Investor demand for safe-haven assets rose as concerns over political instability in Europe increased. Bonds also rose, causing US yields to give back some of yesterday's gains. Ahead of inflation data and the Federal Reserve's interest rate decision on Wednesday, more caution is generally warranted in the markets.
European shares fell significantly after a solid start to the day. The broad Stoxx 600 is more than 1% lower, extending its losses for the third day. Equities in the US are also lower. We see that the USD remains in demand and is benefiting from the rising demand for safe havens. The EUR weakened again.
The biggest losses were recorded on the French markets. The yield on 10-year bonds rose by 10 basis points to 3.32%, the sharpest two-day increase since the first months of the pandemic. This widened the gap to equivalent German bonds to its highest level since October. Traders focused on speculation that French President Emmanuel Macron is considering resigning if his party performs poorly in the upcoming parliamentary elections, which Macron called from a position of great weakness – a major risk/gamble that could easily or even likely go the wrong way. Uncertainty and concerns over the political upheaval in France will continue to weigh on market sentiment in Europe for some time to come.
Wall Street is still near ATHs, but investors are preparing for another volatile Wednesday with both the latest monthly US consumer price data and the Fed decision, as well as more inflation data from China and Germany (+Japan PPI).
The Fed is very likely to keep interest rates unchanged, but the focus will be on the officials' interest rate forecasts. In particular, the dot plot and the question of whether the Fed expects just one or two more rate cuts will take center stage.
In the UK, an unexpected rise in the unemployment rate has increased the prospects of interest rate cuts later this year. Traders expect a first cut of a quarter point in November and see a 40% chance of a second cut the following month. I see more scope and pressure for the BoE to cut rates compared to the Fed.
I see many uncertainties that will make it very difficult for Wall Street to reach (new) ATHs again and therefore expect a slightly negative session in New York today. The concern that interest rates in the US will remain high for longer has recently rubbed off strongly on gold, but also on cryptocurrencies. I think that interest rate expectations have been reasonably adjusted, although I still believe that the market is too optimistic about short-term rate cuts by the Fed.
Gold can benefit from falling yields (due to demand for bonds), general demand for safe havens and more cautious investors.
👁 ROB'S MARKET OVERVIEW:
June 11, 2024
🌐/🇺🇸 Global Markets ↕️/↘️
Cyclical / Luxury Stocks ↕️/↘️
Tech/Growth Stocks ↕️/↘️
Financial Stocks ↕️/↘️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️
Materials Stocks ↗️/➡️
💱 Forex
USD ↗️/➡️/↗️
GBP ↗️/➡️/↘️
JPY, CHF ↗️/➡️ (benefiting from safe haven demand, hopes of rate cuts)
CAD ➡️
AUD ➡️/↘️ (CAD with headwinds if BoC cuts rate / or gives dovish outlook)
EUR ↘️/➡️ (is short-term oversold on concerns about political instability in Europe)
⚒ Commodity Markets ↗️/↕️
Oil prices ↗️/↕️/➡️
Natural Gas prices ↗️/↕️
Metal prices ↘️
Gold ↗️/↕️ (benefiting from lower yields / increased safe haven demand)
⚡️Cryptos ↘️/↕️ (stabilizing after recent slide, Bitcoin trying to move back to $68K – $70K later this week)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
