Global Market Quick Take: Europe – October 3 2023 Global Market Quick Take: Europe – October 3 2023 Global Market Quick Take: Europe – October 3 2023

Global Market Quick Take: Europe – October 3 2023

Macro 3 minutes to read
Saxo Strategy Team

Summary:  Equities are declining across the board as US bond yields surged to a new high yesterday. USDJPY extended its rally on stronger than expected US ISM Manufacturing figures and EURUSD sled to a fresh low for the year. The lift in bond yields came on the back of several hawkish Fed speakers highlighting the need for another rate hike before the end of the year. Oil prices are a bit under pressure from the stronger USD and Turkey resuming its oil pipeline deliveries from Iraqi oil fields.


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

Equities: S&P 500 futures are trading inside the new trading range from 4,313 to 4,349 level, but are still finding themselves in a downward trend weighed by higher US bond yields. The US 10-year yield closed at a new high yesterday at 4.68%. Equities are digesting Fed speakers call for another rate hike and the recent pickup in economic activity which could keep bond yields higher for longer and thus compressing equity valuations. Next major equity event is the upcoming Q3 earnings season that starts next week. Chinese equities were down as much as 3% as trading resumed after a holiday.

FX: The surge in Treasury yields brought another bid to the USD, and the DXY index rose above 107. Risk sentiment waned with US data remaining strong and AUDUSD plunged to YTD lows and approaching 0.63 with RBA signalling an end to its tightening cycle. USDJPY rose above 149.80 and 10-year JGB auction lacked nay fireworks given the BOJ pre-announced an unscheduled bond buying operation for tomorrow. EURUSD extended its slide to fresh YTD lows of 1.0460 and GBPUSD also failed to get a boost from Mann’s hawkish comments and slid to sub-1.21.

Commodities: Oil prices slid further with WTI and Brent both below $90/barrel, with risk off and higher dollar underpinning. Supply concerns also got a pushback with Turkey resuming a key pipeline flow from Iraq. Gold plunged further to lows below $1820 and the big $1800 figure remains in focus. Silver was down over 5% to plunge below $21 and gold/silver ratio climbed above 86. Wheat and corn futures jumped after a plunge lower following Friday’s USDA report that showed significant supplies.

Fixed income: US Treasuries continue to tumble amid hawkish central bank speakers, with bond future increasing chances for another Federal Reserve rate hike in November or December. Rising yields in the long part of the yield curve show that markets are discounting a higher permanent terminal rate. Despite we expect 10-year yields to rise to 5% as selling pressure mounts, we recognize that the higher the yield the better protection the safe haven provides in case of a crisis, making its risk-reward profile appealing.

Volatility: The VIX Index remains well below the structural level (around 22) for when the market is in a negative territory. In commodities there has recently been activity in WTI put spreads.

Macro: Headline US ISM manufacturing rose to 49.0 vs. 47.9 expected and 47.6 previously. The key new orders (49.2 from 46.8) and employment (51.2 from 48.5) indexes rose strongly. Interestingly the prices paid index fell to 43.8 from 48.4, despite the recent rise in energy prices. US Fed speakers remained mixed. Michelle Bowman re-iterated it will likely be appropriate to raise rates further and hold them at restrictive level for some time. RBA stayed pat, keeping cash rate unchanged at 4.10%, and signalled inflation could fall back in the 2-3% target in late 2025.

In the news: Meta is considering a $14/month subscription on Facebook or Instagram as a response to EU’s digital laws preventing personalized advertising (Reuters). Evergrande resumes trading in China jumping as much as 42% (Reuters). Taiwanese technology companies are shown to aid Huawei in their effort to circumvent US sanctions (Bloomberg).

Technical analysis: US and EU stocks Bearish trend: S&P500 rejected at 4,328 resistance. Could drop to 4,200. DAX rejected at 15,483, likely to test 14,933. EURUSD resuming downtrend minor support at 1,0438. GBPUSD resuming downtrend, support at 1.20. USDJPY uptrend, eyeing 152. Crude correction. Brent likely down to 88.10. Gold likely to test 1,800. US 10-year yields towards 5%.

Macro events: US August JOLTS Job Openings (1400 GMT) with est. 8815K vs prior 8827K.

Earnings events: McCormick reports FY23 Q3 earnings (ending 31 August) before the market opens with analysts expecting revenue growth of 6.5% y/y and EBITDA of $313mn up from $239mn a year ago.

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

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.