We see market sentiment deteriorating as the European economies and China show more signs of slowing, while inflation remains stubborn. The relative resilience of the US economy has also led to more investors pushing back into the USD. Despite expectations that the Fed has already reached the end of its tightening campaign, we are also seeing a temporary rebound in US Treasury yields, which continues to support the USD but weigh on the growth sector.
China's services sector posted its slowest growth this year in August, while Eurozone data was unsurprising after the previous days' preliminary results, but again showed that the composite purchasing managers' index remains deep in contraction territory. The data suggest that the Eurozone is sliding (even) deeper into recession. Despite slowing economic activity and falling consumer demand, inflation remains (too) high, putting the ECB (and the Bank of England) in a dilemma.
High energy costs – including oil prices approaching their highest level since November 2022 – continue to put pressure on consumer demand and could cause consumer prices to remain high for longer.
While U.S. investors remain optimistic – Goldman Sachs even sees a lower chance of a U.S. recession if the outlook for Fed rates changes – we see global markets under increasing pressure and strong signs of a (worsening) recession, which would be stagflation given stubborn inflation.
Despite concerns about China, oil prices continue to be supported by rising expectations of expanded production and export curbs by OPEC+ members.
The risk that stock prices will slide again – especially in Europe – is rising again. September is known to be the worst month for equities – and much points to increasing headwinds for equities & risk sentiment.
👁 ROB'S MARKET OVERVIEW:
September 05, 2023
🇺🇸 US Markets↕️ (outperforms Europe/Asia; Headwinds increase; Nevertheless, hope for the end of Fed tightening continues to provide tailwinds)
Cyclical Stocks ↕️ (mixed – china and export sensitive stocks with headwinds)
Tech/Growth Stocks ↗️/↕️/↘️ (very mixed – stronger USD puts pressure on growth stocks – rising resistance for the Nasdaq above 15500).
Financial Stocks ➡️
Defensive Stocks ➡️/↗️ (rotation into more recession prone / defensive stocks)
Energy Stocks ➡️/↗️ (oil prices remain bullish)
Materials Stocks ↕️/↘️ (headwinds on China concerns)
USD ↗️/↕️/↘️ (USD to give back some of the US pre-market gains)
EUR, JPY ➡️ (stabilizing after recent weakness)
CHF, CAD ➡️
AUD ↘️/↕️/↗️ (stabilizing after harsh losses)
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️/↗️ (recovering from earlier losses – oil remains bullish)
Natural Gas prices ↕️/↘️
Metal prices ↕️/↘️ (headwinds from China concerns))
Precious Metal prices ↘️/↕️/↗️ (recovering towards $1,940 with USD stabilizing)
⚡️Cryptos ➡️/↘️ (Recent optimism after ETF approval wanes).
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)