Global Market Quick Take: Europe – 22 December 2023

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

Equities: Futures are headed lower across the board with Hang Seng futures down 1.5% declining the most driven by declines in technology stocks as China is announcing a new set of policies to curb spending on gaming hitting companies such as Tencent and NetEase. Nike shares plunged 12% in extended trading as the US sports apparel maker lowered its revenue guidance over the next six months and announcing cumulative cost savings of up to $2bn. Today’s key macro event to impact US equities is the US PCE Deflator figures for November.

FX: USD weakened following economic data releases that reinforced expectations of a US rate cut. DXY, the dollar spot index, dropped by 0.6% to 101.84. USDJPY extended its slide by 1% to 142.10, while the AUD gained 1% to 0.68, and the EUR strengthened by 0.6% to 1.10 against the dollar. The November US PCE data, scheduled for later today, is the last significant piece of information that could potentially move the FX market before the start of the festive season.

Commodities: Crude oil are trading today with Brent above $80/brl again despite Angola’s announcement to leave OPEC, reflecting discontent among some oil-producing countries. The dissatisfaction arises from OPEC's, under the leadership of Saudi Arabia, persistent efforts to keep crude oil prices high, often at the expense of market shares. This has led to a loss of shares, primarily to US producers. Attacks on ships in the Red Sea are still a supportive factor for crude oil and most ships between Asia and Europe are rerouted south of Africa.

Fixed income: Treasury yields rebounded from their lows to finish the session modestly higher, with the 10-year yield settling at 3.88%. This takes the US 10-year yield back to the level where it started in 2023 ending the year at 3.87% with an unusual trading range (3.24% to 5.02%). All eyes are now on the release of the November PCE deflators scheduled for today.

Macro: US initial jobless claims increased to 205k from 203k (revised up from 202k) but was below the median projection of 215k. Continuing claims came in at 1,865k, also below the consensus. US Philadelphia Fed business outlook decreased to -10.5 in December, from -5.9 in November and much softer than the -3.0 median forecast. Capex intention plunged and was one of the key factors dragging down the index. On its third estimate, the US Q3 GDP was revised down to 4.9% from previous reported 5.2%. Personal consumption was revised down to 3.1% from 3.6%. Inflation was also lower than previously reported as the GDP deflator was revised down to 3.3% from 3.6% and the quarterly Core PCE deflator was lowered to 2.0% from 2.3%. The JPM GDP Nowcast index is still trending higher highlighting that the US economy is estimated to have increased its growth rate in December.

In the news: New rules in China announced to curb spending on games causing Tencent and NetEase shares to plunge (Reuters). Consumers do not want used EVs which is beginning to hurt primary sales of EVs (Bloomberg). Eurozone economies are likely to be hit by lower fiscal impulse in 2024 (FT). Geopolitical risks continue to be a key risk with the US under pressure on its Gaza strategy (FT). Nike sinks 10% after it slashes sales outlook, unveils $2 billion in cost cuts (CNBC).

Macro events (all times are GMT): Italy consumer confidence (Dec) est. 104.0 vs 103.6 (0900), US personal spending (Nov) est. 0.3% vs 0.2% prior (1330), US PCE Deflator YoY (Nov) est. 2.8% vs 3.0% prior (1330), US Durable Goods Orders (Nov P) est. 2.3% vs -5.4% prior (1330), US New Home Sales (Nov) est. 690k vs 679k prior (1500)

Earnings events: No earnings releases today.

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