Global Market Quick Take: Europe – 15 March 2024 Global Market Quick Take: Europe – 15 March 2024 Global Market Quick Take: Europe – 15 March 2024

Global Market Quick Take: Europe – 15 March 2024

Macro 3 minutes to read
Saxo Strategy Team

Summary:  Stocks fell on Thursday with EU and US stock futures following Asian markets lower in early trading today after strong inflation prints this week weakened the case for US rate cuts. The latest being PPI which rose by more than expected, driving up Treasury yields while supporting the first week of dollar gains in four. The S&P 500 and Nasdaq 100 both retreated by 0.3%, with Tesla and Nvidia dropping by 4.1% and 3.2%, respectively. Meanwhile, the BOJ is reportedly preparing to end its zero-interest rate policy next week, pending confirmation based on spring wage negotiation results. A strong week for commodities, led by energy and industrial metals, not least copper which broke higher


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

Equities: Stronger than expected US February PPI figures yesterday at 2.8% YoY (excluding food, energy, and trade) pushed SOFR Dec 24 futures further down reflecting the market constantly lowering the amount of rate cuts expected this year. This combined with Japan finalising an annual wage hike of 5.3% vs 3.8% a year ago for the biggest union will continue to underpin inflationary pressures. Nasdaq 100 futures are down 0.2% this morning and STOXX 50 futures are flat while Asian equities were broadly lower led by Hang Seng futures down 1.7%. Adobe reported fiscal Q1 results (ending 1 Mar) that were in line with estimates and announced a new $25bn share buyback programme. However, investors were disappointed over the fiscal Q2 outlook with revenue at $5.25-5.30 vs est. $5.31 sending shares down as much as 10% in extended trading hours.

FX: The US dollar is heading for its first weekly gain in four after stronger than expected inflation data this week helped send Treasury yields surging with traders pricing in a slower pace of US rate cut. Biggest losers where the minor currencies of NOK, SEK and NZD, with AUD (iron slump below $100/t) and JPY leading the losses among the G7. EURUSD dropped to 1.0873 and USDJPY climbed to 148.66. Despite the anticipation of a BOJ pivot that ends the zero-interest rate in Japan, yen strength remains uncertain without a more hawkish BOJ stance and is largely dominated by the strength of the dollar which has recently picked up amid investors expecting a slower pace of rate cuts.

Commodities: The Bloomberg Commodity TR Index (2% YTD) trades at a three-month high with gains seen across all sectors this week. WTI and Brent reached four-month highs, breaking key resistance levels after the IEA flipped their 2024 supply/demand forecast to a deficit amid prolonged production cuts from OPEC+. Gold meanwhile remains resilient, holding onto most of its recent strong gains despite dollar and yield strength following stronger-than-expected CPI and PPI prints this week. Earlier this month, speculators amassed a major long position which is now being defended. A strong week for copper (+5%) and copper miners (7%) as prices reach an 11-month high, supported by already tight market conditions and now by the prospect for Chinese smelters cutting production. Iron ore (-30% YTD) slumped below USD 100/t as China’s property crisis will continue to keep a lid on steel demand. Uranium’s (-8% YTD) long-term upside remains intact despite recent stop loss selling from investors who got caught up in the January buying frenzy.

Fixed income: The yield curve bear-steepened yesterday on the back of a strong PPI report, which showed that producer prices might be rebounding. Ten-year yields rose by 10 bps closing at 4.29%, while 2-year yields rose by 7 bps to 4.69%. Markets' attention now turns onto next week’s FOMC meeting, the Summary of Economic Projections, and the dot plot. In December, the dot plot was showing 75 bps rate cuts this year; if an updated dot plot shows a decrease in policymakers' rate cut expectations, a cut in June becomes more improbable, putting further pressure on US Treasuries across tenors. The Bank of Japan will also be very important next week, as markets give 65% chances of policy normalization. If that were to materialize, it could be bearish for US Treasuries and European sovereigns in the long term as Japanese investors will repatriate home. Ten-year US Treasury yields have been trading rangebound between 4% and 4.25% since January until today, while 10-year Bund yields are in an uptrend. In order for a bond bull market to form, markets need to believe that above-target inflation is a problem of the past.

