Global Market Quick Take: Europe – September 13 2023

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

Equities: Nasdaq 100 futures are sliding further this morning to the 15,478 level as Apple’s iPhone event last night failed to muster any excitement, which means that the market is now in a wait-and-see mode ahead of today’s US inflation report. Energy stocks continue to be in focus given the rally in Brent crude on estimated oil supply shortfall due to Saudi Arabia’s oil production cuts.

FX: Higher crude oil prices made CAD the G-10 outperformer with USDCAD down to 1.3550 from 1.3590 but EUR attempted to catch up in late NY/early Asian hours on ECB leak that inflation forecasts may be raised higher which are seen to be raising the prospect of a hike this week. EURUSD jumped higher to 1.0770 with EURGBP above the 0.86 hurdle as GBPUSD dipped below 1.25 on not-so-hawkish labor market. USDCNH takes another leg lower below 7.29 but AUDUSD also dipped to 0.64 handle in Asia.

Commodities: Saudi Arabia’s ‘stable market’ reason for cutting production rings increasingly hallow after OPEC in their monthly report said the market may experience a shortfall of 3.3m b/d in the fourth quarter. With the EIA meanwhile only predicting a 230k b/d shortfall, OPEC could find themselves being accused of trying to inflate prices to meet big spending plans among its members. IEA’s report will be on watch today ahead of the US CPI print and EIA’s weekly stock report which according to API’s figures may show a rise. Oil’s rally to a fresh 10-month high and the stronger dollar saw gold drop below 200DMA as inflation concerns returned, bringing more fear of rate hikes.

Fixed income: European sovereign curves are likely to bear-flatten this morning after Reuters reported that the ECB expects inflation to remain above 3% next year and growth to be downgraded for this and next year. Despite the upcoming forecasts painting the perfect stagflation picture for the eurozone, policymakers will weigh their options carefully and tilt towards a hawkish pause rather than a hike. Yet, they might need to reinforce their message by ending reinvestments under the PEPP facility. That would buy them enough time to wait for rate hikes to feed through the economy instead of adding pressure to the German and Dutch recessions. The focus today is on the US CPI numbers and the 30-year US Treasury auction.

Volatility: VIX traded 43 cents higher at 14.23, but more importantly the VIX futures traded 1.31 higher, up to 15.95, indicating there is some uncertainty about the upcoming US inflation report. Adobe, which is scheduled to release its earnings report later this week, closed lower yesterday. Options traders were divided on the stock, with the put/call ratio at 1, indicating that equal amounts of calls and puts were traded. This might suggest that there is no clear consensus on how the earnings report will be received. 

Macro: ECB’s new 2024 inflation projection could be raised above 3% vs 3% in June, firming case for interest rate hike. ECB also to cut 2023 and 2024 economic growth projections to broadly in line with market expectations. UK labor report was mixed with headline earnings up 8.5% YoY in July vs. 8.2% expected. For more, read our latest Macro/FX Watch.

In the news: Europe's high gas prices hit industrial output – full story on Reuters. Apple unveiled four new iPhone models with a muted reaction from investors in extended trading – full story in FT.

Technical analysis: S&P 500 rejected at 4,540 resistance level, expect set back, support at 4,340.
Nasdaq 100 rejected at 15,561 key resistance level. USDJPY uptrend eyeing 149-150. EURUSD downtrend, support at 1.0685, Expect short-term bounce to 1.08. Brent oil uptrend potential to 98.50

Macro events: UK Industrial Production (Jul) exp. -0.7% m/m vs 1.8% prior (0600 GMT), US CPI (Aug) exp. 0.6% m/m and 0.2% core vs 02% and 0.2% prior (1230 GMT), US 30-year T-bond auction ($20 billion)

Commodities events:  IEA’s Oil Market Report (0900 GMT), EIA’s Weekly Crude and Fuel Stock Report (1430 GMT)

Earnings events: Inditex F424 1H results, which have already reported with EPS at €0.81 vs est. €0.80 and a small positive revenue surprise.

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