Stocks in Europe extended their gains and Wall Street also points towards a positive opening and extending the recovery rally for a second day. Earnings reports from Europe / before the NYSE opening remained mixed: Stellantis and Pinterest (+16% !) rose on the positive side, while BP and Caterpillar trades lower. Also Pfizer is trading slightly lower as sales of its Covid-19 shot and Paxlovid pill continued to tumble.
European equities are also supported by strong signs that the ECB has ended its tightening measures, as Eurozone inflation fell to a two-year low of 2.9% in October. The disinflation is faster than analysts expected, but also due to weak demand in Europe – which is actually a sign of continued economic weakness. GDP growth data from the Eurozone also came in slightly lower than expected.
I expect expectations for rate hikes to fall further, which could also help to limit the rise in government bond yields, which should provide a tailwind for interest-rate and yield-sensitive equities (such as growth/tech stocks). Banks should also be able to make further gains, given generally solid earnings, including from international/European banks.
Some of the most dramatic moves in the markets came from Japan after the Bank of Japan made only minor changes to its monetary policy settings, disappointing some market participants who had expected more. The JPY fell back below the $150 mark and dropped to a 15-year low against the euro. In parallel, the Japanese stock market ended the day with strong gains.
We also see a short-term improvement in risk sentiment as the USD fell against its peers (with the exception of the JPY). The overall slight improvement in risk sentiment will continue for most of today. That could change tomorrow as Fed Chair Jerome Powell tries to sound a bit more hawkish – especially in light of recent strong US economic data. Overall, though, September has been a tough month for risk assets. Tomorrow, markets will be much more cautious again (including ahead of Apple's earnings report on Thursday). I expect Apple and Tesla to remain underperformers.
Oil prices were a bit oversold yesterday, posting slight gains as investors remain concerned about developments in the Middle East. Israel attacked more targets in Lebanon and Syria overnight. I expect concerns about the region to increase towards the end of the week.
👁 ROB'S MARKET OVERVIEW:
October 31, 2023
🇺🇸 US Markets ➡️/↗️ (slight gains as market sentiment remains today similar to yesterday)
Cyclical Stocks ➡️/↗️
Tech/Growth Stocks ➡️/↗️
Financial Stocks ➡️/↗️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️/↗️
Materials Stocks ↘️ (China woes show signs of intensifying again)
EUR ↗️/↘️ (benefiting from weakness of USD & JPY – but falling inflation will weigh)
GBP ➡️ (benefiting from weakness of USD & JPY)
AUD, CHF ➡️/↘️
USD ↘️/➡️ (stabilizing after edging lower in early trading – USD remains bullish)
⚒ Commodity Markets ↕️
Oil prices ↗️/➡️ (slight rebound – but resistance near $83.00 WTI / $87.5 Brent)
Natural Gas prices ➡️/↗️
Metal prices ➡️
Gold ➡️/↗️ (gold remains slightly bullish & benefits from lower yields)
⚡️Cryptos ➡️ (in sideways with interest in cryptos fading as stocks rise temporarily)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)