After yesterday's strong performance of global equity markets and Wall Street in particular – including record highs for the S&P 500 and Nasdaq 100 – we are now seeing some profit taking as global traders have become more cautious again – also because inflation in the Eurozone came in above expectations.
Overall, however, I see market sentiment remaining positive and less risk of selling across the board as rate cut expectations for the Fed are also in line with those of the Fed.
Much of yesterday's gains were again driven by strong gains in the technology sector. Dell Technologies shares are trading about 26% higher on strong earnings and a surge in demand for AI. Some headwinds for the Nasdaq and the big tech companies emerged after Goldman Sachs removed Apple from its conviction list but maintained its buy recommendation – I agree with GS (I have recommended my own institutional clients to reduce their Apple holdings and increase their holdings in Nvidia in particular as well as Meta, Microsoft and Amazon).
I expect the general optimism is also supported by signs that rate cuts are on the table later this year and inflation does not appear to be escalating further. Possible inflation risks have already been priced in by the markets.
Traders were also reassured by the initial jobless claims data, which pointed to a slightly softening labor market. The overall positive sentiment in the markets is also reflected in further gains in oil and bitcoin – which is trading back above $62K – and is on track for its eighth consecutive session of gains.
The European Stoxx 600 remains on an upward trend and Asian equities also gained, with Japan's Nikkei 225 index hitting its highest level ever near the 40,000 mark. Gains were also supported by Bank of Japan Governor Kazuo Ueda's statement that the policy rate was not yet on the cards – which also led to the JPY giving back much of yesterday's gains. I agree with Ueda on this point and would actually wait a bit to see how inflation develops – inflation seems to be moderate in Japan.
Bottom line, of course, I see some stocks/sectors at very expensive valuations, but gains are also fundamentally supported by strong earnings reports and an overall strong US economy as well as an improving global economy. Markets continue to expect financial conditions to loosen later this year – I remain positive overall and see good economic conditions going forward. I expect other sectors such as energy to catch up with the strong performance of growth stocks in the coming weeks.
In commodities, oil prices were on track for a modest weekly rise as market indicators continued to show signs of strength and OPEC+ is likely to decide early next week whether to extend production cuts into the next quarter. The slight upturn in iron ore weakened again on Friday as weak Chinese factory data revived concerns about demand for the steel material. Even though gold is facing some headwinds due to high yields, the positive medium/long-term outlook will continue to support the gold price.
👁 ROB'S MARKET OVERVIEW:
March 01, 2024
🌐/🇺🇸 Global Markets ↗️/➡️ (I expect a positive day – we may see some profit taking towards NYSE closing also as geopolitical concerns remain)
Cyclical / Luxury Stocks ↗️/➡️
Tech/Growth Stocks ↗️/➡️
Financial Stocks ➡️
Defensive Stocks ↗️/➡️
Energy Stocks ↗️
Materials Stocks ↗️
💱 Forex
EUR ↗️ (recovering from recent selling / tailwinds from hotter-than-expected inflation data)
AUD, GBP ↗️/➡️
USD, CAD ➡️
CHF, JPY ↘️/➡️
⚒ Commodity Markets ↗️/↕️
Oil prices ↗️
Natural Gas prices ↕️
Metal prices ↕️ (gains to hit profit taking for now)
Gold ↕️/↗️ (remains overall bullish on positive medium-/long-term outlook)
⚡️Cryptos ↕️ (Bitcoin rally will soon hit some profit taking but Bitcoin overall remains bullish)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
