Equity markets remain close to their all-time highs and are benefiting from the ongoing hope that the prospects of interest rate cuts remain intact. The recent fall in yields and the USD has provided an additional tailwind for equities – and for gold, which has just reached a new all-time high of $2,170/oz.
The chairman of the US Federal Reserve, Jerome Powell, indicated on Thursday that the US central bank expects to cut interest rates this year despite the uncertain inflation outlook. In Europe, bond yields fell even more and the EUR slipped after the ECB lowered its inflation forecast, raising expectations that rate cuts could begin in June.
In the short term, however, today's US labor market data will determine the next movements. The consensus expectation is that 200,000 new jobs were created last month, well below the surprisingly strong January report of 353,000. Expectations are heavily influenced by the recent hot hiring data – the consensus (200k) is the highest since July 2023 – and reduces the overall risk of another (very) hot surprise. However, I still think the NFP data may come in slightly higher than expected – the data has been unreliable of late as previous data has also been revised.
After the S&P 500 and many indices in Europe hit record highs yesterday, everything is currently moving sideways. In pre-market trading today, it is Nvidia (again) that is leading the gains, currently trading almost 3% higher (we are LONG 👏). Other chip stocks are also performing well, with the exception of Broadcom (currently -3%), which “only” published a sales forecast for the full year that was in line with analysts' expectations. HelloFresh plunged a record 48% after the company announced that it no longer expects to meet its 2025 targets.
Although the NFP data will have the biggest impact today, the upcoming US inflation data is ultimately more important.
We continue to see the USD in normalization mode in March, and the EUR is also giving back some of its recent gains on expectations of higher rate cuts. The JPY remains in recovery mode as expectations rise that the Bank of Japan will end its negative interest rate policy in April.
Investors have also been surprised by the strength of the gold price, which has now risen for the eighth day in a row and reached new record highs. We expect gold to remain very attractive for most of 2024 given the prospect of falling interest rates. Potentially hot NFP data could cause a dip today, but gold also remains bullish in the short term.
We want to take advantage of NFP volatility or a potential mispricing. The ideal reading for an immediate continuation of the current stock market rally would be a slightly cooler than expected reading (170 – 195K new jobs).
👁 ROB'S MARKET OVERVIEW:
March 08, 2024
⚠️ Strongly influenced by today's NFP data
🌐/🇺🇸 Global Markets ↘️/↕️/↗️/➡️ (we expect solid hiring (200K+) which may first result in some selling of stocks. Stocks will rebound again)
💱 Forex (depending on NFP data – volatile during/after NFP data ↕️)
JPY, AUD ↗️/➡️ (strong gains continued, limited further upside for today)
USD ↗️/↘️ (solid hiring may first cause USD to rise. Overall USD normalization to continue)
GBP ➡️ (benefitted from weaker USD – may see headwinds during NFP data)
CHF, CAD ➡️
EUR ↘️ (remains weak due to higher outlook for June rate cuts)
⚒ Commodity Markets ↗️
Oil prices ↘️/↗️ (may see short-term headwinds on hot hiring, but remains overall bullish)
Natural Gas prices ↘️/↕️
Metal prices ↗️/➡️
Gold ↕️/↗️ (may see short-term headwinds on hot hiring, but remains overall bullish)
⚡️Cryptos ↕️/↗️ (VERY volatile; overall bullish momentum still intact but risk of more profit taking rising)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
