US Treasuries continue their sharp sell-off, leading to US Treasury yields hitting 2024 highs. The impact is also being felt globally as bond yields are also rising in Europe, although German inflation data shows that inflation is also approaching the ECB's 2% target in the Eurozone's largest economy – paving the way for rate cuts later this quarter.
Yields on 10-year US bonds have risen by a further 7 basis points to 4.4% – a level not seen before this year. Today's gains come on top of Monday's sharp rise of 10 basis points when data showed US manufacturing growth for the first time since September 2022. The continued strong US economic data has led traders to further reduce their bets on Fed policy easing. Swap markets also see a good chance of a delay in monetary easing, as the probability of a rate cut in June briefly fell below 50% on Monday.
Attention will now turn to labor market data – particularly the JOLTs Job Openings later today – but also further comments from Fed officials and whether hawkish comments from Fed officials reflect the falling expectations for rate cuts.
The Israeli airstrike on the Iranian embassy in Syria led to another sharp rise in gold prices (to a new record high) and oil prices to over $85/barrel (WTI) as the attack added a risk premium to an already tight market.
We are also seeing greater risk aversion in the crypto market as pressure mounts on bitcoin, which slipped more than 5% to trade below $66,000 after falling more than 10% since its mid-March peak.
As long as rate cut expectations continue to be scaled back, it will be hard to see strong gains in New York. However, the US economy is not in need of rate cuts. Strong US economic data will help US equities in the medium term and will likely lead to solid earnings growth. On the other hand, we continue to see a rotation away from Wall Street and the sectors that will gain the most in 2023 (especially tech) and towards more defensive sectors, as well as energy and (short-term) commodities. Growth stocks, but also financials, are currently facing headwinds due to the expectation that interest rates will remain high for longer. The return of optimism about China is also supporting commodity prices.
👁 ROB'S MARKET OVERVIEW:
April 02, 2024
🌐/🇺🇸 Global Markets ↘️/➡️ (Wall Street stabilizing in regular trading)
Cyclical / Luxury Stocks ↘️/➡️
Tech/Growth Stocks ↘️/➡️
Financial Stocks ↘️
Defensive Stocks ↘️/➡️
Energy Stocks ↗️
Materials Stocks ↗️
💱 Forex
AUD ↗️ (short-term benefiting from higher commodity prices)
USD, CAD ➡️/↗️ (remains bullish)
EUR ↗️/➡️ (recovered from sharp selling; more downside pot.)
GBP, JPY ➡️/↘️
CHF ↘️/➡️
⚒ Commodity Markets ↕️/↗️
Oil prices ↗️/➡️ (remains bullish; also supported from geo tensions)
Natural Gas prices ↕️ (will likely continue to see profit taking after gains)
Metal prices ↗️ (benefiting from China optimism)
Gold ↕️/↗️ (remains bullish; temporary headwinds from stronger USD)
⚡️Cryptos ↘️/↕️ (seems increasingly vulnerable which means spikes will be sold)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
