Global equities are trading broadly lower as bond yields continue to rise. Yields on 10-year Treasury rose above 5%, fueling concerns that rising borrowing costs could hurt economic growth. Equities are becoming less attractive as a higher “risk-free” rate encourages investors to reduce riskier asset holdings such as equities.
The yield on 10-year Treasury bonds rose as much as 11 basis points to 5.02%, its highest level since 2007, although yields cooled slightly again 30 minutes before the NYSE opened.
Stocks in Europe and Asia are also trading lower, with the European Stoxx 600 at its lowest level since March. Asian stocks continue to slide, with China leading the losses. Chinese authorities are again shaking foreign business confidence in the country with a series of arrests in various industries and an investigation into Foxconn Technology Group, Apple's main partner and one of the largest employers in China. In addition, there is concern that China's real estate sector could collapse.
U.S. stock futures are also down in pre-market trading, with risk & yield sensitive stocks (=growth/tech stocks) leading the losses. The continued sell-off in bonds, despite already historically very high yields, remains a concern, especially as earnings reports are also showing signs of slowing – European earnings reports have been particularly disappointing. Volkswagen and Philips gave profit/order warnings today.
With U.S. economic and labor market data continuing to point to a robust economy and Federal Reserve spokespeople reiterating the need to keep interest rates high until inflation eases, investor concern is growing that rates will remain higher for longer, slowing revenue growth and hurting the consumption.
Another sign of growing concern about the global economy is the price of copper, which fell to its lowest level in nearly 11 months.
Concerns about a worsening situation in the Middle East, which could exacerbate oil supply problems, and the overall increase in risks make it increasingly likely that this year's “Santa Rally” will disappoint or not happen at all.
We continue to expect recovery attempts to be met with profit-taking. I see more upside potential for the safe haven gold and the USD, which has mainly moved sideways lately, to rise towards the end of the year.
👁 ROB'S MARKET OVERVIEW:
October 23, 2023
🇺🇸 US Markets ↕️/↘️ (we may see first some dip buying before sell-off returns)
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↕️/↘️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️/↘️
Energy Stocks ↘️/➡️ (energy oversold, will stabilize after early sharp losses)
Materials Stocks ↘️ (headwinds due to concerns of weakening economies; Ongoing CN worries)
USD ➡️/↗️ (USD overall remains in demand with US Treasury yields continue to rise)
EUR ➡️/↗️ (benefits from investors seeing EUR undervalued)
GBP, CAD, CHF ➡️
AUD, JPY ➡️/↘️
⚒ Commodity Markets
Oil prices ↕️ (headwinds due to concerns of weakening economies; Ongoing CN worries)
Natural Gas prices ➡️
Metal prices ↘️ (headwinds due to concerns of weakening economies; Ongoing CN worries)
Gold ↕️/↗️ (remains in demand despite high yields)
⚡️Cryptos ↕️/↗️ (cryptos see gains on ETF optimism & push out of equities)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)