Global Market Quick Take: Europe – 17 January 2025

Global Market Quick Take: Europe – 17 January 2025

• Equities: Tech pullback, European luxury gains, China GDP boost
• Volatility: VIX steady, January options expiry
• Digital Assets: Bitcoin $101K, Trump pro-crypto policy speculation, Ethereum/XRP gains
• Currencies: USD mixed as JPY surges on lower global bond yields
• Commodities:  Natgas surges on cold weather extension; China data lifts copper
• Fixed Income: Yields fall further on soft US Retail Sales in December and dovish Fed comments
• Macro events: US Housing Starts and Industrial Production

Saxo’s Q1 2025 Quarterly Outlook is out, and can be accessed here

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

Macro data and headlines

• Scott Bessent, US Treasury Secretary nominee, had a confirmation hearing yesterday before the Senate. He warned of “economic calamity” if Trump’s 2017 tax cuts were not extended beyond the end of the year. Bessent said he respected the Fed’s independence and stated that “I believe that President Trump has a generational opportunity to unleash a new economic golden age that will create more jobs, wealth and prosperity for all Americans.”
• China’s Foreign Ministry announced that it would send Vice President Han Zheng to Donald Trump’s inauguration on Monday. This after Trump invited President Xi Jinping to attend. The ministry also issued an announcement that China wants a “stable, healthy and sustainable relationship” with the US as it is ready to “find the right way for the two countries to get along with each other.”
• Fed Governor Waller suggesting that a rate cut in March is still possible and that three or four cuts could occur this year based on data. This pressured the dollar, boosted Treasuries, and temporarily supported stocks.
• US December retail sales came in weaker than expected at 0.4% vs 0.6% expected while the US Philly Fed Business Index (Jan) printed the highest figure since April 2021 ( and the second highest therefore since 1984) at +44.3 vs. -5.0 expected.
• China's economy grew 5% in 2024, exceeding the median estimate of 4.9%. The growth was driven by a strong export boom, which may fade in the coming months due to looming US tariffs. The government has vowed to implement further monetary easing and stronger public spending to support the economy.

   

Macro events (times in GMT)

UK Dec. Retail Sales (0700), Eurozone final Dec. CPI (1000), US Dec. Housing Starts and Building Permits (1330), US Dec. Industrial Production (1415), UK Bank of England Governor Bailey to speak (2100)

Earnings events

• Today: Schlumberger, Fastenal, State Street
• Next week: Procter and Gamble, Netflix, Johnson & Johnson, American Express, Intuitive Surgical, Abbott Laboratories, GE Aerospace, Texas Instruments, Verizon, NextEra Energy, Union Pacific, Charles Schwab, Christian Dior

   

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

Equities

• US: US stocks ended lower on Thursday, snapping a three-day rally as profit-taking hit the technology sector. The S&P 500 fell 0.21%, the Nasdaq 100 declined 0.89%, and the Dow Jones slipped 0.16%. Apple and Tesla were among the biggest laggards, down 4% and 3.4% respectively, while Morgan Stanley rose 4% on strong Q4 earnings. Futures are steady as traders focus on options expiries and potential political developments ahead of President-elect Trump’s inauguration next week.
• Europe: European markets extended gains on Thursday, with the STOXX 50 up 1.4% and the STOXX 600 rising 0.9%, driven by strong corporate results and hopes of central bank rate cuts. Swiss luxury giant Richemont surged 16.4% on record quarterly sales, boosting sentiment across luxury stocks, including LVMH (+9.2%) and Kering (+6.2%). ASML gained 4.6%, benefiting from strong results from TSMC. Dovish signals in ECB minutes and weaker-than-expected US retail sales reinforced optimism for further monetary easing. The German DAX hit record highs, while UK GDP data showed a better-than-expected 0.1% monthly increase in November.
• Asia: Asian stocks ended mixed on Friday, with Chinese markets rising on stronger-than-expected Q4 GDP and December industrial production data. The Shanghai Composite gained 0.4%, and the Hang Seng Index added 0.2%, with semiconductors and tech stocks leading the gains amid optimism around domestic innovation. However, Japanese equities lagged as yen strength and expectations of a Bank of Japan rate hike weighed on sentiment. Regional caution lingered ahead of US President-elect Trump’s inauguration, as concerns over potential trade tariffs on Chinese exports resurfaced.

Volatility

Volatility rose modestly, with the VIX ticking up to 16.60 (+2.98%), as markets brace for significant options expiries and political uncertainty around President-elect Trump’s upcoming inauguration. Short-term measures like the VIX1D (+5.28%) and VIX9D (+6.74%) reflected slightly higher near-term uncertainty. Increased trading activity in options, particularly for names like Palantir, SoFi, and MicroStrategy, points to repositioning and speculative bets ahead of Trump’s potential executive orders and corporate earnings releases.

Digital Assets

Bitcoin climbed above $101,000, rising 1.46% as optimism over President-elect Trump’s pro-crypto stance bolstered market sentiment. Bloomberg reported Trump may sign an executive order prioritizing cryptocurrency regulation, potentially creating a national Bitcoin reserve and easing enforcement actions against crypto firms. Ethereum (+1.89%) and XRP (+2.13%) also gained, while altcoins saw smaller increases. Crypto-related equities like Coinbase (+2.44%) and MicroStrategy (+1.77%) advanced, reflecting renewed investor interest in the sector. Traders are awaiting further policy clarity as the inauguration approaches.

Fixed Income

• US Treasury yields fell further all along the curve on Fed governor Waller’s comments and soft retail sales, as well as on follow-on buying from Thursday’s soft core US CPI data. The 2-year treasury benchmark traded as low as 4.23%, near a one-month low of 4.2%, and the 10-year trades some 5 basis points lower than the Wednesday close at 4.61% this morning.
• UK Gilt yields have dropped heavily on the relief found in strong buying of US treasuries, with the 10-year Gilt yield now some 25 basis points lower off recent highs, closing at 4.68% yesterday.

Commodities

• US natural gas futures spiked 7.5% Thursday afternoon on forecasts the current cold weather snap will extend to the end of the month. Gas inventories slumped 258 bcf to 3115 bcf last week, more than twice the five-year avg change, leaving total stocks just 2.5% above their long-term avg.
• Copper, just like most other major commodities, has seen a strong start to the year, currently up 11% this month and on track for its longest winning streak since 2017. Supported by fresh momentum forcing speculators back on the long side amid signs of demand recovery in China where a H2-2024 stimulus push turbocharged activity in the final quarter to the strongest level in six quarters.
• Gold trades a tad lower after once again finding resistance around $2725 following a supportive week that saw US rate cut hopes being reignited following softer US economic data, including inflation. Due to its recent strength despite the stronger dollar, gold has reached fresh record highs against multiple currencies.

Currencies