On the last trading day of April – a negative month – and ahead of further important earnings reports – such as Amazon (today after the market closes) and tomorrow's Fed interest rate decision on a day when many markets around the world will be closed for a public holiday – equity traders are holding back or becoming more cautious for the time being.
Hotter-than-expected US employment cost data has reinforced expectations that the Fed will scale back its own rather optimistic rate cut forecasts and that Fed Chairman Jerome Powell could reduce the outlook to two rate cuts in 2024. The employment cost index, which measures wages and benefits, rose by 1.2%, the most in a year, beating all estimates. The swap markets have already adjusted to fewer rate cuts than at the last FOMC.
I do not expect the Fed to take a much more hawkish stance – especially not more hawkish than the market expects anyway – but concerns that the Fed will address stubborn inflation, the tight labor market, wage inflation and still strong consumption are increasing and could weigh on risk assets and bonds in the short term and support the USD. We see already short-term USD support at the moment.
We have another busy day of earnings reports behind and ahead of us, which have been rather mixed in European trading. In particular, earnings from European car manufacturers were disappointing. However, I don't expect much panic selling – earnings season has been too positive overall so far and with the strong earnings reports from Microsoft and Alphabet in the previous week (as well as strong gains from Tesla and Apple), Wall Street is likely to see another sideways move – but unlike yesterday, where the positive side prevailed, it is likely to be a little more cautious / negative today. I expect investors to be optimistic about Amazon's upcoming earnings report.
The stronger USD and higher yields have weighed on commodity prices, including gold which has fallen back into the $2,300 – $2,310 range. However, given the uncertainty surrounding the upcoming earnings reports and the Fed's outlook, the gold price is likely to find support again in the short term, depending on the extent of fears that the Fed could adopt a hawkish stance, which in turn would help the USD / hurt gold in the short term.
The JPY gained briefly overnight, but is now weakening again as the Japanese authorities are unlikely to announce whether or not interventions have already taken place.
👁 ROB'S MARKET OVERVIEW:
April 30 2024
🌐/🇺🇸 Global Markets ➡️/↘️
Cyclical / Luxury Stocks ↘️/↘️
Tech/Growth Stocks ↘️/↕️
Financial Stocks ➡️/↘️
Defensive Stocks ↕️ (negative consumer staples; health flat, slightly positive)
Energy Stocks ➡️
Materials Stocks ↘️
💱 Forex
USD ↗️ (temporarily benefiting from concerns of more hawkish Fed)
EUR ↗️/➡️
GBP ➡️
CAD ↘️/➡️
JPY ↘️/↕️ (weakens again but concerns about intervention remains)
AUD, CHF ↘️ (pressured from temporarily stronger USD)
⚒ Commodity Markets ↕️
Oil prices ↘️/➡️
Natural Gas prices ↗️/↕️
Metal prices ↘️ (pressure from stronger USD)
Gold ↘️/↕️ (gold short-term oversold on concerns of rates staying higher-for-longer)
⚡️Cryptos ↘️ (pressured from stronger USD, rates staying higher-for-longer, likely to find support (for now) at $60K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
