Global Market Quick Take: Europe – 23 November 2023

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

Equities: More upbeat tone out of Asia with China signaling more support for troubled real estate developers lifting a broad index of Chinese real estate developers by 7%. US and European equity futures are mostly flat and yesterday’s US session was driven by outperformance among defensive sectors. Nvidia shares were down 2.5% following its strong earnings results and outlook as investors were grabbling with the rising risks in Nvidia’s China business due to US export controls negatively impacting sales of AI chips to China. Today’s key macro event that might impact equities are European November preliminary PMI figures out at 09:00 GMT.

FX: The dollar pushed lower again overnight after a slight recovery yesterday amid higher consumer inflation expectations and jobless claims coming in lower than expectations. USDJPY moved above 149.50 before moving back lower to close in on 149, and Japan’s CPI will be in focus on Friday morning in Asia in the absence of US data for the rest of this week. Higher-than-expected Japan CPI will again boost speculation of a BOJ policy tweak and strengthen the yen. GBP was softer after the budget announcement as Gilts sold off on higher issuance. EURUSD trades back above 1.09 but may face formidable resistance above at 1.0960.  USDCNH dipped back to 7.15 from 7.17+ levels yesterday.

Commodities: Crude oil prices tumbled again on Wednesday in thin pre-holiday market trading with Brent dipping below $79/barrel before recovering late in the session, only to drop again overnight. The OPEC+ meeting at the weekend has been postponed until 30 November amid Saudi frustrations about lack of compliance raising uncertainty around deeper supply cuts by the group to support oil prices. Meanwhile, EIA data showed a fifth straight increase in crude inventories to 8.7mn barrels. Gold and copper, two key metals, softened in line with the stronger dollar before rebounding with continued focus on key resistance at $2010 and $3.83 respectively.

Fixed income: A larger-than-expected decline in initial jobless claims and an unexpected rise in the 1-year inflation expectations in the University of Michigan survey, pushing 1-year inflation expectations to 4.5%, triggered some selling in Treasuries. This resulted in the 2-year yield rising by 3bps to 4.90% and the 10-year yield increasing by 1bp to 4.40%. The cash Treasury market is closed today for Thanksgiving, while futures will be open with an early close at midday New York time. The attention shifts to Europe, where far-right Wilders wins in the Dutch elections, and Germany ends the sale of inflation linked-bonds amid a budget crisis.

Volatility: The VIX continues its slide towards the lows of the year, ending at $12.85 (-0.50 | -3.75%). The VVIX, the VIX’s own volatility index, did have an uptick to 83.38 (+1.61 | +1.97%). Which might indicate that there is some uncertainty growing. The Cboe SKEW index, rose 0.75 (+0.53%) to 141.55. Futures were, as we move into the long Thanksgiving weekend, mostly flat: VIX futures are at 14.550 (-0.015 | -0.09%), S&P 500 and Nasdaq futures are at 4570.00 (+2.75 | +0.06%) and 16068.00 (+18.75 | 0.12%) respectively.

Technical analysis highlights: S&P 500 likely to push to 4,607. Nasdaq 100 above 16K, potential to 16,300 but expect short-term correction. DAX strong resist at 16K. EURUSD at resist at 1.0945 and 0.618 retracement, likely setback. USDJPY bouncing from support at 147.30. GBPUSD uptrend resistance at 1.2545. Gold uptrend, resistance at 2,010, break above likely move to 2,040-2,070.  WTI Crude oil range bound 72.65-79.77, Brent 77.24-83.97. Copper rejected at strong resistance at 382. 10-year T-yields key support at 4.36

Macro: US initial jobless claims fell to 209k from 233k, significantly below the consensus, 226k. This comes after last week’s claims print was the highest in 12 week and suggested that labor market is cooling. However, this week’s print is likely to be a seasonal adjustment ahead of Thanksgiving holiday and weakening trends could return from next week. The final reading of University of Michigan inflation expectations showed the year-ahead measure revised up to 4.5% from 4.4% and the 5-10yr measure remained unchanged at its highest levels since 2011 at 3.2%. Both measures were slightly higher than the consensus and sparked fears that higher inflation expectations are becoming embedded. UK Autumn Statement saw Jeremy Hunt announcing measures to reduce debt, push people to join the workforce, encourage corporate investment and cut taxes. The lowering of NI from 12% to 10% will take effect in January at the start of what is likely to be an election year. Other measures such as increased pensions and welfare benefits were also announced although opponents criticised that the Budget did not address the impact of higher inflation on public services expenditure that makes the rosier fiscal projections look unsustainable.

In the news: Sam Altman to return as OpenAI CEO after his tumultuous ouster (Reuters), Israel and Hamas have reached a deal on a cease-fire and hostages (AP), Chinese government advisers will recommend economic growth targets for next year ranging from 4.5% to 5.5% to an annual policymakers' meeting (Reuters), Jeremy Hunt cuts national insurance but taxes head to postwar high (FT), Dutch Far-Right Leader Wilders Scores Shock Election Victory (Bloomberg), Oil down more than 1% as uncertainty swirls over delayed OPEC+ meeting (Reuters)

Macro events (all times are GMT): US Thanksgiving (Market holiday), Riksbank policy announcement (0730), Eurozone manufacturing and services PMI, exp 43.5 & 48.1 vs 43.1 & 47.8 prior (0800),

Earnings events: No important earnings releases today.

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