Global Market Quick Take: Europe – 14 October 2024

Key points:

• Equities: Markets at all-time highs, strong earnings from JPMorgan and Wells Fargo, but Tesla down 8.8%
• Currencies: USD flat after last week’s surge
• Commodities: Gold pulling back toward cycle highs in strong start to week
• Fixed Income: US 10-year yields remain near recent highs above 4.00%
• Economic data: CPI data for many countries this week. 

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

Macro:

• China’s stimulus news at the weekend left market with more questions than answers. While officials promised more support for both the weak property sector and highly debt-laden local governments, there were no specific numbers mentioned in a highly anticipated weekend briefing from Finance Minister Lan Fo’an. As well, observers noted there was no language indicating support for consumption in the form of fiscal stimulus, which would be critical to reflate a Chinese economy that is mired in a balance sheet recession. More details on the size and nature of potential stimulus and other support measures likely awaits meetings of the Chinese legislature in coming weeks. The Chinese mainland market absorbed the general lack of news well, trading positively on the day in afternoon trading. Hong Kong stocks edged slightly lower, however.
• The ECB to cut rates this Thursday.The meeting may be short on drama as the market is pricing nearly 100% odds of a 0.25% rate cut at this meeting and the following one. A dovish surprise would require that the ECB guides for a possibly faster pace of easing due to concerns of a softening labor market, as most inflation indicators continue to ease in the Euro Zone.

Macro events (times in GMT):  US Fed’s Waller to speak at 1900 GMT, UK labor market data up tomorrow early at 0600 GMT, Sweden’s Sep. CPI up at 0600 GMT tomorrow as well. Germany’s Oct. ZEW survey up at 0900 GMT tomorrow.

Earnings events: Earnings season begins to hit full stride this week, although the big weeks for Mag 7 stocks are next week and the week after. Highlighted earnings this week: 

• Tuesday: PNC Financial Services, Johnson & Johnson, Bank of America, Goldman Sachs, Citigroup, Interactive Brokers, UnitedHealth, Progressive, Charles Schwab, Ericsson
• Wednesday: ASML, Morgan Stanley, CSX, Kinder Morgan, Abbott Laboratories, US Bancorp
• Thursday: ABB, Investor, Elevance Health, Netflix, Intuitive Surgical, Blackstone, Marsh & McLennan, Trust Financial, Travelers, Nordea, Nokia, Schindler
• Friday: CATL, Zijin Mining, Volvo, American Express, Schlumberger, Procter & Gamble

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

Equities: U.S. stocks ended last week on a strong note, supported by robust third-quarter earnings from major banks. The S&P 500 gained 0.6% and the Dow Jones rose 1%, both reaching new highs. JPMorgan (+4.4%) and Wells Fargo (+5.6%) delivered standout earnings, boosting financials, while the Nasdaq edged up 0.1%, despite an 8.8% drop in Tesla shares after its Robotaxi event disappointed investors. Economic data, including steady wholesale inflation, helped ease some concerns, though uncertainty about the broader inflationary impact lingers. Internationally, investors remain cautious regarding China’s recent pledge for fiscal support, with the Hang Seng index still trading at the time of writing. Early reactions show muted optimism as markets await more details. Looking ahead, the market will be focused on earnings from Citi, Bank of America, and Goldman Sachs, which will offer more insight into financial sector strength. Tech and semiconductors will be in focus midweek with ASML’s results on Wednesday, while Netflix's earnings may highlight shifting consumer trends. Key economic data, including U.S. retail sales and jobless claims, will also be pivotal in shaping market sentiment as the week unfolds.

Volatility: Despite a retreat in volatility last week, the VIX remains above 20, closing at 20.46 (-2.2%), signaling that underlying market risks persist even as the S&P 500 and Dow Jones reach new all-time highs. This divergence suggests investors are still hedging against potential downside risks. Futures on the VIX, at 19.30, have shown minimal movement, reflecting a cautiously optimistic sentiment heading into a busy earnings week. Short-term volatility, as indicated by the VIX1D, fell sharply (-10.2%), showing that immediate concerns have eased. However, the implied volatility for the S&P 500 still points to a 1.2% (70 points) expected move this week, while the Nasdaq could see a 1.5% (306 points) swing. Earnings from major names like UnitedHealth, J&J, ASML, and Netflix later this week could be key drivers of any volatility spikes, especially if results or guidance miss expectations.

Fixed Income: the US yield curve steepened again last week, even as the market has removed a large chunk of the anticipated Fed easing later this year and into next year due to recent resilient economic data. The market currently prices  90% odds that the Fed will hike 0.25% at its November 7 meeting just two days after the election. Long yields remain near the recent highs, with the US 10-year yield in the pivotal 4.00-4.25% area.

Commodities: The latest hostilities in Israel, Gaza and Lebanon have failed to inspire directional action in crude oil, as Brent trades mid-range near 78 dollars per barrel, nervously awaiting Isreal’s response to Iran’s recent attacks. Gold has pulled sharply higher to start the week, trading north of 2,660 this morning, just over 20 dollars per ounce below the all-time highs from late September.

FX: Weak action to start the week in currencies as the calendar is relatively light this week on US data, though September Retail Sales are up on Thursday. Several countries report their September CPI data this week, including Sweden and Canada tomorrow and New Zealand and the UK on Wednesday. Japan reports its CPI on Friday, an interesting test of the recent slide in the Japanese yen.

For a global look at markets – go to Inspiration.