Global Market Quick Take: Europe – 26 January 2024 Global Market Quick Take: Europe – 26 January 2024 Global Market Quick Take: Europe – 26 January 2024

Global Market Quick Take: Europe – 26 January 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  The S&P 500 reached another all-time high in a sixth straight day of gains after receiving a boost from a hot US Q4 GDP report which showed inflation metrics cooling, leading to a drop in bond yields ahead of today's key PCE inflation report. The Nasdaq 100 was dragged lower by a 12% drop in Tesla, while the dollar traded firmer, especially against the yen after Tokyo inflation cooled below 2% and the euro as ECB failed to push back firmly on the market's belief in an April rate cut. IBM shares soared to more than 10-year high on rosy AI outlook before an after-hour slump in Intel helped drive US and Asian stock futures lower overnight. Crude oil broke out of its recent range on technical buying supported by the US GDP print and China stimulus.


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

Equities: Asian equity futures are cooling in today’s session with Nikkei 225 and Hang Seng futures down 1.5% and 1.2% respectively. US equity futures are still negatively impacted by Tesla’s 12.1% decline yesterday and Intel’s disappointing Q1 outlook with Nasdaq 100 futures down 0.8% in early trading hours. French luxury giant LVMH is in focus today after reporting Q4 results yesterday after the European market close. LVMH delivered in line against expectations on organic revenue growth which was seen as positive surprise given the negative momentum in luxury and weak consumer confidence in China. Volvo has reported Q4 results this morning lowering their outlook for output as demand comes down from peak levels.

FX: The dollar trades firmer despite seeing Treasury yields pushing lower as bond traders focus on the disinflation aspect of the GDP report. Pressure on yields and dollar could increase if December PCE comes in softer than expectations today. CHF and EUR were the underperformers in G10 on Thursday, with USDCHF rising to 0.8680 as SNB setup turning bearish for the franc with FX interventions reduced. EURUSD slipped to lows of 1.0822 on increased pricing of April cut after ECB’s less forceful pushback. USDJPY wobbled around 147.50 but CAD got some support from rising oil prices after some dovish BOC weakness. USDCAD slid back below 1.35 and 50DMA at 1.3455 is coming in focus. NOK also benefitted from oil prices with EURNOK sliding sharply to 11.32 from 11.40 breaking below the 23.6% fibo retracement.

Commodities: Crude oil prices rose 3% to a 7-week high before drifting lower overnight. The rally was triggered by the technical break above recent highs with the drive being a US economy showing faster than expected growth, and China stimulus announcements. With supply side remaining mixed on non-OPEC supply offsetting risks from OPEC+ production cuts or geopolitical tensions, focus is likely to stay on the growth outlook. Gold saw mild gains as Treasury yields slipped, but Silver outperformed as it attempted a break of $23 resistance. Metals were sideways after the initial run higher on China stimulus announcements. A massive drop in weekly natural gas stockpiles had no impact as traders turn their attention to milder weather.

Fixed income: Treasury yields fell across the curve following a 25k rise in the initial jobless claims to 214k. The $41 billion 7-year Treasury note auction met with robust demand, leaving primary dealers with 13.94% of the issuance. That’s a contrast to Wednesday 5-year note sale, where indirect bidders awarded the lowest amount since September 2022. It shows that investors preferred to extend their portfolio duration by locking in 7-year US Treasury notes at 4.109% offering a 5.4 basis point pick up over the 5-year notes. The auction set the grounds for a more pronounced bull-steepening of the yield curve. By the end of day, the 10-year yield dropped 6bps to 4.12% while the 2-year yield dropped by 9bps to 4.29%. Today, the focus shifts on the PCE deflator. If it comes in line with expectations, suggesting a yearly rate close to the Fed’s target, it could cause a further bull-steepening of the yield curve.

Macro: US Q4 GDP came in hot, with annualized growth of 3.3%, well above the expected 2.0% and above the Atlanta Fed tracker of 2.4% but easing from the Q3 pace of 4.9%. Inflation metrics, however, cooled for the quarter, boosting soft landing hopes again. PCE eased to 1.7% from 2.6% while the core PCE printed 2.0%, in line with expectations and the prior. Focus now turns to December PCE due today and a preview can be found here. March rate cut pricing is now back to 50% and could increase further if PCE comes in softer than expected. ECB kept its interest rates unchanged as widely expected, but the pushback on April rut cut expectations was less direct and positive direction was noted on wages, although a data-dependent approach continued to be emphasized. President Lagarde noted that it is “premature” to talk about rate cuts, adding that the ECB will be data-dependent and not fixated on the calendar. Odds of April rate cut have picked up to over 90% from less than 70% at the start of this week. US jobless claims for the week of Jan 20 rose to 214k from 189k, above the expected 200k. The 4-week average ticked down to 202.25k (prev. 203.75k). Continued jobless claims jumped to 1.833mn (exp. 1.828mn) from 1.806mn. German Ifo Expectations was soft accompanied by some downbeat commentary. The headline eased to 85.2 from 86.3 with both current conditions down to 87 from 88.5 and expectations down to 83.5 from 84.2.

Volatility: Volatility is on the rise, with the VIX inching up to $13.45 (+0.31 | +2.36%), edging closer to the 15 mark. This uptick, mirrored by increases in the VVIX and SKEW indices, hints at growing market apprehension and the potential for a near-term correction. Overnight, VIX futures climbed to 14.400 (+0.175 | +1.22%), and S&P 500 and Nasdaq 100 futures saw notable declines to 4903.75 (-19.50 | -0.40%) and 17504 (-130.50 | -0.73%), suggesting more pronounced movements than usual. With the PCE price index on the docket, volatility could further intensify, offering a crucial insight into U.S. inflation trends. Despite a generally positive earnings season, market sentiment is mixed, with an eye towards next week's big tech earnings, which are expected to significantly stir the markets.

In the news: Evergrande case could test China-Hong Kong insolvency arrangement (Nikkei Asia), Intel forecasts quarterly revenue below estimates, stock plunges more than 10% in afterhours trading (Reuters), IBM shares soar to more than 10-year high on rosy AI outlook (Reuters), LVMH grows sales as luxury shoppers show resilience (Reuters), Visa's weak second-quarter revenue forecast clouds profit beat, shares slip (Reuters), Chinese retail investors hit by big losses in ‘snowball’ derivatives (FT), Lithium price plunges on slowing Chinese demand for electric vehicles (FT)

Macro events (all times are GMT):  Germany consumer confidence (0600), France consumer confidence (0645), US PCE deflators (Dec) exp. 0.2% & 2.6% vs –0.1% & 2.6% prior (1230), US personal income 0.3% vs 0.4%, and spending 0.5% vs 0.2% (1230), US pending home sales (Dec) exp 2% & -4.3% vs flat & -5.1% prior, Commitments of traders weekly report on positions for various US and EU markets

Earnings events: Key earnings releases today from Volvo, Kone, Christian Dior, and Colgate Palmolive.

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

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 Markets
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 Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML 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 Markets 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