Global Market Quick Take: Europe – 29 October 2024

Key points:

• Equities: Rally can’t hold yesterday ahead of gush of Q3 earnings reports
• Currencies: little movement in currencies, AUD weaker ahead of Q3 CPI
• Commodities: Crude and natural gas slump; gold holds firm with focus on US elections
• Fixed Income: US Treasury yields rise on weak auction demand
• Economic data today: US JOLTS Job openings and Consumer Confidence

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

The US Election is the biggest event risk of the year. Join our webinar: Trading the US election

Macro:

• The many ways the US election could yet shock markets. The inexorable tightening in the US election polls has continued as Harris’ lead versus Trump has narrowed to the narrowest margin since early August. Many believe from the faulty polling in the 2016 and 2020 elections that the polls always underestimate Trump’s chance of winning. But the pollsters have changed their ways, possibly improving their accuracy, but just as possibly making themselves wrong in new ways. Latest US election update here

Macro events (times in GMT):  Ger Nov Gfk Consumer Confidence (0700), Uk Sep Mortgage Approvals (0930), US Sept Wholesale Inventories (1230), US Sep JOLTS Job Openings (1400), US Oct Consumer Confidence (1400), Australia Q3 CPI (0030)

Earnings events: Banks continue to thrive in the current interest rate environment with HSBC and Banco Santander both reporting better than expected earnings results this morning. In the health care sector, Novartis is raising its fiscal year outlook for sales to low ‘double-digit’ growth rates. It was the third time this year that Novartis has raised its guidance as newer drugs are performing better than expected. Alphabet, Google’s parent company, is today’s main earnings result (reporting after the market close) with investors expecting the cloud business and YouTube to drive the results. Nvidia investors will also be scrutinizing the results of Alphabet as last quarter’s results from the big technology companies hinted of early signs that they are beginning to hold back on AI spending.

• Today: Alphabet, Visa, AMD, McDonald’s, Pfizer, PayPal, Banco Santander, BP, Novartis, Adidas, HSBC, Mondelez,
• Wednesday: Microsoft, Meta Platforms, Eli Lilly, AbbVie, Caterpillar, UBS, BASF, Volkswagen, Airbus, Booking, Carvana, Coinbase, Starbucks
• Thursday: Apple, Amazon.com, Mastercard, Merck&Co, Uber Tech, Intel
• Friday: Exxon Mobile, Chevron
• Next week: Berkshire Hathaway, Palantir, Qualcomm, Arm, Gilead, Airbnb

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

Equities: US equities had its second straight session yesterday of starting positively but ending the session close to the open. It is a signal that momentum right now is fading as we get closer to the US election on 5 November which is the biggest event risk of the year. Japanese equities extended their gains but remains around the same levels since March as investors are still finding it difficult to forecast central bank policies and the impact on non-US equities in the event Trump wins the US election. In Europe, focus on Volkswagen will continue as the German carmaker reported yesterday that it is closing three car manufacturing plants in Germany and cutting wages for workers in an attempt to shore up profitability as the European car industry remains in a weak demand environment. In the US, Boeing was one of the most traded stocks as the company has started its $19bn share sale to avoid a credit downgrade and weather the operational issues still haunting the airplane manufacturer.

Volatility: The VIX stands at 19.80, down 0.53 points (-2.61%) as of the latest update, indicating slightly tempered investor concerns. Notably, VIX1D dropped by a significant 31.31%, suggesting decreased short-term volatility expectations as markets digest the substantial earnings slate this week. In futures, ES and NQ show slight positive moves overnight, signaling tentative optimism. With several big tech and industry giants reporting, these factors are expected to play heavily into volatility in the coming sessions. Bitcoin-related stocks like MARA and MSTR remain highly active in options trading, reflecting the cryptocurrency’s push towards new highs and underscoring heightened speculative interest in the digital asset space.

Fixed Income: German bunds trimmed gains Monday as traders prepared for U.S. Treasury auctions. French bonds outperformed after Moody’s affirmed France’s Aa2 rating, with only the outlook lowered to negative from stable. UK gilts flattened and outperformed U.S. Treasuries in anticipation of Wednesday’s gilt remit which is likely to favour short-dated gilt issuance. Italian and French 10-year yields dipped slightly, with Italian yields at 3.49% and French yields at 3.01%. In the U.S., Treasury yields rose, particularly for shorter maturities, after weak demand in 2- and 5-year note auctions led to a tail. The 10-year yield increased to around 4.27%, trailing European bonds as markets digested these auction results.

Commodities: Crude prices remain under pressure after tumbling the most in more than two years as the geopolitical risk premium evaporated, and traders instead turned their attention to OPEC’s planned December increase of currently unwanted barrels. Natural gas followed suit with a near 10% decline as forecasts for warmer-than-normal temperatures across the US lowered the short-term outlook for demand. Gold trades up on the week, despite deflating risk premiums elsewhere, confirming the focus remains the US election and especially the prospect of a Trump 2.0 as it may bring greater policy disruption, trade tariffs, and increased geopolitical risks. A slew of economic data from the US this week, including growth and employment figures, should provide clues on the Federal Reserve’s rate-cut path, with the markets still pricing in with near certainty another rate cut on 7 November.

Currencies: Little volatility in currencies as the US treasury yield surge yesterday fizzled in overnight trading, leaving the USD/JPY exchange rate near 153.00 as currency watchers eye the Bank of Japan meeting on Thursday, US jobs report Friday and of course the US election next Tuesday. The Australian dollar dipped ahead of Australia reporting Q

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