Global Market Quick Take: Europe – 4 December 2023 Global Market Quick Take: Europe – 4 December 2023 Global Market Quick Take: Europe – 4 December 2023

Global Market Quick Take: Europe – 4 December 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  US equity futures trade lower in early Monday trading with Treasuries and gold also slipping from session highs as markets pared some of Friday’s strong rally that occurred despite Fed chair Powell’s warning that policymakers are in no hurry to cut interest rates. Instead, markets responded by pushing back even harder with bond yields seeing another sharp drop while gold prices reached a fresh record. The market is now pricing in five full 25 bps rate cuts next year, and while that may end up being correct, it leaves little room for error in the short term. A thin economic calendar today with focus on EZ PMIs, China inflation and US job report later in the week.


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

Equities: Another negative Chinese session with Hang Seng futures down 1%, but the bearish sentiment remains an isolated Chinese event. Equity futures in Europe and US are mostly flat as the strong close on Friday taking S&P 500 futures above the 4,600 level. In company specific news, Spotify is laying off 17% of its global workforce as profitability has worsened over the past year. Bond markets and especially pricing of Fed rate cuts next year will continue to set the pace and direction in US equity markets this week. COP28 has committed to increase nuclear power by 200% by 2050 in bid to increase reliable clean energy which could set uranium and nuclear power stocks on the move in today’s session.

FX: Dollar slipped after markets interpreted Powell’s comments as dovish, and Gold raced to all-time highs of $2,100+ and yen rallied on the back of lower Treasury yields. USDJPY slid below 146.50 briefly to test the 23.6% fibo retracement at 146.09 but reversed higher in Asia. AUDUSD rose above 0.6680 with RBA expected to follow the RBNZ to deliver a hawkish hold tomorrow, and NZDUSD spiked to 0.6220 before reversing to 0.6660 and 0.62 respectively. EUR has broken below 1.09 on Friday and sees room for decline especially on the crosses amid dovish ECB repricing risks.

Commodities: Gold surged to a record $2135 overnight, thereby completing a bullish signal with the s/t risk of a pullback towards $2057 with $2000 potentially a new floor. Prices surged as markets saw a dovish repricing of the Fed with Powell’s pushback to rate cut pricing remaining modest, potentially supporting an extension into 2024. Watch silver and platinum given their relative cheapness to gold following the latest surge. Crude oil also recovered in Asia after slipping another over 2% on Friday despite softer dollar and increased Fed rate cut bets as market remain comfortable that supply will be ample and OPEC discord risks remain. Copper trades lower after reaching an August high at $3.93 on Friday with bulls focusing on Powells comments and supply risks

Fixed income: US Treasury yields continued to drop on Friday despite Jerome Powell pushing back on Markets pricing more than 100bps rate cuts next year. The 2-year yield fell 14bps to 4.54% and the 10-year yield dropped by 13bps to 4.20%. The Federal Reserve blackout period started on Saturday, hence the focus shifts on economic data such as US factory orders today, US ISM services on Tuesday and nonfarm payrolls on Friday. The primary high-grade corporate bond market will also be in focus, as syndication desks estimate between $15-$20 billion issuance this week and $30-$35 billion for the whole month, putting pressure on US treasuries. This week the US Treasury sells only T-bills, and coupon auctions will resume next week.

Volatility: The VIX ended last week at $12.63, down 0.29 cents (-2.24%) after Friday’s positive session in the stock markets. VVIX ended at 85.90, down 0.81 (-0.93%), while SKEW stayed flat at 144.54 (+0.00). VIX futures stayed mostly flat overnight at $13.710 (+0.010 | +0.09%). S&P 500 and Nasdaq 100 futures are slightly down: 4592.50 (-8.25 | -0.18%) and 15970 (-53.75 | -0.34%) respectively. Expected moves for the coming week are: +/- 50.96 (+/- 1.11%) and +/- 245.35 (+/- 1.53%) for the S&P 500 and the Nasdaq 100 respectively. Volatility in the coming week will largely be influenced by employment data, which will be released over the span of several days (JOLTS, ADP Nonfarm, Initial Jobless Claims.

Macro: Fed Chair Powell tried to push back on rate cut expectations after Waller’s dovish comments earlier last week, saying that Fed is still prepared to tighten further if it becomes appropriate to do so. However, he mentioned policy is in restrictive territory, and markets interpreted Powell’s comments as tilting dovish and Q1 rate cut pricing ha snow shot up to over 70%. US ISM manufacturing was unchanged at 46.7 in November, against expectations for a recovery to 47.6. New orders and prices paid rose to 48.3 (prev. 45.5) and 49.9 (prev. 45.1), respectively, while employment fell to 45.8 from 46.8.

Technical analysis highlights: S&P 500 eyeing 4,800. Nasdaq 100 short term correction likely, support at 15,744. DAX above resist at 16,060, could test 16,530. EURUSD rejected at 1.10, support 1.0755. USDJPY downtrend support at 145. GBPUSD likely to be rejected at 1.2745. Gold correction likely to 2,032 maybe 2K.  WTI Crude oil range bound 72.65-79.77, Brent 77.24-83.97. Copper support at 382, resistance at 400. 10-year T-yields support at 4.19

In the news: Washington is aiming to halve Russia’s oil and gas revenues by the end of this decade, a senior US diplomat has said (FT), New strikes hit Gaza as Israel-Hamas fighting resumes (CNN), Bitcoin Hits $40,000 Level for the First Time Since May 2022 (Bloomberg), China Evergrande Faces Final Chance to Avoid Liquidation by Hong Kong Court (Bloomberg), Gold soars past $2,100 to new record (CNBC). Leaders have agreed to triple nuclear power by 2050 and launching first Nuclear Energy Summit for 2024 in Brussels (IAEA).

Macro events (all times are GMT): US factory orders (Oct) -3% vs 2.8% prior (1400), US Durable Goods Orders (Oct) exp –5.4% vs –5.4% prior (1400)

Earnings events: Gitlab, US based software company, reports FY24 Q3 (ending 31 October) earnings after the US market close with analysts expecting revenue growth of 25% y/y and negative EBITDA of $4mn up from negative $56mn a year ago.

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

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.