We see investors becoming more cautious as they prepare for a slew of economic data that could reinforce the expectation that the US economy is strong enough and does not need rate cuts.
We see that US futures were down slightly in pre-market trading and the European Stoxx 600 also gave back earlier gains. Reckitt Benckiser slumped 12%, its biggest one-day drop since 2008, after the consumer goods company reported a drop in sales. ASM International fell 3.5% after the Dutch chip supplier issued a disappointing sales forecast.
The main focus will now be on the upcoming data – with the release of US GDP at 13:30 UTC+0 and inflation figures from the US and Europe on Thursday and Friday respectively. We will also hear more voices from central bank spokespeople, which should reinforce the picture that the Fed currently sees no need for rate cuts. Swap markets have already reduced rate cut expectations to only around 75 basis points for Fed rate cuts in 2024.
We assume that yields will remain at a high level but despite the further reduction in rate cut expectations we saw a slight slide (temporarily). Although the further reduced rate cut expectations are weighing on market sentiment, they are the result of a strong US economy, a tight labor market and significant wage growth, which continues to fuel inflation.
We see that the USD has strengthened again today – as we had expected earlier. I expect more fundamental tailwinds for the USD from the US GDP data (today) and – more importantly – from tomorrow's US PCE data.
Despite some profit taking, we see the markets moving sideways and investors remain optimistic overall. Cryptocurrency related stocks such as Coinbase rose strongly. We see Bitcoin (and other major cryptocurrencies) on track for the biggest monthly rise since October 2021. Bitcoin climbed above $59,000 today and is up almost 40% this month.
In Asia, there was selling on the stock markets – including in China/Hong Kong. We see renewed concern that the stimulus measures from Beijing will not be enough to halt the weak performance of Chinese markets.
Oil prices fell after a two-day rise as signs of higher US inventories emerged. Prolonged production cuts by OPEC+ could support oil prices, but ultimately show that OPEC is also concerned about the demand outlook. Commodities, especially those linked to the Chinese economy, such as iron ore, recorded further losses.
We expect positive US economic data, which will have a mixed impact on equities. Ultimately, however, the picture of very healthy economic growth in the US and signs of a return to growth in many other economies will keep market sentiment positive.
👁 ROB'S MARKET OVERVIEW:
February 28, 2024
🌐/🇺🇸 Global Markets ↘️/↗️/↘️ (I expect mixed movements today but investors in the second half of US trading being more concerned about yet another hot inflation reading tomorrow)
Cyclical Stocks ↘️/➡️/↘️
Tech/Growth Stocks ↘️/➡️/↘️
Financial Stocks ↘️/➡️ (with some headwinds; but overall bullish)
Defensive Stocks ↗️/➡️
Energy Stocks ↘️/➡️
Materials Stocks ↘️
💱 Forex
USD ↗️ (additional boost from US GDP data today / PCE data tomorrow)
JPY ↗️/➡️
CHF ➡️
EUR ➡️/↘️/➡️
AUD ↘️/➡️ (headwinds as inflation did not further accelerate, but rate hikes remain on the table)
GBP ↘️/➡️
⚒ Commodity Markets ↘️/↕️
Oil prices ↘️/➡️
Natural Gas prices ↗️/↕️
Metal prices ↘️ (remaining weak)
Gold ↕️ (may come under pressure if USD rises further – $2,030 will remain key – gold remains overall bullish)
⚡️Cryptos ↗️ (Bitcoin sees another day of sharp buying – we expect more resistance near $60K and likely a short-lived profit taking wave)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
