Global Market Quick Take: Europe – 8 November 2024

Key points:

• Equities: Big tech gains while small-caps digest enormous post-election rally.
• Volatility: Short term volatility drops as election and Fed decision pass
• Currencies: Much of post-election USD rally has been erased. Sterling firm post-BoE.
• Commodities: Strong week despite temporary election wobble
• Fixed Income: Relief bond rally follows key FOMC and BOE meetings.
• Macro events: Canada employment data, Uni of Michigan Sentiment

Macro:

• The Federal Reserve cut rates by 25bps to 4.50-4.75%, in line with market pricing and analyst expectations, and also in a unanimous decision. The statement saw some changes, it removed language that it "has gained greater confidence that inflation is moving sustainably toward 2 percent", a minor hawkish tweak. Fed Chair Powell noted the economy is strong, labour market remains solid, and that inflation has eased substantially. He also kept his options open again, noting they can move more quickly or they can move more slowly, depending on how the economy reacts. The Fed Chair was also asked about the recent movement in yields post the Trump victory, he said it is too early to say where bond rates settle, noting financial conditions only tighten when rates are high for long, and they are not yet at the stage where bond rates need to be taken into policy consideration.
• Germany’s Chancellor Scholz rejected the opposition CDU’s demands to hold a confidence vote on the government as early as next week, with a vote likely set for mid-January, with elections to follow within 60 days. The confidence vote comes after Scholz fired Finance Minister head of the government coalition partner FDP party Christian Lindner, who refused to green-light expanded deficit spending
• The Bank of England also cut rates by 25bps as expected to 4.75%. The decision to do so was made via an 8-1 vote split with arch-hawk Mann the lone dissenter in voting for an unchanged rate. The accompanying MPR saw an upgrade to 2025 and 2026 inflation forecasts with the BoE noting that the UK budget is “provisionally expected to boost inflation by just under 0.5ppts at peak between mid 2026 and early 2027”.
• US weekly jobless claims marginally rose to 221k (w/e 2nd Nov) from 218k, in line with expectations, which saw the 4wk average tick lower to 227.25k (prev. 237k). Meanwhile, continued claims (w/e 26th Oct) lifted to 1.892mln (prev. 1.853mln), above the forecasted 1.875mln.
• Sweden’s Riksbank cut its Rate by 50bps, as expected, to 2.75%, and maintained communication from September that the policy rate may also be lowered in December and H1 2025. Norway’s Norges Bank, however, left its Key Policy Rate at 4.5%, as expected, noting the "policy rate will most likely be kept at 4.5% to the end of 2024", where guidance currently puts the first cut in Q1 2025.
• China will hold a briefing at 8 am GMT following the conclusion of a week-long meeting at the budget committee of the National People’s Congress. Apart from a plan to allow local governments to refinance their off-balance-sheet debt officials are expected to introduce more fiscal support for the economy. 

Macro events (times in GMT):  Canada Oct. Employment Data (1330), US Nov University of Michigan Sentiment (1500), Fed’s Bowman, a voter, speaks (1600)

Earnings events:

• Today : NRG, Baxter, Paramount Global B
• Next week: Home Depot, AstraZeneca ADR,  Alibaba, Cisco, Disney, Applied Materials, Shopify, Spotify, Nu Holdings

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

Equities:

• US – U.S. equities surged to record highs, driven by election momentum and the Fed’s recent rate cut. The S&P 500 rose 0.74%, while the Nasdaq added 1.54%. Airbnb initially gained on an optimistic Q4 forecast despite mixed Q3 results but later fell in after-hours trading.
• Europe – European stocks closed higher as markets recalibrated expectations on the impact of Trump’s economic policies. The Stoxx 50 gained 1.1%, and the Stoxx 600 rose 0.8%, led by luxury and tech sectors. LVMH, Hermes, and SAP each saw gains exceeding 3% as they bounced back from prior losses.
• Asia – Asian markets tracked Wall Street’s strength, buoyed by hopes for further Chinese stimulus. Hong Kong’s Hang Seng Index climbed 2%, driven by optimism surrounding China’s export growth and potential post-legislative stimulus. In Singapore, the Straits Times Index reached its highest level since 2007, with robust gains in tech, healthcare, and banking stocks, bolstered by leaders DBS Group, OCBC, and UOB.

Volatility: Volatility continues to ease as the initial reactions to the election outcome and Fed rate cut stabilize, with VIX and short-term measures like VIX1D and VIX9D moving lower, indicating reduced short-term risk perception. Options market volumes remain elevated, with notable activity in Trump-related names, indicating continued investor interest in hedging or speculating on policy impacts.

Fixed Income: German bunds fell across tenors due to concerns over a possible no-confidence vote against Chancellor Olaf Scholz, which could lead to early elections. This led to a bear-steepening of the German curve, with the 30-year yield up 5bps at 2.70% suggesting potential for more fiscal spending. Meanwhile, UK gilts gained after the Bank of England cut the key rate by 25bps as expected, with the UK 10-year yield dropping 6bps to 4.50%. U.S. Treasuries saw strong gains on Thursday, partly recovering from losses after the presidential election results. The 7-year tenor led the rally, with yields across the curve falling during Fed Chair Powell’s press conference after a 25bps rate cut, leaving open the possibility of another cut in December. The 10-year yield dropped about 10bps to 4.33%. Early in the day, gains were driven by short-covering and bolstered by a rate cut from the Bank of England,

Commodities: The sector is heading for a weekly gain, having recovered strongly from the post-election slump that was mostly driven by USD strength, which by now has almost reversed, and the tariff threat, which may take many months to be implemented. Gains are led by the agriculture sector and energy, while precious metals remain the biggest loser, primarily due to profit-taking and technical selling that has yet to be reversed. Copper rose strongly on optimism that US tariffs might lead to Chinese stimulus measures, but gains were pared overnight as traders await the outcome of a key legislature meeting that may unveil policy support. Crude trades up 3% on the week, with multiple opposing forces keeping prices range-bound for now. Gold holds below USD 2700 as a post-election consolidation phase continues with silver weakness also weighing.

 
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