Growing concerns over whether the Fed will cut rates this year have led to a broad market decline ahead of today's key US jobs report, which analysts estimate will show that more than 200,000 new jobs were created last month. Another sign of a robust US economy – which I believe is highly likely – could further lower rate cut expectations and increase concerns about a prolonged rise in interest rates. In particular, Minneapolis Fed President Neel Kashkari's reference to the possibility that rate cuts may not be necessary this year if progress on inflation fails to materialize led swap markets to further reduce their rate cut expectations.
In addition to signs of a tight US labor market and continued rapidly rising wages, we have seen strong signs of stubborn inflation in the US. Inflation concerns have been exacerbated by the recent sharp rise in oil prices. Other commodity prices have also risen again, including palm oil – a key component of global food production.
A flight to safety, exacerbated by the increasing escalation in the Middle East, is adding to a growing list of uncertainties. With all of this, investment banks and many analysts are warning that valuations in the US are too high.
Despite all these uncertainties, Wall Street is trying to recover and the S&P 500 is already up 0.3%. In Europe, however, shares have fallen significantly. Stocks in Asia are also mixed, but less changed overall as Chinese markets remain closed for a holiday.
While we see the long list of uncertainties, we also recognize a strong US economy and signs of an improving global economy. That being said, I still see the risk of a deeper correction in the short term and given the current momentum and sentiment, it is likely that we see a bit more selling. I expect a slightly stronger than expected NFP report, which will continue to weigh on market and equity sentiment in the short term.
This will be compounded by increasing geopolitical uncertainties, which will lead investors to fear further escalation over the weekend. Further selling on Friday therefore remains likely – although a rather cool or mixed NFP report would initially lead to a strong rebound.
Gold remains supported. Although there may be some short-term profit-taking, especially if the NFP report comes in hot, gold is one of the most attractive investments for 2024.
👁 ROB'S MARKET OVERVIEW:
⚠️ Today's movements will be highly affected by the NFP report. We expect a robust, rather strong US labor market report.
April 06, 2024
🌐/🇺🇸 Global Markets ↗️/↕️ (I expect more headwinds for markets as rate cut hopes will be further challenged; A soft NFP report will cause global stocks to rebound significantly)
Cyclical / Luxury Stocks ↗️/↕️/↘️
Tech/Growth Stocks ↗️/↕️/↘️
Financial Stocks ↗️/↕️
Defensive Stocks ➡️
Energy Stocks ↗️/↕️
Materials Stocks ↗️/↕️/↘️
💱 Forex
USD ↗️/↕️/↗️ (USD to benefit from robust US labor market data; if report comes in cool, sharp losses of USD)
EUR, ↗️/➡️ (being less affected by stronger USD than other currencies)
JPY ↗️/↘️ (will continue to be on path to 152.00 (USD/JPY) – then see some resistance)
CAD ➡️
GBP ➡️/↘️
USD ↘️/➡️ (USD to stabilize / edge higher in second half of US trading)
CHF ↘️
⚒ Commodity Markets ↗️/↕️
Oil prices ↗️/↕️ (hovering near $86/barrel for WTI – remains bullish)
Natural Gas prices ↗️/↕️
Metal prices ↕️ (mixed, short-term headwinds if NFP report comes in strong)
Gold ↕️/↗️ (remains bullish – may see short-term headwinds on stronger USD)
⚡️Cryptos ↘️/↕️/↗️ (remains volatile; showed signs of support)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
