Global Market Quick Take: Europe – 30 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: BHP and Lundin Mining to buy Filo for $3.25 billion (Investing), Japan June jobless rate falls to 2.5%, job availability slips (Yahoo), Apple says it uses no Nvidia GPUs to train its AI models (Yahoo), Microsoft to report fiscal Q4 earnings as Wall Street eyes AI revenue and spending (Yahoo), Europe Property Funds Near Reckoning as €12 Billion Gets Pulled (Bloomberg), Stock Bulls Dealt Blow by Mounting Profit Warnings in Europe (Bloomberg)

Macro: US Dallas Fed manufacturing survey for July came in at -17.5 from -15.1 previously. New orders were saw a steep decline to come in at -12.8 from -1.3 prior and shipments were at -16.3 from +2.8 prior. The worse-than-expected data could have been impacted by hurricane effects, which may also make their way into the non-farm payrolls report due later this week. Japan’s unemployment rate came in lower at 2.5% for June vs. 2.6% expected and previous.

Macro events (times in GMT): EZ GDP 2Q prelim. Exp 0.5% YoY vs 0.4% prior (0900), German Prelim. CPI (Jul) exp 2.2% vs 2.2% prior (1200), EZ July Consumer Confidence Final (0900), US JOLTS (Jun) exp 8000k vs 8140k prior (1400), US Consumer Confidence (Jul) exp 99.7 vs 100.4 prior (1400)

Earnings events: Manufacturer of flow control systems Flowserve Q2 adj. EPS USD0.73 beats 0.63 estimates. Sales USD1.16bln beats 1.13 bln. Company raises full year guidance. Shares traded down 3.2% after. Cannabis producer Tilray released their Q4 earnings EPS USD0.04 vs -0.02 expected. Sales 229.9 mln vs 227 expected by analysts. Company sees strong revenue growth. Shares up 8.75% after market. Toyota's global sales and production fell in 1H, with drops in Japan and China offsetting a hybrid rebound in North America. Output decreased 9.8% to 5 million units, while sales declined 4.7% to 5.2 million units. BP Q2 revenue USD48.25 bln but a net loss of 129mio. EPS loss of 0.78 cents. Raises dividend to 8.00 cents/share. Confirms USD1.75bln share buyback. Diageo FY24 Sales USD20.3  bln. Almost in line with analast’s expectations at 20.2. EPS 173.2 cents. Glencore upgrades steelmaking coal production guidance for 2024. Rio Tinto is expected to report underlying H1 earnings of $5.79bln.

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

Equities: Us stock market was quite Monday as investors are awaiting a busy earnings week.  Tesla bounced back more than 5% after heavy selling following its earnings release last week. Delta Air Lines is planning to seek compensation from Microsoft and CrowdStrike following the software outage last week leading to Delta cancelling 1000’s of flights. No amount disclosed. Hang Seng ended down 1.4% Tuesday morning. European markets are expected to open slightly lower.

Fixed income: On Monday, the U.S. Treasury yield curve twist-flattened, with long-term yields dropping slightly. The 10-year yields closed at 4.17%, and 2-year yields at 4.39%. The 5-year Treasury yield hit its lowest point since March. Trading volumes were modest as investors await the FOMC meeting on Wednesday and the July employment report on Friday. The market anticipates at least two Fed rate cuts starting in September, with no cut expected this week. Supporting Treasuries, the U.S. Treasury announced it would need to borrow less than previously stated and maintain a smaller cash buffer by year-end. Additionally, coupon issuance is paused until August 6. Corporate bond issuance remained robust, with nearly $14 billion in offerings ahead of the Fed meeting.

Commodities: The BCOM TR index fell for a sixth day on Monday, led by continued weakness among the growth and demand dependent sectors of energy and industrial metals. Brent crude slipped below $80 to a seven-week low as technical/momentum sellers remain in control amid concerns about demand in China while shrugging off the risk of conflict escalation in the Middle East. Gold prices fell but remains one of the few commodities trading up on the month, supported by expectations the FOMC will commence a rate cutting cycle from September. Focus on Wednesday’s FOMC meeting

FX: The US dollar started the week firmer ahead of key event risks from major central bank meetings and Big tech earnings in the week. The euro weakened the most against the buck relative to its G10 FX peers, and Germany’s Q2 GDP and flash CPI report out today will be key. Both activity and haven currencies were softer, although the Australian dollar was resilient ahead of the Q2 inflation report on Wednesday and British pound also held up ahead of the Bank of England meeting on Thursday. The Japanese yen was also back lower after last week’s surge, but remains very volatile ahead of the Fed and Bank of Japan meeting announcements. We covered the Fed preview here and how to position for the announcement here.

Volatility: Yesterday was a relatively calm day on the markets. Markets seem to be in a holding pattern for the upcoming big-tech earnings and the FOMC statement/press conference. On Monday, the VIX increased slightly to $16.60 (+0.21 | +1.28%). Expected moves for today, derived from options pricing, indicate the S&P 500 with an expected move of plus or minus 35.00 points (+/- 0.64%) and the Nasdaq 100 plus or minus 196.20 points (+/- 1.03%). VIX futures rose to $16.050 (+0.080 | +0.49%) this morning. Futures for the S&P 500 and Nasdaq 100 show slight declines, with S&P 500 futures at 5,500.25 (-2.75 | -0.05%) and Nasdaq 100 futures at 19,189.75 (-19.50 | -0.10%). Markets closed Monday with the S&P 500 at 5,463.54 (+4.44 | +0.08%) and the Nasdaq 100 at 19,059.49 (+35.83 | +0.19%). This week is expected to be highly volatile with numerous economic reports and significant earnings releases. Key economic events today include CB Consumer Confidence and JOLTs Job Openings. Today's notable earnings include P&G, Pfizer, and PayPal reporting before the bell, and Microsoft, AMD, and Starbucks reporting after the bell. Yesterday's top 10 most traded stock options were Nvidia, Tesla, Sofi Technologies, Apple, Advanced Micro Devices, Pfizer, Ford Motor Company, PayPal Holdings, Marathon Digital Holdings, and Amazon.

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