Global Market Quick Take: Europe – 20 December 2023

Global Market Quick Take: Europe – 20 December 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US stock futures trade steady following fresh advances on Tuesday after robust housing starts print added to the optimism of a resilient US economy while moderation in inflation may allow the Fed to cut rates, despite policymakers saying they are in no hurry to start that process. Stocks in Asia rose along with Treasuries, led by the Nikkei hitting a 33-year high with exporters enjoying the benefits of low rates and a competitive (weak) yen. With just a few days of trading left the positive momentum is likely to be maintained with focus on Thursday's US third quarter gross domestic product print and Friday's personal consumption expenditures - the Fed's preferred measure of inflation.


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

Equities: Mixed sentiment out of the Asian session with Nikkei 225 futures being the winner up 1.4% as the JPY gave back gains yesterday on remarks from BoJ Governor Ueda saying the market was wrong on its expectations for the central bank to lift policy rates into positive territory. FedEx shares declined 10% in extended trading hours as the company lowered its revenue guidance for FY24 and said that peak holiday season volume was like last year. Liquidity is coming down in equities with S&P 500 futures volume already around half of normal levels so expect little action with equity futures in Europe and the US cruising into the new year.

FX: After the BoJ kept its monetary policies unchanged, the post-Monetary Policy Meeting communication was deemed somewhat more dovish than anticipated. There were no hints of leaning towards ending its ultra-loose monetary policy in Q1 2024. As a result, USDJPY surged to a high of 144.96 before retracing to trade around 143.70 in Tokyo today.

Commodities: Crude oil extended its rally with the driver being the elevated risks posed by potential attacks from Yemen’s Houthi rebels on tankers passing through the Red Sea, a vital route between Europe and Asia. Brent crude oil trades near $80 with the rerouting of ships causing delays while raising supply concerns. Gold trades above $2040 and near the upper end of its current range with support at $2021 as the market continues to price in a succession of rate cuts in 2024, potentially starting as early as March. Coffee surged above $2 per pound for the first time since April on concerns about El Niño related heat damage in Brazil at a time where stocks are at a 24-year low.

Fixed income: Treasury yields finished the Tuesday session nearly unchanged, before falling a couple of basis points overnight. This stability occurred amid robust housing starts data, mixed messages from Fed officials regarding rate cut anticipations, and a dovish-leaning Bank of Japan. The 2-year yield trades at 4.42%, while the 10-year yield trades softer to sit just 2 bps above last week’s low point at 3.89%

Macro: As anticipated, the BoJ maintained short-term interest rates at minus 0.1% and 10-year JGB yields around zero per cent, with a 1% reference rate serving as the soft upper bound of the range The next BoJ Monetary Policy Meeting is scheduled for January 22-23. During the press conference on Tuesday, Governor Ueda noted that the BoJ would incorporate new information in its policy decision and could not completely rule out a policy surprise. Therefore, the January meeting remains a ‘live’ meeting." US housing starts increased 14.8% M/M to 1,560k in November, surpassing the median forecast of 1,360k. Building permits fell 2.5% M/M to 1,460k, slightly below the 1,465k projected. The surge in housing starts is largely due to an 18% increase in the single-family component.

Technical analysis highlights: S&P 500 uptrend extended, likely to test all-time high at 4,818. Nasdaq 100 testing all-time highs, likely to be taken out. DAX top and reversal pattern correction likely, support at 16,528 and 16,060. EURUSD likely to testing key resistance at 1.10 once again. USDJPY rebounding likely to 145.40, support at 141.55. AUDJPY above key resist at 96.10, uptrend resumed. Gold potential to 2,070.  WTI Crude oil rebounding could move to 77, Brent to 82. US 10-year T-yields below support at 3.95 next support at 3.83

In the news: Fed’s Bostic Says He Doesn’t See Urgency to Cut Interest Rates (Bloomberg), FedEx shares tumble 9% after weaker demand hit revenue outlook (CNBC), Oil rises 1% as Red Sea shipping concerns unnerve traders (Reuters)

Macro events (all times are GMT): UK CPI (Nov) exp 0.1% & 4.3% vs 0% and 4.6% prior (0600), US Existing Home Sales (Nov) exp. 3.78m vs 3.79m prior (1400), US Consumer Confidence (Dec) exp 104.5 vs 102 prior (1400), EIA’s Weekly Crude and Fuel Stock Report (1430),

Earnings events: Earnings releases today from Aurubus, General Mills, Toro, and Micron Technology. Our key focus is Micron Technology which reports FY24 Q1 earnings (ending 30 November) after the US market close with analysts expecting revenue growth of 11% y/y as consumer electronics demand is coming back and prices are improving for memory chips.

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

Quarterly Outlook

01 /

  • 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

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

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

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

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.