Global Market Quick Take: Europe – 29 April 2024

Key points:

• Equities: Positive sentiment ahead of key earnings this week.
• FX: USDJPY drops on suspected Bank of Japan action
• Commodities: Gold bulls undeterred by recent correction
• Fixed Income: US Treasury Quarterly Refunding Announcement (QRA) in focus.
• Economic data: German CPI

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

Equities: Positive session in Asia with Japanese equities up 1.8%. Equity futures in Europe and the US are pointing 0.5% and 0.3% higher respectively. This week is another important week on earnings with key earnings from Amazon (Tue), AMD (Tue), Eli Lilly (Tue), Apple (Thu), and Novo Nordisk (Thu). Key macro event today is German April CPI figures expected to show an increase in the inflation following a period of easing inflation pressure. This morning BBVA and Philips have reported earnings ahead of European trading. BBVA is posting strong Q1 results with management saying the Spanish bank is on track to clearly exceed the 2021-2024 goals. Philips is announcing a $1.1bn settlement with the US and a bit mixed results on revenue and operating income; Philips shares are indicated 7% up in pre-market trading.

FX: Japanese yen remains the big focus again today after an initial move to 160 levels in USDJPY but suspected intervention thereafter pushing it back lower to touch 155. With a 5 yen move now in place, the yen strength will have to be backed now by either weak US data or a hawkish BOJ narrative which was completely absent in Friday’s announcement. Focus turns to Fed meeting this week, where focus will be on whether a rate hike or QT tapering is on the table. Yen crosses also reversed course, with AUDJPY back lower to 102 from decade-highs of 104.94, NZDJPY back to 93.0 from 17-year highs of 95.4, and CNHJPY reversing from 22 to 21.40. AUDUSD has continued its ascent and now trades above 0.6570 while GBPUSD is above 1.2540. Euro-area CPI on the radar today, and EURUSD has surged above 1.0730.

Commodities: Gold trades steadily after recording its first weekly decline in six weeks, while silver was down 5% on the week despite a strong tailwind from surging copper prices. Yet the correction in gold has so far not been big enough to trigger long liquidation from funds who at the beginning of March bought bullion aggressively below USD 2200. Focus on yields, dollar and this week’s FOMC meeting. Crude oil remains stuck with Brent settling into a range around USD 90 with fading geo-risks in the Middle East being offset by OPEC+ production cuts and attacks on Russian and Ukraine energy infrastructure. Base metals rose strongly last week with copper reaching a two-year high on SouthAm supply concerns offsetting question marks over demand in China. Key support at USD 4.40 in HG with recent strong hedge funds buying activity pointing to stops below that level. A heavily shorted grain sector has sprung back to life, initially driven by a 10% wheat surge on dry weather concerns in Russia and parts of the US Plains.

Fixed income: Bond markets surged on Friday in response to the BOJ decision and the release of U.S. PCE data, with investors finding relief in inflation figures that weren't as alarming as feared. Notably, Italian BTPs outperformed their counterparts in Europe, with 10-year BTP yields sliding by 10 basis points to 3.92%, while 10-year Bund yields dipped 6 basis points to 2.57%. Across the pond, US Treasuries saw gains across the yield curve, with 10-year yields settling at 4.66%, just marginally higher for the week. Despite the Friday rally, expectations for rate cuts remained largely steady, with bond futures indicating roughly 34 basis points of rate cuts by year-end in the U.S. and around 66 basis points in Europe. Looking ahead, attention shifts to the Quarterly Refunding Announcement (QRA) and the upcoming FOMC meeting. Our expectation is for the QRA to be bullish for markets, as gross issuance is going to decrease from the previous quarter for the first time since 2Q 2022, and the Treasury General Account level is going to remain unchanged (for more information, click here).

Macro: US core PCE for March rose 0.32% MoM, in line with the expected +0.3%, and relieving concerns of a potential 0.4% or even 0.5% print after Thursday's Q1 Core PCE prices came in significantly on the upside. Core YoY gains were unchanged at 2.8% vs. expected 2.7%, but there was a revision higher in January and February prints. Focus now turns to the Fed announcement due Wednesday (Thursday morning for Asia) where the central bank will likely keep its options open after the disinflation trend has become bumpy. The Bank of Japan kept policy settings unchanged, with the short-term interest rate unchanged at between 0.0-0.1% as expected and CPI outlook raised to 2.8% for 2024 fiscal year from 2.4% previously. There was no clear mention of FX concerns, and while there was a change in the language around bond purchases - the amount 6 trillion yen per month was not mentioned – details were patchy, and the message was not clearly hawkish.

Technical analysis highlights: S&P500 uptrend if close above 5,146, key support 4,953. Nasdaq 100 rebound, key resist at 17,808, support at 16,963. DAX key resistance at 18,192, close above uptrend, support 17,620 . Hang Seng uptrend to 18,844
EURUSD correction could push higher to 1.0777, below 1.0670 downtrend. GBPUSD correction reaching 1.2553, could it continue to 1.2625? Below 1.2449 downtrend. USDJPY could push to 163.55, if closing below 156 expect down to 152.85. EURJPY uptrend intact but key is can it close above 170 or not, if yes potential to 175. USDCAD key strong support at 1.3618. AUDUSD spiked to 0.786 retracement at 0.6584 key resist, a close above potential to 0.6650.
Copper upside potential to 500. Gold hovering around key support at 2,319, above 2,350 likely resuming uptrend. US 10-year T-yield looks short-term toppish but upside potential to 4.75

In the news: Japanese yen strengthens sharply after hitting 160 against dollar for the first time since 1990 (CNBC), Elon Musk visits China as Tesla seeks self-driving technology rollout (Reuters),Earnings for Big Oil backpedal as natgas prices tumble (Reuters), Elliott Said to Have Built ‘Large’ Stake in Buffett-Favored Sumitomo (Bloomberg), Copper at $10,000 and BHP's Mega Bid Expose Mining’s Biggest Problem (Bloomberg)

Macro events (all times are GMT): EZ April Sentiment Survey (0900), German Prelim CPI (Apr) exp. 2.3% vs 2.2% prior (1200), Dallas Fed Mfg Activity (Apr) exp. -11.3 vs –11.4 prior (1430), US Corn and Soybeans Planting Progress (2000), US Winter Wheat Conditions (2000)

Earnings events: Another important earnings week ahead with Tuesday and Thursday being the most important days with earnings from Amazon, AMD, Eli Lilly, Novo Nordisk, and Apple.

• Monday: Philips, BBVA, NXP Semiconductors
• Tuesday: Stryker, Amazon, AMD, Starbucks, Mondelez, Eli Lilly, Coca-Cola, McDonald’s HSBC, Eaton, Cameco, Mercedes-Benz Group, Volkswagen, Adidas, Banco Santander, PayPal, Super Micro Computer
• Wednesday: Qualcomm, Mastercard, Pfizer, ADP, Barrick Gold, Franco-Nevada, GSK, Estee Lauder, DoorDash, AIG, Kraft Heinz
• Thursday: Novo Nordisk, Linde, Booking, Apple, Amgen, Shell, ConocoPhillips, Cigna, Regeneron Pharmaceuticals, National Australia Bank, Macquarie Group, Vestas, Mærsk, Ørsted, Genmab, Pandora, Universal Music, ING, ArcelorMittal, Coinbase, Fortinet, Block, Moderna, Cloudflare,
• Friday: Novonesis, Danske Bank, Credit Agricole, Societe Generale, Intesa Sanpaolo, MercadoLibre, Monster Beverage
• Weekend: Berkshire Hathaway

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