Global Market Quick Take: Europe – 3 December 2024

Global Market Quick Take: Europe – 3 December 2024

Key points

• Equities: Global equities mostly rose, led by tech gains in the US and Asia
• Volatility: Volatility remains muted, with focus on upcoming US job data
• Currencies: Euro stays weak on French political turmoil
• Commodities: Gold bounces despite dollar strength. Coffee slumps on margin calls
• Fixed Income: OAT-Bund spread widens amid Political Turmoil as US Treasuries Flatten on Rate Cut Signals
• Macro events: US JOLTS Job Openings

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

Macro data and headlines

• The US ISM Manufacturing PMI rose to 48.4 from 46.5 and above the 47.5 consensus. New orders returned to expansion, rising from 47.1 to 50.4 while production rose to 46.8 from 46.2, prices fell to 50.3 from 54.8 and employment rose to 48.1 from 44.4. It was a goldilocks report that boosted sentiment on the state of the US economy.
• Fed’s Chris Waller stated he leans towards supporting a cut in December, although added that one could argue a case for skipping a rate cut and that he will be watching data closely to decide. Waller is an influential member and his dovish-leaning comments sparked market optimism. Other Fed members like John Williams and Raphael Bostic also hinted at a December Fed rate cut.
• Marine Le Pen’s far-right party pledged to topple French PM Michel Barnier’s government after he used a constitutional tool to push through parts of his budget bill without a parliamentary vote. Reuters reported that a no-confidence vote may be likely Wednesday. If the no-confidence vote passes (and nothing is certain in French politics) Barnier would have to tender his resignation. However, Reuters reports that "Macron may ask him and his government to stay on in a caretaker role to handle day-to-day business while he seeks a new prime minister, which could well happen only next year."
• China’s top leaders plan to start the annual closed-door Central Economic Work Conference next Wednesday to map out economic targets and stimulus plans for 2025

Macro events (times in GMT): US JOLTS Job Openings (1500), API’s Weekly Crude and Fuel Stock Report (2100)

Earnings events

• Today: Salesforce, Marvell
• Thursday: Kroger, Lululemon, Veeva Systems, Samsara

   

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

Equities

• US: The S&P 500 and Nasdaq 100 closed at record highs, up 0.24% and 0.97% respectively, driven by large-cap tech stocks such as Meta (+3.2%), Tesla (+3.5%), and Apple (+1%). Super Micro Computer soared 28.7% after its financial reports were validated by a special committee. Conversely, the Dow Jones declined by 0.29% as industrials underperformed.
• Asia: Japanese equities surged, with the Nikkei 225 rising 1.6% and the TOPIX up 1.3%, supported by gains in technology and industrial stocks like Tokyo Electron (+4%). South Korea's KOSPI also climbed 1.6%, led by tech giants Samsung and SK Hynix. Meanwhile, Chinese stocks saw mixed performance, with mainland indices down slightly, weighed by new US export restrictions on Chinese chipmakers, while Hong Kong's Hang Seng rose modestly.
• Europe: European markets closed higher, with the Stoxx 50 gaining 1% and the Stoxx 600 rising 0.5%. Novo Nordisk, LVMH, and SAP were among the top performers. However, Stellantis dropped 6.3% following the abrupt resignation of CEO Carlos Tavares, citing board conflicts amid a challenging US market.
• China’s top leaders plan to start the annual closed-door Central Economic Work Conference next Wednesday to map out economic targets and stimulus plans for 2025, according to people familiar with the matter.

Volatility

Volatility remains subdued despite ongoing geopolitical and economic uncertainties. The VIX declined slightly, reflecting steady market conditions amid new US export restrictions targeting Chinese firms. Key focus is on upcoming economic releases, including JOLTS job openings and labor market data later this week, which could influence sentiment. Options activity continues to highlight strong interest in tech stocks and semiconductors, as these sectors drive current market momentum.

Fixed Income

French bonds underperformed peers yesterday due to political instability as the National Rally party pushed for a no-confidence vote, widening the OAT-bund spread to 88bps, while German bunds benefitted from haven flows, pushing yields lower for an eighth consecutive day. Money markets adjusted rate cut expectations, trimming near-term bets but increasing long-term easing wagers. In the UK, gilts rose modestly, underperforming bunds but outperforming Treasuries. In the US, Treasuries saw a mixed session with a flatter yield curve. Long-end yields briefly dropped to October lows following Federal Reserve Governor Christopher Waller’s dovish comments hinting at a December rate cut. Treasury yields were also influenced by heavy corporate bond issuance and month-end index rebalancing.

Commodities

• Gold found fresh demand on Monday after briefly dipping towards $2620 as the dollar strengthened following Trump’s warning to BRICS against supporting dollar alternatives. Silver meanwhile traded higher overnight and are now in a better position to respond to supportive news after speculators cut their net long to a 9-month low.
• WTI crude oil futures stabilized at $68, driven by positive economic data from China, as traders looked ahead to Thursday’s OPEC+ meeting and after a survey showed the group increased production by 120kbd last month.
• European natural gas futures rose to near €50/MWh due to colder weather forecasts and supply concerns with inventories being 85% full, down from 95% last year.
• Arabica coffee slumped the most since 2021 on Monday, down 7% driven by profit taking and margin calls in the futures markets, after prices failed to break the 1977 record

Currencies

• The dollar index rallied on Monday, weakening most G10 currencies, not least the euro which fell 1.1% against the dollar amid France's political crisis.
• The yen outperformed, while the Swedish krona and Norwegian krone, and euro were among the weakest.
• GBPUSD traded mixed, falling against the dollar after house prices rose by the most since March 2022, while rallying versus the under-pressure euro.
• USDJPY trades back above 150 after Monday’s drop as yen gains were seen as excessive.