Global Market Quick Take: Europe – 17 June 2024 Global Market Quick Take: Europe – 17 June 2024 Global Market Quick Take: Europe – 17 June 2024

Global Market Quick Take: Europe – 17 June 2024

Macro 3 minutes to read
Saxo Strategy Team

Key points:

  • Equities: Europe trades higher but French election jitters remain
  • Currencies: Dollar holds gain near November high
  • Commodities: Broad weakness on dollar strength
  • Fixed Income: US yields drop on US consumer pessimism
  • Economic data: US Empire Manufacturing

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

In the news: China May retail sales beat expectations, but industrial output and fixed asset investment missed (CNBC), Taylor Swift’s London Eras Tour could delay Bank of England rate cut, analysts say (CNBC), Europe Traders Look for Cover on Surprise Call for French Vote (Bloomberg), ECB Officials See No Cause for Alarm Over France’s Market Turmoil (Bloomberg)

Equities: Asian share markets were mostly softer on Monday as mixed Chinese economic data underlined the country's bumpy recovery, while political uncertainty in Europe soured risk appetites and kept the euro on the defensive. Japanese stocks were the hardest hit overnight as investors offloaded risks assets with US exporters leading the declines amid signs of a slowdown in the US economy after consumer sentiment unexpectedly dropped to a seven-month low. European and US equity futures have started the week on a firmer footing as investors assess the political volatility in France while looking ahead to policy decisions from major central banks this week, starting with Australia on Tuesday. 

Macro: US consumer sentiment unexpectedly fell to a seven-month low as high prices continued to take a toll on views of personal finances. The sentiment index dropped to 65.6 in June from 69.1, according to the preliminary reading from the University of Michigan, well below surveys calling for a rise to 72. The decline in sentiment coincides with signs that the labor market, which has driven consumer spending over the last year, is softening. The unemployment rate rose to 4% last month, the highest in more than two years. Voting FOMC member Loretta Mester said she still sees inflation risks as tilted to the upside despite welcome news in the latest data. In an interview on Friday, she also said the median projection of policymakers’ latest forecasts — which signaled just one interest-rate cut this year — is “pretty close” to her own outlook for the economy. China’s overnight data dump showed a mixed picture after industrial expansion slowed in May and retail spending beat forecasts. Industrial production rose 5.6% in May from a year ago, compared with April’s increase of 6.7%, and a median forecast of 6.2%. Retail sales accelerated, climbing 3.7% compared with a forecast of 3%, offering some encouragement, after years in which Chinese households have held back despite government efforts to boost consumption. 

Macro events (times in GMT): US Empire Manufacturing (Jun) exp. -14 vs –15.6 (1230), USDA’s Weekly Crop Conditions report (2000)

Earnings events: No important earnings release today.

  • Monday: Lennar
  • Tuesday: Ashtead
  • Thursday: Accenture, Kroger, Darden Restaurants, Jabil
  • Friday: FactSet, CarMax

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

Fixed income:  US Treasury yields extended their weekly slump on Friday after a gauge of US consumer sentiment unexpectedly fell to a seven-month low as high prices continued to take a toll on personal finances. US 10-year yields briefly fell below 4.2% for the first time since April 1, to record a weekly decline of 21 basis points while 2-year fell 18 basis points to 4.7%, and the short-term interest rate market maintained a forecast for two rate cuts this year. Meanwhile the turmoil in Europe, caused by the French election, will continue to be the focus this week, despite ECB officials seeing no cause for alarm, after the spread between French and German government bonds recorded a record weekly jump.

Commodities: Crude oil trades softer following its biggest weekly gain since April on signs of strong demand in fuels from diesel to jet fuel with the aviation industry ramping up for a potential record quarter. Last week Saudi Arabia made it clear that the announced gradual production increase from October could be reversed quickly should market conditions warrant it. In addition, stricter adherence to quotas could see non-compliant members reduced output in the coming months. Gold trades lower after rising on Friday in response to an unexpected drop in US consumer spending while political uncertainty in Europe saw traders prefer dollars and gold over the euro. Copper’s correction from a record high continues, with prices near a two-month low on China demand concerns, more than offsetting supply issues after Codelco, a top copper miner saw April production slump to an 18-year low. Weekly COT data showed strong demand for energy and broad selling across the other sectors in the week to June 11.

FX: The dollar has started the week on a steady path, after the broad Bloomberg Dollar index ended last week at the highest level since November, not least against the euro after the political chaos in France spurred anxiety across global markets over potential debt risks depending on the election outcome. 

Volatility: The VIX ended Friday at $12.66 (+0.72 | +6.03%). Short-term volatility indicators also rose, with the VIX1D at $10.44 (+1.75 | +20.14%) and the VIX9D at $11.00 (+0.72 | +7.00%), suggesting expected short-term market movements. The SKEW index, which measures the perceived risk of outlier moves in the S&P 500, dropped to 156.18 (-6.07 | -3.74%), yet remains above the 150 mark. This week’s economic calendar includes several key releases, starting with Retail Sales figures tomorrow. Expected moves for this week, based on options pricing, indicate slightly lower volatility: the S&P 500 has an expected move of plus or minus 48.73 points (+/- 0.90%) and the Nasdaq 100 plus or minus 233.32 points (+/- 1.19%). VIX futures are currently at $14.350 (-0.065 | -0.44%). S&P 500 and Nasdaq 100 futures show minimal movement: 5498.75 (-3.50 | -0.06%) and 19952.75 (+7.25 | +0.04%), respectively. Friday's top 10 most traded stock options were Nvidia, Tesla, Apple, GameStop, Advanced Micro Devices, Amazon, ARM Holdings, AMC Entertainment Holdings, Sofi Technologies, and Palantir Technologies.

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