Global Market Quick Take: Europe – 8 January 2025

Global Market Quick Take: Europe – 8 January 2025

Key points

• Equities: US selloff; stronger ISM data, Eurozone inflation 2.4%; mixed Asia
• Volatility: VIX +11% to 17.81; highest in the last 2 weeks
• Digital Assets: Bitcoin -1.43% to $95,572; Ethereum, Solana also weaker
• Currencies: US dollar remains firm after strong US ISM Services, ahead of today’s ADP payrolls
• Commodities: Metals on top followed by energy in strong start to the year
• Fixed Income: US yield curve sees additional bear steepening, with 10-year close to 4.7%
• Macro events: Euro-area consumer confidence, US ADP, jobless claims, and FOMC minutes

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

Macro data and headlines

• US president-elect Donald Trump in a speech yesterday suggested that Canada should become part of the United States and that the US should apply “economic force” to that end, threatened “high level” tariffs against Denmark to wrest control of Greenland from it, and hinted at a willingness to use military force to take control of the Panama Canal.
• Germany Nov. Factor Orders plunged -5.4% MoM and -1.7% YoY vs. -0.2%/+3.0% expected, respectively.
• Sweden’s Flash Dec. CPI out at 0.0% MoM and 0.8% YoY vs. 0.2%/1.0% expected, respectively, and the core YoY number was out at 1.5% vs. 1.7% expected.
• Australia Nov. CPI out at 2.3% YoY vs. 2.2% expected and 2.1% in October, with the “trimmed mean” core measure of CPI dropping to 3.2% vs. 3.5% in Oct.
• US Nov. JOLTS job openings came in at 8.1M vs. 7.74M expected, though heavy revisions have marked this data series due to data collection difficulties.
• US Dec. ISM Services was out at 54.2 vs. 53.5 expected and 52.1 previous, with the Prices Paid index jumping to 64.4, a sign of greater inflationary pressures in services.
• China will subsidize more consumer products and boost funding for industrial equipment upgrades, ramping up a program aimed at bolstering domestic consumption in the face of growing headwinds for exports.

Macro events (times in GMT)

Eurozone Dec. Confidence Surveys (1000) US Fed’s Waller, voter, to speak (1300), US Dec. ADP Employment Change (1315), US Weekly Initial and Continuing Jobless Claims (1330), US Treasury auctions 30-year T-bonds (1800), US FOMC Minutes (1900), Australia Nov. Retail Sales (0030), China Dec. CPI/PPI (0130)

Earnings events

• Friday: Constellation Brands, Delta Airlines, Walgreens Boots

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

Equities

• US : US futures stabilized early Wednesday after a sharp selloff on Tuesday. The S&P 500 fell 1.11%, the Nasdaq 100 dropped 1.89%, and the Dow lost 0.42%. This decline followed stronger-than-expected ISM Services data, which renewed concerns about inflation and raised expectations for fewer Fed rate cuts in 2025. Treasury yields surged, with the 10-year yield climbing to 4.69%, amplifying pressure on equities. Nvidia declined 6.2%, reversing recent gains, while Tesla dropped 4% after a downgrade from Bank of America. Other notable losers included MicroStrategy (-9.94%) and Palantir (-7.8%).
• Europe : European stocks extended gains on Tuesday, with the Stoxx 50 rising 0.5%, supported by strong performances in the industrial and tech sectors. Kion Group surged over 9% after announcing an AI collaboration with Nvidia and Accenture, while Volvo Cars gained 6% on record 2024 global EV sales. Meanwhile, Eurozone inflation increased to 2.4% in December, aligning with expectations but highlighting persistent price pressures. Optimism was dampened slightly after President-elect Trump dismissed reports of softer US tariffs, keeping trade uncertainties in focus.
• Asia : Asian equities were mixed on Wednesday. Japan's Nikkei 225 fell 0.9% as government officials warned of currency market intervention. Hong Kong's Hang Seng dropped 0.99%, weighed down by Tencent’s 7.28% loss following its inclusion on a US military blacklist. In South Korea, Samsung Electronics gained 2.7% despite missing profit expectations, helping the KOSPI rise 1.1%. Chinese markets remained under pressure, with the Shanghai Composite declining 0.8% amid heightened US-China tensions and new trade blacklist additions.

Volatility

Volatility spiked on Tuesday as the CBOE VIX surged 11% to 17.81, its highest in over two weeks. Rising Treasury yields, driven by stronger-than-expected ISM Services data, added to market turbulence. Expected moves for the S&P 500 stand at 42.89 points (~0.73%), while the Nasdaq 100 reflects 205.96 points (~0.97%). Notable options activity centered around Nvidia, Tesla, and Palantir, as traders positioned for continued rate uncertainty and broader market volatility.

Fixed Income

• US Treasury yields jumped, with the 10-year benchmark posting new local cycle highs above 4.64%, trading nearly to 4.70% in the wake of the hot ISM Service Prices Paid component yesterday. The critical level to the upside is the 5.0% mark touched briefly in late 2023.
• European yields rose as CPI prints from Eurozone were in line with expectations yesterday, with the Dec. flash CPI estimate at 2.4% YoY vs. 2.2% in November, though a Nov. ECB survey of CPI expectations came rose to 2.6% for 1-year ahead from 2.5% previously and to 2.4% for 3-year expectations vs 2.1% previously.

Commodities

• Copper and platinum have emerged as top performers in the first week of trading, driven by short covering after money managers ended 2024 with short positions in both metals. Additionally, there is fundamental support from a weaker US dollar and an improved outlook for China, with Beijing promising "more proactive" policies and lower interest rates to boost growth.
• Silver is holding above USD 30, up around 5% this month, supported by an improved technical outlook and a softer dollar. The risk of a Trump trade war and a sticky inflation outlook have also contributed to a bounce-back for gold.
• Crude oil futures have resumed their ascent following a brief pause. This rise is supported by reduced flows from Iran and Russia amid sanctions, with shipments from Russia tumbling to a 16-month low. Cold weather in the US has lifted diesel demand, and the API's weekly stock report showed a 4 million barrel drop last week.

Currencies

• The US dollar jumped back higher as US Treasury yields rose sharply in the wake of the strong Dec. ISM Services release. EURUSD bottomed out below 1.0350 overnight and USDJPY edged back above 158.00 overnight at times despite Japan’s Ministry of Finance warning on JPY weakness the prior day.
• The Chinese central bank pushed back against the weak CNH by setting the reference rate for the onshore CNY at its strongest level yet relative to where the market trades – setting the rate below 7.19 even as spot trades above 7.33 onshore and near 7.35 for the offshore USDCNH exchange rate. 7.3750 is the critical level – the twice touched high tested in both 2022 and 2023.