Global Market Quick Take: Europe – 14 November 2024

Key points:

• Equities: US fell on Powell’s rate stance; Europe rebounded on earnings; Asia mixed on China data and trade tensions.
• Volatility: VIX steady; short-term volatility up post-Powell
• Currencies: Momentary USD weakness yesterday largely erased, with JPY faltering overnight as USD rebounds
• Commodities: Gold bounced another long slide yesterday. Silver found support below USD per ounce.
• Fixed Income: Powell signals caution on rate cuts.
• Macro events: US Oct. Retail Sales, US Nov. Empire Manufacturing, US Oct. Import/Export Prices, US Oct. Industrial Production

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

Macro data and headlines:

• UK Sep. Manufacturing Production out this morning reported at -1.0% MoM and -0.7% YoY vs. -0.1%/0.0% expected, respectively and vs. -0.3% YoY in Aug.
• UK Q3 GDP estimate out at +0.1% QoQ and 1.0% YoY vs. +0.2%/1.0% expected, respectively and vs. +0.7% YoY in Q2.
• Fed Chair Powell spoke with less dovish tones late yesterday, suggesting little need to hurry further rate cuts. Current odds are slightly greater than 60% for a December rate cut from the Fed.
• US Oct. PPI out at +0.2% MoM and +2.4% YoY vs. +0.2%/+2.3% expected, respectively, and ex Food and Energy at +0.3%/3.1% vs. +0.2%/3.0%, respectively
• US Weekly Initial Jobless Claims out at 217k vs. 220k expected. This was the lowest level since April
• Mexico’s Central Bank cut the policy rate 0.25% to 10.25% as expected.
• China Oct. Industrial Production rose 5.3% YoY vs. 5.6% expected and 5.4% in Sep.

Macro events (times in GMT): US Oct. Retail Sales (1330), US Nov. Empire Manufacturing (1330), US Oct. Import/Export Prices (1330), US Oct. Industrial Production (1415), ECB Chief Economist Lane (1500), US Fed’s Collins, non-voter (1530), US Fed Vice Chair Williams, voter (1815), US Fed’s Goolsbee, non-voter (1905), US Fed’s Barkin, voter (2000)

Earnings events:

• Today: Alibaba
• Next week: Tue: Lowes, Medtronic, Walmart, Wed: TJX Companies, Target, Nvidia, Thu: Intuit, PDD Holdings, Deere&Co.

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

Equities:

• US: The S&P 500 dropped 0.61%, pressured by Fed Chair Powell’s signals that rate cuts may be delayed. The Russell 2000 led declines, closing down 1.37%. Auto stocks slid after Trump’s plan to remove EV tax credits, with Rivian down 14.3% and Tesla losing 6%. Disney surged 6.2% on strong streaming and box office results, while Berkshire Hathaway’s $550 million stake in Domino’s spurred a 7.3% rise in the pizza chain’s stock.
• Europe: European markets rebounded sharply, with the Stoxx 50 gaining 1.9% and the Stoxx 600 up 1.1%, as upbeat earnings offset recent losses. ASML rose 7% on strong long-term sales forecasts, and Siemens added 4.9% despite lowering its sales outlook for 2025. Burberry led gains in the Stoxx 600, jumping 19% on a new growth strategy, while banks, luxury, and energy stocks also performed strongly.
• Asia: Asian markets traded mixed amid waning rate cut expectations after Powell’s comments and U.S. inflation data. Chinese stocks were subdued as industrial and fixed asset investment data disappointed, though retail sales exceeded expectations due to Golden Week. The Hang Seng edged up but remained down over 6% for the week, pressured by weak stimulus measures and renewed U.S.-China trade tensions. In Japan, the Nikkei 225 rose 0.9%, overcoming weak GDP data as sentiment remained positive.

Volatility: Volatility shows a mixed profile, with the VIX up slightly, suggesting a cautious market stance. Meanwhile, short-term volatility, indicated by the VIX1D, rose noticeably by over 24%, likely influenced by Fed Chair Powell’s comments on holding off on rate cuts. Options activity remains strong, particularly in tech and EV sectors, with Tesla, Nvidia, and Super Micro Computer leading in volume and implied volatility. Expected moves are relatively low, with the S&P 500 projected to fluctuate by around 0.53%, indicating that traders anticipate moderate swings despite increased near-term caution.

Fixed Income: European sovereign bonds rallied as traders raised bets on faster, deeper ECB rate cuts, driven by optimism that inflation will hit the 2% target sooner than previously expected. Italian bonds outperformed peers, narrowing the spread with German bunds, while UK gilts also saw gains amid expectations for a lower Bank of England terminal rate. U.S. Treasuries ended the day mixed on Thursday after Fed Chair Powell’s comments reduced expectations for a December rate cut, leading to higher short-term yields and lower long-term yields. The market saw a flattening of yield curves, with 2s10s and 5s30s spreads reversing much of Wednesday’s steepening.

Commodities: Gold posted new local lows yesterday south of 2,540 before bouncing as the relentless USD strength eased off yesterday and managed to avoid new lows in Asia overnight despite a late USD surge yesterday on less dovish talk from Fed Chair Powell. Silver trades above USD 30/ounce after a test below that level yesterday. Copper bounced from new local lows but eyes the big USD 4 per pound level, currently 4.15 this morning. Crude oil trades heavily as traders eye major price support in Brent around USD 70 per barrel and just above USD 65 per barrel for WTI.

Currencies: Fed Chair Powell’s less dovish rhetoric on the desired speed of rate cuts (“The economy is not sending any signals that we need to be in a hurry to lower rates” helped the US dollar rebound sharply late yesterday after it suffered some mild weakness yesterday. The greenback posted new highs versus the weak Canadian dollar and Japanese Yen. EUR/USD remains well above 1.0500, however having touched that level briefly in earlier trade yesterday.

 For a global look at markets – go to Inspiration.