Global Market Quick Take: Europe – 9 December 2024

Key points

• Equities: US tech rallies, Europe steady, Asia hit by South Korea’s political unrest
• Volatility: VIX steady near lows; futures slightly higher; hedging activity rises
• Currencies: USD and JPY firm after mixed US jobs report. AUD weak ahead of RBA
• Commodities: Gold and crude trade firmer with Middle East and central banks in focus
• Fixed Income: Bond markets anticipate further rate cuts
• Macro events: Mexico Nov. CPI, Bank of England’s Ramsden speaking, Australia RBA meeting

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

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Macro data and headlines

• The US jobs report was a mixed bag, with the unemployment rate ticking back up to 4.2% versus a steady 4.1% reading expected, with the additionally negative angle that this was despite a 0.1% drop in the participation rate (more unemployed despite the slightly smaller labor force). This has edged out the relatively positive news that the Nonfarm Payrolls Change rose +227k for the month vs. +220k expected, with a +56k revision to the two prior months' data. However, market continues to expect the Fed to cut rates next week.
• Canada’s unemployment rate jumped higher to 6.8% in November, the highest since 2016, from 6.6% previously. Participation rate jumped higher to 65.1% from 64.8% and headline payrolls was above expectations at 50.5k vs. 25k expected and 14.5k prior. Market is now pricing 80% odds of a 50bps cut this week.
• China's CPI inflation slowed to 0.2% YoY in Nov, while factory-gate prices showed a 2.5% YoY decline, highlighting deflationary risks and ineffective stimulus. Policymakers may signal more support at the Central Economic Work Conference on Wednesday and Thursday with a possible 25 bps reserve requirement cut by year-end

Macro events (times in GMT):

Mexico Nov. CPI (1200), UK Bank of England’s Ramsden to speak (1300), Australia Nov. NAB Business Confidence/Conditions (0030), Australia RBA Cash Target announcement (0330)

Earnings events

• Today: Oracle
• Tuesday: Autozone, Gamestop
• Wednesday: Adobe, Inditex
• Thursday: Broadcom, Costco

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

Equities

• US: The S&P 500 and Nasdaq 100 reached record highs on Friday, gaining 0.2% and 0.8%, respectively, driven by optimism over rate cuts after a strong jobs report. Tech stocks led the rally, with Amazon, Tesla, and Meta posting significant gains. However, the Dow Jones fell 123 points, impacted by declines in healthcare and semiconductor sectors, notably Nvidia and UnitedHealth. Lululemon surged 15.9% after strong earnings and raised guidance, while DocuSign soared 28% on upbeat results and an improved outlook.
• Europe: European stocks climbed on Friday, with the STOXX 50 and STOXX 600 rising 0.6% and 0.4%, reaching seven-week highs. Strong US economic data fueled rate cut expectations, which boosted sentiment. French stocks outperformed despite political instability, with President Macron set to appoint a new Prime Minister. Retail and luxury stocks like Kering and LVMH led the gains, while ASML Holding declined. The DAX in Germany hovered near record highs, closing 0.1% higher, aided by a weaker euro enhancing exports.
• Asia: Asian markets were mixed on Monday, with South Korea’s KOSPI sliding over 2% to its lowest level in more than a year due to deepening political turmoil. Japan’s Nikkei 225 rose 0.3% on better-than-expected GDP data, though doubts lingered about further Bank of Japan rate hikes. China’s Shanghai Composite edged 0.4% higher, with sentiment buoyed by expectations of monetary easing next year. Hong Kong’s Hang Seng was flat after the prior session’s gains, as investors digested softer-than-expected inflation data from China.

Volatility

The VIX remained near its lows, reflecting steady investor sentiment despite geopolitical and macroeconomic concerns. Futures edged slightly higher, with limited movement expected ahead of upcoming inflation data. Weekly options data showed reduced implied volatility, though the rising Put/Call Ratio for indices highlighted a gradual increase in hedging activity as caution builds around key central bank decisions later this week.

Fixed Income

US Treasury yields dropped to their lowest levels in weeks on Friday following a surprising rise in the US unemployment rate, which has heightened expectations for a Federal Reserve rate cut in December. The 10-year yield fell to 4.15%, dipping below its 50-day moving average for the first time since October, while shorter maturities saw the sharpest rally. In Europe, sovereign bond yields moved lower as investors anticipated a dovish European Central Bank decision this week, fuelled by weakening economic data and a dimming inflation outlook. Looking ahead, markets will focus on the US CPI report, a pivotal release that could sway the Fed’s December rate decision depending on whether inflationary pressures persist. Similarly, the ECB meeting is expected to deliver a 25 basis point rate cut. Other global events, such as the decisions of the Bank of Canada and Swiss National Bank on monetary easing, as well as China’s trade and inflation data, will also weigh on market sentiment.

Commodities

• Gold trades firmer at the start of a week with focus on geopolitics and central banks. Several central banks, led by the Federal Reserve, are expected to cut rates, while developments in Syria will be watched closely. The PBOC, the world’s top buyer of bullion in 2023, resumed buying in November following a seven-month pause, with the relatively small quantity of just 5.4 tons only partly offsetting around 27 tons of ETF outflows.
• Crude fell towards key support on Friday, in Brent at USD 70.70 and WTI at USD 66.70, with a sluggish 2025 demand outlook more than offsetting OPEC+ production restraint, before bouncing overnight as traders weighed the fallout from the toppling of the Syrian government. Focus this week is on China’s Central Economic Work Conference on Wednesday, as well as monthly oil market reports from OPEC and the EIA on Wednesday and the IEA on Thursday.

Currencies

• The US dollar initially sold off in the wake of a mixed US November jobs report Friday, in which payrolls grew as expected, but the unemployment rate edged back higher to 4.2% despite a drop in the participation rate. USDCAD rose sharply back toward multi-year highs above 1.4150 as Canada’s unemployment rate jumped in November.
• The JPY stayed relatively firm versus a rebounding US dollar as US treasury yields dropped to new local lows across the yield curve
• The Australian dollar trades softly, with AUDUSD below 0.6400, which it only traded below twice earlier this year, and only briefly intraday. The RBA meets tonight as the market questions how much longer Governor Bullock and company will keep their “hawkish hold” stance on the policy rate. After a weak Q3 GDP report last week, the market has brought forward the anticipated first rate cut to as early as the February meeting, with a 25 basis point cut priced at slightly more than 50/50 odds.