After a week of significant losses and thin trading, European equities struggled to recover on Monday. The ECB's chief economist, Philip Lane, warned that monetary policy would need to remain tight throughout the year, pointing to growing concerns that inflation could accelerate again not only in the US but also in Europe.
However, equity markets in Asia started the week well with all major Asian equity futures broadly higher. The MSCI Asia Pacific Index posted its biggest gain since May 16. US equity futures are little changed, as is the USD, as the UK and US markets were closed for the holidays.
After last week's better than expected US economic data, we see the market reassessing rate cut expectations while fearing that companies will continue to raise rates and labor markets will remain tight, which could slow or even reverse the recent disinflation.
The week is off to a slow start as earnings season comes to a close. The main focus this week will be on inflation data from Australia, Japan, the Eurozone and the US. The Fed's preferred measure of underlying inflation (PCE) will be released on Friday and is expected to show a slight slowdown – however, signs of renewed acceleration and concerns that inflation will remain a major issue for longer could lead to further profit-taking.
Fed Chairman Jerome Powell has emphasized that the Fed needs more evidence that inflation is on track to reach the 2% target before easing policy. Fed representatives Williams, Cook, Kashkari and Logan are among the Fed officials due to speak this week.
Meanwhile, gold prices rose slightly, while iron ore and copper futures fell. Oil prices are also edging higher after their biggest weekly loss in four years, with the focus on Sunday's OPEC+ supply meeting and how much US demand will rise at the start of the summer driving season.
We will see the markets moving sideways. We see some assets like gold or oil in technical oversold territory, which will lead to some dip buying. Overall, however, the market is now more nervous about the increasing signs that inflation will remain a problem for longer, which would further delay rate cuts. Today's small moves are not indicative of how the markets will perform over the course of the week.
👁 ROB'S MARKET OVERVIEW:
⚠️ US/UK markets remain closed resulting in thin trading / volatility
May 27, 2024
🌐 Global Markets ↗️/➡️ (slight dip buying after last week's sell-off)
Cyclical / Luxury Stocks ➡️
Tech/Growth Stocks ↗️/➡️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️
Energy Stocks ➡️ (remains oversold)
Materials Stocks ↗️/➡️
💱 Forex
AUD ↗️ (rebounding after last week's losses; benefiting from improved risk sentiment)
GBP ↗️/➡️ (benefiting from improved risk sentiment, hotter-than-expected inflation)
CAD ↗️/➡️
EUR, CHF, JPY ➡️
USD ↘️/➡️ (giving back some of last weeks gains today, downside limited)
⚒ Commodity Markets ↗️/➡️
Oil prices ↗️/➡️ (rebound from technically oversold territory)
Natural Gas prices ↗️/↕️
Metal prices ↗️/➡️
Gold ↗️/➡️ (rebound from technically oversold territory)
⚡️Cryptos ↕️ (btc moving in the range $67K – $70K for now after ETF hype eased / general outlook rather bullish)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
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