Global Market Quick Take: Europe – 21 November 2024

Key points:

• Equities: Mixed close in US markets; Nvidia's earnings strong but cautious guidance
• Volatility: VIX rose to 17.16, with short-term volatility spiking
• Currencies: USD churns in range. JPY nervous with key Japan CPI coming up in early Asian hours.
• Commodities: Gold gathering momentum. Weather issues support coffee and natural gas surge
• Fixed Income: Yields rise as inflation and weak auctions weigh on markets
• Macro events: Philadelphia Fed & Initial Jobless Claims

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

Macro data and headlines:

• France’s National Rally leader Le Pen threatens to bring down the French government on budget dispute as she weighs in against PM Michel Barnier’s taxation increases.
• Fed Governor Bowman, who dissented at the September Fed decision to cut rates by 50bps, remained hawkish calling for a cautious approach, noting how she sees greater risks to the price stability mandate. Governor Cook largely kept options open in her speech, noting policy is not on a pre-set path.
• Geopolitical enthusiasm on reports that Russian President Putin is open to talking about a Ukraine ceasefire with US President-elect Trump. However, risk off was later seen in wake of Bloomberg reports that Ukraine fired a UK storm shadow missile into Russia.

Macro events (times in GMT): Philadelphia Fed & Initial Jobless Claims (1330), US Leading Index & Existing Home Sales (1500), Eurozone Nov. Consumer Confidence Flash (1500), EIA’s Natural Gas Storage Change (1530), Japan Oct CPI (2330)

Earnings events:

• Today: Intuit, Deere & Co., PDD Holdings DRC, Copart, Ross Stores
• Friday: Meituan

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

Equities:

• US: Markets closed mixed on Wednesday, with the S&P 500 flat and the Nasdaq 100 dipping 0.1%. Nvidia's earnings exceeded expectations, reporting a 94% YoY revenue increase to $35.08 billion and net income nearly doubling to $19.3 billion. Despite these strong results, its shares fell 1.8% in after-hours trading due to tempered Q4 guidance. (read more here: Why Nvidias Story is Far From Over) Target tumbled 21% after missing earnings expectations, while Snowflake rose 19% after hours on better-than-expected revenue growth and positive guidance.
• Asia: Most Asian markets declined as Nvidia's mixed signals triggered cautious sentiment, with Japan's Nikkei 225 down 0.7% and TSMC losing 1%. Some Nvidia suppliers, such as SK Hynix and Samsung, gained on news of advanced chip production. Chinese markets weakened as the PBoC held rates steady, disappointing stimulus expectations. Geopolitical tensions around Ukraine and Russia further dampened sentiment.
• Europe: The Stoxx 50 fell 0.5%, while the Stoxx 600 edged down 0.1% amid escalating geopolitical tensions as Ukraine fired missiles into Russian territory. Banks and autos led losses, with key players like Santander and Mercedes-Benz down over 1%. ASML dropped 1.5% ahead of Nvidia’s earnings, as investors brace for AI demand guidance.

Volatility: Volatility increased notably, with the VIX rising 4.95% to 17.16 and the VIX1D climbing over 64% to 19.11, reflecting elevated short-term risks. The VVIX spiked 4.83 points to 102.2, signaling heightened hedging activity. Nvidia's implied move remains significant at ±8%, driving market-wide volatility expectations. For broader indices, expected daily moves are 0.87% for the S&P 500 and 1.46% for the Nasdaq 100. Most active options included MicroStrategy, Mara Holdings due to continued interest in crypto related stocks and Target, reflecting post-earnings momentum. Economic data releases today, including jobless claims and home sales, could further shape sentiment.

Fixed Income: European sovereign yields rose modestly as UK inflation unexpectedly accelerated in October, pushing long-dated gilts yields higher. The German curve steepened slightly, with 10-year Bund yields ending the day at 2.35%, while 10-year gilt yields closed at 4.47%. Markets held steady on ECB rate-cut expectations despite strong euro-zone wage growth. In the US, Treasuries weakened across the curve after a poorly received 20-year bond auction, with 10-year Treasury yields finishing at 4.44%, erasing earlier risk-off gains tied to geopolitical tensions. Overall, both European and US bonds faced selling pressure amid weaker auction results and inflation concerns.

Commodities: Gold has retraced half the recent 253-dollar correction, reaching its 50-DMA at USD 2,661 as geopolitical concerns continue to feed fresh momentum. Silver’s so-far sluggish recovery highlights this concern as the main driver, with limited support from industrial metals, which continue to be weighed down by the tariff threat to demand. Crude remains stuck near the range low after US inventories exceeded expectations, and concerns persist about a surplus next year from slowing Chinese demand and high production. US natural gas surged to a ten-month high at USD 3.335 due to incoming cold weather and exports lifting demand, while European prices trade near a high for the year on winter supply concerns. Arabica coffee futures rose to a 13-year high at USD 2.925 per pound due to supply concerns in Brazil, the top producer, as it faces reduced arabica output this season due to drought.

Currencies: The US dollar rebounded broadly yesterday, though largely continues to churn within a range against the other major currencies. USDJPY retreated sharply in the Asian session overnight on rhetoric from the Bank of Japan, as governor Ueda said that the bank is closely watching the impact of FX on the economy and inflation, though he refused to provide guidance for the December BoJ meeting, saying that there would be a lot of further data available before that meeting. This will likely enhance market reactivity to the Japan CPI figures up tomorrow in Asia (late tonight European time). Yesterday’s hotter than expected UK CPI failed to sustain a sterling rally, suggesting a concern that sustained high BoE rates are not necessarily supportive of the currency if the UK is suffering mild stagflation.

For a global look at markets – go to Inspiration.