Global Market Quick Take: Europe – 5 November 2024

Key points:

• Equities: US stocks dip ahead of election, Palantir soars; European markets cautious; Hong Kong buoyed.
• Currencies: the USD winding around in the range ahead of US election
• Commodities: Gold steady, copper rising on stimulus bets and lower Trump 2.0 risks
• Fixed Income: US Treasuries rally on Harris poll momentum
• Macro events: US election day ahead and latest polls show Harris gaining momentum

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

• US election day ahead and the momentum has shifted slightly in favour of VP Kamala Harris after weekend polls and betting markets showed Trump losing momentum. Of the 7 key swing states, Harris leads in 4, Trump in 1 and 2 tied – but all are within the margin of error so the race is still tight. Saxo’s election hub has everything covered, from stocks to ETFs to bonds and FX or option strategies that can be useful in the volatile days ahead.
• Polls begin closing at 2300 GMT this evening, with the first large states that are not deeply partisan like Florida and North Carolina closing an hour later. This piece gives a sense of how long it could take for the result to be known, with a close result possibly meaning it could take days to call the election for president and especially for individual races that could determine which party controls the Senate and the House. The market may try to react within hours if specific districts are showing a consistent and large directional swing in favour of either party.
• On tap today, besides the US elections would be the China’s NPC that is underway from Nov 4-8 with eyes on a potential "bazooka" of stimulus although WSJ reported authorities will signal that China is not planning such a "bazooka". China’s Caixin services PMI for October is also due.

Macro events (times in GMT):  UK Octo PMI (Final) 0930, US Sept Trade Balance (1330), US Oct ISM Services Index (1500), US Election Day/night

Earnings events:

• Today : Marathon Petroleum, Coca-Cola European
• Wednesday : Qualcomm, Arm, Gilead, MercadoLibre
• Thursday : Arista Networks, Airbnb, Motorola

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

Equities:

• US equities closed with modest losses on Monday as investors remained cautious ahead of today’s presidential election. The S&P 500 edged down 0.28% and the Nasdaq 100 dropped 0.35%, with markets trading lightly in anticipation of potential post-election volatility. Apple announced an internal “Atlas” project, signaling a potential expansion into smart glasses. Palantir shares jumped 13% in after-hours trading, buoyed by strong Q3 results showing a 30% YoY revenue increase and earnings that beat estimates, with the company now projecting higher revenue for the year.
• In Europe, markets also slipped, with the Stoxx 50 down 0.6% and the Stoxx 600 off by 0.3% as tech stocks faced renewed pressure, while bank stocks added 0.7%. Oil-related shares saw gains, reflecting rising crude prices. Notably, Burberry shares surged 4.8% amid speculation of a potential bid from Moncler.
• Japan’s Nikkei was steady ahead of a trading hour extension effective today, with a new closing time of 3:30 p.m. and an added auction session to enhance liquidity. In Hong Kong, the Hang Seng Index rose 0.3%, driven by tech and consumer gains, as well as sentiment boosts from China’s pro-growth legislative efforts and Saudi Arabia’s $1 billion investment in Hong Kong companies.

Volatility: With election day upon us, volatility metrics reflect a subdued outlook, as markets largely anticipate results to begin impacting trading after the initial counts are released. The VIX sits near 21.9, showing limited upward movement as the market holds its breath. The one-day VIX (VIX1D), representing expected intraday volatility, has eased slightly but remains elevated at 14.6, signaling some anticipation of short-term price shifts as results start coming in later today.

Implied moves for the S&P 500 and Nasdaq remain moderate, with an expected swing of ~0.63% for the SPX and ~0.82% for the NDX, pointing to a calm trading session during the day as traders await final results. However, with the Federal Reserve's interest rate decision looming on Thursday and potentially significant policy shifts in play, traders are likely maintaining positions to hedge against volatility post-election. Additionally, the heightened put/call ratio at 1.56 suggests a lean towards protective positioning, indicating underlying caution among investors.

Fixed Income: European sovereign bonds closed the day mixed. German Bunds underperformed U.S. Treasuries, weighed down by a poll indicating Kamala Harris leading in Iowa, a state Trump won in the past. Money markets kept ECB rate-cut expectations steady, with 28 basis points projected for December and 122 basis points by the end of next year. UK Gilts held steady, with 10-year yields at a one-year high following the UK autumn budget announcement last week. Traders continued to anticipate a 22-basis-point rate cut from the Bank of England this week and 30 basis points by year-end. Meanwhile, U.S. Treasuries rallied, with yields dropping sharply at the open as polls showed Vice President Harris gaining ground on former President Trump. The gains held throughout the day, despite a lukewarm reception for a 3-year note auction that slightly tempered momentum. The 10-year yield settled at approximately 4.315%, after dipping as low as 4.26% earlier in the session

Commodities: Crude prices have returned to their mid-range, supported by OPEC+'s move to further delay a planned production increase, and continued tensions in the Middle East with Iran reportedly planning an attack on Israel after the U.S. election. Elsewhere, a softer USD and U.S. Treasury yields driven by fresh Harris momentum helped stabilise gold, while silver is still holding just above a key area of support. Copper trades higher for a third day, supported by recent economic data strength and hopes Beijing will announce more support measures. In addition, a late surge in the polls for Harris has reduced the risk of a Trump 2.0 and his promised increase in trade tariffs.

Currencies: The US dollar dipped to start the week yesterday, posting local lows briefly as US treasury yields fell back after a sharp run into the end of the week. This may have been in correlation with rising odds in probability markets that Trump will not win the US presidential election. The greenback regained its feet as investors and traders await the outcome of that election, with the first polls closing at midnight tonight.

For a global look at markets – go to Inspiration.