Global Market Quick Take: Europe – 17 December 2024

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

Saxo’s Outrageous Predictions for 2025 is out, and can be found here

Macro data and headlines

• Germany’s Chancellor Olaf Scholz lost a confidence vote as expected yesterday and he has called for a snap election set for February 23, seven months ahead of the regularly scheduled election, only the sixth time since WWII that an election has been called early.
• US services PMI hit its highest levels since October 2021 at 58.5, while manufacturing was at 48.3. Composite employment nudged above 50 for the first time since July, while new orders were at their highest level since April 2022. Price data was stable, sending a Goldilocks message once again ahead of the Fed decision this week where a 25bps cut is baked in, but 2025 path looks highly uncertain.
• Eurozone PMIs also saw some improvement, mainly driven by services that rose to expansion territory at 51.4 while manufacturing was unchanged at 45.2 with both German and France manufacturing PMIs slipping further but Germany’s services PMI in expansion. Meanwhile, UK’s manufacturing PMI slipped to 47.3 from 48 in November, while services rose to 51.4 from 50.8.

   

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  Macro events (times in GMT):  Germany Dec. IFO Survey (0900), ECB’s Kazimir and Rehn (0900), Germany Dec. ZEW Survey (1999), Hungary Rate Decision (1300), Canada Nov. CPI (1330), US Nov. Retail Sales (1330), US Nov. Industrial Production (1415), US Dec. NAHB Housing Market Index (1500), US Treasury to auction 20-year T-notes (1800)

  Central bank meetings: FOMC (Wednesday), Bank of Japan and Bank of England (Thursday)

  Earnings events

• Wednesday: Micron Technology, Lennar
• Thursday: Fedex, Cintas, Nike, Accenture, Darden Restaurants
• Friday: Carnival

   

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

Equities

• US: equities posted mixed results on Monday as investors prepared for this week’s Federal Reserve policy decision. The Nasdaq 100 climbed 1.3%, surpassing the 22,000 level for the first time, driven by Broadcom (+11.2%) after reaching a $1 trillion valuation and Tesla (+6.1%). Apple (+1.1%) and Alphabet (+3.6%) also hit record highs. However, the Dow Jones fell 0.25%, marking its eighth consecutive decline, weighed down by a 4.2% drop in UnitedHealth Group. Super Micro Computer tumbled 8.2% ahead of its exit from the Nasdaq 100, while MicroStrategy edged slightly lower ahead of its upcoming inclusion.
• Europe: European stocks closed lower on Monday as markets digested Moody’s downgrade of France’s credit rating and Germany’s escalating political uncertainty. The STOXX 50 fell 0.4% to 4,948, and the STOXX 600 slipped 0.1% to 516. Automakers led losses, with Mercedes-Benz, BMW, and Stellantis sliding on weak Chinese retail data. In France, the CAC 40 dropped 0.7% following the downgrade and Chancellor Macron’s nomination of a new prime minister. Meanwhile, ECB officials reiterated their cautious stance on rate cuts, as PMI data indicated continued Eurozone economic softness.
• Asia: Asian markets were mixed ahead of major global interest rate decisions this week. The Hang Seng Index fell 0.9%, hitting its lowest since December 6, weighed down by weak Chinese retail sales (+3% vs. 4.6% forecast) and lingering economic uncertainty. The Shanghai Composite slipped 0.5%, while the CSI 300 edged up 0.3%, supported by gains in automakers and battery stocks. Japan’s Nikkei 225 ticked up 0.3% as markets priced in a steady policy decision from the Bank of Japan later this week. Investor sentiment across the region remains cautious, awaiting clarity on global monetary policies.
  

Volatility

Volatility rose ahead of central bank decisions, with the VIX climbing 6.37% to 14.69, signaling heightened market caution. Expected moves for the S&P 500 stand at 19.22 points (~0.32%) and for the Nasdaq 100 at 133.04 points (~0.60%), both showing no big expected moves for the day, based on options pricing. Notable options activity focused on Nvidia, Tesla, and Broadcom, as AI momentum and index reshuffling continue to drive market positioning. With the Fed’s rate decision and retail sales data on deck, near-term volatility remains in focus. 

Fixed Income

• US Treasury will auction 20-year T-notes today as long US yields as the 20-year benchmark sits near 4.7% versus the November highs just above 4.75% (and 2024 high of 4.97%).
• Yields in Europe rose again yesterday in the wake of the flash Dec. Eurozone PMI, which show the manufacturing economy continuing to contract at a rapid pace in France and Germany, but the Services surprisingly above 50 in both Germany and in the wider Eurozone.

Commodities

• NY Cocoa hit a record high on Monday, up 181% this year, due to ongoing supply concerns in West Africa, where adverse weather hampers efforts to rebuild global stockpiles. A decade-low in NY open interest has reduced liquidity and increased volatility.
• Gold drifts lower ahead of the FOMC meeting, weighed down by profit-taking after its strongest year since 2010, amid a firmer dollar, and US 10-year Treasury yields.
• Live Cattle Futures approach USD 2 per pound for the first time ever, up 14% YTD, supported by the smallest US beef herd since 1961, a temporary halt on Mexican imports due to a pest issue, and potential supply-chain disruptions if Trump imposes tariffs on Mexican and Canadian imports.
• Crude prices remain stuck near the lower end of a range that has persisted for more than two years and are heading for a modest loss on the year, as expectations of a glut next year and the dour outlook in China overshadow geopolitical tensions in Russia and the Middle East. Support from additional Western sanctions against Russia and Iran is being offset by a large amount of spare capacity currently held by producers.

Currencies

• The US dollar mostly sideways as the focus is on CNH weakness as China appears in a deflationary spiral – with 10-year Chinese debt plunging further to new lows below 1.75% yesterday. USDCNH pulled close to the 7.30 level while AUDUSD similarly pushed on the lows of the cycle near 0.6350 this morning.
• The Swedish krone bolted higher on no discernible news, with EURSEK trading below 11.45 this morning and down around a percent from the levels yesterday morning. The Riksbank meets Thursday and is expected to chop rates another 0.25%
• Focus this week on the five G10 central banks meeting, all within 24 hours of each other and kicking off with the FOMC on Wednesday, which is seen likely to produce a 25 basis point cut, but uncertainty on the degree to which the Fed will adjust its forward guidance as much as the market has shifted since the September Fed projections on policy (market has removed about 100 basis points of easing since then).

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