We are seeing a slow start to the second week of the year as markets are still trying to calibrate their rate cut bets after last week's sell-off. Wall Street futures are pointing to some weakness and European stocks also started the day with losses – though they were able to trim their early losses and moved back into flat territory.
Boeing slumped as much as 9.8% in pre-market US trading after a fuselage section of a 737 Max 9 was ejected during a flight over the weekend. Spirit AeroSystems Holdings Inc, which installed the part, fell 21%. Concerns about a lengthy grounding of the plane sparked heavy panic selling.
Oil prices fell more 3% after Saudi Arabia cut official selling prices for all regions amid continued weakness in the market. The deteriorating global oil outlook has not changed in the face of strong global supply, including from the US. Last week's gains due to tensions in the Red Sea and supply disruptions in Libya have been priced in and exaggerated and will not be enough to push oil prices higher.
We see that investors are looking for guidance after Friday's mixed US economic data. The first week of 2024 ended with heavy losses for global equity markets – the biggest one-week drop since October. The main reason for the heavy selling is that markets have scaled back their optimistic rate cut bets on speculation that the Federal Reserve is in no hurry to cut rates.
Ahead of some important economic data – such as US inflation data on Thursday or the (unofficial) start of earnings season on Friday, when Wall Street banks such as JPMorgan Chase & Co and Citigroup announce their Q4/2023 earnings – it is likely to remain a rather quiet day.
While panic selling would not be warranted, we see a Wall Street that remains very highly valued after its strong performance in 2023. I see a high probability of disappointment in terms of rate cuts – which therefore offers much more downside than upside potential for equities. I prefer to sell spikes rather than buy dips at the moment – although we will see further waves of dip buying this week.
In Europe, new orders at German factories rose much less than expected in November, a discouraging sign for Europe's largest economy – one of many. The DAX nevertheless managed to trim its losses on hopes that economic weakness will increase the chance of an end to tight monetary policy.
Yields are little changed at the start of the week. Similar to the previous week – the markets will react sensitively to changes in yields. Most analysts see an opportunity to buy bonds now – I expect yields to rise further instead.
In Asia, the Hang Seng China Enterprises Index closed down 2.3%, led by a sell-off in technology stocks. Sentiment in China remains negative. Investors are hoping for further stimulus measures from Beijing – otherwise shares would probably be sold off even more. However, the latest stimulus measures did not have the effect Beijing had hoped for and only led to a short-lived recovery rally.
👁 ROB'S MARKET OVERVIEW:
January 08, 2024
🌐/🇺🇸 Global/US Markets ↕️/↘️
Cyclical Stocks ➡️/↘️
Tech/Growth Stocks ↗️/➡️/↘️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️/↗️
Energy Stocks ↘️
Materials Stocks ↘️
💱 Forex
USD ➡️/↗️ (I expect USD to remain supported and rate cut optimism to fade further)
EUR ↗️/➡️ (EUR in outperformance but will lose a bit again as USD rises)
GBP ➡️
JPY, CHF ➡️/↘️
AUD ↘️ (commodity prices under pressure / weak China weighs additionally)
⚒ Commodity Markets ↘️
Oil prices ↘️
Natural Gas prices ↘️ (very sharp losses!)
Metal prices ↕️/↘️
Gold ↘️ (I expect further selling – as yields rose stronger in the previous week than gold fell / yields likely rise further)
⚡️Cryptos ↕️ (I see today resistance at $45K – if broken, further gains likely ahead of Bitcoin ETF decision)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
