Global Market Quick Take: Europe – 1 November 2024

Macro 3 minutes to read
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Saxo Strategy Team

Key points:

  • Equities: US markets fall on tech earnings; Apple slips, Amazon rises; Japan, Europe mixed; NFP awaited.
  • Currencies: Sterling sharply lower in follow-on reaction to new UK budget
  • Commodities: Gold sees mini correction on US data strength; natural gas slumps
  • Fixed Income: UK Gilt yields soar amid budget turmoil, Treasuries stable ahead of non-farm payrolls
  • Economic data today: US jobs report, ISM Manufacturing

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

Webinar replay: Trading the 2024 US election

Macro:

  • US September PCE was in line with expectations on the headline, rising 0.2% M/M, but accelerating from the prior 0.1% pace. Meanwhile, the Y/Y rose by 2.1%, in line with expectations while the prior was revised up to 2.3% from 2.2%. The core metrics saw a 0.3% rise M/M, in line with forecasts while the prior was revised up to 0.2% from 0.1%, while the Y/Y rose by 2.7%, matching the prior pace but above the 2.6% analyst forecast.
  • US initial jobless claims (w/e Oct. 26th) tumbled to their lowest since May, printing 216k from 228k, well below the expected 230k, despite an increase expected due to seasonal factors and recent hurricane impacts in Florida and elsewhere.
  • Eurozone Q3 GDP growth came in better than expected at 0.4% QoQ vs. 0.2% expected. Downside risks remain but this may prevent the need for ECB to go for a jumbo rate cut in December. US GDP data once more evidenced the continued ‘US exceptionalism’ theme with Q3 GDP up 2.8% YoY.
  • Eurozone Oct. Flash CPI came in hotter than expected for both headline and core, with the latter steady at 2.7% versus a drop to 2.6% expected.
  • NFP preview: Hurricanes and the Boeing strike effects will be in focus, and consensus for headline jobs growth is at +100k from 254k previously with unemployment rate remaining unchanged at 4.1%. Sentiment is shaky with tech earnings misses and any upside surprises could question the next Fed move and may push out the expectations of a rate cut in November.

Macro events (times in GMT):  Switzerland Oct. CPI (0730), US Oct Nonfarm Payrolls Change and Unemployment Rate (1230), US Oct ISM Manufacturing (1400)

Earnings events:

  • Today: Exxon Mobile, Chevron
  • Next week: Berkshire Hathaway, Palantir, Qualcomm, Arm, Vertex Pharmaceuticals, Arista Networks, Gilead, Airbnb, Constellation Energy

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

Equities: US markets saw significant declines, with the S&P 500 dropping 1.8%, Nasdaq 100 down 2.4%, and Dow shedding 378 points, primarily driven by disappointing guidance from Microsoft and Meta, which highlighted high costs associated with AI investments. In corporate earnings, Apple beat revenue and EPS estimates but reported lower net income due to a tax charge, leading to a 2% drop in after-hours trading. Amazon’s results exceeded expectations on both earnings and revenue, lifting its shares by 5% post-market. Japanese markets slipped 0.5% following US tech earnings, with chip stocks like Hitachi and Renesas underperforming despite strong gains by Advantest on AI demand. In Europe, shares declined amid mixed earnings and inflation concerns, with Microsoft and Meta's outlooks impacting tech shares such as SAP and ASML.

Volatility: The VIX rose 13.81%, reaching 23.16, indicating increased market caution. The VIX1D, a measure of one-day volatility, jumped 41.01%, signaling heightened short-term uncertainty. Implied volatility remains elevated as the SPX and NDX are set for potential moves of 52.81 points (0.93%) and 254.27 points (1.28%), respectively, based on options pricing. Notable options activity includes MSFT, META, and INTC, reflecting the impact of earnings. Today, the release of Nonfarm Payrolls (NFP) data is expected to be a critical factor influencing market sentiment, as investors look for clues on economic resilience amidst inflationary pressures and potential Fed rate adjustments.

Fixed Income: UK markets saw another day of turmoil as gilts dropped, with 2-year and 10-year yields both hitting 4.53%, driven by reduced expectations of BOE rate cuts after the government’s Autumn budget. Bunds, OATs and BTPS held steady, outperforming gilts. U.S. Treasuries ended slightly higher yesterday, recovering from earlier losses caused by a selloff in UK gilts. The gains were led by longer-term bonds, flattening the yield curve. Economic data, like lower jobless claims and the PCE index, had little impact on the market, as traders focused more on European developments. Today market’s focus is on the nonfarm payrolls ahead of next week’s FOMC meeting.

Commodities: Gold's near USD 60-dollar correction yesterday was triggered by profit-taking amid a less dovish Fed. This shift, following a string of strong US economic data, temporarily removed focus from political concerns—including Trump's policies and their potential effects on debt and inflation. Silver mirrored gold, falling more than 3% before reaching a key support level that managed to attract fresh buying. US natural gas extended its weekly decline to over 12% as stockpiles rose above the five-year average amid warmer weather forecasts, indicating sluggish demand for heating fuel. Crude oil found support from strong US economic data, China's stimulus, and Iran’s threat of an imminent retaliatory strike against Israel. The focus now turns to the US jobs report and the countdown to Tuesday's US election.

Currencies: Sterling was the chief focus in FX as it dropped sharply in a follow-on reaction to the UK budget unveiled on Wednesday. The Euro/Sterling exchange rate rose through the important 0.8400 area (a prior major cycle low from the summer) as the market sees the heavy spending in the budget as possibly stagflationary, judging from the sharp rise in UK rates all along the UK yield curve and the sell-off in the currency and the country’s equity market. Elsewhere, the USD was sideways ahead of today’s October jobs report and next Tuesday’s election, as well as the Thursday FOMC meeting next week.

For a global look at markets – go to Inspiration.

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