Global Market Quick Take: Europe – July 5, 2023 Global Market Quick Take: Europe – July 5, 2023 Global Market Quick Take: Europe – July 5, 2023

Global Market Quick Take: Europe – July 5, 2023

Macro 5 minutes to read
Saxo Strategy Team

Summary:  US Markets were closed yesterday for a holiday, while European equities traded on the soft side after recent attempts at cycle highs in some markets. Japanese equities also edged lower. The FOMC minutes today may provide little drama, but incoming US data tomorrow and with Friday’s June jobs report will inevitably spark volatility, particularly if surprises drive a strong reaction in US treasury yields.


What is our trading focus?

US equities (US500.I and USNAS100.I): Waiting for Q2 earnings

US equities are coming today after yesterday’s holiday with Chinese equities expressing negative sentiment as the PMI services slowed further from the month before highlighting that the Chinese economy is still not rebounding. We expect a quiet trading session as the equity market is preparing for the Q2 earnings season that starts next week with earnings from JPMorgan Chase, Wells Fargo, and Citigroup on Friday.

European equities (EU50.I): focus on miners

STOXX 50 futures declined in yesterday’s low-volume trading session following China’s decision to introduce export controls on two critical raw materials, Gallium and Germanium, that are critical for semiconductor manufacturing and various military applications. As in the US, we expect a quiet trading sesion with some focus on miners as copper and iron ore fell in the Asian session.

FX: Dollar edges stronger, AUD wilts in Asian session

The US dollar edged back to the strong side in the Asian session, with AUD tilting broadly lower as the Chinese renminbi once again came under pressure and metals priced fell. Key local AUDUSD resistance comes in the 0.6700 area. The incoming US data in the days ahead will likely provide the spark for the next USD move, with the long end of the US yield curve in focus as the 10-year Treasury yield benchmark trades at the upper end of the persistent range capped just ahead of the 4.00% level. For EURUSD, the range supports around 1.0850 are a focus for the risk of a capitulation lower if strong US data drives a USD rally. USDJPY should also trade with high sensitivity to the direction in US treasury yields (higher yields = higher USDJPY) as the 145.00 round level has been a focus of late.

Crude oil: gains return as traders weigh Saudi output cuts

Oil prices gained in a thin trading session yesterday as traders contemplated further curbs in supply after the announcement that Saudi Arabia will extend its unilateral 1mb/d production cut into August. Meanwhile, Russia’s cuts have little impact on the market given it could continue to export oil to continue its war in Ukraine. China’s services PMI due today may be key for oil traders before focus shifts to FOMC minutes in the US session and labor market data in the rest of the week.

Gold: the 1930 re-test to continue

Gold prices re-tested the key $1930 level at the start of the week as dollar traded range-bounded due to the US holiday and manufacturing PMI release brought some inflation relief with the slide in prices paid component. Our technical analyst Kim Cramer has noted a bottom and reversal pattern in Gold after it bounced from 1900, and focus remains on $2000. Hawkish FOMC minutes later today may however cause some bumps, and labor market data from the US remains key this week.

Bonds: FOMC minutes, US data to push further inversion (2YYM3, 10YM3, 30YM3)

We expect the US yield curve to continue to flatten throughout summer. If inflation eases slowly and the economy remains resilient, long-term yields will continue to rise, with front-term yields soaring at a faster space, contributing to a further inversion of the yield curve. However, weaker than expected data on growth might provoke drops on the longer part of the yield curve providing an even faster flattening. Today the focus is on the FOMC minutes, and tomorrow it will turn on jobs data with the JOLTS numbers and non-farm payrolls on Friday. Ten-year Treasury yields remain in an uptrend on their way to 4%, and two-year yields are rising towards 5% as markets push expectations for rate cuts further in the future.

What is going on?

Meta’s Threads app could be a rival for Twitter

Meta plans to launch a Twitter-rivalling microblogging app called Threads, days after Twitter boss Elon Musk attracted criticism by announcing a temporary cap on how many posts users can read on the social media site. Threads is expected to be released on Thursday and will allow users to retain followers from photo-sharing platform Instagram.

China Caixin June Services PMI softer than expected

The Caixin Services PMI for June was out at 53.9 overnight, far below the 56.2 expected and the 57.1 in May. It was the weakest reading since January. Hong Kong shares trade lower as the Hang Seng Index continues to wind around its 200-day moving average.

Tesla China June deliveries up 20% from May

Total shipments of Tesla China is June were reported to be 93,860 cars from the Shanghai factory, preliminary data from China’s Passenger Car Association showed. That compares to 78,906 units shipped in June 2022 and 77,695 units in May. While PCA didn’t break out local deliveries and exports, Tesla typically focuses more on the domestic market in the last month of each quarter.

What are we watching next?

Important rest of the week ahead for US data

The rest of the week continues to deliver a string of key macro data, with FOMC minutes tonight not particularly in focus as the Fed is seen as reactive to incoming data. Tomorrow, the US reports the June ISM Services survey after May’s print was the worst for the cycle at 50.3. Another survey, the S&P Global Services PMI, on the other hand, registered its strongest reading in over a year in April at 55.0 and the initial June reading only dipped slightly to 54.1 (tomorrow sees the final reading for this survey). Tomorrow also sees the June ADP private payrolls data after a strong +278k reading in May. Finally, Friday brings the official June US labor market data, especially the Nonfarm Payrolls Change number after a strong surge in payrolls of +339k reported in May, while the Unemployment Rate is expected to dip back lower to 3.6% after an odd surge to 3.7% in May. Average Weekly Earnings/Hours are also in focus as these have both been on a declining trend since early 2022.

Technical update

  • S&P500.Likely to move higher to resistance at 4,546
  • Nasdaq 100 Close to testing strong resistance at 15,265. Close above potential to 15,653-15,882
  • DAX resuming uptrend. Could test all-time high
  • AEX25 closed above key resistance at 777. Room to 800 resistance
  • CAC40 testing key resistance at 7,403. If closing above likely move to all-time highs at 7,581
  • EURUSD rejected at 1.10. Range bound short-term between 1.08 and 1.10 but uptrend intact. Resistance at 1.11
  • GBPUSD below support at 1.2667. Could correct to 0.618 at 1.2515. Uptrend intact
  • USDJPY Uptrend to 146.60. Uptrend stretched. Resistance at 145.30
  • EURNOK rejected at rising trendline. Shoulder-Head-Shoulder reversal pattern could unfold
  • GOLD bottom and reversal pattern indicating downtrend is over. Short-term bounce to 1,964 could be seen

Earnings to watch

There are no important earnings releases this week. The Q2 earnings season starts next week with US banks kicking off the earnings season.

Economic calendar highlights for today (times GMT)

  • 0715-0800 – Eurozone Final Jun. Services PMI
  • 0830 – UK Final Jun. Services PMI
  • 1400 – US May Factory Orders
  • 1800 – US FOMC Minutes
  • 2000 – US Fed’s Williams (Voter) to speak
  • 0130 – Australia May Trade Balance

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

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)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/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.