Global Market Quick Take: Europe – 29 January 2024

Global Market Quick Take: Europe – 29 January 2024

Macro 3 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  US equity futures point to a steady opening after the S&P 500 pulled back from an intra-day record high at 4,907 on Friday to finish the session down 0.1%, with the loss being driven by weakness in the information technology sector. Stocks in Asia gained on optimism over China’s latest measures while higher oil prices supported energy shares after separate attacks in the Middle East added further fuel to the current tensions. Key events in coming days include a Federal Reserve policy decision Wednesday, a Bank of England one Thursday, and US payroll numbers Friday.


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

Equities: Positive equity futures in Asia session (except for Chinese mainland CSI 300 Index down 1.2%) while US and European futures are flat this morning. It is the most important earnings week in the Q4 earnings season with major earnings on tap from Microsoft (Tue), Alphabet (Tue), Novo Nordisk (Wed), Apple (Thu), Amazon (Thu), Meta (Thu), Chevron (Fri)0, and Exxon Mobil (Fri). We remain optimistic on the outlook for companies, but the key question is whether US technology companies can meet the steep expectations built into prices. In focus this week is also energy prices with Brent Crude trading sharply higher compared to a week ago at $83.80/bbl driven by deadly attacks on US soldiers in Jordan linked to Iran and renewed attacks on commercial ships in the Red Sea by Houthi rebels elevating geopolitical risks.

FX: A choppy session on Friday left the dollar with another week of gains, with more volatility potentially seen this week with Fed and BOE decisions on tap, along with key data from jobs to ISM manufacturing. CHF was the outperformer with CAD and NOK being supported by firmer oil prices. USDJPY back above 148 although watch for any safety bid as worsening geopolitics underpin. The EURUSD is unable to move back above 1.09 but GBP could remain supported this week if BOE stays hawkish.

Commodities: Crude oil prices rose to near 12-week highs after separate attacks killed US troops in Jordan and hit a fuel tanker in the Red Sea, potentially signaling an escalation of tensions in the region. In addition, last week's decline in US inventories (although probably weather-led) as well as resilient US economy and China’s stimulus measures could also support prices in the short-term. Gold also got a safety bid at the open in Asia, but overall, it remains stuck with US data strength raising questions about the timing, pace and depth of incoming US rate cuts. Industrial metals softened after an initial short covering boost in response to China stimulus optimism started to fade.

Fixed income: The bond market will be closely monitoring the FOMC meeting this week, trying to understand whether a March rate cut is possible. Before that, the US Treasury Quarterly Refunding Announcement (QRA) could send jitters into the long part of the yield curve. Today, the Treasury will disclose financing needs for the next two quarters and, on Wednesday, the auction sizes for the next quarter. The Treasury has already well advertised in November that there will be an increase in debt and coupon size issuance this quarter, however we do not know yet by how much and which tenor will be increased in size. In focus will also be the Bank of England on Thursday, with its new economic projections. Bloomberg economists expect inflation to drop below 2% in summer, one year before BOE’s expectations. Any revision of inflation downward would ignite a bull-steepening of the yield curve.

Macro: US PCE data for December continued to reaffirm soft landing hopes. PCE cooled as expected with headline at 0.2% MoM and 2.6% YoY and core at 0.2% MoM and 2.9% YoY (below the 3% expected). The 6-month annualized rate eased to 1.9% with the 3-month at 1.5%, both beneath the Fed's 2% target. Also, consumer spending was strong, rising 0.7% in December, above the 0.4% forecast while the prior was revised up to 0.4%. Personal income rose 0.3%, in line with expectations, although the US savings rate declined to 3.7% from 4.1% - the lowest since 2022 – but remaining resilient enough not to spark recession concerns immediately. Market pricing of the March Fed rate cut remained unchanged at around 50%.

Volatility: On Friday volatility declined to 13.26 (-0.19 | -1.41%). Markets were in a wait and see mode, the S&P500 topping out a new intraday ATH at 4906.69, but eventually ending flat. Futures this morning are showing a similar image, with the VIX futures slightly green at 15.160 (+0.045 | +0.30%) and the S&P500 and Nasdaq 100 futures at 4914.25 (-2.00 | -0.04%) and 17547 (+20 | +0.11%) respectively. Expected moves for the coming week are a bit higher than last week. S&P500 options show an up or down movement of 1.30% (compared to 1% the week before) and the Nasdaq 100 has an expected move of +/- 1.93% (compared to 1.54% the week before). The elevated expected moves show that the market anticipates a higher volatility in the week ahead, mainly due to the many economic news releases (ADP, FOMC statement, Jobless Claims, Nonfarm Payrolls, ...) and of course all the big tech names releasing their earnings (MSFT, GOOGL, AMD, AAPL, AMZN, ...)

In the news: According to the Washington Post, Donald Trump, the former US president and the front-runner for the Republican candidacy for the US presidential election this year, is mulling a flat 60% tariff on all imports from China. Three US troops killed, up to 34 injured in Jordan drone strike linked to Iran (CNBC), US to announce billions in subsidies for advanced chips (Reuters), Intel tumbles as chipmaker falls further behind in AI race (Reuters), Top US, China Officials Discussed Setting Up Next Biden-Xi Call (Bloomberg), Brussels threatens to hit Hungary’s economy if Viktor Orbán vetoes Ukraine aid (FT).

Macro events (all times are GMT): US Dallas Fed Manf. Survey (Jan) est. -11.8 vs -9.3 prior.

Earnings events: Key earnings releases this week with US technology earnings being the key driver in equities this week.

  • Tuesday: Volvo, Stryker, Mondelez, Microsoft, Alphabet (Google), AMD, Starbucks, Chubb, Danaher, Pfizer, UPS
  • Wednesday: Novo Nordisk, Qualcomm, Mastercard, Novartis, Thermo Fisher Scientific, Boeing
  • Thursday: Apple, Roche, Amazon, Meta, Merck, Shell, Honeywell, Sanofi
  • Friday: Keyence, ExxonMobil, AbbVie, Chevron, Regeneron Pharmaceuticals, Bristol-Myers Squibb

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

Quarterly Outlook

01 /

  • 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...
  • 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 ...
  • 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.