We see traders awaiting the US inflation figures which could shed more light on the interest rate outlook. Equity markets have shown signs of recovery recently after yields fell back slightly and markets are still expecting CPI data to show some easing of price pressures after stronger readings earlier in the year.
The USD is also stable and has even weakened slightly in recent sessions as investors have slightly raised rate cut expectations again – they currently expect 65bps of rate cuts – so three Fed rate cuts rather than two in 2024.
We believe that today's US CPI data will raise the question of whether the Fed will cut rates at all this summer – i.e. in June or July – or whether the first rate cut will come in September – which I think is more likely. Although I am generally positive on global markets given the signs of an improving global economy and a resilient US economy, I see equities as vulnerable in the short term as expectations for rate cuts will probably have to be scaled back further.
Economists expect consumer prices to have risen by 0.3% in March MoM, both overall and excluding food and energy costs (core inflation). I think it is more likely that we will see no or almost no signs of disinflation given the strong economic data of late, robust consumers and a tight labor market with rising wages.
The Bank of Canada announces its interest rate decision today – I expect a more dovish outlook (than the Fed), which should weigh somewhat on the CAD in the short term, but it will continue to benefit from rising commodity/energy prices.
The most likely scenario is a short-term setback after another inflation report that points to stubborn inflation, but markets will recover towards the end of the week and ahead of the first quarter earnings season. Rising sales at Taiwan Semiconductor Manufacturing Co. gave tech stocks a boost – important as the sector has been booming thanks to AI hype, which is much more than “just” hype given the rising sales in the tech industry – especially AI-related companies.
I see too many worries about a sharp correction and see little reason for the current bull market to hit a strong wall and correct sharply. Rising commodity prices and improving production data also show a positive trend in the global economy. Stocks in China/Hong Kong in particular have much more recovery potential.
We expect stubborn inflation figures, which will put the gold price under slight pressure in the short term. Nevertheless, gold remains bullish. Short-term rate cut expectations will also weigh on other risk assets – but the overall positive risk sentiment seems resilient enough to persist. Rather hot US CPI data is in fact also another sign of a strong US economy and a soft indicator of positive corporate earnings.
👁 ROB'S MARKET OVERVIEW:
⚠️ We expect US CPI data to show no clear signs of disinflation which should first have a negative impact on risk sentiment. Bull market, however, remains intact.
April 10, 2024
🌐/🇺🇸 Global Markets ↗️/↘️/↗️ (short-term headwinds after CPI data – markets trying to edge higher; remain overall bullish)
Cyclical / Luxury Stocks ↗️/↘️/↗️
Tech/Growth Stocks ↗️/↘️/↕️
Financial Stocks ↘️/➡️
Defensive Stocks ➡️
Energy Stocks ↗️/➡️/↗️
Materials Stocks ↗️/➡️/↗️
💱 Forex
EUR, GBP ↗️/➡️
USD ➡️/↗️ (USD to benefit from more signs that Fed will have to wait for inflation to cool)
CHF, JPY ➡️
AUD ➡️/↕️
CAD ➡️/↘️ (may see additional headwinds from rather dovish BOC comments)
⚒ Commodity Markets ↗️
Oil prices ↗️/↕️ (short-term headwinds if CPI report rather hot; but oil to remain bullish)
Natural Gas prices ↗️/↕️
Metal prices ↗️/↕️ (short-term headwinds if CPI report rather hot)
Gold ↘️/↕️ (short-term headwinds if CPI report rather hot – gold remains bullish)
⚡️Cryptos ↕️ (Will try to break through $70K again – remains volatile)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
