Global equity and bond markets fluctuated, while the JPY rose sharply on renewed speculation that the Bank of Japan will soon abolish the world's last negative interest rate regime.
While markets in Asia and Europe are trading lower, we see the S&P 500 little changed in pre-market trading. The rapid slide in yields paused, with Japanese bond yields in particular rising sharply. The JPY gained more than 1.5% against the major currencies, including the USD and the EUR. Our EUR/JPY triggered our TP overnight, but fell significantly further. Investors are still surprised by the strong JPY recovery, which we predicted back in November and even advised to trade the JPY LONG in the long term.
Following BOJ Governor Kazuo Ueda's comments, swap markets have shifted their interest rate bets. At one point on Thursday, overnight index swaps indicated a nearly 45% probability that the BOJ would end its negative interest rate policy at this month's meeting.
We are also seeing signs (again) that investors believe stocks and bonds have run too hot and are now due for a break. Even rate-cutting-friendly economic data was not enough to help Wall Street rally yesterday. Caution prevailed ahead of tomorrow's important US labor market data (NFP) – today's initial jobless claims will influence the market pre-market.
We continue to see a strong outperformance of US technology stocks, also today thanks to pre-market gains by Alphabet and Advanced Micro Devices. AMD has unveiled new so-called accelerator chips with which the company aims to conquer the lucrative artificial intelligence market. Alphabet, which owns Google, rose by more than 3% as the company is also pushing ahead with generative AI.
The price of gold rose towards $2,035, as we predicted. However, Bitcoin saw profit taking after the recent strong gains. I also attribute the movements in gold and Bitcoin to a slight deterioration in risk sentiment (positive for gold / negative for Bitcoin).
I do not expect any major movements in the US today – more of a sideways movement. There may be further signs of a weakening labor market, which will help Wall Street get off to a positive start. In the second half of US trading, we will see increasing recession concerns weighing on equities and risk sentiment.
👁 ROB'S MARKET OVERVIEW:
December 07, 2023
🌐/🇺🇸 Global/US Markets ➡️
Cyclical Stocks ➡️/↘️
Tech/Growth Stocks ↗️/➡️/↘️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ↗️/➡️ (slight gains; in oversold territory)
Materials Stocks ↗️/➡️
JPY ↗️↗️/↘️ (JPY with very strong gains – short-term overbought, slight correction)
USD ➡️/↗️ (remains in demand)
EUR, GBP, CAD ➡️/↘️
⚡️Cryptos ↘️/↕️ (some short-term headwinds; Bitcoin remains attractive)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)