Global Market Quick Take: Europe – 24 June 2024

Global Market Quick Take: Europe – 24 June 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Key points:

  • Equities: Slightly higher open indicated in Europe. Focus on IFO.
  • Currencies: USDJPY close to 160 and verbal jawboning has picked up
  • Commodities: Rangebound gold and silver on US economic data watch
  • Fixed Income: 2-, 5- and 7-year U.S. Treasury auctions in focus ahead of PCE data.
  • Economic data: German IFO Survey

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

In the news: US business activity inches up in June; price pressures abating (Reuters), France Keeps Markets on Edge With Le Pen Fighting Left for Power (Bloomberg), Yen Is Under Pressure Even as Japan Steps Up Its Verbal Warnings (Bloomberg), EU and China set for talks on planned electric vehicle tariffs (CNBC), Apple and Meta have discussed AI partnership, WSJ reports (Investing),  Existing home sales decline in May as home prices reach record high (Yahoo), Apple, Competitors Face Tougher AI Regulation in EU, Driving Decisive Calls (Barron’s)

Equities: Mixed start to the new week in the Asia session with Japanese equities up 0.5% and Hong Kong equities down 0.7%. Futures are pointing to a slightly higher open in European and US equities. This week has some interesting earnings releases from FedEx (Tue), Micron Technology (Wed), and Nike (Thu). On macro, the key event today is the IFO survey for June which is survey across 9,000 companies on the outlook for the German and Eurozone economy. The VIX Index remains subdued trading at levels just above 13 making downside protection trades cheap relative to history for those investors that are worried about a setback.

Macro: Flash US PMIs for June were hot across the board, showing the US economy expanded at the fastest pace in more than two years. The manufacturing component rose to 51.7 (prev. 51.3, exp. 51.0), and services to 55.1 (prev. 54.8, exp. 53.7), resulting in the composite moving higher to 54.6 from 54.5. European PMIs were a stark contrast and came in weaker than expected. Manufacturing dipped further into contraction at 45.6 in June vs. 47.3 in May, while Services eased to 52.6 from 53.2, bringing the Composite index close to the 50-mark at 50.8 from 52.2 in May. UK retail sales for May surprised to the upside, coming in at 1.2% YoY ex-auto fuel from -2.5% YoY previously and -0.7% expected. The report led to calls for firmer Q2 GDP growth in the UK as wages have supported consumption, but the outlook is weakening and that has led to the Bank of England hinting at the start of rate cuts at its June announcement. US economic data watch this week will be focusing on Friday with the release of PCE inflation data for May, the price gauge preferred by Fed officials, spending and income as well as University of Michigan consumer sentiment.

Macro events (times in GMT):  German IFO Survey (Jun) exp 89.6 vs 89.3 prior (0800), CFTC’s Weekly COT report (delayed from Friday), US Crop Conditions (2000). ECB Speakers today: Nagel (1010), Villeroy (1230) & Schnabel (1530)

Earnings events: A busier week ahead on earnings with the key releases to watch being FedEx (Tue), Micron Technology (Wed), and Nike (Thu). FedEx is interesting from a macro perspective because the company in plugged into the global logistics network and thus is a good barometer for economic activity. Micron Technology will be interesting because its memory chips are used across many different consumer electronic devices. Nike has had some disappointing quarters so investors will be looking for glues that the Euro Championship in football and the Olympics later in July can help on demand.

  • Monday: Prosus
  • Tuesday: FedEx, Alimentation Couche-Tard, Carnival, TD Synnex
  • Wednesday: Vantage Towers, Micron Technology, Paychex, General Mills
  • Thursday: Walgreens Boots Alliance, Nike, H&M, McCormisk
  • Friday: Geely Automobile

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

Fixed income: U.S. Treasury yields closed slightly lower on Friday, as S&P Global’s preliminary June PMIs for U.S. manufacturing and services beat estimates, despite weak European PMI data. The yield on the 10-year U.S. Treasury closed the week around 4.25%, while the 2-year U.S. Treasury closed at 4.73%. Bond futures are currently pricing in 47 basis points of rate cuts by year-end, with the first 25 basis point cut expected in November. This week’s PCE data will be in focus as economists expect it to decrease to an annualized rate of 2.6% from 2.8% last month. Although this is the lowest rate since March 2021, it still exceeds the Fed's 2% inflation target. At the same time, the unemployment rate remains at or below 4%. Additional gains in bonds may necessitate a more significant slowdown in inflation and economic growth to trigger faster and more substantial interest rate cuts than the Federal Reserve currently anticipates, making a broad bond rally unlikely at this point. This week U.S. Treasury auctions will also be in focus with the U.S. Treasury selling $69 billion in 2-year notes on Tuesday, $70 billion in 5-year notes on Wednesday, and $44 billion in 7-year notes on Thursday.

Commodities: A stronger dollar following better than expected US manufacturing and services data saw the commodities sector end the week on a sour note on speculation a synchronised global easing cycle could be further delayed. Gold and silver reversed sharply lower on Friday, and with incoming US economic data currently giving mixed signals, we expect the current consolidation period will continue until we get a clearer picture about the timing and depth of US rate cuts. Copper failed to hold onto mid-week gains amid ongoing concerns over demand in China. Crude oil trades lower following Friday’s strong data prints but remains on track for a monthly gain, amid signs of rising gasoline demand in the US and healthy demand for air travel and OPEC+ production restraints.

FX: The Bloomberg Dollar Index recorded its highest weekly close since November on Friday, driven by continued yen weakness and concerns over how next Sunday’s French election outcome may impact the euro following Friday’s weak PMI data. Additionally, a rate cut by the Swiss National Bank and a dovish stance from the Bank of England supported the dollar last week. However, the Japanese yen was the weakest performer among G10 currencies, with USDJPY nearing the significant 160 level, and despite increased verbal intervention from FX chief Kanda, the yen remained unaffected. Key yen pairs such as AUDJPY, GBPJPY, and MXNJPY surpassed important thresholds, with AUDJPY above 106, GBPJPY above 202, and MXNJPY breaking its 200-day moving average. 

Quarterly Outlook

01 /

  • 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

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

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/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. 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

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.