Global Market Highlights: November 14, 2024

European Markets

European stocks initially opened with a subdued tone, mirroring the restrained sentiment from Asian markets. However, an uptick in market optimism lifted the Stoxx 600 by 0.2%, supported by gains in Energy and Basic Resources sectors. Siemens Energy spurred enthusiasm in Energy stocks after the company raised its mid-term targets, hinting at a resilient business outlook despite economic headwinds. Oil prices also rose, lending further support. Basic Resources bounced back, recovering from prior losses, likely driven by improved sentiment around European economic prospects and resilience in commodity demand. Conversely, the Technology sector underperformed, pressured by a higher interest rate environment, which could weigh on growth stocks. U.S. equity futures traded slightly lower as investors awaited U.S. CPI data, which could be a pivotal indicator for Federal Reserve policy direction.

Asia-Pacific Markets

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Asian equities experienced muted trading following Wall Street’s decline. In Japan, higher-than-expected PPI data pressured stocks, though Sharp and Tokyo Electron outperformed on earnings. Chinese stocks were mixed, with investors awaiting major earnings releases and monitoring potential impacts of Trump’s China-related appointments, including hawkish figures like Waltz, Rubio, and Lighthizer. However, Trump’s selection of Elon Musk to lead a government efficiency drive offers a potential balancing influence in Sino-U.S. relations.

US Market

US equity futures and global markets fell for the second consecutive day on Wednesday, as higher yields and a strengthening dollar tempered enthusiasm over recent market rallies. Investor focus is turning to upcoming US inflation data, with concerns that President-elect Trump’s proposed “America First” policies could accelerate inflationary pressures. As of 8:00 a.m. ET, S&P 500 and Nasdaq 100 futures slipped by 0.2%, in anticipation of the CPI report, which is expected to post its fourth consecutive monthly increase. Notably, pre-market activity showed a mixed trend in the “Magnificent Seven” tech giants, while semiconductors lagged. Sectors like Banks, Energy, Industrials, and Healthcare are attracting bids amid this cautious sentiment.

Treasury yields stabilized following Tuesday’s selloff, while the dollar held steady after briefly climbing past 155 yen, its highest level since July—a surge that raises the likelihood of intervention by Japanese authorities. The euro briefly touched its lowest level in a year at $1.0594. Commodity prices rose, led by gains in the Energy and Precious Metals sectors, signaling potential hedging activity as investors await inflation data and insights from five Fed speakers scheduled to address economic policy today.

Premarket Movers:

• Cava Group (+15%): Shares of the Mediterranean restaurant chain surged after it raised annual projections for comparable sales.
• Chegg (-15%): The education technology company fell after issuing a weaker-than-expected Q4 forecast.
• Tesla (TSLA) (+1.6%) and Roivant (ROIV) (+3%): Gains followed Trump’s selection of Elon Musk and Vivek Ramaswamy to head a new government efficiency initiative.
• Dave Inc. (DAVE) (+34%): The financial services firm increased its full-year revenue outlook, fueling investor optimism.
• Groupon (GRPN) (-20%): The company lowered its adjusted EBITDA guidance, disappointing investors.
• Instacart (CART) (-7%): Shares dipped after delivering a weaker-than-anticipated Q4 EBITDA forecast.
• Rivian (RIVN) (+8%): Jumped on news that Volkswagen plans to invest an additional $800 million in the electric vehicle maker.
• Rocket Lab USA (RKLB) (+24%): Surged after announcing a robust Q4 revenue forecast, driven by increased Electron launches.
• Rocket Cos. (RKT) (-13%): The mortgage lender issued a downbeat revenue forecast.
• Spirit Airlines (SAVE) (-70%): Plunged as bankruptcy negotiations with creditors intensified, following unsuccessful merger talks with Frontier.
• Spotify (SPOT) (+8%): Climbed after reporting Q3 results that exceeded both margin and user growth expectations.
• ZoomInfo Technologies (ZI) (-14%): Declined on a disappointing revenue forecast.

Bloomberg reports that investors are increasing positions in inflation hedges and adjusting for fewer rate cuts in 2025, responding to Trump’s potential pro-growth agenda, which could fuel inflationary trends. US inflation data due today is forecasted to show a 0.2% increase in the CPI for the fourth consecutive month.

