Global Market Quick Take: Europe – 18 November 2024

Key points:

• Equities: US indices fell sharply, led by Nasdaq, with mega-cap stocks under pressure
• Volatility: Options activity focused on Palantir and Super Micro amid heightened volatility
• Currencies: JPY rose on BoJ hike bets, CAD hit 1.4000 lows
• Commodities:  Gold recovers from deep weekly loss
• Fixed Income: U.S. Treasury yields hit 4.5% amid robust economic data
• Macro events: Multiple ECB speakers

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

Macro data and headlines:

• US President Joe Biden allows Ukraine to strike Russia with US-made long-range missile, some argue as Russia has deployed North Korean troops.
• US Nov. Empire Manufacturing on Friday surprised with a +31.2 reading, the strongest since December 2021. This versus 0.0 expected and -11.9 in October. Some attribute the strong reading to a rush of new orders to front-run eventual tariffs from the new Trump administration.
• US Oct. Retail Sales out at +0.4% MoM vs. +0.3% expected, but with a +0.4% revision to +0.8% for the September data. The ex Auto and Gas Retail Sales was out at +0.1% vs. +0.3% expected, with the Sep. figure revised up to +1.2% from +0.7%.

Macro events (times in GMT):  Multiple speeches by ECB members throughout the day. Fed’s Goolsbee speaks at 1500.

Earnings events:

• Tuesday: Lowes, Medtronic, Walmart
• Wednesday: TJX Companies, Target, Nvidia
• Thursday: Intuit, PDD Holdings, Deere & Co.

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

Equities:

• US: US indices suffered their worst session since the election, with the S&P 500 falling 1.3% and Nasdaq 100 dropping 2.4% (over 500 points), erasing much of the post-election rally. Mega-cap stocks and the "Magnificent Seven" led the decline, and Applied Materials plunging over 9% on weak sales guidance. Nvidia is facing challenges as suppliers work to redesign server racks for its Blackwell chips due to overheating issues, raising concerns ahead of its earnings.
• Europe: Stoxx 50 and Stoxx 600 dropped 0.8% each, pressured by Powell's comments on rate cuts and weak UK GDP growth (+0.1% in Q3). Healthcare stocks led losses after Trump's HHS pick, with Bayer (-1%) and Sanofi (-3.2%) hit hardest. ASML reversed prior gains, falling 5.5% on profit-taking.
• Asia: Japan’s Nikkei fell 0.76% despite Q3 GDP growth (+0.3% yoy), weighed by weakness in healthcare shares. Hong Kong's HSI was flat as mixed Chinese data (weak industrial output, strong retail sales) offset gains in tech and consumer sectors.

Volatility: Volatility rose sharply on Friday, with the VIX climbing over 12%, reflecting increased caution following Powell’s hawkish comments and a downturn in US indices. Expected moves for this week expanded significantly, with the S&P 500 implied to swing by 1.47% and the Nasdaq 100 by over 2.2%. Options activity was notable in names like Palantir Technologies, which saw heightened interest due to its recent momentum, and Super Micro Computer, where volatility remains elevated amid accounting concerns. Overall, the options market hints at sustained market sensitivity ahead of key earnings and broader macro uncertainty.

Fixed Income: US Treasury yields initially rose sharply on Friday, with the 10-year yield hitting 4.5%—its highest since May—driven by strong retail sales data. However, dip-buying reversed the momentum. By the end of the day, front-end yields fell over 4 basis points from the previous day’s close, while long-end yields rose about 2 basis points, steepening the curve. Ten-year U.S. Treasury yields closed the week at 4.439%. In Europe, money markets trimmed rate-cut expectations, now pricing 30 basis points of ECB cuts next month and 143 basis points by the end of 2025. Bund yields rose slightly, while Italian and French 10-year yields were stable. The UK gilts yield curve steepened, with traders adding a modest 2 basis points to Bank of England rate-cut expectations for the first half of 2024.

Commodities: The Bloomberg Commodity Index fell 2% last week amid weakness across all sectors except softs where cocoa and coffee showed strong gains on renewed supply concerns. Gold rebounds on geopolitical concerns after a deep weekly loss with focus on USD 2605 resistance. Crude prices continued to be weighed down by China demand concerns and ample global supply into 2025 after both OPEC and the IEA lowered their demand forecasts. EU gas prices rose strongly last week as winter demand picks up and on supply concerns after Gazprom cut supplies to Austria’s biggest gas company amid a contractual dispute.

Currencies: The Japanese yen rose sharply across the board on Friday, rejecting the latest surge higher in USDJPY north of 156.00. This seemed a belated acknowledgment that expectations for a December BoJ meeting rate hike have risen sharply. The yen strength eased off in a volatile Asian session to start the week as BoJ governor Ueda spoke overnight and said the timing of any policy move would “depend on developments in economic activity and prices as well as financial conditions going forward”. Elsewhere, the Canadian dollar has melted to new multi-year lows versus the US dollar, with the USDCAD exchange rate trading well north of 1.4000, which has not traded since the pandemic outbreak in early 2020.

 For a global look at markets – go to Inspiration.