Global Market Quick Take: Europe – 23 January 2024

Global Market Quick Take: Europe – 23 January 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  Wall Street reached another record yesterday on continued optimism surrounding a Goldilocks US economy and positive earnings surprises in the ongoing earnings season. Asian markets meanwhile received and additional boost from reports suggesting China is considering mobilizing RMB 2 trillion to support stocks in Hong Kong and China. A softer dollar also supporting risk sentiment ahead of key economic events and earnings later in the week. Commodities trade steady with geopolitical concerns underpinning gold and crude oil. Focus today on the New Hampshire Primary, as well as earnings from J&J, P&G and Netflix, which is expected to report strong subscriber growth.


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

Equities: Hang Seng futures are up 2.7% in today’s session following comments by China’s Premier Li Qiang asking authorities to implement forceful measures to shore up investor confidence with a figure such as RMB 2trn being floated. European and US equity futures are slightly higher as sentiment remains positive. The earnings season kicks into gear today with key earnings from Netflix and already in European pre-market Swedish-based Ericsson has beat estimates on dividends and operating margin, but Q4 net revenue is a lot weaker than estimated dragged down by lower growth outside China.

FX: A softer dollar within relative tight ranges is what the currency market has given us so far as traders focus on key events later in the week, including the New Hampshire Primary today, followed by Bank of Canada on Wednesday and ECB on Thursday along with US GDP data followed by PCE on Friday. The Bank of Japan left its policy rate unchanged as an expected drop in core inflation to 2.4% remains above the BOJ target of 2%. The DXY 103 support level in focus with the EURUSD still stuck in a 1.0850 to 1.10 range. AUDUSD however reversed its drop to get back to the 0.66 handle on the announcement of China’s stock support package, and 50DMA at 0.6656 could be key.

Commodities: While markets focused on Mideast tensions, geopolitical risks escalated on another front after Ukrainian drones attacked Russian oil facilities on the Baltic coast, raising the stakes in the two-year long war. Tensions in the Red Sea remain elevated and will likely for now keep a floor under the oil market while gas prices continue to tumble, with stock levels expected to be elevated as spring approaches. Silver slumped below $22.50 on technical selling with gold still supported as markets pushed back Fed rate cut expectations. Copper at risk of a short squeeze as China makes further attempts to support its ailing economy. The most shorted grains market since 2019 trades higher for a third day on short covering led by wheat and soybeans.

Fixed income: In the absence of comments from Fed officials during the blackout period ahead of the January 30-31 FOMC meeting, and with no major economic data to move the market, Treasuries finished a lackluster session mixed, with the 2-year yield 1bp higher at 4.39% and the 10-year yield falling by 2bps to 4.11%. On economic data, the focus will be on the GDP first estimate on Thursday and the PCE deflator on Friday.

Macro: The Bank of Japan maintained its short-term interest rate at -0.1% and YCC settings, while cutting FY 2024 inflation forecast to 2.4% from 2.8% in October. FY 2025 core CPI forecast was slightly increased, but not enough for the market to interpret this as a hawkish outcome and Governor Ueda’s press conference will be skimmed for any further hints. We still think BOJ has no exit policy, as discussed in this article and any move in April or July will remain very modest. Chinese policymakers were said to consider a 2 trillion-yuan ($278 billion) package of measures to stabilize slumping equity markets in Hong Kong and mainland China, culminating on Monday when the CSI300 hit a five-year low and the HSI Index slumped to a near 19-year lows. Still more details are needed, including how exactly to raise the fund and what kinds of stocks the stabilization fund aims to buy

Volatility: Volatility further eased as the VIX slipped to $13.19, despite the markets retreating slightly from their intraday peaks. Both the VVIX and SKEW indexes saw declines to 79.17 and 146.01, yet the elevated SKEW suggests the potential for a notable downward move remains. VIX futures continued to trend down, reaching 14.00, in alignment with a muted but positive stance in S&P 500 and Nasdaq 100 futures, which are showing a slight uptick. Today's session could be stirred by Johnson & Johnson and Procter & Gamble's pre-market earnings, with investors watching for impacts on market volatility. As the week progresses, the focus will stay on the possibility of further gains or retracements influenced by economic releases and the slew of earnings reports on the horizon.

In the news: China’s Premier Orders More Measures to Arrest Stock Rout (Bloomberg), Bitcoin falls to $40,000, lowest level since bitcoin ETF launch (Reuters), China's 'lackluster recovery' not having strong effect on US economy -Brainard (Reuters), Fed Should Stop Quantitative Tightening, Reduce Interest Rates Soon, Bill Gross Says (Bloomberg), Accounting investigation under way at Archer Daniels Midland and its top financial executive has been placed on leave (AP), Gilead's Trodelvy fails to meet main goal in lung cancer trial (Reuters)

Macro events (all times are GMT): New Hampshire Primary, US Richmond Fed Mfg index (Jan) exp -6 vs -11 prior (1400), API’s weekly crude and fuel stock report (2030)

Earnings events: Busy week ahead with key earnings releases listed below. Read our earnings preview published yesterday.

  • Today: GE, J&J, P&G, RTX, Lockheed Martin, 3M, Netflix, Intuitive Surgical, Ericsson
  • Wednesday: SAP, ASML, Freeport-McMoRan, Abbott Laboratories, Tesla, CSX
  • Thursday: SEB, Sandvik, Valero Energy, Atlas Copco, STMicroelectronics, NextEra Energy, Humana, Intel, LVMH, Visa
  • Friday: Volvo, Kone, Christian Dior, Colgate Palmolive.

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

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 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.