Risk sentiment deteriorated significantly after disappointing Chinese trade data added to concerns about the weak Chinese economy. In particular, Chinese imports fell well short of expectations and weighed on equities, especially in Europe, as demand from China is crucial. But exports were also very weak, posting the sharpest drop since early 2020, when the Covid pandemic began.
Banks also came under heavy pressure again after Italy surprised with a new tax on windfall profits, and even more so after Moody's Investors Service cut the ratings of 10 small and mid-sized lenders – reviving concerns about the health of smaller U.S. lenders.
Commodity prices fell sharply, including oil prices, as China is the world's largest importer of commodities, particularly industrial metals and oil. European automakers, technology and mining companies also suffered significant losses, with banks leading the losses.
We are seeing some indices break the 50-day moving average, which could trigger further technical selling. Losses in Asia, Europe and emerging markets have been particularly strong.
The market could come under further pressure with the U.S. Treasury bond auction later today – especially if demand for bonds is lower than hoped – and with** U.S. inflation data on Thursday**. We also expect *expectations for further rate hikes to rise* as concerns grow that inflation will prove more stubborn than hoped.
At the same time, we also see some recovery potential as banks lead the losses. However, banks reported strong earnings at the start of the current earnings season. However, pressure on regional banks could intensify further.
Eil Lilly beat expectations and provided a strong outlook. UPS, on the other hand, fell short of expectations and could have a greater impact on market sentiment as falling demand for logistics services is a sign of weakening consumer demand.
The USD remains strong, benefiting most from the deterioration in risk sentiment. The USD also fully recovered its losses after investors misinterpreted the NFP data on Friday. The JPY continues to disappoint as the Bank of Japan remains accommodative. We also see pressure on riskier currencies, especially if they are linked to commodities – like AUD.
👁 ROB'S MARKET OVERVIEW:
August 8, 2023
🇺🇸 US Markets ↘️
Cyclical Stocks ↘️
Tech/Growth Stocks ↘️
Financial Stocks ↘️
Defensive Stocks ➡️
Energy Stocks ↕️/↘️ (sharp losses but downside limited)
Materials Stocks ↘️
EUR, JPY, CHF ➡️
GBP, AUD, CAD ↘️
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️/↗️ (after sharp losses, rebound likely, oil prices remain bullish)
Natural Gas prices ↕️/↗️
Metal prices ↘️
Precious Metal prices ➡️/↘️ (pressured from strong USD, high bond yields)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)