The surprisingly good results from the investment banking giants were a bright spot amid a fall in global share prices as central bank officials countered bets of aggressive interest rate cuts. Both Goldman Sachs and Morgan Stanley beat analysts' estimates in key business areas – but we see both banks only cautiously higher – I see more headwinds for banks overall here. The overall picture for the financial sector points to a slowdown in earnings growth, especially as high interest rates reduce demand for credit.
Equities were previously trading more in the red, and stocks in Europe and Asia were also weak. The MSCI Asia Pacific Index lost 1.5% today, the most in three months. Yields rose sharply, but the surprisingly weak NY Empire State Manufacturing Index also helped to cool yields a bit as it raises rate cut expectations. We are seeing sharp declines in new orders and shipments, which is consistent with the ongoing difficulties faced by manufacturers in the US.
On a positive note, the ECB's monthly survey showed that Eurozone consumer inflation expectations fell to their lowest level in more than 1 1/2 years in November – but this is mainly due to cooling consumer demand. Swap markets continue to expect a first rate cut by the ECB in April, followed by almost five more by the end of the year – I think the strong rate cut expectations for the ECB are more likely than the Fed starting a strong rate cut cycle as early as March,
China is considering massive further stimulus with $139 billion worth of special bonds – another sign of continued weakness in China. The recent stimulus news helped Chinese markets rally for a day, but the overall sentiment remains bearish.
Crude oil prices rose slightly after the Wall Street Journal reported that UK oil company Shell had halted shipments through the Red Sea after US and UK attacks on Houthi rebels in Yemen stoked fears of further escalation. Above all, Iran's missile attacks in Iraq and Syria gave oil prices a tailwind. However, in view of the clear signs of weak growth, the demand outlook for oil remains weak. Gold prices fell slightly after the rise in yields, but trimmed its losses after the shockingly poor NY Empire State Manufacturing Index – I see this tailwind as very shaky and concerns about a sharp slowdown or possible contraction in the US as more of a headwind.
👁 ROB'S MARKET OVERVIEW:
January 16, 2024
🌐/🇺🇸 Global/US Markets ↕️/↘️
Cyclical Stocks ↘️/➡️
Tech/Growth Stocks ↘️/➡️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️
Energy Stocks ➡️/↘️
Materials Stocks ↘️
💱 Forex
USD ↗️
CAD ↗️/➡️
EUR, GBP, CHF ↘️/➡️
AUD, JPY ↘️
⚒ Commodity Markets ↕️
Oil prices ↗️/↕️/↘️
Natural Gas prices ↘️
Metal prices ↕️
Gold ➡️/↘️ (will continue to edge lower with yields again higher)
⚡️Cryptos ↕️/↘️ (Bitcoin remains bullish in the medium term, but could see slight additional selling to near ~$41K; overall a good time to buy)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
