Signs of a slowdown in the US economy continue to put pressure on global equities. European stocks in particular fell sharply, with losses in the energy, cyclical and banking sectors. US stocks are also pointing to a lower open in pre-market trading as investors continue to weigh concerns about the health of the US economy against optimism that the Federal Reserve will cut interest rates in the fourth quarter.
Yields continue to fall as bonds benefit from safe-haven demand and increasing expectations of rate cuts. We are also seeing increasing signs that weak data is increasingly being seen as bad news for the growth sector again, rather than these sectors then benefiting from increased rate cut expectations. With equities still expensive and close to all-time highs, we are generally not yet seeing pessimism – but investors are becoming more cautious.
The increasing signs of a weakening US economy, which could lead to interest rate cuts, are also evident in the classic safe-haven currencies CHF and JPY, which have recovered some of their heavy losses of recent months.
Equities in Asia were mixed, with the exception of India, where stocks slumped when the count showed that Prime Minister Narendra Modi's ruling party failed to win a majority of seats in the national elections.
The focus is now also turning to more US economic data, particularly labor market data such as today's job openings and Friday's NFPs. The labor market could help investors get a better picture of the outlook for the global/US economy and interest rates.
In the Eurozone, economic data has improved recently. Investors continue to expect a first rate cut from the ECB on Thursday, but possibly with hawkish comments from ECB President Lagarde.
Rising rate cut hopes should limit near-term headwinds, but we are increasingly seeing investors, particularly in the US, question whether the US economy can remain resilient while inflation cools sufficiently, or whether the US economy needs to cool significantly first, which would also lead to a slowdown in corporate earnings.
We saw a recovery in the USD, while bond yields also fell in other regions. The USD is experiencing some demand as a perceived safe haven. The gold price gave back some of yesterday's strong gains, but continues to be supported by falling yields. Commodity prices, especially energy prices, are facing headwinds from worsening risk sentiment and today's likely temporary rebound in the USD.
👁 ROB'S MARKET OVERVIEW:
June 4, 2024
🌐/🇺🇸 Global Markets ↘️/↕️
Cyclical / Luxury Stocks ↘️/↕️
Tech/Growth Stocks ↘️/↕️
Financial Stocks ↘️/➡️
Defensive Stocks ↘️/➡️/↗️
Energy Stocks ↘️
Materials Stocks ↘️
💱 Forex
JPY, CHF ↗️ (benefiting from safe haven demand & increased Fed rate cut expectations)
USD ↗️/➡️ (rebound after yesterday's sharp slide; increased Fed rate cut expectations continue to weigh)
EUR, GBP ➡️
AUD, CAD ↘️
⚒ Commodity Markets ↘️/↕️
Oil prices ↘️/↕️ (remains with headwinds but may short-term rebound partially from oversold territory)
Natural Gas prices ↕️
Metal prices ↘️
Gold ↘️/↕️/↗️ (volatile but overall benefiting from falling yields and increasing safe haven demand)
⚡️Cryptos ↕️ (for now in sideways with BTC stuck in $67K – $70K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
