Wall Street remains under pressure to push yields higher as stubborn US inflation forces investors to lower their expectations for Federal Reserve rate cuts. We see the S&P 500 little changed after the leading US index fell 1% on Wednesday following a surprisingly hot US CPI report that beat analysts' expectations for the third consecutive month.
Equity prices are also slightly lower in Europe as investors are also scaling back expectations of a rate cut by the ECB ahead of today's ECB interest rate decision, where the ECB is likely to leave rates unchanged.
Analysts continue to believe that the ECB will not push ahead with easing monetary conditions as the Fed is likely to keep rates high for longer (as we have always predicted). I do not share this view and believe that the ECB is preparing the markets for a rate cut as early as June.
Yesterday's US CPI report was a real shock to investors who had expected the US CPI data to again show that disinflation was returning. We saw the strongest one-day rise in USD since January and the strongest one-day rise in yields since August 2022, which shows how big a surprise it was for analysts/market participants.
Once again, we congratulate our community on an outstanding trading performance yesterday – while traders, investors and analysts around the world were caught on the wrong foot and suffered big losses, our community made a gigantic profit 🎆
We continue to expect a recovery and a return of positive market sentiment, however the swap markets have also significantly reduced rate cut expectations for the ECB and the Bank of England. If the ECB sends a more dovish signal, this could be enough to reverse sentiment again. We also saw heavy losses in European equities and expect a recovery soon.
The main focus will be on the ECB and today's ECB press conference. Today's US PPI data and possibly further signs of a strong US labor market could continue to weigh on Wall Street, but we expect optimism for the upcoming earnings season and a solid start to earnings season tomorrow to help markets trim recent sharp losses. The energy sector will continue to outperform, but I also see the tech sector (and big tech companies) being able to rally, supported by dip buying.
Oil prices have risen again after moving sideways for three sessions. Markets are concerned about a possible attack on Israel by Iran or its proxies, which could trigger a significant escalation of hostilities in the Middle East. We are also seeing a further upward trend in commodity prices: copper, zinc and other industrial metals continue to rise. Gold continues to see profit-taking due to high yields, but remains bullish.
👁 ROB'S MARKET OVERVIEW:
⚠️ We expect the ECB to leave interest rates unchanged. We do not believe the ECB will position itself as cautiously as the Fed and instead see it saying that conditions for rate cuts are approaching.
April 11, 2024
🌐/🇺🇸 Global Markets ↘️/↕️
Cyclical / Luxury Stocks ↘️/↕️
Tech/Growth Stocks ↘️/↕️/↗️
Financial Stocks ↘️/➡️
Defensive Stocks ↘️/➡️
Energy Stocks ↗️/➡️
Materials Stocks ↘️/↕️/↗️
💱 Forex
AUD, CAD ➡️/↗️
JPY ➡️/↗️ (as speculation about BoJ intervention rise following yesterday's slide)
USD ↕️ (USD to stabilize – after strong gains, further short-term gains limited)
GBP, CHF ➡️
EUR ➡️/↘️ (if ECB points to rate cuts in June)
⚒ Commodity Markets ↗️
Oil prices ↘️/↕️/↗️ (oil to remain bullish; concerns about Iran attacking Israel will result in ongoing dip-purchases)
Natural Gas prices ↘️/↕️ (some profit taking after recent gains)
Metal prices ↕️ (some profit taking after recent gains)
Gold ↕️/↗️ (profit taking to occur but gold to remain bullish)
⚡️Cryptos ↕️ (Bitcoin remains volatile range $68K – $72K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
