Global Market Quick Take: Europe – 24 November 2023

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

Equities: Optimism around China’s support for its troubled real estate sector vanished quickly with Hang Seng futures trading 2% lower signalling that a turnaround in the Chinese economy will take longer than expected and require more stimulus. S&P 500 futures trade around the 4,567 level extending their recently strong momentum and US equity cash markets close earlier today at 1 p.m. New York time. Euro STOXX 50 futures are down 0.2% in early trading hours despite yesterday’s PMI figures suggesting that the European manufacturing sector might be turning a corner for the better.

FX: The dollar trade sideways against its G-10 peers amid the Thanksgiving holiday and is heading for a small weekly loss with gains being led by the NZDUSD, followed by the CNH and AUD. GBPUSD rose to highs of 1.2564 on improvement in UK PMIs while EURUSD holds around 1.09 below key resistance at 1.0960 amid mixed EZ PMIs and Germany’s debt limit suspension. USDJPY reversed back below 149.50 in Asia as a lagged impact from another spike in Japan’s Inflation for October, while EURSEK rose sharply to 11.46 on Riksbank no change.

Commodities: Crude oil held its decline with OPEC discord continuing to unnerve traders. China’s efforts to boost property market sentiment however boosted metals, with copper prices up although iron ore fell from a recent 9-month high as China’s NDRC attempted to curb speculation in the market. Gold holds below $2k with focus on higher yields in EZ and UK as well as a temporary truce in the Middle East conflict. Overall, the BBG Commodity Index is heading for a small weekly gain with all sectors trading higher, on an individual level led by diesel, platinum, wheat and coffee.

Fixed income: The cash Treasury market was closed on Thursday for the Thanksgiving holiday. Futures were under pressure as German Bunds and UK Gilts sold off. As the cash Treasury market resumed trading in Tokyo on Friday, the 2-year yield rose by 4bps to 4.94% and the 10-year yield increased by 5bps to 4.46%. Overnight, the 10-year Bund yield rose by 6bps to 2.62% after Germany suspended the constitutional limit on borrowing for a 4th consecutive year. The 10-year UK Gilt yield surged by 10bps to 4.26% after the flash services PMI rose above 50, and the manufacturing PMI also registered a stronger-than-expected improvement to 46.7. The cash Treasury market closes early at 2 p.m. New York time today.

Volatility: No US volatility data due to Thanksgiving weekend.

Technical analysis highlights: S&P 500 likely to push to 4,607. Nasdaq 100 above 16K, potential to 16,300 . DAX strong resist at 16K. EURUSD rejected at 1.0960, close above potential to 1.11, expect minor correction. 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: November PMI in UK and Europe increased marginally, with UK services and composite PMIs jumping up to expansion territory of above-50. French PMIs were weaker than expected while German numbers came in better-than-expected. Germany is to suspend the borrowing limit for 2023 for the fourth consecutive year after the budget ruling. German Finance Minister Lindner said they will put to the Cabinet next week the supplementary budget for 2023. Swedish Riksbank maintained its key rate at 4% vs. an expected hike to 4.25%. Riksbank stated that monetary policy needs to be contractionary and is prepared to raise the policy rate further if inflation prospects deteriorate. ECB October Meeting minutes noted that policy is working as intended but remained in favor of agreeing to keep open the option of another interest rate rise, recognising the need to avoid an unwarranted loosening of financial conditions. Japan’s October inflation came in below expectations, but still well above the BOJ’s 2% target. Headline was at 3.3% y/y, higher than last month’s 3.0% and core also accelerated to 2.9% from 2.8%, although it was below the expected 3.0%. Core-core measure however showed some signs of cooling but remained high at 4.0% y/y (vs. exp 4.1% and prev 4.2%).

In the news: Israel and Hamas to start four-day truce on Friday -Qatar mediators (Reuters), WHO asks China for more information about rise in illnesses and pneumonia clusters (AP), China Weighs Unprecedented Builder Support With First-Ever Unsecured Loans (Bloomberg), Volume of Apple sales underperforms Huawei, Xiaomi on China's Singles Day – data  (Reuters), Far-right leader Geert Wilders wins most votes in Dutch election (FT)

Macro events (all times are GMT): Ger IFO Business Climate (Nov) exp 87.5 vs 86.9 prior, Expectations exp 85.8 vs 84.7 prior (0800), US Manufacturing PMI (Nov) exp 49.9 vs 50 prior, Services exp 50.3 vs 50.6 prior and Composite exp 50.4 vs 50.7 prior (1345), Black Friday, traditional kick-off for the US holiday shopping season

Earnings events: No important earnings releases today.

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