Bonds and US equity futures pared losses after a producer price inflation (PPI) indicator showed a cooling of price pressures. Contracts on the S&P 500 and Treasury yields are now trading flat after the PPI unexpectedly fell for the third consecutive month in December. Year-on-year, the index rose just 1%, while the core index posted its smallest gain since the end of 2020.
Financial results from some of the biggest banks had initially pushed futures contracts lower in premarket trading as executives struck a negative tone. Shares in JPMorgan Chase & Co bucked the trend, rising 1.7% after a pre-market decline on forecasts of stronger growth in net interest income.
The otherwise positive outlook for the markets in 2024 is marred by the erosion of corporate earnings and the threat of another war in the Middle East, which has led to a rise in oil prices – although oil prices are on shaky ground as we also see a weak outlook for oil demand. WTI rose by up to 4.5% after the US and UK launched joint military strikes against the Houthi rebels in Yemen.
Expectations that the Fed will ease monetary policy quickly in 2024 remain after US inflation data was released faster than expected on Thursday, but today's PPI data suggests that disinflation continues. Expectations of rapid rate cuts remain optimistic – leaving room for disappointment.
The gains in oil also carried over to commodity-linked currencies such as the CAD. Energy companies helped the indices in Europe to rise and also supported Wall Street, which is currently trading unchanged. Oil prices are still looking to find a price, but have benefited from rising tensions (safe haven demand) and now cooler yields. I still see the medium-term outlook for yields as bullish, providing a headwind for risk assets in the first quarter.
👁 ROB'S MARKET OVERVIEW:
January 12, 2024
🌐/🇺🇸 Global/US Markets ↗️/↕️/↘️ (mixed markets with more profit taking in the second half of US trading on concerns of slowing corporate earnings)
Cyclical Stocks ↗️/↕️/↘️
Tech/Growth Stocks ↗️/↕️/↘️
Financial Stocks ➡️/↘️
Defensive Stocks ↘️/➡️ (health with early sharp losses – but will stabilize)
Energy Stocks ↗️/➡️
Materials Stocks ↗️/➡️
JPY, CHF, CAD, AUD ↗️/➡️
EUR, GBP ↘️/➡️
⚒ Commodity Markets ↕️
Oil prices ↗️/↕️/➡️
Natural Gas prices ↗️/↕️
Metal prices ↕️/↘️
Gold ↗️/➡️ (gains limited after early strong gains; may see some additional gains towards the end of today's session on concerns of more tension in the Middle East over the weekend)
⚡️Cryptos ↕️ (remains volatile; / upside potential upcoming week)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)