The USD is continuing its slide (= normalize) against its peers, as there are expectations that the US Federal Reserve has reached the end of its rate hike cycle and that interest rate cuts could follow as early as March. The USD is now at its lowest level since August. The JPY, which is still very weak, as well as the EUR are benefiting from the weakness of the USD. The currency markets continue to be dominated by USD weakness (+GBP) and a recovering JPY (+EUR).
After last week's cool inflation data, traders currently expect a probability of around 30% for a first Fed rate cut in March – very optimistic in my view. It is possible that these expectations will be scaled back somewhat after the minutes of the last Fed meeting are published (tomorrow). At the moment, however, the generally dovish expectations for the Fed, but also for other major central banks, remain and are the main reason why the markets are holding near the highs of 2023. The Nikkei even reached a new all-time high today.
We see that stocks in Europe and the US remain stable after a three-week rally. Investors are shell-shocked and face losses and opportunity costs after panic selling Microsoft following the Altman news of OpenAI's departure, and will take even more losses as Microsoft rises nearly 3% pre-market.
Congrats to the community 🎉, we traded against the market again and positioned LONG into Microsoft after Friday's panic selling.
With Altman set to lead Microsoft's AI team, investors are likely to gain even more confidence in Microsoft's leadership in AI.
I see increasingly little scope for further share price gains in 2023 – especially as the rally has gone a long way, especially as there are strong signs that revenue growth will slow (further) for now. Further mixed results in Europe, including from German pharmaceutical giant Bayer, will weigh on us. We assume that profit-taking will soon gain the upper hand – but much will depend on yields. As long as yields can fall further, there could be some more upside potential for equities (and gold).
Another risk – particularly for European markets, but also for ongoing disinflation – is rising energy prices. European gas futures rose by up to 6.9%. The rise was also caused by colder weather forecasts and higher crude oil prices ahead of an OPEC+ meeting later this week. I expect OPEC+ to try to support oil prices further – even sharper production cuts could be possible and push oil prices higher in the short term. We traded the rising energy sector very well on Friday and expect oil prices and the energy sector to remain in recovery mode.
Overall, however, we will see more of a sideways movement today as the economic calendar is quiet.
👁 ROB'S MARKET OVERVIEW:
November 20, 2023
🇺🇸 US Markets ➡️/↗️ (little action today, US markets outperforming Europe due to dovish hopes / Microsoft gains)
Cyclical Stocks ➡️/↗️
Tech/Growth Stocks ➡️/↗️
Financial Stocks ➡️
Defensive Stocks ➡️
Energy Stocks ↗️
EUR, AUD ➡️/↗️
CAD, CHF ➡️
USD, GBP ➡️/↘️
⚒ Commodity Markets ↕️/↗️ (benefiting from weak USD)
Oil prices ↗️
Natural Gas prices ↕️/↗️
Metal prices ↗️
⚡️Cryptos ➡️/↗️ (benefiting from USD weakness / dovish hopes)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)