Global Market Quick Take: Europe – August 30, 2023

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

Equities: Short-term sentiment remains positive with equity futures extending their recent gains despite worse than expected US macro data yesterday. Cyclical industries such as carmakers were leading the gains yesterday and cyclical sectors have now retraced almost half of the underperformance to defensive sectors weakness began in July. We remain defensive on equities.

FX: Bad US macro data yesterday was good for the markets and risk sentiment improved with a sharp fall in front-end Treasury yields pushing the dollar lower. AUDUSD went as high as last week to 0.6487 while USDJPY rocketed to 147.37 ahead of the US jobs data on Friday and only retreated to lows of 145.67 before recovering to 146+ levels in early Asia.

Commodities: US economic data weakness driving down the dollar and US Treasury yields added fresh fuel to an ongoing short covering rally in precious metals with gold reaching its next resistance level at $1936 ahead of $1948. Crude oil trades higher on large US stockpile draw and concerns about a hurricane building momentum in the Gulf of Mexico. Ahead of EIA’s stock report, the API reported a hefty 11.5 million barrel stock drop. US grain prices trade softer as crop conditions are better than expected while continued tensions in the Black Sea region has limited impact on wheat, amid ample supply from Russia.

Fixed-income: US 10-year yield dropped 8 basis points to 4.12% on the close yesterday as worse than expected US consumer confidence and fewer than anticipated job openings in July adding evidence to the US economic slowdown. In Europe, credit markets have started the week on the strongest note since June with strong issuances from Banca Monte dei Paschi and Volkswagen.

Volatility: VIX is rapidly retreating towards 14.45 due to the strong bounce back of equities in the last couple of days. All eyes on the Core PCE and initial job claims which could have an impact on volatility as volatility premium in option prices are dropping fast. 

Macro: US August consumer confidence came in at 106.1 yesterday vs est. 116.0 and down from a revised 114.0 indicating a deterioration in sentiment among US consumers also reflected in recent earnings from retailers. US July JOLTS job openings missed significantly consistent with a slowdown, but labour markets remain tight.

In the news: A third of German businesses are looking to expand production abroad over fears of access to competitive prices on electricity and natural gas - Full story in the FT. Australia’s Inflation Cools, Boosting Case to Extend Pause – Full story on Bloomberg. Key US jobs data boost Fed's 'soft-landing' hopes – Full story on Reuters

Macro events: US ADP Employment Change (Aug) est. 195 vs prior 324 (1215 GMT)

Earnings events: Salesforce FY24 Q2 results (after the US market close) - read our options preview here.

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