Global Market Quick Take: Europe – 24 July 2024

Key points:

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

In the news: Shapiro, Kelly and Cooper frontrunners to be Harris’s running mate, say donors (FT), Secret Service Director Resigns Following Trump Shooting (Bloomberg), Macron Says He Won’t Name a New Prime Minister Before Mid-August (Bloomberg), Typhoon Gaemi strengthens as it nears Taiwan, work halted, flights cancelled (Reuters).

Macro: Eurozone and U.S. PMI data today will be closely watched for signs of economic growth and inflation pressures, which could influence future ECB monetary policies. Tomorrow, the advance U.S. Q2 GDP data will be released, with economists expecting the economy to have grown at an annualized pace of 1.9%, up from 1.4% in the first quarter. U.S. PCE data will be released on Friday, potentially confirming expectations for a Federal Reserve rate cut in September. Additionally, oil prices, influenced by geopolitical tensions in Gaza and U.S. economic data affecting the dollar, will be important to monitor.

Macro events (times in GMT): Eurozone and U.S. Manufacturing, Service and Composite PMI (08:00 for the EU and 13:45 for the U.S.), New Home sales (14:00), US Treasury sells $70 billion 5-year notes (17:00). ECB’s Guindos and Lane speak (6:45 and 12:00 respectively), Fed’s Bowman and Logan speak (20:00 GMT).

Earnings events: Lockheed-Martin Q2 adj EPS 7.11 vs 6.46 expected., Sales 18.1 bln vs. 17.04 expected. Raising guidance. General Motors fell 6.4% Tuesday despite releasing better than expected earnings. Stock falls because GM takes a USD600 mio loss on China market. LVMH Q2 revenue EUR20.98 bln vs 21.41 expected. Net profit for H1 14% lower at 7.27 bln.  Tesla Q2 sales USD25.5 bln beat estimates at 24.726 due to energy generation and storage growth. Adj. EPS 0.52 vs. 0.62 expected. Tesla delivered 443,956 cars in Q2. Expects 2024 vehicle volume growth to be lower than 2023. Says focus remains on company-wide cost reduction. Tesla closed down 3.2% in after market trading. Google parent Alphabet Q2 sales USD84.742bln vs. 84.202 analysts estimate. EPS 1.89 vs 1.85 estimated. Visa Q3 net profit of USD4.91 bln. Adj. EPS 2.40 in line with expectations compared to net profit 4.2 bln and EPS 2.00 for same period last year. Texas Instruments Q2 adj. EPS 1.22 beats 1.17 estimate, sales in line at 3.82bln. Deutsche Bank AG reports its first quarterly loss in four years due to a trading slowdown and a €1.3 billion Postbank litigation charge. Fixed-income and currency trading revenue fell 3%, leading to a €143 million loss. BNP Paribas Q2 net income increased to EUR 3.395 bln vs. net income of 2.810 bin same period last year and analyst’s expectations at 2.91 bln. Equinor Equinor Q2 2024 Adj EPS $0.84 Misses $0.85 Estimate, Sales $25.538B Beat $23.721B Estimate

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

Equities: European equities mixed Tuesday. S&P 500, Nasdaq and Dow Jones slightly lower. Small cap index Russell 2000 bounced after a correction and ended up 1.1%. Aerospace and Defense sector gained 3.2% lead by Lockheed-Martin after Q2 earnings beats estimates and Boeing after winning several big orders for wide body airplanes on the first day of the Farnborough airshow. Transportation down 2%. Semiconductors down 1%

