Key points
- Equities: US declines on Nvidia probe; Europe up on ECB cut bets; Asia rallies on China stimulus
- Volatility: VIX rises ahead of inflation data; VIX9D jumps on near-term event risk
- Currencies: AUD rally on China stimulus hopes reversed on dovish RBA. JPY lower on firmer US treasury yields.
- Commodities: China monetary and fiscal support signals lift metal and energy prices
- Fixed Income: US Treasury yields rise ahead of auctions
- Macro events: US 3-year treasury auction
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Saxo’s Outrageous Predictions for 2025 is out, and can be found here
Macro data and headlines
- The RBA kept its benchmark rate unchanged at 4.35% while saying it was “gaining some confidence” that inflation is moving toward target. This comment saw the Australian dollar fall while swap traders boosted bets on a February cut to 70% from 50% the previous day.
- China’s inflation data disappointed again, with CPI coming in at 0.2% YoY for November vs. 0.5% expected and PPI at -2.5% YoY vs. -2.8% expected. However, the numbers were overshadowed by earlier-than-expected Politburo announcement of more economic stimulus, including shift in monetary policy stance to “moderately loose” for the first time since 2011. A similar shift during the GFC delivered ~200bps of rate cuts, but policy detail was still scant.
- The NY Fed survey of inflation expectations rose modestly across the forward calendar: the year-ahead rose to 3.0% from 2.9%, three-year-ahead to 2.6% from 2.5% prior, and five-year-ahead to 2.9% from 2.8%.
- China’s November trade surplus ballooned to USD 97.4 billion, as Chinese companies rushed to get goods to the US before new tariffs are imposed. This focus drove exports 6.7% higher to USD 312 billion in November, while imports unexpectedly fell 3.9%. In addition to front-loading by US importers trying to secure goods before the tariffs, exports are getting a lift from Chinese companies looking to overseas markets to make up for weak domestic demand.
Macro events (times in GMT): Ger Nov (Final) CPI (0700), Norway Nov CPI (0700), US Treasury to auction 3-year t-notes (1800)
Earnings events
- Today: Autozone, Gamestop
- Wednesday: Adobe, Inditex
- Thursday: Broadcom, Costco
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
- United States: US equities fell on Monday, with the S&P 500 and Nasdaq Composite sliding 0.6%, while the Dow Jones lost 240 points. Nvidia shares dropped 2.5% following the launch of a Chinese antitrust probe, and other tech giants like Meta (-1.6%) and Palantir (-5.1%) also faced declines. Apple, however, gained 1.7%, marking its 21st record close this year. Oracle fell over 7% after missing Q2 expectations, with its revenue falling slightly below forecasts. Investors remain cautious ahead of a critical inflation report due Wednesday, which could impact Federal Reserve rate cut expectations.
- Europe: European equities inched higher on Monday, supported by optimism from China's commitment to "proactive" fiscal measures and "moderately loose" monetary policies. The Stoxx 50 gained 0.4%, with notable gains in luxury stocks like Kering (+4%) and strong performances from Volkswagen amid labor strikes. Markets remain focused on the European Central Bank's anticipated rate cut later this week, with traders eyeing signals on future monetary easing. The broader sentiment was buoyed by China's efforts to stimulate its economy, which is expected to drive increased global consumption.
- Asia: Asian markets rallied on Tuesday, driven by China’s pledge for robust stimulus measures in 2025. The Shanghai Composite climbed 1.6%, while the CSI 300 rose nearly 2%, led by gains in real estate and consumer sectors. The Hang Seng Index gained 1.5% despite weak trade data, reflecting optimism around the Politburo’s pro-growth policies. South Korea’s KOSPI rebounded by 2.4% after a volatile week amid political unrest, and Japan’s Nikkei rose 0.2% as GDP data indicated slightly better-than-expected growth. Regional investors remained focused on China's upcoming economic measures to combat the global slowdown.
Volatility
Volatility ticked higher, with the VIX gaining 11.12% to close at 14.19, reflecting market caution ahead of significant economic data, including inflation figures due Wednesday. The VIX9D saw the most significant jump, up 24.95%, highlighting near-term event risk. VIX futures remained stable, indicating muted longer-term concerns. Meanwhile, expected moves for the day are subdued, with SPX options forecasting a 0.34% shift and NDX options projecting a 0.56% move. Notable options activity was concentrated in Nvidia, Tesla, and Palantir.
Fixed Income
German bunds saw a twist steepening of the yield curve, outperforming US Treasuries. This came ahead of bond sales in the US, Austria, and Italy, which are concentrated in longer-dated maturities. Italy’s BTP-bund spread narrowed for a fifth consecutive day, though it remains above recent lows. Money markets kept steady expectations for European Central Bank rate cuts through 2025, while UK gilts also experienced a slight twist steepening with marginal adjustments in Bank of England easing bets. In the US, Treasury yields climbed, with the 10-year yield rising over 4 basis points to approach 4.20%, driven by higher crude oil prices and anticipation of this week’s Treasury auctions. The yield curve steepened, with markets showing some unwinding of last week’s rally in rate futures. Auction cycles for 3-year, 10-year, and 30-year Treasuries are set to proceed, starting today with a $58 billion 3-year issuance.
Commodities
- A leading commodities index rose 1.1% on Monday after China’s leadership raised the prospect of more monetary easing and stimulus support for the economy in 2025, saying they would be more proactive. Gains were led by industrial metals and energy, with some of the best performers being silver (+3.3%), gasoline (+2.4%), and copper (+1.9%). Investors will now be looking ahead to the Central Economic Work Conference on Wednesday and Thursday. The annual meeting sets the policy direction for the year ahead, and the market will be on the lookout for support measures.
- Gold reached a USD 2,676 high on fresh momentum buying as China resumed buying, and the developments in Syria triggered renewed focus on havens. Silver, meanwhile, rose strongly, breaking key levels of resistance, driven by the dual support from rising gold and industrial metal prices.
Currencies
- Hopes for Chinese stimulus roiled currency markets yesterday, with CNH sharply stronger and AUD surging from very low levels as commodities responded to the news. The RBA meeting overnight was read as quite dovish as the central bank declared that it is “gaining some confidence” that inflation is falling toward the target. This took Australian 2-year rates some 10 basis points lower and sent the AUD back lower as well as the market priced the RBA to cut sooner than previously anticipated.
- Elsewhere, the bounce in US Treasury yields saw the JPY weaker and the US dollar mostly stable, while CAD remains weak after an attempt at consolidating yesterday ahead of tomorrow’s Bank of Canada meeting, where a 50-basis point rate cut is strongly favoured.
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