Global equity and bond markets are little changed as investors await further guidance and await the data. The euro fluctuated a little as the European Central Bank kept interest rates on hold and signaled that rate cuts are still a long way off – which is hard to believe (I wonder if the ECB believes its own words – I hope not).
There were further modest gains on Wall Street, although Tesla's share price fell sharply after the company reported a drastic slowdown in earnings growth and significantly weaker profit margins (y-o-y). Even worse for the stocks (in my opinion) was CEO Elon Musk's call for investors to look past the slowdown in growth. On the other hand, IBM gave a strong outlook for revenue and cash flow in 2024, an optimistic signal for the pace of corporate technology spending. IBM is also benefiting from rising demand for AI and cloud solutions.
We are also seeing little movement in yields and the dollar is hardly moving at all.
Equities in Asia, particularly in China, and the prices of industrial metals continue to benefit from the hope that the extensive Chinese economic stimulus measures will have a positive impact on the Chinese equity market – I doubt this.
We are seeing higher energy prices, with natural gas prices in particular rising again after the recent weakness. Oil is also trading slightly higher, supported by China optimism, but also questionable signs as to whether there is still an oversupply of oil/fuel after inventories in the US have fallen (much more than expected).
I expect the positive sentiment and current rally in tech stocks to continue for a while without any groundbreaking news. Tesla's weakness has limited impact on the other mega-cap tech stocks. The news flow remains mostly positive – US GDP growth continues to exceed expectations and is surprisingly strong overall. I expect further signs of a resilient US economy that can withstand high interest rates and shows strong signs of a soft landing (=no recession).
👁 ROB'S MARKET OVERVIEW:
January 25, 2024
🌐/🇺🇸 Global/US Markets ➡️/↗️ (mostly sideways / positive market sentiment to remain)
Cyclical Stocks ➡️/↗️
Tech/Growth Stocks ➡️/↗️ (I expect the gains in tech to continue)
Financial Stocks ➡️/↗️
Defensive Stocks ➡️/↗️ (will catch up a bit)
Energy Stocks ↗️/➡️
Materials Stocks ↗️
AUD ↗️ (boosted by China stimulus & improved risk sentiment, higher commodity prices)
CAD ↗️/➡️ (boosted by China stimulus & improved risk sentiment, higher energy prices)
EUR ↗️/➡️/↘️ (I don't see the EUR strengthening as market will disregard hawkish ECB comments)
GBP, USD ➡️
⚒ Commodity Markets ↗️
Oil prices ↗️/➡️ (boosted by China stimulus, higher gas prices, signs of more demand & falling stockpiles)
Natural Gas prices ↗️
Metal prices ↗️ (boosted by China stimulus & improved risk sentiment)
⚡️Cryptos ➡️ (Bitcoin will continue to fluctuate around the $40K for now)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)