Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Global Market Quick Take: Europe – 19 November 2024
Saxo Strategy Team
Key points:
Equities: US markets rebounded modestly; HSI rose 0.8%; Europe ended slightly lower
Volatility: Nvidia earnings tomorrow expected to drive market swings
Currencies: USD eases lower as US treasury yields dip slightly. Sterling eyes CPI tomorrow.
Commodities: Gold and crude rebound on dollar softness and geopolitical tensions
Fixed Income:US Treasuries rebound as European bonds fall on reduced ECB rate cut expectations.
Macro events: US Housing Data and Canadian CPI, China rate announcement
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Macro data and headlines:
RBA minutes indicated a continued restrictive policy until inflation targets are met. The RBA remains open to future adjustments, with markets not expecting a rate cut until May, and February at 38% probability.
Trump 2.0 cabinet announcements remain in focus as a clear gauge of the agenda starting January. After getting the China hawks in key trade roles and emphasising tariff policy, Trump has picked the CEO of Liberty Energy Chris Wright, a vocal advocate of oil and gas development, as the Energy Secretary. Trump team is also considering pairing former Fed governor Kevin Warsh in the Treasury secretary role with Scott Bessent as director of the White House’s NEC. Former Congressman Sean Duffy was tapped for Transportation. We discuss more about Trump’s cabinet cabinet nominations in this article.
Bank of Japan’s Governor Ueda held a press conference yesterday but avoided giving any clear signals on the potential for a December rate hike. This was interpreted by the market to be less dovish than expected as there was a clear lack of urgency on further policy normalization.
There was a slew of ECB speak but the highlight came from Makhlouf who stated that evidence would need to be "overwhelming" for him to back a 50bps rate cut next month. Money markets are currently pricing in a 25% chance of a 50bps cut in December, although rate expectations are likely be further fine-tuned by Friday's flash PMI data.
A run of robust U.S. data combined with expectations of faster inflation under Trump's higher-tariff, tighter-immigration policies have seen bets for a December rate cut pared to around 58% on CME FedWatch, from greater than 65% odds a week ago.
Macro events (times in GMT): UK Bank of England Governor Bailey and others to speak (1000) Eurozone Oct (Final) CPI (1000), US Oct. Housing Starts and Building Permits (1330), Canada Oct CPI (1330) China Rate Announcement (0100)
Earnings events:
Tuesday: Lowes, Medtronic, Walmart, Dollar Tree
Wednesday: TJX Companies, Target, Nvidia, Palo Alto Networks
Thursday: Intuit, PDD Holdings, Deere & Co.
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities:
US: The S&P 500 rose 0.4% and Nasdaq 100 gained 0.7% as markets rebounded from last week’s declines, led by Tesla’s 5.6% rally on plans for a federal framework for self-driving regulations. That same news saw Uber dropping heavily yesterday, down over 5%. Super Micro surged 40% postmarket after resolving compliance issues with Nasdaq and hiring a new auditor. However, the Dow slipped 0.13%, marking its fourth loss in five sessions. Palantir dropped nearly 7% after a board member deleted his X account, after having posted about moving the stock to the Nasdaq exchange next week, the rationale being it would “force billions in ETF buying” among retail traders.
Hong Kong: The HSI climbed 0.8%, snapping a six-day losing streak as Beijing encouraged companies to boost share prices through buybacks and dividends. Gains in tech and consumer sectors offset lingering pressure from weak economic data and Morgan Stanley’s downgrade of Hong Kong equities to "underweight."
Europe: European indices closed slightly lower, with Stoxx 50 down 0.2% and Stoxx 600 slipping 0.1%. Retail stocks fell 0.9%, dragging markets, while miners gained 0.6%. Key names like Novo Nordisk and ASML saw losses, while SAP, LVMH, and Nestlé posted modest gains. Caution lingered as investors awaited wage growth and inflation data.
Volatility: Market attention has shifted to Nvidia’s earnings tomorrow, expected to drive significant volatility given its central role in the AI sector. Options activity has been elevated in names like Palantir and Super Micro, reflecting momentum from recent news. While today’s economic calendar is quiet, Nvidia’s report may overshadow macroeconomic events like inflation or employment reports in its impact on market sentiment.
Fixed Income: US Treasuries gained on Monday, reversing early losses. The 10-year yield, which touched a high of 4.49%, ended near session lows at 4.41%, with gains led by the belly of the curve. This occurred despite strong issuance in corporate bonds and rising oil prices. European sovereign bonds saw losses, particularly in German short-term yields, as traders reduced expectations for ECB rate cuts following hawkish comments from policymakers. The German 2-year yield rose 5 basis points to 2.18%, and money markets now price 29 basis points of ECB cuts in December, down from last week’s estimate. The 10-year Bund yield edged up 1 basis point to 2.37%, while spreads between Italian and German bonds remained steady.
Commodities: Gold and silver prices rebounded strongly on Monday following losses in the previous six sessions, while crude posted its biggest gains in five weeks. Gains in both were supported by a softer dollar and worsening US–Russia relations after the US approved Ukraine's use of long-range missiles against Russia. The latter lifting wheat prices on concerns of an escalating war in the Black Sea breadbasket region. Industrial metals rose, led by aluminium, after China cancelled tax relief on exports of copper and aluminium, but overall, the spectre of trade war and tariffs hanging over the global economy may limit the upside for now. Iron ore rebounded strongly, pushing back above USD 100/t amid signs of stronger demand, potentially driven by industries front running anticipated tariffs on Chinese steel next year.
Currencies: The US dollar continued to back off its recent strength, with EUR/USD pulling as high as 1.0600 and USDCAD finally finding a ceiling in the 1.4100 area yesterday before dropping back toward 1.4000. AUDUSD pulled back above 0.6500 on a bounce in industrial metals. The JPY firmed slightly as US treasury yields eased lower. Sterling will eye key inflation data tomorrow after dipping to new local lows versus the euro and the US dollar
For a global look at markets – go to Inspiration.
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