US equities are giving back some of yesterday's gains, which came as a surprise to investors. Given the hot US inflation data (CPI data), the USD's / yield's multi-month highs, most analysts expected a further sharp sell-off in equities.
JPMorgan lost almost 4.5% in pre-market trading after its full-year net interest income outlook missed expectations. Wells Fargo also slipped as much as 2% after the results, as net asset value came in below expectations – despite both Wall Street banks significantly beating expectations on both revenue and profit. Citigroup rose after a strong quarter. BlackRock, the world's largest asset manager, reported a record $10.5 trillion in client assets and is trading more than 2% higher in pre-market US trading. I see financial stocks in a good position and at fair valuations and therefore expect a solid performance of equities in the first half of US trading and also in the coming week.
The EUR has fallen to its weakest level against the dollar in five months as the market adopts the view we had last month – that the ECB will start cutting rates earlier and more overall in 2024. Swap markets currently expect three rate cuts by the ECB and slightly less than two by the Fed.
Commodity prices also rose – Brent was back above $90 a barrel and gold reached a record high of $2,400. Other base metals also continued to rise. Commodity prices are benefiting from simmering tensions in the Middle East as the US expects Iran or its proxies to launch an attack on Israel in the next 24-48 hours. We are likely to see another flight to safety in the second half of US trading and before the markets close for the weekend. However, I do not anticipate a response from Iran that could draw more countries or even the US into a “war”. The markets have heavily priced in a further escalation of tensions, which could lead to profit taking early next week – although this depends on what happens in the Middle East.
Gold is also benefiting from the fact that many analysts still see a bubble market – especially after tech stocks have seen a record rise over the last 15+ months. I don't agree, but the focus will be on whether US companies, especially the big tech companies, can continue to report strong earnings reports and revenue growth.
We expect commodity-linked sectors such as energy and materials to outperform. There is also likely to be a slight rotation from cyclical to more defensive stocks. However, analysts continue to underestimate the strength of the US economy and the US consumer.
👁 ROB'S MARKET OVERVIEW:
April 12, 2024
🌐/🇺🇸 Global Markets ↘️/↕️/↘️
Cyclical / Luxury Stocks ↘️/↕️/↘️
Tech/Growth Stocks ↘️/↕️/↘️
Financial Stocks ↘️/↗️/➡️
Defensive Stocks ↗️
Energy Stocks ↗️
Materials Stocks ↘️/➡️
💱 Forex
USD ↗️/➡️/↗️ (USD to remain in demand; more safe haven USD demand before weekend)
JPY ➡️/↗️ (I expect some buys ahead of weekend on rising BoJ-internvention expectations)
AUD ↘️/↗️ (AUD oversold on recent strong USD)
CHF, CAD ↘️/➡️
GBP ↘️ (Also BOE rate cut expectations will rise)
EUR ↘️ (markets finally taking over our prediction that ECB will not wait for Fed to pivot)
⚒ Commodity Markets ↗️
Oil prices ↗️ (oil to remain bullish – benefitting from concerns about worsening geo-tensions)
Natural Gas prices ↘️/↕️
Metal prices ↗️ (base metal to remain bullish – benefitting from concerns about geo-tensions)
Gold ↗️/↕️ (gold saw strong gains, short-term overbought but remains – bullish benefitting from concerns about worsening geo-tensions)
⚡️Cryptos ↕️/↗️ (Bitcoin remains volatile but seems to have found support above $70K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
