Global Market Quick Take: Europe – November 2 2023 Global Market Quick Take: Europe – November 2 2023 Global Market Quick Take: Europe – November 2 2023

Global Market Quick Take: Europe – November 2 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  Equity futures trade higher extending yesterday’s rally driven by a combination of weak US ISM manufacturing data, and Federal Reserve chair Powell hinting the US central bank is done with hikes and stating that the recent rise in longer-term Treasury yields have reduced the need to tighten further. Risk sentiment was further cheered by the dollar suffering broad losses and US 10-year yields tumbling by more than 20bps back below 4.75%. Elsewhere, the Bank of England is expected to follow suit and keep rates on hold at today’s meeting. The US earnings season continues with Apple reporting tonight after the US market close. Novo Nordisk reports Wegovy sales this morning beating estimates.


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

Equities: Powell’s hint yesterday at the FOMC meeting lifted equities with S&P 500 futures gaining 1% to close at the 4,256 level. The positive sentiment in US equity futures has spilled over into the Asian session with Nikkei 225 and Hang Seng around 1% higher. Today’s equity session will focus on green transformation stocks after the rout in Orsted shares following widening write-downs related to its offshore wind turbine projects. In Europe this morning, Novo Nordisk has reported Q3 earnings results with revenue and EBIT beating estimates despite several upgrades to guidance. The Obesity Care segment revenue was DKK 12.3bn vs est. DKK 10.8bn, and Novo Nordisk lifts its free cash flow guidance. Apple reports later today (aft-mkt) and will be key for setting sentiment in the overall US equity market.

FX: While Powell tried to signal a hawkish hold, there was a sense that the Fed has come to an end of its rate hike cycle with little being read out of the strong Q3 GDP report or the blowout September jobs numbers. This saw the dollar weakening after Powell’s presser as Treasury yields slumped, and once again, AUD proved the most sensitive to the US yields. AUDUSD shot up above 50DMA at 0.6390 which has provided an upside barrier for over a month and broke above 0.64. Yen also recovered, with USDJPY back below 150.50 amid lower US yields and a ramp-up in verbal intervention. EUR recovered back above 1.0550 and is testing a break of 1.06. GBPUSD is the focus today as it moved towards 1.22 with BOE decision ahead. Vote split or language suggesting dovishness could bring a test of recent lows around 1.2070 again.

Commodities: Crude oil struggled to find direction with the Israel-Hamas overhang remaining but risks not accelerating rapidly, and the Fed’s less hawkish message supports a growth outlook while China’s economic numbers paint a less supportive picture for now. A rise in US crude inventories also weighed on sentiment. Gold gyrated around recent levels, surprisingly not finding a bid despite a run lower in dollar and Treasury yields as risks of a credit event possibly pared with the Fed message sounding less hawkish.

Fixed income: Treasury yields fell initially after a larger-than-expected decrease in the ISM manufacturing index, which exhibited a weak underlying composition, and a smaller-than-expected job gain in the ADP report. The market rallied further following the Treasury's announcement of $112 billion in supply for the next week, comprising $48 billion in 3-year notes, $40 billion in 10-year notes, and $24 billion in 30-year bonds. This supply was below the expected $114 billion. After the Fed left rates unchanged and noted "tighter financial and credit conditions" in its statement, Treasury yields fell even further. The word "financial" was newly added, as the previous language only mentioned "credit conditions." The 2-year yield declined by 14 basis points to 4.94%, while the 5-year and 10-year yields dropped sharply by 20 basis points to 4.65% and 4.73%, respectively.

Volatility: VIX ended at $16.87, down -1.27 (-7.00%), the third consecutive day of steep decline in volatility. Bonds raised, yields fell, Fed left rates unchanged, fear subsided, VIX/volatility took a nose-dive, stocks rose: that’s a short summary of yesterday’s events. Just as implied volatility drops after a company’s earnings release, VIX dropped after Powell’s press conference, sending stocks higher. VIX Volatility (VVIX) also continued its decline ending the session at 85.08 (-2.86) and returned to the level it was at, earlier this year (Q2), which suggests that market nervousness is currently back under control. VIX futures remained flat during the overnight session at $17.30, S&P 500 and Nasdaq futures had a slight increase, +0.21% and +0.17% respectively.

Technical analysis highlights: S&P 500 closed below 200 Moving Average, resistance at 4,260. Nasdaq 100 resistance at 14,781. DAX bouncing from support, resistance at 14,980. USDJPY ran out of steam just below 152 but uptrend intact, downtrend if break below 148.80. Gold uptrend but expect correction possibly to 1,935. WTI testing key support at 81.50. Brent broken support, next is 83.44. US 10-year T-yields bearish testing 4.70, could drop to 4.62. Key support at 4.50

Macro: The Fed left rates unchanged at 5.25-5.50%, in line with expectations and market pricing while there were only slight changes to the FOMC statement and the door for further rate hikes was left open. Growth expectation was changed from ‘solid’ to ‘strong’ and there was some acknowledgement of higher longer-end yields, with tighter financial conditions mentioned alongside tighter credit conditions. However, Powell was clear that the Fed was not thinking about rate cuts yet. US ADP private payrolls rose by 113k in October, less than the 150k expected by the consensus. Job openings increased 56k to 9.55m from a downwardly revised August, though were a little above the 9.4mn expected. The ratio of job openings to unemployed was steady at 1.5, well down form the peak of 2 but remaining above pre-pandemic levels near 1.2. In contrast, the quits rate held steady at 2.3%, in line with pre-pandemic levels, and the hiring rate held at 3.7%, a little below its 2019 average. Labor market loosening trends remain slow. US ISM manufacturing fell to 46.7, coming in below the expected and prior 49. Looking at the internals, new orders fell to 45.5 (prev. 49.2) while employment declined back into contractionary territory at 46.8 from 51.2. Prices rose to 45.1 from 43.8.

In the news: FOMC statement, Treasury quarterly refunding announcement, Nick Timiraos - Fed Extends Pause on Rate Hikes but Keeps Door Open to Moving Higher (WSJ),Japan’s Kishida Announces Stimulus Package as Support Sags (Bloomberg), ‍Orsted hit by up to $5.6 billion impairment on halted US projects (Reuters).

Macro events (all times are GMT): BoE (1200) and Norges Bank (0900) Policy Announcements, EZ Final Manufacturing PMI (Oct) exp 43 vs. 43 prior (0900), US jobless claims exp 210k vs. 210k prior (1230), US Factory Orders (Sep) exp 2.3% MoM vs. 1.2% prior (1400), EIA’s Weekly Natural Gas Storage Change (1430)

Earnings events: Big earnings day with the important earnings releases coming from Apple, Novo Nordisk, Cigna, S&P Global, Booking, Stryker, Eli Lilly, Shell, ConocoPhillips, Starbucks, Regeneron Pharmaceuticals, Shopify, ING Groep, Ferrari, Fortinet, Palantir, Block, Cloudflare, and Coinbase. Our key focus is Apple reporting FY23 Q4 (ending 30 Sep) earnings after the US market close with analysts expecting revenue growth of -1%, but a healthy rise in EBITDA to $29.7bn from $27.8bn a year ago.

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

Disclaimer

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.