Global Market Quick Take: Europe – 20 November 2024

Key points:

• Equities: US markets rose as Nvidia led gains, while geopolitical risks eased
• Volatility: VIX climbed on Ukraine-Russia concerns, with focus now on Nvidia's earnings
• Currencies: JPY surge on geopolitical concern yesterday erased. USD on back foot
• Commodities: Gold and copper bounced back on Russia and China focus
• Fixed Income: Geopolitical tensions drive bond rally before easing on improved risk sentiment
• Macro events:  ECB, FED and BoE Speakers

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

Macro data and headlines:

• US President-elect Trump appointed Howard Lutnick as Secretary of Commerce. This leaves the position as the Secretary of Treasury as the most important remaining position yet to be filled.
• PBoC kept its key lending rates unchanged in November, matching market expectations. The one-year loan prime rate stayed at 3.1%, and the five-year rate for mortgages remained at 3.6%, both at record lows after previous cuts.

Macro events (times in GMT):  US Fed’s Barr, voter, to testify before Congress (1500), EIA’s Weekly Crude and Fuel Stock Report (1530), US Fed’s Cook, voter, to speak on Economic Policy, Outlook (1600), US Fed’s Bowman, voter, to speak (1715), US 20-year Treasury Auction (1800)

Earnings events:

• Today: NIO, TJX Companies, Target, Nvidia (after the close), Palo Alto Networks
• Thursday: Intuit, PDD Holdings, Deere & Co.

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

Equities:

• US: The S&P 500 rose 0.4%, lifted by Nvidia’s 4.9% gain ahead of its earnings, seen as a key market driver. Super Micro soared 31.2% after progress on compliance issues, while Walmart climbed 3% on better-than-expected earnings and raised forecasts. Geopolitical tensions from Ukraine-Russia escalations had limited impact on sentiment. Nasdaq 100 futures gained slightly overnight, signaling optimism ahead of Nvidia’s report.
• Asia: HSI edged up 0.4%, led by tech and consumer gains, supported by Chinese VP comments on Hong Kong’s growth. Mainland Chinese indices slipped slightly as lending rates remained unchanged, keeping investors cautious before further economic measures. Japan’s Nikkei was flat as mixed inflation data kept expectations for BOJ policy unchanged.
• Europe: European markets declined, with the Stoxx 50 falling 0.9%, dragged by geopolitical fears and weak banking and travel stocks. Healthcare posted modest gains, while earnings updates drove stock-specific moves like Caixabank (-5%) and Rheinmetall (+3.9%). Investors are also monitoring flash PMIs due later this week, expected to shed light on Eurozone economic resilience.

Volatility: The VIX climbed 4.9% to 16.35, primarily reflecting heightened geopolitical risks tied to Ukraine’s missile strike in Russia. While initial market concerns have eased, focus has now shifted toward Nvidia’s earnings, which carry a ±8% implied move and are expected to steer sentiment in tech-heavy indices. Stocks appear to outweigh geopolitical concerns for now, with weekly expected moves of ±0.45% for the S&P 500 and ±0.66% for the Nasdaq 100. Elevated options activity reflects growing anticipation around Nvidia’s results.

Fixed Income: European sovereign bonds and US Treasuries initially rallied as geopolitical tensions spiked following Ukraine’s use of long-range missiles and concerns over Russia’s nuclear posture. The German 10-year yield fell to its lowest since late October, while US Treasury yields dropped across the curve amid a flight to safety. However, these moves were pared later in the day as Russia sought to calm nuclear fears and US equities recovered, signaling an easing of risk-off sentiment. ECB official Fabio Panetta’s call for rate cuts had little immediate impact on market expectations, while in the US, risk sentiment improved as the S&P 500 turned positive, easing the flight to safety.

Commodities: Russia’s nuclear threat triggered haven demand for gold which thereby extended its recovery before encountering some resistance near $2640 in Asia, while silver’s rally ran out of steam ahead of resistance in the $31.50 area. Besides geopolitics, the dollar, and direction of US interest rates remain a key focus and whether the recent correction has helped attract a fresh bid from physical buyers. Despite the latest bounce, crude oil continues to trade with no firm conviction with plenty of global supply, sluggish demand and Middle East and Ukraine hostilities keeping prices stuck for now. EIA’s weekly report in focus after the API reported a 4.8m barrel build. Copper rose for a fourth day to near resistance above $4.20 after the recent pullback helped stimulate demand from China, supported by a slew of monetary stimulus from Beijing.

Currencies: Geopolitical concerns linked to Russia announcing changes to its nuclear war doctrine saw the Japanese yen surging briefly yesterday and the euro and sterling weaker, but the yen reversed sharply to the weak side, even posting a new three day low versus the Euro in the Asian session overnight. Outside of USDJPY, the US dollar was on its backfoot, stuck in a range capped by 1.0600+ in EUR/USD, while USDCAD has posted a significant reversal that throws into question the break above the important 1.4000 psychological level.

For a global look at markets – go to Inspiration.