Global Market Quick Take: Europe – 3 January 2024

Global Market Quick Take: Europe – 3 January 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  Sentiment is weaker with Asian stocks trading lower today following losses on Wall Street as risk-on mood soured following a broad December rally that was driven by expectations for big rate cuts in 2024. The change in sentiment was driven by a slump in US bonds on doubts that policymakers will deliver the extent of monetary easing that’s priced by money markets. The tech-heavy Nasdaq 100 dropped the most in more than two months with European stocks following suit. Crude oil futures fell as the Red Sea geopolitical risk premium deflated while gold is holding above support. The market will be watching closing for any signs of weakness in today’s US jobs openings data and Friday’s non-farm payrolls.


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

Equities: Chinese equities in Hong Kong are down another 1% in today’s trading session as both US and European equity futures reversed initial gains yesterday falling on the first day of trading this year. The market is still hoping for the Chinese government to increase stimulus and European miners might be in focus today. In the US session, we expect Apple to be in focus again following yesterday’s drop of 3.6% as a negative sell-side report said volume remained negative for iPhone 15 and could extend into iPhone 16 models. European defence stocks have also started the year being bid as investors are positioning themselves for a year of Europe doing more heavy lifting on military spending to aid Ukraine.

FX: The dollar rallied against major currencies as Treasury yields rose, resulting in the DXY gaining 0.9%. USDJPY rebounded back above 142.00. EURUSD dropped by 0.9% to 1.0940 before rebounding ahead of German economic data. Traders are unwinding some of their dollar shorts ahead of key US labor market statistics this week, particularly the non-farm payrolls and unemployment rate to be released this Friday. In the week to December 26 speculators in the futures market increased their gross dollar short position by 55% to a four-month high.

Commodities: Crude oil failed to hold onto its gains on Tuesday after a general risk-off tone helped offset Red Sea concerns. EU gas, in a downtrend since late Oct, trades near a 20-handle, as the winter is running out of days to cause havoc with storage facilities being 86.5% full compared with a 5-yr average of 74%. Weak industrial demand and strong power production from renewables during the holiday period also weighing. Soybean futures meanwhile has fallen to a June low on improved Brazilian crop weather, and together with ongoing weakness across corn and wheat, the Bloomberg Grains index has slumped to a 2-½-year low. Gold traded softer in response to rising US yields but holding above $2050 support, and the market scaling back elevated rate cut expectations remains golds biggest short-term challenge.

Fixed income: Treasury yields surged across the curve as traders reassessed the anticipated amount of Fed rate cuts, now back below six 25 bps cuts this year, and considered the potential impact on liquidity due to ongoing quantitative tightening and the decline in reverse repo balances at the Fed. The 2-year yield jumped by 7 bps to 4.32%, and the 10-year yield increased by 5 bps to 3.93%. Today's focus will be on the JOLTS job openings data, with attention then shifting to the job report scheduled for release on Friday.

Macro: The final reading of the US S&P manufacturing PMI came in at 47.9, down from the previously reported flash reading of 48.2. The private survey of Caixin China manufacturing PMI picked up to 50.8 in December from 50.7 in November, better than 50.3 expected.

Technical analysis highlights: S&P 500 correction unfolding, key support at 4,697. Nasdaq 100 correction, support 16,166. DAX top and reversal pattern, support at 16,630 and 16,060. EURUSD correction, support at 1.0931 and 1.0882. USDJPY could rebound to 142.67 or even to 144.17. GBPUSD below rising trendline, support at 1.25. Gold potential to 2,100 but uptrend stalling and could slide lower to 2,030. 10-year Treasury future rejected at 113 8/32 expect correction to 111 12/32, yields likely back to 4% Crude oil resuming downtrend

In the news: China’s BYD overtakes Tesla as world’s largest maker of pure-electric vehicles on fourth-quarter EV sales surge (SCMP), China removed an official at a government body overseeing its press and publications regulator, days after Chinese gaming stocks were hit by proposed rules to curb spending on video games (Reuters), EV maker Rivian's quarterly deliveries miss expectations, shares tank (Reuters), OPEC+ Plans Oil Market Monitoring Meeting in Early February After Fresh Output Cuts Start (Bloomberg).

Macro events (all times are GMT): US ISM Manufacturing (Dec) 47.1 vs 46.7 prior (1500), US JOLTS Jobs Openings (Nov) 8821k vs 8733k prior (1500), FOMC 13 Dec Meeting Minutes (1900)

Earnings events: Next important earnings releases are tomorrow from RPM International, Walgreens Boots Alliance, Conagra Brands, and Lamb Weston.

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

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • 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

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

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