Global Market Quick Take: Europe – 17 July 2024

Key points:

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

In the news: IMF Warns Slower Disinflation Risks Higher Rates for ‘Even Longer’(Bloomberg), Musk, frustrated with California laws, says SpaceX, X will move headquarters to Texas (Reuters), Trump says Taiwan should pay for defence, sending TSMC stock down (Reuters), UK inflation pressure stays hot, reducing chance of August rate cut (Reuters).

Equities: Goldmans Sach, Bank of America, Morgan Stanley and PNC Financial posted better than expected earnings Pre-Market Tuesday and all ended higher. Charles Schwab did not live up to expectations, ending down 10%. Small caps gained another 3.5% and is now up 10% past 5 trading days. Bitcoin related stocks continued their rise. Alternative Energy bounced back after Monday sell-off. BHP's iron ore output rose 6% in the three months to June, hitting a record 260 million tons for the full year. Quarterly production was 69.2 million tons. Roche announces positive phase one results of CT-996 Obesity treatment (Newsedge). Assa Abloy  Q2 sales SEK37.97 bln vs 38.4 expected. Profit 3.92bln vs 4.0 expected. Antofagasta Q2 Copper output 155,300 tons up 20% but sees 2024 Copper output lower end of guidance, gold output 33,600 oz up1%.

Macro: US indices rose on Tuesday, with the S&P 500 up 0.6% and the Dow Jones gaining 1.9%, while the Nasdaq 100 was flat due to Nvidia's drop. The Russell 2000 surged 3.5%. Strong US retail sales, particularly the Control print, suggest a positive Q2 GDP impact. The dollar strengthened, initially weakening Treasuries, but both stabilized by afternoon. Gold hit a record high at $2469/oz, and oil prices fell due to a stronger dollar and China concerns. Canadian CPI was lower than expected, affecting the Bank of Canada's outlook. Industrials and Materials sectors outperformed, while Technology and Communications lagged. This morning, Asian stocks posted a slight increase for the first time in four days, with Australia outperforming other markets. The Hang Seng Index remains stable following a two-day technology sector decline. The New Zealand dollar appreciated as yields rose despite lower-than-expected inflation figures.

Macro events (times in GMT): Eurozone Final June CPI readings (09:00), UK June CPI, RPI and PPI readings  (06:00), U.S. MBA Mortgage Applications and Industrial production (12:30), Fed’s Waller, Barkin and Kugler speak. Twenty-year US Treasury auction (17:00).

Earnings events: Earnings After-Hours Tuesday: Interactive Brokers Q2 EPS 1.76 vs 1.74 expected. Customer accounts increased 28%. J.B. Hunt Transportation Q2 EPS 1.32 vs 1.81 down 27%. Revenue down 7%, share slipped 2.3% in After-Hours trading. ASML's Q2 beats forecast amid AI Chip boom. Q2 EPS EUR4.01 vs 3.71 expected. New orders hit EUR 5.57bln vs. estimated EUR 4.41B, driven by higher immersion system sales. Net sales were EUR 6.24bln, vs. EUR 6bln estimated and up 18%. ASML expects sales for 2024 to EUR27.56 bln similar to 2023.

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

Fixed income: In a blow to the "Trump Trade", Treasury yields declined during the US afternoon session yesterday. Long-end tenors led the gains, fully recovering from the impact of robust June retail sales data from earlier in the day. Yields ended the session near their lows, with long-end yields richer by up to 8 basis points. Ten-year yields fell below the 4.18% support level, confirming the downtrend; if they remain below this level, they will next find support at 3.78%. In Europe, the German 10-year yield dropped by up to 6 basis points to 2.42%, its lowest level since late June. Meanwhile, the yield on two-year gilts decreased by 7 basis points yesterday, falling below 4% for the first time this year, ahead of the UK CPI figures released this morning. Despite the YoY headline CPI remaining at 2%, core and services CPI remained flat at 3.5% and 5.7% respectively, both exceeding market’s expectations. Looking ahead, key events include comments from US Fed's Waller, the 20-year auction (for a preview of the auction click here), and the Philly Fed index. For a preview to tomorrow’s ECB meeting click here.

Commodities: Gold prices hit a record high on Tuesday due to expectations of Federal Reserve interest rate cuts and the potential for a second Trump presidency. Gold rose to $2,465 per ounce, surpassing the previous record from May. The weaker-than-expected US inflation data heightened expectations of lower borrowing costs, which benefit non-yielding assets like gold. Additionally, an assassination attempt on Trump boosted his re-election odds, with his policies potentially increasing the US budget deficit and geopolitical tensions, thereby enhancing gold's appeal as a safe-haven asset. Oil prices saw their steepest decline in over three weeks, influenced by a stronger dollar and indications of reduced demand. West Texas Intermediate (WTI) fell, closing below $81 per barrel, but above their 100-day moving average, a level which served as support since June. This morning WTI prices continued to fell, breaking slightly below their 100-day moving average support.

FX: The dollar trimmed most of its gains following a stronger-than-expected June retail sales report. The yen experienced its largest intraday drop against the dollar in over two weeks, we listed the reasons for potential yen weakness in this article. The the New Zealand dollar rose following mixed June-quarter inflation data, which may temper expectations that the nation's central bank will cut rates as soon as its August meeting.  The UK pound strengthens as UK inflation data shows annual CPI at 2% in June, slightly above expectations. Services inflation remains high at 5.7%. This data supports the view that the Bank of England will likely not cut interest rates in August.

Volatility: The VIX ended Tuesday at $13.19 (+0.07 | +0.53%). The VIX1D decreased to $9.61 (-0.32 | -3.22%), while the VIX9D dropped to $11.80 (-0.38 | -3.12%). The VVIX, a measure of volatility in VIX options, fell to 82.40 (-1.46 | -1.74%), and the SKEW index, which measures the perceived risk of outlier moves in the S&P 500, increased to 151.53 (+4.13 | +2.80%). VIX futures are at $14.30 (-0.035 | -0.25%). Expected moves for today, derived from options pricing, are slightly lower: the S&P 500 has an expected move of plus or minus 24.50 points (+/- 0.43%) and the Nasdaq 100 plus or minus 148.14 points (+/- 0.73%). S&P 500 and Nasdaq 100 futures show minimal movement, with S&P 500 futures at 5,706.50 (-10.75 | -0.19%) and Nasdaq 100 futures at 20,524.50 (-73.50 | -0.36%). No major news today, tomorrow's key economic event is the Initial Jobless Claims report at 14:30, with a forecast of 229K (vs previous 222K), which is expected to have a significant impact on market movements. Eyes are also on upcoming earnings, with notable releases including ASML ADR and J&J today, followed by Netflix tomorrow. Yesterday's top 10 most traded stock options were Nvidia, Tesla, Apple, Amazon, Marathon Digital Holdings, Palantir Technologies, Advanced Micro Devices, GameStop, Meta Platforms, and Sofi Technologies.

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