change in policy rate.
  • UK’s Q2 GDP came in as expected at 0.6% QoQ (vs. 0.7% prior) and 0.9% YoY (vs. 0.3% prior) signalling resilience in the UK economy. Private consumption was weak at 0.2% QoQ vs. 0.5% expected but that July retail sales out today could shed more light on the state of the consumer.
  • Australia’s July jobs numbers were upbeat with total employment at 58.2k for July coming in better than 20k expected, and full-time employment very healthy. Participation rate, however, jumped higher to 67.1% from 66.9%, pushing the unemployment rate higher to 4.2% from 4.1%.

Macro events (times in GMT): UK Retail Sales (Jul), exp 0.6% & 1.4% vs –1.2% & -0.2% prior (0600), US Housing Starts (July) exp 1333k vs 1353k prior (1230), US Building Permits (Jul) exp 1425k vs 1446k prior (1230), Uni of Michigan Consumer Sentiment (Aug) exp 66.9 vs 66.4 (1400). Fed’s Goolsbee speaks at 1100, 1725 & 2015.

Earnings events: Walmart shares rose 6.6% yesterday as the major US retailer raised its outlook on both revenue and profits. In addition, losses in its e-commerce business are coming down, adding to a positive development on the bottom line. Applied Materials shares gained 5% in the primary session before giving most of it up as its earnings results and revenue guidance were a bit weaker than estimated. Deere’s earnings results surprised despite a weak backdrop in global agricultural fundamentals with shares gaining 6%. There are no major earnings releases today.

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

Equities: Japanese equities are up another 3.6% today extending the gains to 21% from the lows 8 trading sessions ago. Japanese equities have now recouped the losses from the JPY carry trade fallout and subsequent global selloff. Futures are pointing to a higher open in Europe and the US. The equity market sentiment was bolstered yesterday by strong US July retail sales and initial jobless claims declining back to levels below 230k reaffirming that the US labour market remains strong enough despite some weakness. Today’s focus is on US July housing starts and Michigan August sentiment. In Europe, investors will focus on earnings from NKT and Nibe Industrier. Nike could also be in focus today as the hedge fund Pershing Square has taken a share in Nike lifting the shares 5% yesterday and making Nike one of the most trade stocks.

Fixed income: On Thursday, U.S. Treasury yields surged, leading to a sharp flattening of the yield curve. This movement was driven by stronger-than-expected retail sales data and lower-than-anticipated weekly jobless claims. Short-term yields jumped by up to 14 basis points, while 30-year yields rose by about 5 basis points. The market's response reflected a reduced likelihood of a significant Federal Reserve rate cut in September, with bond futures now pricing in a 32 basis point cut, down from 50 basis points last week. European bond markets also declined following the U.S. data. German 10-year yields increased by 8 basis points to 2.26%, while UK 10-year yields rose by 10 basis points to 3.93%, the largest jump since July 1st, as traders reassessed expectations for rate cuts by the ECB and the Bank of England. Markets are now pricing in a 65 basis point rate cut by the ECB and a 40 basis point cut by the BOE by the end of the year. Today the focus shifts on the University of Michigan Sentiment, while markets prepare for next week's European CPI numbers.

Commodities: Industrial metals shrugged off weak Chinese economic data to push higher, with copper heading for a 3.4% weekly gain as strike action at BHP’s Escondida mine in Chile entered a third day, impacting 5% of global supply. Lundin, another miner operating in Chile, has also been forced to lower production. Gold dipped following a strong set of US data, only to bounce back with bulls focusing on a September rate cut, and not the actual size of it. Brent crude, the global benchmark, is heading for a second weekly gain after rebounding from a seven-month low. The market remains on alert for developments in the Middle East, as Israel entered talks about pausing the conflict in Gaza. US natural gas was underpinned by the first summer withdrawal of stocks in six years, but strong demand through late summer heat and production restraint are still needed to underpin prices.

FX: The US dollar is heading for a third, albeit small, weekly decline with the Bloomberg Dollar Index trading near a four-month low. This week it has faced two opposing forces, with rising Treasury yields pushing it higher but offset by reduced recession concerns supporting a risk-on sentiment and pushing the US dollar lower. The Japanese yen, however, suffered on both accounts and has retraced all its gains since recession concerns first picked up with the July US jobs report on August 2. Activity currencies, however, saw a sharp rebound after the initial US retail sales-driven decline. UK’s pound as well as Australian dollar were eventually higher against the US dollar, while the euro near €1.10 may record its highest weekly close this year.

For a global look at markets – go to Inspiration.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.