Global Market Quick Take: Europe – 8 July 2024

Key points:

• Equities: French equities in focus. Delivery Hero plunge on big antitrust fine.
• Currencies: The euro is in focus due to the surprise French election result
• Commodities: Uncertainty about the U.S. economy and the upcoming election drives gold prices higher.
• Fixed Income: A French leftist victory may spell trouble for the country’s sovereign bonds.
• Economic data: Eurozone July Sentix Investor Confidence

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

In the news: France’s elections end up with no clear majority. This is what could happen next (AP), Is Joe Biden about to quit the 2024 presidential race? (FT), Boeing Agrees to Plead Guilty in 737 MAX Criminal Case (WSJ)

Equities: Futures are indicating a flat opening in European equity markets with French equities indicated 0.5% lower as the market is reacting to the surprise French election result showing the most support to a broad leftist coalition. The French parliamentary situation will likely lead to a hung parliamentary situation which could worsen the fiscal situation, but for now investors remain calm about the French political situation. Delivery Hero shares are indicated down 17% as the company faces an antitrust fine in excess of €400mn which is more than double the amount the company had set aside. Carlsberg is announcing it has agreed to take over Britvic in deal valued at $4.2bn in a move to expand beyond beer and broadening its geographical reach. Boeing is announcing that it has agreed to plead guilty to fraud after violating Department of Justice (DOJ) deal.

Macro: On Friday, US Nonfarm Payrolls eased, coming in at 206k in June from 218k in May which was revised down from 272k. The unemployment rate rose to 4.1% from 4%, coming in above the Fed’s median 2024 projection. Wages meanwhile were in-line with expectations at 0.29% (exp. 0.30%), ticking down from the 0.4% prior, while Y/Y eased to 3.86% from 4.1%, in line with the 3.9% forecast. Overall, the NFP report had a dovish read to it, and the market is slowly increasing the probability for a September rate cut, which now stand at 81%.

Macro events (times in GMT): Eurozone July Sentix Investor Confidence est. -0.5 vs 0.3 prior (08:30)

Earnings events: The Q2 earnings season kicks off this week with the three most watched earnings being Kongsberg Gruppen (Wed), PepsiCo (Thu), and JPMorgan Chase (Fri). Analysts expect Kongsberg to report Q2 revenue of NOK 11.2bn up 16% YoY and EPS of NOK 5.42 up 24% YoY. PepsiCo is expected to report another quarter of stagnant growth with revenue only expected to be up 2% YoY which means that in real terms these parts of the consumer market are still weak. It will interesting to hear whether PepsiCo

• Monday: Industrivärden
• Wednesday: Vantage Towers, Kongsberg Gruppen
• Thursday: Seven & i, DNB Bank, Tryg, Fast Retailing, PepsiCo, Delta Air Lines, Conagra Brands
• Friday: Progressive, EMS-Chemie, Aeon, Aker, Ericsson, Lifco, JPMorgan Chase, Wells Fargo, Fastenal, Citigroup, Bank of New York Mellon

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

Fixed income: Sovereign bonds rose last Friday following the release of the June jobs report, which showed an increase in the unemployment rate and significant downward revisions to May's figures. This caused the yield curve to bull-steepen, driven by gains in the front and belly, as markets priced in two full 25bp rate cuts for this year starting in November. This week, market attention will focus on the CPI report due on Thursday, expected to show consumer prices rising at the slowest annual pace since January. Evidence of further disinflation may support additional steepening of the yield curve, particularly after Friday’s unemployment rate increase, which could prompt Fed officials to consider upcoming rate cuts. Also in focus are the 3-, 10-, and 30-year US Treasury auctions, which may indicate increased demand for longer-term securities. In Europe, attention is turning to the French elections, where the New Popular Front is expected to win the most seats in the National Assembly. This outcome could negatively impact French sovereign bonds, as markets are likely to be concerned about the country’s public finances due to the party's plans to increase fiscal spending.

Commodities: Gold is erasing some of the Friday session gains. Long-term we believe investors will be positive on gold as uncertainty about the US economy and unsustainability of the US deficit remains. WTI continued its upward momentum for the fourth consecutive week, driven by a significant reduction in U.S. crude inventories and robust demand from the summer holiday season. Additionally, OPEC+ is supporting prices through ongoing production cuts. To confirm the uptrend, WTI needs to break above $86.24, with support around $79.16. This week's EIA data will be closely watched for further insights.

FX: The euro is in focus today after the French election result showed the broad leftist coalition got the most seats in parliament. The open question is what the French election result will mean for the French fiscal situation and eventually

Volatility: The VIX closed at $12.48 (+0.22 | +1.79%) on Friday. Expected moves for the week, based on options pricing, show the S&P 500 with an expected move of +/- 54.89 points (0.99%) and the Nasdaq 100 at +/- 302.39 points (1.48%). European markets also show notable expected moves, with the DAX at +/- 223.18 points (1.21%) and the CAC 40 (PXA) at +/- 157.06 points (2.05%). This week's key economic events which will have impact on market volatility include Core CPI (MoM) (Jun), CPI (YoY) (Jun), CPI (MoM) (Jun), Initial Jobless Claims, and PPI (MoM) (Jun). Additionally, a new earnings season kicks off this week with notable releases from JP Morgan, Wells Fargo and Citigroup. S&P 500 and Nasdaq 100 futures are a bit in the red after their first session of the week, with the S&P 500 futures at 5611.00 (-10.80 | -0.19%) and Nasdaq 100 futures at 20586.25 (-34.50 | -0.17%). Friday's top 10 most traded stock options were Nvidia, Tesla, Apple, Amazon, Advanced Micro Devices, Meta Platforms, Palantir Technologies, Sirius XM Holdings, Intel, and Microsoft.

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