Global Market Quick Take: Europe – 9 February 2024

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

Equities: US and European equity futures are flat this morning after the S&P 500 Index briefly touched 5,000 in yesterday’s session. As we wrote in our equity note this week, equity valuations are stretched to high levels not seen since the 2000 and 2021 technology bubble. This means that any reversal in sentiment could be quite big and reset equities by up to 10%. For long-term investors the equity market still offers the best expected real return compared to government bonds. In today’s session investors will focus on Arm shares that jumped 48% yesterday, and on Pinterest that disappointed against estimates on revenue.

FX: Fresh dollar strength following a lower jobless claims print and hawkish Fedspeak reversed later in the day with the greenback heading for a small weekly gain against its major peers. The NZD rose above 0.61 overnight after a bank called for two more rate hikes from the RBNZ while USDJPY reached a 149.48 high with the latest yen weakness seemingly an over-reaction to BOJ Uchida’s comments that continuous interest rate hikes are unlikely which we think is a sign how market is over-pricing BOJ hawkishness.  Focus later turns to US CPI revisions that have been highlighted by Fed’s Waller earlier. The EURUSD trades nearly unchanged after a slump to sub-1.0750 met fresh demand.

Commodities: US natural gas trades down 10% on the week to a Sept 2020 low, as mild weather reduces demand for heating while slowing the pace of stock draws. Last week's 75bcf reduction compared with an avg. decline of 193 bcf. Crude oil prices rose over 3% on Thursday supported by diesel market strength with gas oil up +8% on the week and after Israel rejected the peace offer from Hamas. Gold and especially silver recovered following an algo-led selling reaction to the stronger jobless claims print, a sign underlying demand remains firm, while platinum moved ahead of palladium for the first time in over five years, driven by its growing use in auto catalysts for gasoline-powered cars. The grains sector trades down on the week led by wheat amid pressure from falling prices in Russia.

Fixed income: Despite solid demand for the 30-year bond auction, US Treasuries ended Thursday near session low ignited by several cautious Federal Reserve members’ speeches, and lower-than expected jobless claims. The Treasury sold $25 billion bonds, the largest amount in a period of Quantitative Tightening, yet an increase in indirect bidders' demand to 70.7% was able to absorb the supply. Yet, direct award dropped to 15.5%, the lowest since August 2020, showing that demand for the long end remains volatile. The auction drew a yield of 2bps lower than the When Issue (WI). Today the focus is on the US CPI revision, Fed’s Logan speech, and WTI crude futures, which rose 3.2% yesterday. In Europe, sovereign yields also edged higher as ECB members see upside inflation risk. The German 5-year yields rose to 2.29%, the highest since December 4^th, 2023, as traders lowered interest rate cut expectations for this year.

Macro: US jobless claims for the week ending February 3rd fell to 218k from the upwardly revised 227k, falling for the first time in three weeks and coming in just short of the 220k estimate. Fed’s Barkin (voter) said that he wants to see a broadening in forces lowering inflation and he wants to see rents and service prices cool more, which will give them the confidence to cut. He also said that he would be cautious of January NFP report due to seasonals. Collins (2025 voter) said her baseline is similar to the December SEPs for 75bps of cuts in 2024. ECB’s Lane said that they need to be further along in the disinflation process before being sufficiently confident that inflation will hit the target in a timely manner and settle at target sustainably.

Technical analysis highlights: S&P 500 uptrend to break 5K could move to 5,110. Nasdaq 100 uptrend, eyeing 18K. DAX uptrend potential to 17,255-17,410. EURUSD bouncing from 1.0730 key support likely to around 1.08 before resuming down trend, below 1.0730 next support 1.0660. USDJPY above key resistance at 148.80, resist at 149.75 and 152. EURJPY testing 161 resistance. USDCHF uptrend likely move to 0.8820 resistance. AUDUSD below key strong support at 0.6520. Gold range bound 2,065 – 2K. 10-year T-yields key resistance at 4.20, above potential to 4.38

Volatility: The VIX nudged down to $12.79 (-0.04 | -0.31%), marking another subdued day in the market. Despite touching the 5000 milestone intraday, the S&P 500 couldn't sustain gains to close above this key psychological level, reflecting a cautious optimism among traders. The VVIX's increase to 83.07 (+2.53 | +3.14%) alongside a persistently high SKEW index over 150 underscores a latent market nervousness, hinting at underlying concerns despite the surface calm. With a lack of significant economic triggers on the horizon, today's session may follow a similar pattern of restrained volatility. However, the market's hesitation at the 5000 threshold keeps the door open for either direction in the coming sessions. Overnight, futures for the VIX, S&P 500, and Nasdaq 100 indicated a continuation of this holding pattern, suggesting a wait-and-see approach as investors gauge the next catalyst for a decisive move.

In the news:  Expedia Falls on Sudden CEO Change, Holiday Bookings Miss (Bloomberg), Pinterest Follows Snap in Posting Disappointing Revenue (Bloomberg), BOJ's Uchida rules out large interest rate hikes (Nikkei Asia), Yellen Eyes Nonbank Mortgage Lenders, Warns of Potential Failure (Bloomberg), German bank PBB says it can cope with US real estate troubles as shares slide (Reuters), SoftBank posts first quarterly profit in over a year on bull market (Nikkei Asia), Former Fox News host Tucker Carlson interviewed Russian President Vladimir Putin (CNBC), Maersk warns oversupply to hit profits and plays down Red Sea boost (Reuters)

Macro events (all times are GMT): US CPI Seasonal Factor Revisions. Speakers: ECB’s Cipollone (1315), Fed's Logan 1730), Weekly COT reports from the CFTC and ICE (2030)

Earnings events: A busy earnings week is ending with focus on PepsiCo. The news story yesterday that CEOs from food companies are calling nervously Novo Nordisk about obesity drugs is potential a beacon that trouble is coming over time for food and beverage companies such as Pepsi

• Today: Toyota Electron, Hermes International, PepsiCo, Coloplast

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