Global Market Quick Take: Europe – 21 December 2023

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

Equities: The US equity market rally reeled a bit yesterday declining but US equity futures are rebounding in early trading hours. Liquidity is coming down a lot these days and the VIX Index remains below 14 indicating the equity market will likely cruise into the new year. Micron Technology shares rose 4% in extended trading as the memory chip maker earnings beat on revenue and earnings while lifting the current quarter revenue figures well above consensus estimates suggesting growth is rebounding in consumer electronics.

FX: An ongoing decline in Treasury yields helped support a rebound in the yen with USDJPY falling to around 142.80 in Asia while Sterling plunged with the GBPUSD declining to 1.2630 after UK inflation slowed more than expected in November. Overall, the dollar trade nearly unchanged on the week with losses in JPY, KRW and GBP being offset by gains in CHF, EUR and AUD.

Commodities: Brent eased back below $80 with the softness being led by WTI after the EIA report an across the board increase in stocks and after US production hit a fresh record high at 13.3m b/d, a 1.2m b/d YoY increase. Meanwhile, the US took some of its strongest steps yet to enforce a price cap on Russian oil, targeting for the first-time crude traders and a state-backed shipping giant as it seeks to pressure Moscow over its invasion of Ukraine. Gold trades lower after failing to challenge resistance in the $2050 area with continued albeit small selling of ETFs also weighing. Focus on Friday’s PCE print, the Fed’s preferred inflation measure. Corn holds a six-week low as ample US supply weighs on prices

Fixed income: Treasuries rallied on Wednesday, with yields falling across the yield curve. The 10-year yield, down 8bps to 3.85%, reached levels last seen in July. Meanwhile, the 2-year yield dropped by 11bps to 4.33%. This move was triggered by the 12bp drop in the 10-year UK Gilt yields following an unexpected 0.2% month-on-month contraction in the U.K. CPI. Overnight saw yields move a tad higher.

Macro: U.S. Conference Board consumer confidence jumped to 110.7 in November from 102.0 in October, surpassing 104.5 projected in consensus estimates. U.S. existing home sales increased 0.8% M/M to 3.82 million, higher than 3.78 million expected. Supply of existing homes remains tight at 3.5 months. U.K. CPI unexpected dropped by 0.2% M/M in November versus consensus +0.1%. On a year-on-year basis, CPI growth slowed to 3.9% in November from 4.6% in October, below 4.3% expected. Core CPI slowed to 5.1% Y/Y from 5.7% vs median estimate 5.6%.

Technical analysis highlights: S&P 500 correction likely to 4,600, uptrend intact. Nasdaq 100 took out all-time high now correction, likely to 16,140. DAX top and reversal pattern correction likely, support at 16,528 and 16,060. EURUSD likely to testing key resistance at 1.10 once again. USDJPY range bound 141.70- 145.00 likely. AUDJPY rejected at 97,50, could test support at 96.10. Gold potential to 2,070.  WTI Crude oil rebound rejected at 75 but could move to 77, Brent maybe to 82. US 10-year T-yields below support at 3.95 next support at 3.83    

In the news: Bond market rally drives yields past Wall Street’s end-2024 targets ($FT), Toyota shares slump on safety scandal at Daihatsu, vehicle recall (Reuters), Tesla Skips Merit-Based Stock Awards, Squeezing Compensation (Bloomberg), Google Plans Ad Sales Restructuring as Automation Booms (The Information), Micron revenue forecasts strong recovery, shares jump (Reuters), Tesla blamed drivers for failures of parts it long knew were defective (Reuters)

Macro events (all times are GMT): US 3Q GDP exp unchanged at 5.2% (1230), US Initial Jobless Claims, exp. 215k vs 202k prior (1230), Philadelphia Fed Business Outlook (Dec) exp. -3 vs –5.9 prior (1230), EIA’s Weekly Natural Gas Storage Change (1430), U.S. 5-year TIPS auction (1700)

Earnings events: Earnings releases today from CarMax, Paychex, Cintas, Carnival and Nike. Our focus is naturally on Nike reporting FY24 Q2 earnings (ending 30 November) tonight after the US market close with analysts expecting revenue growth of 1% y/y and EPS of $0.85 unchanged from a year ago.

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