Global Market Quick Take: Europe – 17 January 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  Risk aversion has ramped up as the dollar jumps with US and EU stock futures extended Tuesday’s losses after Fed’s Wallers pushed back against the markets aggressive rate cut expectations. His comments sent bond yields and the dollar higher while lowering the prospect for a March cut. The stock market selloff deepened in Asia overnight, with the Hang Seng down around 4% after China data showed a worsening slump in housing and listless domestic demand. Gold has returned to challenge key support; crude oil remains stuck while Robusta coffee hit a record on tight supply. Focus on eurozone’s CPI numbers, and later in the day on US retail sales, industrial production and the import price index as well as US earnings


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

Equities: US equity futures trade softer after Tuesday’s rate cut comments from Fed’s Waller drove bond yields higher while lowering the prospect for a March cut, and after weak Chinese economic data helped sent Asian stocks lower overnight. The S&P 500 shed 0.4% to 4,766 with 10 of its 11 sectors losing except information technology. The Nasdaq 100 was flat, closing at 16,831, supported by strength in semiconductor names on positive analyst reports. Nvidia surged 3.1% to $563.82, reaching a new high. Meanwhile, AMD jumped 8.3%. In US earnings, Morgan Stanley slid amid a warning on lower margins in wealth, while Goldman Sachs Group Inc. rose as profit beat estimates. Boeing Co. sank on an analyst downgrade. Apple Inc. slipped as the US Supreme Court refused to consider its appeal in an antitrust suit challenging the App Store.

FX: The dollar extended its recent run of gains in Asia, with the dollar index reaching a fresh one-month high, breaking above the 200DMA at 103.45 with Treasuries falling as markets re-assessed the aggressive rate cut pricing for this year after a pushback from Waller as well as a host of ECB officials. Aussie was the weakest of the majors, with AUDUSD breaking the 0.66 handle and moving below the 200DMA at 0.6583. Yen also suffered on the back of higher Treasury yields, with USDJPY breaking higher towards 148. EURUSD pushed below the 1.09 mark despite the ECB pushback on rate cut pricing, while GBP was hit by wage data with CPI data eyed today as pair tests the 50DMA and 1.26 handle.

Commodities: A stronger dollar in response to the Fed pushing back against current aggressive rate cut pricing and weak economic data out of China helped pull commodities lower. Gold is once again challenging key support in the 2010-15 area, copper continues to find support amid China stimulus hopes, while crude oil remains stuck with demand concerns being offset by current Mideast tensions. OPEC will publish its monthly oil market report later today. US natural gas plunged the most in 10 months as current cold weather support look set to pass soon. Coffee prices meanwhile went in the opposite direction with Robusta reaching a record high as producers in Vietnam hoard beans in anticipation of even higher selling prices.

Fixed income: After first reacting to weakness in European government bonds during Asian and European hours, Treasury yields extended their rises in the U.S. session on hawkish comments from Fed Governor Waller, who said rate cuts don’t have to be “rushed”. To weigh on bond markets this morning, UK inflation data are showing a rebound in headline and core inflation.  The focus turns onto the eurozone’s CPI numbers, and later in the day on US retail sales, industrial production and the import price index which will be released ahead of a 20-year US Treasury bond auction.

Macro: Fed Governor Waller reaffirmed that the Fed could start cutting rates this year, but he pushed back on market’s aggressive pricing. He said that the central bank should be methodical and careful when lowering rates as there could be concerns around the sustainability of data such as low inflation with strong growth and low unemployment. He did not comment specifically on the possibility of a March rate cut and continued to emphasize a data-dependent approach. He also did not sound like he was in a big rush to taper QT. The NY Fed manufacturing survey saw a sharp deterioration. Headline manufacturing business conditions fell to -43.7 from -14.5, much deeper than the forecast of -5, driven primarily by a huge decline in New Orders and Shipments. New Orders fell to -49.4 from -11.3, while Shipments dropped to -31.3 from -6.4. UK labor and wage data cooled more than expected. Private sector regular pay growth – which removes the volatile bonus category – now sits at 6.5%, down from a peak of over 8% last summer. German January ZEW survey saw economic sentiment a notch higher than expected at 15 vs. 12 expected. But more ECB speakers pushed back on rate cut expectations. ECB’s Villeroy said it was too early to declare victory over inflation, while Simkus said that he is far less optimistic than the market on rate cuts. Meanwhile, Muller said that market expectations for 2024 ECB rate cuts are aggressive and wage growth is not in line with inflation target. The Hang Seng Index plunged amid weak Chinese data and President Xi’s reiteration of tightening the Party’s control over China’s financial sector with supervision that has 'teeth'´ China’s Q4, as well as the full-year GDP for 2003, grew by 5.2%. Industrial production increased by 6.8% Y/Y in December, slightly above the estimate and November’s 6.6%. However, retail slowed more than expected to 7.4% Y/Y from 10.1%

Volatility: The VIX rose yesterday to $13.84 (+0.59 | +4.45%) caused by a rising yield on the 10-year Treasury (to 4.06%), signaling heightened market caution. The S&P 500 dipped 0.4% while a resilient tech sector kept the Nasdaq 100 flat. VIX futures edged higher to $15.15m (+0.160 | +1.08%), pressuring S&P and Nasdaq futures down during their nightly session to 4776.50 (-22.50 | -0.45%) and 16840 (-125 | -0.74%), respectively. Eyes now turn to today’s retail sales numbers and earnings from Charles Schwab and US Bancorp for further market direction.

In the news: China Weighs More Stimulus With $139 Billion of Special Bonds (Bloomberg), Trump faces tougher test in New Hampshire after blowout Iowa win (Reuters), Goldman and Morgan Stanley report lowest profits in 4 years (FT), Morgan Stanley revenue tops estimates, but CEO warns of geopolitical, economic risks ahead (CNBC), China misses fourth-quarter GDP estimates (CNBC)

Macro events (all times are GMT): UK CPI (Dec) exp 0.2% & 3.8% vs –0.2% & 3.9% prior (0600), UK Retail price index (Dec) exp 0.4% & 5.1% vs –0.1% & 5.3% prior, US Retail Sales (Dec) exp. 0.4% vs 0.3% prior (1230), US IP (Dec) exp –0.1% vs 0.2% prior (1315), US NAHB (Jan) exp 39  vs 37 prior (1400). During the day OPEC’s Monthly Oil Market Report, API’s weekly crude and fuel stock report (2030)

Earnings events: Charles Schwab, US Bancorp, Citizen Financials, Prologis, Kinder Morgan, Discover

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

Quarterly Outlook 2024 Q4

01 /

  • 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...
  • 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

    Head of FX Strategy

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • 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

    Head of FX Strategy

    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/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.

©   since 1992