After last week's sharp rise, there was some profit-taking in Europe and the US as investors assessed the outlook for corporate earnings ahead of key US data, which could provide further clues as to whether the US Federal Reserve will actually push through three rate cuts this year while reducing its QT measures. There was also little change on the Asian markets, where activity was also subdued overall. Japanese equities fell slightly as expectations rise that the Bank of Japan will not allow the JPY to fall further.
While analysts remain divided, with around 50% of analysts believing the markets to be heavily overbought and expecting a correction (a view they have also held over the last few months), we have now just seen the best weekly performance this year. The Stoxx Europe 600 Index is currently posting slight losses, but has also posted nine consecutive weeks of gains, the longest streak in 12 years.
Yields on US Treasuries are rising slightly. However, the USD is unable to make further gains – for the time being, as the USD index is down slightly. The strong USD has depressed risk sentiment in recent days and also weighed on commodity prices and Wall Street.
The main focus this week will be on the Fed's preferred inflation index (PCE), which will be released on Friday when many markets are closed for the holidays. Although the Fed has announced it will cut rates this year and Fed Chairman Jerome Powell has taken a dovish stance in the past week, investors now see other central banks as even more dovish and remain concerned about high equity valuations after the recent rally.
In pre-market US trading, we are seeing some headwinds in chip stocks after the Financial Times reported that China plans to restrict the use of US-made chips in government computers. Boeing shares continue to rise after the struggling airplane manufacturer announced that its CEO Dave Calhoun is stepping down. We are LONG in Boeing.
With Wall Street (as a whole) actually relatively expensive by historical standards, other markets (in Europe and Asia) seem to have much more room to catch up. We also see the other sectors far behind technology – and with more upside potential. I expect a solid week overall with muted trading activity – mainly due to the upcoming holidays. Markets will be rather mixed – with a possible outperformance of equities in Europe and some rotation away from growth stocks and towards more defensive sectors.
In commodities, oil prices rose as geopolitical turmoil escalated following the attacks in Russia (including a deadly terrorist attack in Moscow that killed at least 137 people). I see further upside potential in commodity prices, which are currently under pressure from the strong USD. Gold recorded strong gains last week and remains bullish. Bitcoin also found some support, but remains very volatile. However, Bitcoin's positive start to the week is a positive sign for the general risk sentiment.
👁 ROB'S MARKET OVERVIEW:
March 25, 2024
🌐/🇺🇸 Global Markets ↕️
Cyclical / Luxury Stocks ↘️/➡️
Tech/Growth Stocks ↘️/➡️
Financial Stocks ➡️/↗️
Defensive Stocks ➡️
Energy Stocks ➡️/↗️
Materials Stocks ↗️/➡️
💱 Forex
AUD, NZD ↗️ (recovering from over-selling)
CAD, JPY ↗️/➡️ (recovering from over-selling)
EUR, GBP ➡️
USD ↘️/➡️ (limited upside / slight losses after THU/FRI-gains)
CHF ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ➡️/↗️ (oil to remain bullish – gains if/as USD weakens)
Natural Gas prices ↘️/↕️
Metal prices ↗️ (commodity prices with upside – further gains if/as USD weakens)
Gold ↗️/↕️ (gold to remain bullish – further gains if/as USD weakens)
⚡️Cryptos ↗️/↕️ (volatile – gains continue to hit profit taking – shows signs of rebounding; resistance at $69K – $70K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
