Global Market Quick Take: Europe – 15 December 2023

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

Equities: Although ECB sounded a bit more hawkish yesterday in its message than investors would have expected given Powell’s remarks at the FOMC press conference on Wednesday, equity markets are still enjoying a strong sentiment. S&P 500 futures are trading at the 4,782 level this morning and a push to 5,000 by year-end is still within reach as the policy rate cut narrative has pushed short sellers out of the market. On geopolitical news the EU failed to back Ukraine with Hungary’s veto after the country just agreed to Ukraine’s EU membership. More Chinese stimulus announced today is also adding to sentiment in equities reviving hopes of higher Chinese growth in 2024.

FX: The dollar extended its post-FOMC slump, which was aided by a relatively hawkish BOE and ECB pushing their currencies higher. EURUSD jumped higher to test 1.10 from sub-1.09 at Thursday’s open, and 76.4% fibo retracement level at 1.1080 is in focus. GBPUSD pierced through the 1.27 handle and touched highs of near 1.28 with 1.2881 now in focus. USDNOK slid to 10.4471 on Norges Bank rate hike, while USDCHF saw only a modest gain to 0.8630-levels. AUDUSD rose to trade around the 0.67 handle while NZD rose to 0.6240. USDJPY was seen at lows of 140.97, and a break below 140 could open the doors to 137-138 levels.

Commodities: The sharply lower USD and the Fed pivoting towards rate cuts helped give the commodity sector a boost with a leading index trading up 1% on the week with gains being led by industrial and precious metals. Crude oil prices heading for their first weekly gain since October but rising non-OPEC supply and a weakening demand outlook will likely limit the upside potential at this stage. Silver and platinum led the rally among the metals with gold settling into a $2020-40 range while waiting for the next tigger. HG copper has risen to trade to trade near $3.90 on Fed pivot and support from the PBoC after it injected a record amount of cash overnight

Macro: As expected, the ECB opted to stand pat on rates while Lagarde, in her press conference, said that the committee members did not talk about rate cuts, and they are in a data-dependent mode. This despite the market steadfastly holds onto expectations for six 25 bps cuts next year. Inflation projections were downgraded 2.7% from 3.2% in 2024 with 2025 held at 1.9%. On the growth front, 2023 and 2024 projections were cut with GDP next year seen at just 0.8% with the 2025 forecast held steady at 1.5%. The BOE also opted to stand pat on rates via a 6-3 vote with hawkish dissent once again. The central bank noted that economic developments have been muted, and overall language remained firm. Comments like “it was too early to conclude that services price inflation and pay growth were on a firmly downward path” suggested that the BOE leaned relatively hawkish for now. US retail sales came in hot and bodes well for Q4 GDP growth, but there were some downward revisions to October. Headline rose 0.3%, above the -0.1% expected although the prior was revised down to -0.2% from -0.1%. The Core (ex-autos) retail sales rose by 0.2%, above the -0.1% forecast and accelerating from downwardly revised unchanged print (initially +0.1%). US jobless claims for the week ending 9th December fell to 202k from 221k, short of the expected 220k. Continued claims (w/e 2nd Dec) ticked higher to 1.876mln from 1.856mln, but beneath the forecasted 1.887mln. The Swiss National Bank also maintained the policy rate at 1.75% and the emphasis on selling foreign currency removed. There was no clear guidance for the next move but inflation is seen back below 2% for 2024. Norges Bank defied consensus by triggering the hike that they flagged in November's meeting as "likely" to occur in December. The rate hike was primarily driven by NOK depreciation, and the statement does not rule out further tightening.

Technical analysis highlights: S&P 500 forming top and reversal? Nasdaq 100 short term correction likely. DAX top and reversal pattern, support at 16,528 and 16,060. EURUSD testing key resistance at 1.10, likely breaking to 1.1130. USDJPY if closing below support at 141.55 potential to 138 otherwise expect rebound. GBPUSD above key resistance at 1.2745. potential to 1.29. Gold potential to 2,070.  WTI Crude oil rebound likely resist at 72.65, Brent testing resist at 77.25. Platinum XPTUSD broken bullish potential to 1,000, possibly higher. Copper resuming uptrend. 10-year T-yields below support at 3.95 next 3.83

In the news: AT&T to buy Rivian electric vehicles in pilot deal to cut cost, emissions (Reuters), Yellen to Visit China Again in 2024, Focusing on ‘Difficult’ Topics (Bloomberg), Berkshire Hathaway buys Occidental Petroleum shares worth about $588. (Reuters), Costco posts upbeat first-quarter results on strong demand for cheaper groceries (Reuters)

Macro events (all times are GMT):  EZ Flash PMI (Dec) exp 48 vs 47.6 (0800), EZ Trade (Oct) exp €10bn vs €9.2bn (0900), US NY Fed Manufacturing (Dec) exp 2.1 vs 9.1 (1230), US Industrial production (Nov) exp 0.3% vs –0.6%, US PMI (Dec) Mfg 49.5 vs 9.4 & Services 50.7 vs 50.8 (1345),  Quad Witching in the US, being the simultaneous expiry of of stock options, index futures. Index futures options, and single stock futures,

Earnings events: Earnings releases today from Sectra and Darden Restaurants (US bef-mkt).

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