Global Market Quick Take: Europe – 31 October 2024

Key points:

• Equities: US indices declined, Super Micro fell 33%, European luxury shares down, Asia up
• Currencies: JPY firms during BoJ presser as Governor Ueda ponders policy review, FX moves. Sterling lower post autumn budget statement.
• Commodities: Gold sets new record highs again, crude rebounds
• Fixed Income: European yields rise on strong data, US Treasuries flatten after mixed data
• Economic data today: Eurozone Oct. CPI estimate, US Sep. PCE Inflation, US Weekly Jobless claims.

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

Webinar replay: Trading the 2024 US election

Macro:

• • The Bank of Japan as expected kept its benchmark interest rate unchanged at 0.25% while sticking to its view that it’s on track to achieve its inflation target, an outlook that points to the possibility of another rate hike in the coming months. The Governor Ueda press conference brought comments on the impacts of the Japanese yen and promises of a policy review.
  • US ADP employment data showed hiring at US companies accelerated last month after private payrolls increased by 233,000 in October, the most in more than a year, while September was revised higher. Manufacturing was the only sector to lose jobs, while education and health services, as well as trade and transportation posted some of the strongest advance
  • The US economy expanded at a robust pace in Q3 as consumer spending advanced the most since early 2023, and the government ramped up defense spending. Inflation-adjusted GDP increased 2.8% YoY after rising 3% in the previous quarter, while a measure of underlying inflation rose 2.2%, roughly in line with the Feds target.

  • Chinese factory activity strengthened for the first time in six months in October, potentially a sign the Chinese economy is stabilizing after Beijing unleashed a number of stimulus measures, although the result of next weeks US election may limit the impact. The official manufacturing PMI rose to 50.1 in October, higher than 49.8 with a reading above 50 marking an expansion. The non-manufacturing PMI showed activity in construction and services expanded after staying little changed the previous month.

Macro events (times in GMT): Ger Sept Retail Sales (0700), Eurozone Prelim CPI (1000), US Sep Core PCE Price Index (1230), US Sep Personal Spending (1230), US Weekly Jobless Claims (1230), US 3Q Employment Cost Index (1230), EIA’s Natural Gas Storage Change (1430)

Earnings events:

• Today: Apple, Amazon.com, Mastercard, Merck&Co, Uber Tech, Intel
• Friday: Exxon Mobile, Chevron
• Next week: Berkshire Hathaway, Palantir, Qualcomm, Arm, Gilead, Airbnb

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

Equities:

• US Markets – Major US indices slipped yesterday, with the Nasdaq Composite down 0.6%, the S&P 500 losing 0.3%, and the Dow Jones dipping 0.2% as investors absorbed mixed earnings results and Q3 GDP data indicating slower growth than expected. Super Micro Computer dropped nearly 33% after its auditor, Ernst & Young, resigned and refused to endorse the company’s financial statements. Microsoft and Meta reported after-hours, both surpassing revenue expectations, but Microsoft traded over 3% lower in after-hours trading on a disappointing Azure growth forecast. Meta traded 3% lower in late trading on announcing heavier AI spending. Garmin surged 23% on a strong earnings beat and raised guidance, while Alphabet rose nearly 3% following robust Q3 results.
• Europe – European equities continued to decline, with the Stoxx 50 and Stoxx 600 down around 1.1% after a Q3 Eurozone GDP surprise of 0.4% trimmed hopes for a larger ECB rate cut. Luxury stocks like Moncler (-2.5%), LVMH (-2.3%), and Kering (-3.9%) weakened, while Volkswagen gained 0.9% on slightly better-than-expected revenue. GSK and Capgemini saw notable declines following disappointing results.
• Asia – Hong Kong and mainland Chinese stocks ticked higher, with the CSI300 up 0.2% and the Hang Seng climbing 0.5% on Thursday. Gains were led by property shares after China’s manufacturing PMI data showed growth in October, marking its first expansion in six months. Investors are closely monitoring Beijing for potential stimulus announcements.

Volatility: The VIX climbed 5.22% to 20.35, reflecting rising market unease ahead of today's key economic data releases, including PCE inflation and jobless claims. The VIX1D, a one-day volatility measure, surged over 16%, suggesting heightened short-term caution. Expected moves based on options pricing project a daily range of approximately 35.57 points (0.61%) for the S&P 500 and 198.86 points (0.98%) for the Nasdaq-100. Notable options activity centers around post-earnings stocks like AMD, Alphabet, and Pfizer, while anticipation for Apple's and Amazon’s reports this evening continues to influence volatility.

Fixed Income: European sovereign yields rose after higher-than-expected German inflation and GDP figures, alongside comments from ECB’s Isabel Schnabel advising caution on rate cuts. Traders reduced bets on ECB rate cuts, pricing in 30bps for December and 125bps by the end of next year. Italian bonds underperformed following stagnant GDP, highlighting economic fragility. In the UK, gilt yields fluctuated sharply after the budget announcement, with money markets scaling back expectations for BOE rate cuts following the Chancellor’s fiscal easing. U.S. Treasury yields ended Wednesday mixed, with short-term yields rising over 5bps and longer-term yields mostly unchanged, leading to a flattening curve. Early gains in Treasuries faded after stronger-than-expected ADP employment data and a positive surprise in 3Q GDP’s personal consumption component.

Commodities: Crude oil trades higher for a second day, supported by shrinking US crude inventories and gasoline demand running at the highest seasonal levels since 2022. In addition, the market’s relaxed attitude towards the Middle East situation is once again being challenged after Iran said it would respond to Israel’s attack. Meanwhile, a US-led push to end the Hezbollah conflict continues. Strong US economic data failed to derail gold’s ongoing rise to a fresh record as traders positioned for a high level of uncertainty ahead of the US election, a major risk event that could trigger a significant market move depending on the outcome. Additionally, the FOMC is still, despite recent data strength, expected to trim rates by 25 bps at the 7 November meeting

Currencies: US dollar strength eased further yesterday and the yen rose sharply after the beginning of the Bank of Japan Governor Ueda press conference this morning, as Ueda said that he is weighing the impact of the weak Japanese yen and its background and that the BoJ will conduct a review to discuss the neutral policy rate, although the review may not have any immediate policy impact. Ueda also noted the strength in the US economy. Short JGB yields were largely unchanged, although they snapped back higher after a dip earlier in the Asian session. Elsewhere, the sell-off in UK gilts yesterday on the autumn budget statement, which announced significant new spending initiatives, saw sterling sharply weaker versus the euro.

For a global look at markets – go to Inspiration.