Global Market Quick Take: Europe – 28 November 2024

Key points

• Equities: S&P 500 fell 0.38%, Nasdaq 100 lost 0.85%, while Hong Kong’s HSI gained 2.3% on policy optimism
• Volatility: VIX remained unchanged at 14.10, amid Thanksgiving holiday calm.
• Currencies: Dollar sees light selling ahead of Thanksgiving
• Commodities: Panic buying lifts coffee prices to 47-year highs
• Fixed Income: U.S. Treasuries rally on solid demand.
• Macro events: EZ Consumer Confidence, US markets closed for Thanksgiving

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

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Macro data and headlines

• In October, the Personal Consumption Expenditures (PCE) Index, the Feds favored inflation indicator, rose by 0.2% (2.3% yoy), while the core PCE gained 0.3% (2.8% yoy). These figures aligned with forecasts but have accelerated from the previous month, suggesting that we are further away from the Fed’s 2% goal, thereby supporting the Fed’s cautious approach to the timing and pace of future rate cuts with the odds of a December cut currently at 68%.
• US economy expanded at 2.8% QoQ in Q3 as expected with jobless claims coming in at 213k, slightly lower than 215k consensus.

Macro events (times in GMT): US markets closed for Thanksgiving, Eurozone Nov Consumer Confidence (1000), Germany Nov CPI (1300), ECB Speakers: Villeroy (1330), Knot (1350) and Lane (1700)

Earnings events

• Next week: Salesforce, Prosus, Marvell, Kroger, Lululemon, Zscaler
• US: The S&P 500 dropped 0.38%, with the Nasdaq 100 leading losses, down 0.85%, as tech names Autodesk and Workday fell 8.5% and 6.2% respectively following concerns about guidance and margins. Markets saw a rotation from growth to defensive sectors as investors locked in profits ahead of Thanksgiving.
• Asia: Hong Kong’s HSI rose 2.3% yesterday, buoyed by optimism around potential PBoC policy easing as traders anticipate another RRR cut to support growth. Meanwhile, Japan’s Nikkei 225 and TOPIX both gained this morning, up 0.6% and 0.5% respectively, rebounding from the prior session's losses where the Nikkei fell 0.8% due to yen strength on speculation of a potential BOJ rate hike. In China, markets were mixed yesterday, with the CSI 300 largely flat, reflecting lingering concerns over U.S. trade tariffs despite hopes for domestic policy support.
• Europe: The Stoxx 50 and Stoxx 600 fell 0.6% and 0.2%, respectively, as tariff threats and cautious ECB commentary weighed on sentiment. AXA and BNP Paribas underperformed, dropping 4.7% and 1%, while ASML declined 2%, dragging down tech.

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Volatility

The VIX held steady at 14.10, reflecting a subdued day ahead with US markets closed for Thanksgiving. Short-term implied volatility (VIX1D) rose sharply yesterday, indicating anticipated price swings for the session preceding the holiday. No major earnings or economic data are expected today, keeping volatility muted.
 

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Fixed Income

French yields retreated after reaching a 12-year high relative to Germany, as hawkish comments from ECB’s Isabel Schnabel weighed on core and semi-core debt. Schnabel’s remarks tempered expectations of rate cuts, leading to a selloff in short-term German sovereigns. Ten-year Bund yields dipped slightly, French yields softened, and Italian spreads tightened further against German debt. Greek 10-year bonds saw their spread over French peers narrow to a record low. In the US, Treasuries advanced following a wave of economic data, including GDP and jobless claims, which reinforced demand. A solid 7-year note auction underpinned the rally, with demand staying robust. By the close, Treasury yields were significantly lower across the curve, with the 10-year settling near 4.235%.
 

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Commodities

• Oil prices remained stable and range bound as trading slowed before the US Thanksgiving holiday, with attention on the OPEC+ meeting this weekend. OPEC+ is expected to delay increasing production to address potential oversupply concerns next year. Meanwhile, US crude stocks showed a weekly decline of 1.8 million barrels, the first in four weeks.
• Gold saw earlier gains, led by a softer dollar, being reversed after US data revealed an uptick in a key inflation indicator last month, reinforcing expectations the Fed will cautiously approach lowering interest rates. Overall, the bullion market trades down on the week amid choppy trading, leading some investors to book profit following a strong rally this year.
• Arabica coffee futures raced to a 47-year high on Wednesday; just like cocoa earlier this year, commercial buyers have gone into panic mode to secure high-quality Arabica beans amid concerns over a global shortage triggered by hot and dry weather in Brazil and uncertainty over the impact of incoming EU laws on deforestation.

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Currencies

• USD declined in light pre-holiday trading as US Treasury yields fell and investors considered U.S. economic resilience and potential tariff war risks under President-elect Trump. This extended the reversal of the dollar's recent rally.
• JPY weakened overnight, moderating a Wednesday gain that was driven by speculation of a potential December rate hike by the Bank of Japan. BOJ Governor Kazuo Ueda recently suggested a rate increase might be considered due to concerns about the JPY's weakness.

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