Global Market Quick Take: Europe – 4 December 2024

Global Market Quick Take: Europe – 4 December 2024

Key points

• Equities: US tech gains push markets to record highs, CAC40 and DAX rise, Asia subdued
• Volatility: VIX trends lower, focus on Powell’s speech and labor market data
• Currencies: AUD weaker after soft Q3 GDP brings forward rate cut prospects
• Commodities: Crude jumps on Iran sanction and OPEC+ production curb speculation
• Fixed Income: France no-confidence vote in focus
• Macro events: EZ, UK & US PMIs, US ADP Employment Change

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

• US JOLTS Job Openings edged up to 7.74 million in October from 7.37 in the prior month, while the number of workers quitting one job for another rose to the highest level in five months, both suggesting the labor market has improved after a soft spell last summer
• Australia's 3Q GDP growth was sluggish, rising only 0.3% against a 0.5% forecast, as government spending offset weak exports and consumer demand. The YoY rise of 0.8% was below estimates of 1.1% and led traders fully pricing in an April interest rate cut, compared with about 60% odds ahead of the data.
• South Korea’s President Yoon Suk Yeol declared martial law, which was later reversed after both ruling and opposition lawmakers voted against the measure. The move leaves his leadership in a precarious position and brings the focus on political instability in South Korea. Authorities are stepping in to limit the impact on markets, with Bank of Korea scheduling a special meeting this morning after a surprise rate cut last week.

Macro events (times in GMT): Eurozone Nov PMI (0900), UK Nov PMI (0930), US Nov ADP Employment Change (1315), US Nov PMI (1445), US Nov ISM Services (1500), EIA’s Weekly Crude and Fuel Stock Report (1530), Feds Beige Book (1900)

Central Bank speakers: BOE’s Bailey (0900), ECBs Lagarde (1330), Fed’s Powell (1840),

Earnings events

• Today: Synopsys, Hormel Foods, Dollar Tree
• Thursday: Kroger, Lululemon, Hewlett Packard, Cooper, Ulta Beauty, Dollar General, Veeva Systems, Samsara

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

Equities

• US: The S&P 500 and Nasdaq Composite reached record highs on Tuesday, gaining 0.05% and 0.4%, respectively, driven by strong performance in large-cap tech stocks such as Meta (+3.5%), Palantir (+6.8%), and Salesforce (+10% in after-hours trading) following better-than-expected earnings. Conversely, the Dow Jones underperformed, declining by 0.17%, as investors digested stronger-than-expected JOLTS data indicating a resilient labor market. Tesla also gained 3.4%, buoyed by optimism surrounding its updated Full Self-Driving software.
• Europe: European markets climbed, with the CAC 40 rising 0.26% and the DAX up 0.42%, as political tensions in France eased after President Macron expressed confidence in surviving a no-confidence vote. The DAX crossed the 20,000 mark for the first time, supported by gains in retail and tech sectors. Elsewhere, ASML advanced 2% on reduced concerns over U.S. restrictions, while Delivery Hero fell on South Korea's political instability.
• Asia: Most Asian markets dropped on Wednesday, led by South Korea’s KOSPI falling over 2% amid political turmoil after President Yoon declared and swiftly revoked martial law. In Japan, the Nikkei 225 fell 0.4% following softer-than-expected services PMI data, while Chinese indices remained subdued as weak services growth and geopolitical tensions weighed on sentiment.

Volatility

Volatility remains subdued as the VIX edges lower toward 13, reflecting optimism amid strong equity performance and declining concerns over near-term risks. However, key economic data, including ADP employment numbers and ISM PMI reports, as well as Federal Reserve Chair Powell’s speech later today, may provide fresh drivers for market sentiment. Trading activity in options suggests a focus on tech stocks like Nvidia and Tesla, alongside ETFs such as SPY and QQQ, highlighting continued interest in high-growth sectors.

Fixed Income

German bunds bear flattened, snapping their longest streak of gains since 2020 while traders adjusted ECB rate-cut bets. French bonds outperformed as lawmakers prepare for a no-confidence vote today. Meanwhile, UK gilts ended a four-day advance with yields rising across the curve while BOE rate-cut expectations remained steady at 82bps by the end of next year. In the US, Treasuries experienced a volatile session, with early gains from flight-to-quality bids fading into afternoon losses. Front-end yields held slightly lower, continuing a bullish trend driven by dovish Fed comments, while the rest of the curve steepened as 2s10s spreads widened. External factors, including martial law developments in South Korea and gains in equities and oil prices, added pressure to Treasury yields.

Commodities

• Crude oil futures rose more than 2.5% on Tuesday with WTI back above $70 after the US imposed more sanctions on 35 entities involved in illegal Iranian oil shipments while Thursday’s OPEC+ meeting is likely to yield another delay to planned production increase, amid sluggish demand and fear of oversupply.
• Gold trades higher towards to upper band of its current range, supported by a weaker US Dollar, as well as political turmoil in France and South Korea, while silver trades back above $31 having recently found firm support below $30.
• US natural gas futures continue to slump, falling over 4% on Tuesday due to rising production and milder weather reducing demand. Analysts expect prices to rebound in 2025 with increased LNG export demand after a 2024 decline.

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