Equity markets are facing headwinds at the start of a data-heavy week and ahead of a key report on US inflation (on Tuesday) that will test the resolve of a bull market that remains optimistic about the Fed's commitment to easing monetary policy.
Wall Street is trading 0.4% lower in pre-market trading (S&P 500) and similar losses are being seen in Europe amid fears that another hot CPI report could dash hopes of interest rate cuts after Fed and ECB officials said rates will be raised later this year. In the previous month, a hot CPI report in the US triggered a sell-off in the markets. However, any sign that inflation remains manageable or that disinflation is returning will also reinvigorate the ongoing bull market.
The still expansionary US economy, a strong earnings season and forecasts and signs of a return to growth internationally, including a better than expected Japanese GDP report, are strong arguments that the bulls are on the right side.
On the other hand, we see a growing number of skeptical analysts and investment firms forecasting tough headwinds for equities for the rest of the year.
In pre-market trading today, we are seeing a little more selling in tech stocks – especially chip stocks. In general, we are seeing a flight to safety, which is also reflected in the outperformance of Apple versus other major tech stocks and the outperformance of defensive sectors such as health, consumer staples and energy. Markets will be mixed today as investors are not making big bets ahead of tomorrow's key US inflation report.
In currencies, we see the JPY remaining strong as expectations rise that the Bank of Japan will raise interest rates in April. The USD is currently on track for its seventh day of losses, the longest losing streak in almost four years. I expect some support ahead of the US inflation report, but the general trend of a normalizing USD will continue – unless tomorrow's US CPI comes in surprisingly hot.
In commodities, oil prices remain little changed ahead of the OPEC and IEA reports which could shed light on the demand outlook this week. Gold prices remain near the record levels reached on Friday and continue to be supported by cautious trading and falling yields as hopes for rate cuts remain intact. Bitcoin hit a new ATH and broke through the $72,000 mark for the first time, which also continues to buoy crypto stocks such as Coinbase. Gold and Bitcoin also continue to see inflows as investors are increasingly skeptical about how much upside is left for Wall Street (=stocks) in 2024.
👁 ROB'S MARKET OVERVIEW:
March 11, 2024
🌐/🇺🇸 Global Markets ↕️ (markets remain mixed with investors not making big bets ahead of the CPI report on TUE; Short recovery rallies will end in profit taking)
Cyclical / Luxury Stocks ↕️
Tech/Growth Stocks ↕️/↘️ (tech mixed, remains overall bullish but today rebound will hit profit taking)
Financial Stocks ↘️/↗️ (financial recover some of the pre-market losses)
Defensive Stocks ➡️/↗️ (defensive stocks benefit from cautious trading)
Energy Stocks ➡️
Materials Stocks ↘️
💱 Forex
JPY ↗️/➡️ (remains bullish, may see some headwinds on potential rebound of USD)
USD ➡️/↗️ (USD today with slight support after recent selling)
GBP, EUR, CHF ➡️
CAD ↘️/➡️
AUD ↘️ (cautious mood, weak metal prices weigh)
⚒ Commodity Markets ↘️/↕️
Oil prices ↕️ (remains in sideways movement)
Natural Gas prices ↘️/↕️ (remains volatile)
Metal prices ↘️/↕️ (overall mixed, but iron ore / steel prices continue to drop rapidly on China concerns)
Gold ➡️/↗️ (remains in demand, continues to benefit from falling yields & weakness in stocks)
⚡️Cryptos ↕️/↗️ (Remains volatile; overall bullish momentum is strong, buying dips remains right strategy)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
