Global Market Quick Take: Europe – 20 June 2024

Key points:

• Equities: Low volumes with futures pointing higher. Accenture earnings in US pre-market session.
• Currencies: Focus on CHF and GBP today with central bank rate decisions looming
• Commodities: Gold is breaking out this morning, while copper and brent crude are flat
• Fixed Income: France-Germany 10-year yield spread is still in focus
• Economic data: SNB and BOE rate decisions, US initial jobless claims

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

In the news: North Korea, Russia sign pact to give all available military help if other is attacked (Reuters), Energy emissions hit record high on rising fossil fuel demand, says report (FT), Nvidia’s Ascent to Most Valuable Company Has Echoes of Dot-Com Boom (WSJ), Putin’s Hybrid War Opens a Second Front on NATO’s Eastern Border (Bloomberg)

Equities: Mixed session in Asia with Hong Kong stocks down 0.6% and Japanese equities up 0.3%. Futures are pointing to a higher open in Europe and the US. European car sales are down 2.6% YoY in May underlining the weakness in interest rate sensitive parts of the economy. After yesterday’s US national holiday markets remain in a low volatility environment. Key events to watch today are SNB and BOE rate decisions (no change expected) for changes to forward guidance on their rate policies. Later Philly Fed business outlook for June is worth paying attention to and Accenture reports earnings ahead of the US market open.

Macro: UK May CPI was back at the Bank of England’s 2% target on the headline, but core and services measures continued to trend higher at 3.5% and 5.7% respectively. This would make any dovish pivot from the BOE at the meeting today look premature. For a full preview, read here. The upcoming Swiss National Bank (SNB) meeting today holds significance amid heightened uncertainty, with consensus expecting a Hold but market expectations leaning towards a potential rate cut due to the recent strength of the Swiss franc driven by safe-haven demand amid political turmoil in Europe, particularly in France.

Macro events (times in GMT): SNB rate decision (07:30), BOE rate decision (11:00), US initial jobless claims (12:30), Philly Fed June business outlook (12:30), Eurozone preliminary June consumer confidence (14:00), Japan May CPI (23:30)

Earnings events: Accenture reports FY24 Q3 earnings ahead of the US market opening with analysts expecting revenue of $16.6bn flat YoY and EPS of $3.14 down 12% YoY as demand for consultancy services remains weak as companies are trimming costs.

• Thursday: Accenture, Kroger, Darden Restaurants, Jabil
• Friday: FactSet, CarMax

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

Fixed income: The France-Germany 10-year yield spread remains around 77 basis points but has stopped its rise suggesting traders are scaling back trades related to the upcoming French election that has Le Pen as a favourite. This spread is still a key watch for bond investors as it will indicate how the market is interpretating the French political situation and thus potentially prospects for the Eurozone. The US 10-year yield remains around the 4.25% level this morning waiting for direction which may could come today from initial jobless claims, that were weaker than expected last week, and June Philly Fed business outlook figures which are some of the first regional survey figures we have on the US economy for June.

Commodities: Brent crude remains around the $85/brl level halting two weeks of gains. Focus is still on resilient demand coming from an expanding global economy while OPEC+ recently extended supply cuts and hinted more could come if necessary. Gold is breaking out this morning trading around the 2,342 level the highest since the big decline on 7 June suggesting investors are still placing hedging bets against inflation and central bank policy uncertainty. Copper is rebounding for the second straight session halting its sharp selloff that has continue uninterrupted since 22 May. The key underlying driver in the copper market is still that of a tight supply function and rising demand for electrification.

FX: The US dollar traded sideways in a quiet session overnight with US markets closed for the Juneteenth holiday. AUDUSD continued to rise and was above 0.6670 and AUDNZD also pushed above 1.0880 to test the 50-day moving average at 1.0885. NZ’s Q1 GDP report out this morning showed that the economy exited recession with 0.2% growth but gains in NZDUSD to 0.6140+ did not stick. Meetings for Bank of England and Swiss National Bank could be key for FX markets today. GBPUSD continues to hold on to its gains above 1.27 while USDCHF trades just below 0.8850. Any hints of dovishness may weaken sterling or franc respectively, especially against AUD where the RBA has kept a rate hike on the table this week.

Volatility: The VIX ended Tuesday at $12.30 (-0.45 | -3.53%). Short-term volatility indicators also declined, with the VIX1D at $9.51 (-0.34 | -3.45%) and the VIX9D at $11.12 (-0.82 | -6.87%). The SKEW index, which measures the perceived risk of outlier moves in the S&P 500, fell to 142.90 (-10.94 | -7.11%), indicating a reduction in perceived tail risk. Wednesday was Juneteenth, a US holiday, so markets were closed. Today, VIX futures are at $14.200 (-0.095 | -0.67%). S&P 500 and Nasdaq 100 futures are showing some upside movement: 5577.25 (+17.50 | +0.31%) and 20325.00 (+128.75 | +0.64%) respectively. Today's economic focus includes Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Crude Oil Inventories. Tuesday's top 10 most traded stock options were Nvidia, Apple, Tesla, Advanced Micro Devices, Palantir Technologies, GameStop, Amazon, Taiwan Semiconductor, Micron Technology, and Dell Technologies.