Fixed income: Treasuries ended Tuesday mixed, resulting in a steeper yield curve driven by strong demand for the monthly 2-year note auction. This auction saw primary dealers receiving a record low share, with investor awards rising to 91%. Notably, indirect bidders surged to a record high of 76.6%, even with notes priced at 4.434%, the lowest auction high-yield since January. Yields in the auction sector closed the day nearly 3 basis points lower, while 10-year yields remained flat at 4.24%. This led to a steepening of the yield curve, with the 2s10s spread increasing to -24 basis points, one of the steepest levels of the year. The US Treasury auction cycle continues today with a $70 billion 5-year note sale, followed by a 7-year note sale tomorrow. Investors will also focus on stock market earnings and macroeconomic data, including today's closely monitored Eurozone PMI. Tomorrow and Friday will bring key advanced U.S. GDP data for Q2 and PCE data. All data will be closely watched as investors recalibrate expectations for the upcoming interest rate cutting cycle. If Friday’s PCE data indicates that the Fed is nearing its 2% inflation target, the bond market could react positively, potentially pushing 10-year yields below 4.18%. Conversely, if the data does not support this, yields may reject this level and continue to rise.

Commodities: Gold prices recovered yesterday, driven by a decline in US Treasury bond yields, which weakened the US dollar. Currently trading above $2,400, gold is buoyed by anticipation of upcoming inflation and GDP data, along with expectations of the Fed's first interest rate cut later this year. Oil prices fell for the fourth consecutive session, with WTI closing below $77 a barrel. The American Petroleum Institute is set to release its estimate for weekly US inventory changes, followed by a government report today. Despite being higher year-to-date due to OPEC+ supply cuts and expectations of lower US interest rates, political uncertainties persist, particularly with President Biden dropping his reelection bid. Copper prices fell for the seventh straight session, reaching their lowest level since early April, driven by weak Chinese demand and a supply-demand imbalance. Prices have dropped nearly 20% from their late May high, with global inventories rising and production outpacing demand.

FX: The US dollar was higher on Tuesday across most major currencies, but fell against the Japanese yen. The yen has seen broad strength as US yields continue to fall in the run up to the Fed meeting next week where Chair Powell could acknowledge the progress on bringing inflation back towards the target and potentially open the door to a September rate cut. Meanwhile, expectation for the Bank of Japan to hike rates again next week is also underpinning and pushing Japanese yields higher. Activity currencies such as the Norwegian krone, New Zealand dollar and the Australian dollar, meanwhile, continue to weaken with commodity prices on a decline and equities also seemingly losing momentum. Canadian dollar will be on watch today with the Bank of Canada meeting on tap, and recent decline in the Loonie could mean that further weakness would need a rate cut and dovish language along with it. 

Volatility: Volatility eased yesterday. The VIX edged down to $14.72 (-0.19 | -1.27%). Volatility’s own volatility, the VVIX fell to 88.51 (-5.15 | -5.50%), indicating further easing. VIX futures rose to $15.30 (+0.370 | +2.46%) this morning. Expected moves for today, derived from options pricing, show the S&P 500 with an expected move of plus or minus 34.82 points (+/- 0.63%) and the Nasdaq 100 plus or minus 196.55 points (+/- 0.98%). S&P 500 and Nasdaq 100 futures indicated a bearish sentiment, with S&P 500 futures at 5,563.50 (-35.75 | -0.64%) and Nasdaq 100 futures at 19,735.50 (-189.50 | -0.95%). Economic events for today include the S&P Global US Manufacturing PMI and S&P Global Services PMI at 15:45. Earnings results from yesterday were mixed: Alphabet (GOOGL) reported strong results with an EPS of 1.89 (vs forecast 1.83) and revenue of $84.74B (vs forecast $84.16B), while Tesla (TSLA) fell short with an EPS of 0.52 (vs forecast 0.61) and revenue of $25.5B (vs forecast $24.33B). Today's notable earnings include Qualcomm (QCOM), IBM (IBM), and ServiceNow Inc (NOW). Yesterday's top 10 most traded stock options were Nvidia, Tesla, Amazon, Apple, Alphabet (GOOGL), Crowdstrike Holdings, Sirius XM Holdings, Advanced Micro Devices, Marathon Digital Holdings, and Alphabet (GOOG).

For a global look at markets – go to Inspiration.