We see a shaky start into the new week despite a quite economic calendar and no important earning reports. Government bonds in Europe and the US as well as stocks continue to slide as investors expect that monetary policy need to further tighten or remain tight for much longer to fight elevated inflation. The USD is at the highest level since March.
The selloff in US Treasury has caused Treasury yields to the highest level since 2007 – the height of the financial crisis. We see analysts becoming increasingly pessimistic not even one month after a record H1 stock market rally. A selloff in German bonds pushed yields to the highest since 2011. One week after the worst weekly selloff in New York since March we see Chinese, European and US stocks with signs of extending losses.
Mining shares and commodities (exception oil) dragged down the Stoxx Europe 600 and Wall Street in pre-market trading as China’s property problems weighed on the outlook for natural resources.
After conflicting decisions from central banks in the previous two weeks traders are now more concerned that more tightening is needed in particular with rising oil/energy price fanning inflation. Hedge funds increase their bets on further tightening supply in the oil market resulting in oil prices to rise further.
Even the ECB's dovish outlook has not helped to keep up optimism as investors now believe the central banks have no room in upcoming months to cut rates – even as the economic activity and outlook worsens.
We already positioned ourselves strongly against analyst opinion at the end of the first half of the year, assuming that USD strength, inflation and recession fears would return – we could not have been more right. Equities have still significant downside potential after the very strong H1/2023 performance. Yields at more than a decade high will continue to weigh heavily on growth stocks, precious metals and extend the rotation from tech to more defensive sector. The energy sector will continue to outperform other sectors.
👁 ROB'S MARKET OVERVIEW:
September 25, 2023
🇺🇸 US Markets ↕️/↘️ (likely slight dip buying in early trading / more profit taking in growth stocks following)
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↕️/↘️
Financial Stocks ➡️
Defensive Stocks ➡️
Energy Stocks ➡️/↗️
Materials Stocks ↘️
EUR, AUD, JPY ➡️/↘️
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️/↗️ (sees temporary headwinds on growth & rate hike concerns / stronger USD; oil remains bullish)
Natural Gas prices ↕️
Metal prices ↕️/↘️ (benefiting from strong China today, overall rather bearish)
Precious Metal prices ➡️/↘️ (high yields + strong USD weigh on attractiveness of gold)
⚡️Cryptos ↘️ (high yields weigh on attractiveness of cryptos)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)