Equities, but also other assets such as the USD, commodities and bonds, remain extremely calm (also yesterday) as the markets wait for the US inflation reports to give direction to the markets.
Wall Street is unchanged in pre-market US trading and European and Asian equities are also moving sideways. US government bonds are also barely moving ahead of the inflation reports, as the US producer price inflation (PPI) will be published in 15 minutes. Much attention will also be paid to the speech by Federal Reserve Chairman Jerome Powell. The CPI, which will be released tomorrow, is expected to show a slowdown but is still too high to increase the pace of rate cuts. Any surprise will trigger big moves as the data suggests that the S&P 500 will fluctuate by more than 1% after the CPI data.
Hopes for interest rate cuts have led to a strong upswing, pushing investor optimism to its highest level in more than two years. Sentiment data from the Eurozone/Germany also came in better than expected (as reported by the ZEW). How much upside potential remains in equities – a question that has also driven gold significantly higher this year.
The US PPI (today) will have an impact on the markets, but traders will continue to wait for tomorrow's US CPI data. We are seeing cautious investors who are not willing to make major bets at the moment.
Oil prices rose slightly ahead of the publication of the OPEC market outlook. Gold has stabilized after Monday's sharp drop. I believe today's PPI will show a slight reacceleration in product price pressures – which could revive stagflation fears as inflation remains stubborn while the US economy slows.
A PPI (YoY) of 2.5% or more would trigger some selling in US equities. If PPI is 2.4% YoY and 0.3% MoM, we are unlikely to see much. Any signs of weakening PPI – especially if PPI MoM is at 0.2% (or lower -> very unlikely) – will lead to a short term rise in (US) equities and an improvement in risk sentiment. The most likely outcome is that today's PPI will only have a short-term impact before the markets move sideways again.
👁 ROB'S MARKET OVERVIEW:
⚠️ Impacted by today's US PPI data – I don't expect a major surprise from US PPI
May 14, 2024
🌐/🇺🇸 Global Markets ➡️
Cyclical / Luxury Stocks ➡️
Tech/Growth Stocks ➡️/↘️ (early performance depending on PPI – likely some profit taking ahead of US CPI)
Financial Stocks ↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️/↗️
Materials Stocks ↗️/➡️
💱 Forex
EUR ↗️/➡️ (temporarily benefiting from solid Eurozone/German sentiment data)
AUD, CAD ↗️/➡️
USD ↕️/➡️ (impacted by PPI data)
CHF ➡️
JPY, GBP ↘️/➡️
⚒ Commodity Markets ➡️
Oil prices ➡️
Natural Gas prices ↘️/↕️
Metal prices ↗️/➡️
Gold ↗️/↕️
⚡️Cryptos ↕️ (remaining in sideways – range $60K – $64K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