Macro: According to Jiji, a prominent Japanese news agency, the BOJ is preparing to terminate its zero-interest rate policy during its meeting scheduled for March 18-19. This decision is pending final confirmation based on the aggregated results of the spring wage negotiations (Shunto), which are set to be released later today by the Japanese Trade Union Confederation (Rengo). US PPI surged beyond expectations, rising by 0.6% M/M or 1.6% Y/Y in February, surpassing consensus forecasts of 0.3% M/M and 1.2% Y/Y. January's figure was revised upward to 1.0% Y/Y from 0.9% Y/Y. Excluding food and energy, the core PPI increased by 0.3% M/M and 2.0% Y/Y, also exceeding median forecasts of 0.2% and 1.9%, respectively. Notably, domestic scheduled air passenger transportation services saw a 3.5% M/M price hike. The upward revisions to PPI’s hospital and physician service costs for January could lead to a significant upward revision in January's core PCE inflation, the preferred gauge of the Fed, reducing market expectations regarding the pace of rate cuts this year. US retail sales expanded at a slower pace than anticipated, increasing by 0.6% M/M in February, while the January decline was revised downwards to -1.1% M/M from the previously reported -0.8%. Excluding auto sales, retail figures in February rose by 0.3% M/M, falling short of the expected 0.5%, and the January data was revised downward to -0.8% from -0.6%. US initial jobless claims declined to 209k, below the 218k projected by economists and the prior week’s 210k (revised down from the previously reported 217k).

Technical analysis highlights: S&P 500 & Nasdaq 100 Bearish Engulfing top and reversal pattern. Key support for S&P 500 and 17,808 for Nasdaq 100. DAX touched 18K, uptrend intact, key support at 17,620. Below expect sell-off to 17,326-17,118. EURUSD below support at 1.09, support at 1.0870, could dip to 1.09 strong support. USDJPY heavy, could move to strong resist at 149.20. EURJPY rebounding from 0.618 retracement at 160.23, likely resuming uptrend. GBPUSD correction, support at 1.27, expect rebound from there. AUDJPY range bound 96.80- 98.20.  Gold uptrend but correction could test support at 2,134, possibly 2,115. Silver broken resistance at 24.60 potential to 26.00. WTI confirmed uptrend, resist at 82.56.  US 10-year T-yields broke resist at 4.20, strong resist at 4.35

Volatility: Yesterday saw the VIX increase to $14.40 (+0.65 | +4.73%), with a notable rise in the VIX1D to $14.28 (+2.40 | +20.20%), indicating heightened short-term market volatility. The VVIX also rose to 88.75 (+2.48 | +2.87%), reflecting growing market unease. Despite the absence of significant economic events or earnings reports, today's market is notably marked by triple witching, an occurrence often associated with increased market volatility. This morning, VIX futures edged up slightly to 15.450 (+0.045 | +0.30%). Meanwhile, S&P 500 and Nasdaq 100 futures dipped to 5212.00 (-6.00 | -0.11%) and 18218.00 (-52.75 | -0.29%) respectively, indicating a cautious market stance. Thursday's options trading was most active for TSLA, NVDA, AAPL, MSFT, AMD, AMZN, SOUN, GOOGL, MARA, and HOOD.

In the news: BOJ preparing to end negative interest rate policy at March meeting, Jiji reports (Reuters), Fed Gets More Reasons to Delay Interest-Rate Cuts (Bloomberg), Adobe Drops on Weak Forecast Fueled by AI Competition Fears (Bloomberg), Mnuchin Now Wants to Buy TikTok, Days After Leading NYCB Rescue (Bloomberg), China issues draft rules to allow companies to tap foreign debt markets (Reuters)

Macro events (all times are GMT): Can housing start (Feb) exp 227.5k vs 223.6k prior (1115), US Empire manufacturing (Mch) exp –7 vs –2.4 (1130), US industrial production (Feb) exp flat vs –0.1% prior (1215), U of Michigan sentiment (Mar) exp 77.1 vs 76.9 prior (1300), After the close: weekly COT reports from the CFTC and ICE Europe

Earnings events: Light earnings calendar today. Vonovia, Germany’s largest real estate owner, has already reported earnings with shares down 5% in pre-market trading on weak 2024 outlook.

  • Today: CATL, Vonovia, Jabil

 

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

Disclaimer

The Saxo 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 is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, 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 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 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 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 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 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.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.