Investors are increasingly concerned that rising oil prices will lead to a renewed acceleration in inflation and raise the prospect of higher interest rates in the longer term. Benchmark Brent crude has topped $95 per barrel for the first time since November.
There is little sign that oil prices will be able to stop the current rise as oil prices are well supported fundamentally, refiners are already paying premiums for crude, demand for oil/diesel is rising ahead of winter, OPEC+ is now showing signs of moving away from cutting oil production, and Chinese/global oil demand is reaching new record levels.
Bond yields also continue to rise, with policy-sensitive shorter-term government bonds posting strong gains. The USD declined slightly (this is temporary!) as investors hope that the Fed will keep rates on hold tomorrow, signaling the end of tightening measures. However, we expect the Fed to keep rates on hold and wait for more data in the coming weeks and before the November rate decision – the Fed will provide a more hawkish outlook. It's not so much about tomorrow's pause, but more about the Fed's outlook and whether it uses hawkish or a rather dovish tone (like the ECB; we expect a “hawkish pause” from the Fed tomorrow).
We're also likely to see a more hawkish stance from Fed members in the so-called dot plot, which will add to concerns that higher rates will be the new normal as rate cuts are absent for more than 12 months.
We will see stocks in New York moving sideways / edging slowly lower for much of the day and then more selling in the second half of the trading day and towards the end of the trading session as investors holding LONG positions become increasingly cautious. Fundamental signs for a near-term reversal, especially in growth/tech stocks are rising. We see yields continue to rise in the face of rising hawkish expectations – and the Fed will likely warn about the risk of slowing disinflation and not rule out more tightening measures to fight inflation, especially since the rise in oil prices shows no signs of abating.
👁 ROB'S MARKET OVERVIEW:
September 19, 2023
🇺🇸 US Markets ↕️/↘️
Cyclical Stocks ➡️/↘️
Tech/Growth Stocks ↕️/↘️
Financial Stocks ↘️
Defensive Stocks ➡️
Energy Stocks ↗️
Materials Stocks ↕️
CAD ↗️ (benefiting from very bullish oil prices / elevated Canadian inflation data)
USD ↘️/➡️/↗️ (USD to benefit from rising hawkish Fed expectations)
AUD ↗️/➡️ (benefit from higher commodity prices – limited/no upside during US trading)
EUR, GBP ↗️/➡️/↘️ (weakening in second half of US trading)
⚒ Commodity Markets ↕️/↗️
Oil prices ↗️
Natural Gas prices ↗️
Metal prices ↕️/↘️
Precious Metal prices ↕️/↘️ (gold under pressure from rising yields, benefiting from safe haven demand)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)