Stock markets barely move(d) globally today, Asia closed mixed, and in Europe equities are little changed and bonds fell (yields rose) as economic surveys showed a recession in the Eurozone is looking increasingly likely or rather is deepening.
On a global level, the S&P Global Purchasing Managers' Index fell again in November to a reading of 47.1, which is better than economists had expected, but it is the sixth month in a row that the index has been below the 50 mark, which represents growth. The purchasing managers' indices in Europe remain deep in contraction territory. German PMIs were slightly better than expected, which helped the DAX to stay close to 16000 – but the overall picture remains bleak and does not reflect the performance of equity markets.
Dutch companies were among the biggest decliners in the Stoxx Europe 600 Index after far-right lawmaker Geert Wilders won a surprise victory in the country's elections. Wilders has promised voters a binding referendum on leaving the European Union – but it is highly unlikely that the pro-EU country and very large beneficiaries would vote to “leave”.
European companies continue to be very cautious with their forecasts, which was also visible in the very mixed earnings season overall and clear signs of slowing sales growth.
Swedish equities rose and the Swedish krona fell after the Swedish central bank surprisingly decided to leave its key interest rate unchanged at 4%. Analysts had expected an increase to 4.25%. This is a further sign to investors that central banks around the world believe that current interest rates are sufficient to bring down (still) high inflation.
US equity futures were little changed. There is no Treasury cash trading on Thursday due to the Thanksgiving holiday and Japanese markets were also closed today.
Macroeconomic data does not point to a strong Q1/2024 or even H1/2024 – aside from optimism that central banks have already ended their tightening measures and that there could be rate cuts in the next ~6 months – there is actually little to support the strong and further rising equity markets. Valuations are high – especially on Wall Street, driven by Big Tech and the AI revolution. Some of the Big Tech companies, however, will continue to perform well, such as Microsoft, Meta or Nvidia.
We also see signs of economic weakness in oil prices, which continue to decline and remain bearish, and some weakness in today's commodities market – after a recent bounce on optimism that Chinese stimulus measures would prop up the highly leveraged Chinese real estate market.
The EUR and JPY rebounded slightly, while the USD gave back some of Wednesday's temporary gains.
Normally, markets perform well until the Thanksgiving weekend and in the two weeks after. So far, the markets have reacted as they always have in the past – however, I think further gains are increasingly limited given how far the rally has already gone this year. The rally could go a little further due to falling yields – as bonds are also attractive at current yields – which would also help gold to get above $2,000/oz.
👁 ROB'S MARKET OVERVIEW:
November 23, 2023
🌐 Global Markets ➡️
USD ↘️/➡️ (give back some of yesterday's gains; overall remaining bearish)
GBP ↗️/➡️ (stabilizing with rates remaining high, impact from rapid disinflation fading as disinflation more advanced in other economies)
EUR, JPY ➡️/↗️ (remains in recovery mode)
⚡️Cryptos ➡️ (mostly flat, but medium-term I expect additional gains)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)