Global Market Quick Take: Europe – 24 January 2024

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

Equities: The rebound in Chinese equities continues today with Hang Seng futures up 2.3% while Nikkei 225 futures are down 0.8% in what seems to be a stunning reversal of much traded spread between those two equity markets. The indications about big support for the Chinese equity market has short-term changed sentiment. Medium-term we remain sceptical on Chinese equities. US and European equity futures are trading higher this morning. In single stock names, Netflix reported much better than expected Q4 results lifting its shares in extended trading last night by 8.5% setting a positive tone in technology stocks. In European pre-market session ASML reports big jump in Q4 bookings as semiconductor market recovers but maintains a conservative FY24 outlook (no change in revenue). The big event in equities comes tonight after the US market close with Tesla reporting Q4 earnings.

FX: Dollar trades broadly firmer with the EURUSD once again testing 200-DMA support around €1.0845 on weaker Eurozone consumer confidence and Bank Lending survey suggesting tighter Q4 credit standards with ECB meeting on the radar this week. USDJPY trades back below 148 as JGB bond yields moved higher today anticipating an April exit from NIRP from BOJ. NZDUSD popped higher on high non-tradeable inflation in Q4 reported this morning and came back to test 0.61 handle after slipping overnight. AUDUSD received a boost on Tuesday from China stock support package talk but is now back below 0.66.

Commodities: Metals continued to rally despite a stronger dollar, as China stock support package boosted sentiment and expectations that economic stimulus will also continue. Iron ore rallied 2.4% with Lunar New Year demand optimism also playing out with copper entering potential short squeeze territory above $3.81. Gold was steady but Silver recovered strongly after hitting 2-month lows earlier this week. Crude oil, however, remains stuck in a tight range but with a succession of higher lows indicating limited selling appetite as geopolitical tensions continuing to escalate while a 6.7mn barrel weekly US stock decline, according to the API, was being offset by a 7.2mn barrel rise in gasoline stocks. EIA’s weekly crude and fuel stock report is due later today.

Fixed income: The 10-year Treasury yield edged up 2bps to 4.13% amid the Bank of Japan’s anticipated inaction and the lack of U.S. economic data. The $60 billion 2-year auction met with decent demand. In Europe, yield curves bear-steepened amid long-end supply with the UK selling 30-year Gilts, the EU selling 2030 and 2053 bonds, and Germany auctioning 2027 and 2053 bonds.

Macro: Fed surveys continue to be mixed, keeping the battle between soft landing and recession outlooks alive. Richmond Fed composite index fell to -15 in December from -11 in January with new orders down to -16 from -14 and employment slumping to -15 from -1. Meanwhile, Philly Fed Non-manufacturing Business Outlook Survey indicated an overall improvement in business activity, edging up to 6.8 from 6.1 in December. Eurozone consumer confidence surprised on the downside as it dropped to -16.1 in January from -15.1 previously, reversing some of the improvement seen in the last 2 months. The ECB Bank Lending Survey noted credit standards tightened in Q4 for firms and households, with further tightening expected in Q1.

Volatility: Volatility eased further, with the VIX retreating to $12.55 (-0.64 | -4.85%), indicating a return to a calmer market environment. The VVIX also decreased to 76.67 (-2.50 | -3.16%), though a rise in the SKEW to 148.12(+2.11 | 1.45%)  suggests an increasing probability of an outlier move. The market ended higher but with restrained momentum. After-hours, Netflix's earnings beat, with strong subscriber growth and optimistic revenue and operating margin forecasts, led to an 8.66% surge in its shares. VIX futures are down at 13.600 (-0.100 | -0.73%) , continuing the downward trend, and futures for the S&P 500 and Nasdaq 100 are positive, at $4909.75 (+14.75 | +0.30%) and $17625.75 (+94.50 | +0.54%) respectively. The day ahead is likely to see heightened volatility with numerous significant companies reporting their Q4 results.

In the news: Nvidia CEO’s low-key China visit seen as a goodwill gesture towards key market as US chip firm grapples with sanction issues (SCMP), China’s Bold Stock-Market Rescue Plan Leaves Investors Skeptical (Bloomberg), China’s demand for LNG imports may double over next decade: largest US exporter Cheniere Energy (SCMP), Jack Ma, Joe Tsai replace SoftBank as Alibaba’s largest shareholders by scooping up tech giant’s tumbling shares in Hong Kong, New York (SCMP), Netflix adds 13.1 million subscribers, tops revenue estimates as membership push gains steam (CNBC).

Macro events (all times are GMT): Ger Mfg & Serv PMI (Jan) exp. 43.7 & 49.3 vs 43.3 & 49.3 last (0730), US Mfg & Serv PMI (Jan) exp. 47.6 & 51.5 vs 47.9 & 51.4 prior (1345), EIA’s Weekly Crude & Fuel Stock report (1430). US to sell $61bn 5-yr Notes (1700)

Earnings events: Busy week ahead with key earnings releases listed below. Read our earnings preview published yesterday.

• Today: SAP, ASML, Freeport-McMoRan, Abbott Laboratories, Tesla, CSX
• Thursday: SEB, Sandvik, Valero Energy, Atlas Copco, STMicroelectronics, NextEra Energy, Humana, Intel, LVMH, Visa
• Friday: Volvo, Kone, Christian Dior, Colgate Palmolive.

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