Stocks in Europe and the U.S. (pre-market) are trying to stabilize after three weeks of declines. European equities are trading ~0.5% higher, trying to recover from a six-week low that actually pushed the UK FTSE 100 into negative territory for the year, for example.
Overall, however, risk sentiment remains cautious after sharp losses triggered in particular by disappointing Chinese economic data, falling consumer spending and rising risks. Losses were also accelerated by expectations that central banks in Europe and North America will remain restrictive and possibly raise interest rates further to prevent a renewed acceleration in inflation.
We see a correction attempt after the recent sharp losses, which is not supported by much positive. We also see demand for bonds weakening across the board, which is also pushing bond yields higher again – actually more headwinds for growth stocks. The energy sector is benefiting from oil and natural gas prices rebounding after last week's decline. European benchmark gas prices rose as much as 18% as traders priced in the possibility of supply disruptions from a potential strike in Australia. The correction attempt is taking place on low trading volume as investors are still looking for more clues.
The economic calendar for Monday is very thin – and the week also has fewer major events/data than most weeks. One important report will be Nvidia's earnings report on Wednesday. More clues on the way forward for Fed policy will come from the annual meeting of central bankers in Jackson Hole, Wyoming, where Fed Chairman Jerome Powell is scheduled to speak on Friday – ECB President Christine Lagarde will also address conference attendees on Friday.
The recovery moves are not based on improved fundamentals, but are a correction after recent selling pushed stocks into short-term oversold territory. Headwinds remain and gains will be limited. Given the low trading volume and quiet economic calendar, we will see mostly sideways action today, with the energy sector outperforming – supported by rising (and recovering) oil and natural gas prices. Nvidia could see dip buying again in anticipation of another strong earnings report (or positive forecast).
👁 ROB'S MARKET OVERVIEW:
August 21, 2023
🇺🇸 US Markets ↗️/➡️ (gains limited – mostly correction after recent sharp losses)
Cyclical Stocks ↗️/➡️
Tech/Growth Stocks ↗️/➡️
Financial Stocks ➡️/↗️
Defensive Stocks ➡️/↗️
Energy Stocks ↗️
Materials Stocks ➡️/↗️
💱 Forex
EUR, AUD ↗️/➡️ (correction gains limited)
USD ➡️/↗️
CAD ➡️/↗️
GBP ➡️
CHF ➡️/↘️
JPY ↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ↗️
Natural Gas prices ↗️
Metal prices ↕️
Precious Metal prices ↗️/➡️/↘️ (correction gains limited; Higher yields will pressure gold again)
⚡️Cryptos ➡️/↘️ (risk-off, confidence in cryptos negative after recent losses, higher yields weigh on cryptos)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Yours, Robert
