Global Market Quick Take: Europe – 28 October 2024

Key points: 

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

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Macro:

Macro events (times in GMT): Spain Sept Retail Sales (0800), Dallas Fed Manf. Activity (1430) 

Earnings events:

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

Equities: U.S. equities closed mixed on Friday, with the Nasdaq 100 edging up 0.59% as major tech names like Apple, Meta, and Amazon gained momentum ahead of this week's critical earnings announcements. Banks, however, underperformed; New York Community Bancorp dropped 8% following weak Q3 results, while other financial giants like Bank of America and Wells Fargo faced modest losses. Asian markets saw some relief as concerns over the Israel-Iran conflict eased, with Japan’s Nikkei navigating political uncertainties following the ruling party's election setback. In Europe, the DAX rose a slight 0.1% on Friday, supported by resilient market sentiment despite notable underperformance from Mercedes-Benz, which halved net profit. Key earnings releases today include Ford, ON Semiconductor, and Philips.

Volatility: Volatility expectations remain elevated, with the VIX up 6.55% to 20.33, reflecting market caution ahead of a dense week of economic data and earnings. The front-month VIX futures have dipped slightly to 18.90, suggesting some moderation in immediate-term risk. The week’s high-profile earnings from companies like Microsoft, Meta, and Apple are pushing expected weekly moves higher—1.58% for the S&P 500 and 2.23% for the Nasdaq. In early trading, S&P 500 (ES) and Nasdaq 100 (NQ) futures are up slightly, hinting at a positive open as investors digest global developments. Elevated options activity in DJT further signals market attention on next week’s U.S. election, contributing to heightened volatility expectations.

Fixed Income:U.S. Treasury yields rose last week as oil prices increased, supported by strong September durable goods data. The 2-year yield reached 4.10%, its highest since August, while the 10-year yield rose to 4.24%. European bond yields also increased, with the UK 10-year yield up 18 basis points, its largest weekly rise since January, and Germany's 10-year yield up 11 basis points to 2.29%. Upcoming credit reviews for France and Belgium added market tension. Key events this week include the U.S. third-quarter GDP report, PCE and ECI data on Thursday, and Friday's October jobs report, expected to show a decline in payrolls.

Commodities: Crude oil slumped more than 4% after Israel's limited attack on Iran avoided the nation's energy infrastructure, thereby reducing the risk of a disruption and potentially signalling a de-escalation. Prices have now retraced most of the early October China stimulus and Iran supply risk boost, weighed down by sluggish demand and the risk of rising supply of currently unwanted barrels from OPEC+ next month. Gold’s limited (negative) reaction to the Israeli attack, USD and yield strength, as well as data pointing to a 20% slump in China’s Q3 demand, highlight a market that for now remains focused on the US election and the potential risks the result may lead to excessive government spending, pushing the debt-to-GDP ratio higher, while fueling inflation fears.

Currencies: The Japanese yen weakened sharply again overnight on the results of the Japanese lower-house elections, which saw the ruling LDP party losing its majority and raising concerns of political instability. The US dollar remains firm as the US election polls tighten further in Trump’s favour and betting odds shifted further in favour of a Trump victory, which many see delivering a stronger US dollar. The critical even risk for the US dollar in the week ahead is this Friday’s jobs report.

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