Global Market Quick Take: Europe – 7 January 2025

Global Market Quick Take: Europe – 7 January 2025

Key points

• Equities: Tech surge boosts global equities; Europe leads with auto and AI gains
• Volatility: VIX stable at 16.04, options suggest muted risk outlook
• Digital Assets: Bitcoin near $101.8K, mixed performance in crypto this morning
• Currencies: USDJPY reverses from new highs above 158. USD still weak despite Trump denial of plans to dial back tariff threat.
• Commodities: Crude rally pauses. Copper tops the table on technical-driven bounce. Gold sees fresh buy-the-dip demand
• Fixed Income: US treasury yields dip after 10-year US Treasury benchmark tested cycle high yesterday.
• Macro events: Eurozone Dec CPI, US JOLTS Job Openings

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

Macro data and headlines

• The Washington Post reported that President-elect Donald Trump's aides are considering tariffs on critical imports from all countries, differing from his 2024 campaign plans (though Trump denied this). This news benefited sectors like autos, metals, and solar, which were initially expected to suffer from aggressive tariffs.
• Canada’s Prime Minister Justin Trudeau announced his resignation as Liberal Party leader and will step down when a new leader is found, likely in March, with a snap election to follow within several weeks.
• Germany's inflation rate increased to 2.6% Y/Y in December 2024, up from 2.2% in November and above the 2.4% forecast. It's the highest in eleven months, with rising service (4.1%) and food prices (2%), and a smaller energy price drop (-1.7%).
• U.S. S&P Global December composite PMI was 55.4, services PMI 56.8. November factory orders fell 0.4%, with ex-transportation up 0.2%. Nondefense capital orders ex-aircraft revised to +0.4%. December.
• UK retail sales jumped 3.1% in December 2024, recovering from a 3.4% drop in November and exceeding expectations of a 0.2% decline, thanks to strong Black Friday sales. Despite this, fourth-quarter sales grew just 0.4% year-on-year.

Macro events (times in GMT)

Dec CPI from Switzerland (0730), France (0745), Eurozone (1000), Italy (1000), Dec Construction PMI from Germany (0830), and the UK Dec (0930). US Nov JOLTS Job Openings (1500), US Dec ISM Services Index (1500)

Earnings events

• Friday: Constellation Brands, Delta Airlines, Walgreens Boots

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

Equities

• US: US equities extended their rally on Monday, with the S&P 500 up 0.55% and the Nasdaq 100 gaining 1.24%, driven by strength in semiconductor stocks. Nvidia advanced 3.4% to a record close, while Micron topped the leaderboard among S&P 500 stocks, gaining more than 10%. Disney revealed plans to merge Hulu + Live TV with FuboTV, sending Fubo shares skyrocketing over 251%. Meanwhile, the Dow edged down 0.06%, weighed by energy and financials. Investor sentiment improved on reports suggesting that President-elect Trump’s tariff policies may be narrower than initially feared, alleviating some trade tension concerns.
• Europe: European stocks rallied on Monday, with the Stoxx 50 climbing 2.36% and the Stoxx 600 adding 0.95%, led by a 3% surge in the auto sector. Volkswagen jumped 3.5% after announcing a partnership with China's Xpeng for a fast-charging network. Tech stocks were buoyed by Microsoft’s $80 billion investment in AI-driven data centers. However, German inflation unexpectedly rose to 2.9% in December, surpassing forecasts, keeping price pressure concerns intact. Broader European sentiment improved as traders digested gains in global tech and autos.
• Asia: Asian equities were mixed on Tuesday. Japan's Nikkei 225 surged 2.4%, led by tech sector gains, while Hong Kong's Hang Seng declined 1.81%, pressured by Tencent (-5%) and CATL (-5%) after being added to the US military blacklist. Chinese mainland indices were range-bound as investors weighed domestic policy updates and trade concerns under President-elect Trump. Broader Asian markets tracked Wall Street’s overnight rally in tech, with AI and semiconductor momentum driving optimism.

Volatility

Fixed Income

• US Treasury yields dropped back slightly overnight after the 10-year treasury benchmark tested recent cycle highs near 4.64% yesterday, while the 2-year yield was more rangebound.
• In Europe, the German 10-year Bund yield tested above 2.45% yesterday, with 2.50% a notable high from early November. The France-Germany 10-year yield spread eased back several basis points to 81 bps after pushing toward cycle highs to start the year and after France’s 10-year benchmark yield rose above that of Greece for the first time ever in the first trading days of 2025.
• In Japan, 2-year JGB yields rose to a cycle high near 64 basis points as Japan’s Finance Minister Kato warned of speculative moves in the Japanese yen, expressing “deep concern” in the event of “excessive movements”. The 10-year JGB yield teased 13-year highs near 114 basis points.

Commodities

• Crude oil fell on Monday, after initially extending a five-day rally as the dollar temporary weakened and traders pre-empted a short-term cold weather related pick up in US fuel demand next week after Natural gas prices soared by 10% to $3.701 per million MMBtu due to anticipated strong weather-driven demand extending past mid-January. Despite expectations for a glut this year, money managers –often responding to short-term technical developments - held a 347 million barrel long in WTI and Brent at the start of the year, the highest since July
• Gold and silver traded within relative wide ranges on Monday, initially rallying in response to dollar weakness (see below) on a later denied report the Trump administration was planning weaker tariffs, only to slump before recovering late in the session.
• Copper’s bounce back from key support in the USD 4 area helped attract fresh demand, supported by tariffs speculation. This following a weak Q4-24 that was marred by tepid Chinese demand and growing trade turmoil risks.

Currencies

• The US dollar bounced around yesterday, somewhat weak on the session and then very weak on the report from the Washington Post that, according to sources, Trump may not seek broad-based tariffs, preferring to target key imports instead. Trump was out specifically denying the rumors, though this only partially defused the USD weakness, as EURUSD still bobbed back to near 1.0400 after posting a cycle low of 1.0226 on the first trading day of the year.
• USDJPY posted new cycle highs north of 158.00, managing 158.42 before Japan’s Finance Minister warned of “excessive moves” in the the JPY, expressing his “deep concern”.
• Choppy action in USDCAD, which fell sharply on reports that PM Justin Trudeau was set to resign his leadership of the Liberal party and falling again when the PM indeed announced his resignation yesterday.