FX Market

• Dollar Index (DXY): The DXY started firmly on expectations that a Trump administration could enact policies affecting global trade dynamics, prompting a slight risk aversion sentiment in early trading. However, it later flattened near 105.98 as investors braced for the U.S. CPI release and the subsequent statements from Fed speakers, which are likely to provide clues on future monetary policy.
• EUR/USD: The Euro began the session weaker, slipping to a new year-to-date low of 1.0594 against the Dollar, reflecting concerns around a slower Eurozone economic recovery under the potential policy framework of a Trump administration. The Euro later edged back above the 1.06 level, but sentiment remains cautious due to risks of prolonged economic stagnation in the region.
• USD/JPY: The Japanese Yen continued its losing streak, with USD/JPY breaching the 155 mark for the first time since July, driven by interest rate differentials and Japan’s ongoing loose monetary policy stance. The depreciation could prompt verbal intervention from Japanese officials concerned about the currency’s weakening.
• GBP/USD: The British Pound held steady against the Dollar amid a quiet macroeconomic environment. Bank of England’s MPC member Catherine Mann reiterated her hawkish views, emphasizing that UK inflation, particularly in services, remains sticky. Her comments indicate the BoE’s vigilance in containing inflationary pressures and could influence the timing of potential rate cuts.
• AUD/USD & NZD/USD: The Australian Dollar extended its losses, affected by weaker Chinese growth prospects, while the New Zealand Dollar traded in a narrow range, showing resilience against its peers amid limited economic drivers.

Fixed Income Markets

• U.S. Treasuries (USTs): U.S. Treasuries held steady, with a slight upward bias as yields cooled ahead of the U.S. CPI print. Overnight, Treasuries faced downward pressure due to a soft Japanese Government Bond (JGB) auction and higher-than-expected Japanese corporate goods prices. Investors are awaiting U.S. inflation data, which could impact rate hike expectations and set the tone for upcoming Fed commentary.
• Bunds: German Bunds softened early, trading near a 131.62 low before gradually recovering. Chancellor Scholz’s upcoming address on December 16, regarding a potential confidence vote, added to the political overhang. The Bund market, like its peers, is also poised for the U.S. CPI results, which could impact global bond yields.
• Gilts: UK Gilts continued their downward trajectory, with the benchmark yield declining after a sharp drop in overnight trading. BoE’s Mann’s hawkish statements regarding persistent inflationary pressures reinforced expectations for tighter UK monetary policy, exerting additional pressure on Gilts. Meanwhile, a successful UK Gilt auction had minimal influence on trading.

Commodities

• Crude Oil: Crude oil prices saw moderate gains, with Brent January contracts trading near $72/bbl. Middle East tensions have underpinned prices, though gains were tempered by recent Dollar strength. The oil market remains sensitive to geopolitical developments, especially in light of Iran’s contingency plans to stabilize exports under the anticipated Trump administration.
• Precious Metals: Gold gained modestly, trading in the range of $2,597-$2,613/oz as the Dollar softened slightly. Investors are eyeing gold as a safe-haven asset amid global economic uncertainties and high U.S. inflation expectations. Silver and platinum followed gold’s upward trajectory, benefiting from increased safe-haven demand.
• Copper: Copper futures slipped as market sentiment remained cautious after a lackluster session in Asia. Citi’s downgrade of its near-term copper price target, citing weaker demand, has weighed on the metal, which remains vulnerable to further downside if Chinese industrial activity continues to slow.

Notable Headlines

• BoE’s Mann: Reiterated her hawkish stance on UK inflation, highlighting that underlying inflationary pressures in services remain persistent. Mann expressed concerns about potential energy price volatility, which could exacerbate inflation, suggesting the BoE may be inclined to take a proactive stance on inflation.
• ECB’s Villeroy: Indicated the potential for rate cuts in the Eurozone, citing moderating inflation prospects. He added that France’s unemployment rate could temporarily rise to 8% before easing, underscoring potential economic headwinds in the short term.
• ECB’s Kazaks and Nagel: Kazaks advised a measured approach to inflation, recommending that the ECB avoid large policy swings. Nagel, meanwhile, noted that core inflation remains high, with Trump’s potential trade policies posing additional risks to Germany’s growth, potentially cutting 1% from GDP.
• Middle East: Regional tensions persisted with reports of Israeli airstrikes in Lebanon and Syria. The U.S. conducted strikes targeting Iranian-backed militia weapon facilities in Syria, which could escalate tensions and impact global oil markets.
• China: China’s military carried out air and naval patrols near Scarborough Shoal in the South China Sea, reinforcing its territorial claims. Additionally, the U.S. sanctions office is reportedly scrutinizing UBS for its Russian clients inherited from Credit Suisse, adding another dimension to U.S.-China-Russia relations.