We see global stocks mixed and trading activity / volatility muted. While European stocks opened higher, the gains were already realized on Friday's afterhours trading and thanks to the strong Friday rally of tech stocks. The broad-based European Stoxx 600 index is still trading 0.5% higher after losing most of Friday's gains in after-hours trading. After a strong performance on Friday and two weeks of gains, US equities are pointing to a slightly negative start to the week.
We see a very slow start to the week with no major earnings reports and no sentiment changing market data. Investors' attention will be focused on tomorrow's US PCI data. The rally could continue if inflation cools further. US Treasury yields are slightly higher on Monday, with 10-year bond yields at +4 basis points. The slightly higher yields are adding to profit-taking pressure on stocks, which are technically overbought and have risen despite little fundamental support.
Fed officials have tried to dispel hopes of rapid rate cuts, but money markets and equity investors continue to believe that rapid rate cuts are just around the corner. I disagree with this optimism and believe that rate cuts are a long way off and unlikely to come before the end of the third quarter of 2024.
We are likely to see more hawkish statements from Fed officials (also) this week – but as markets continue to be driven by sentiment, we need to move a bit away from fundamentals and look more at overall market sentiment for short-term movements.
We see the USD stable. The JPY has hit a new low of 2023 against the dollar as inflation cools in Japan, easing pressure on the Bank of Japan – on the other hand, the JPY is extremely weak, increasing the “risk” of BoJ intervention.
The focus will also be on talks between China and the US in the hope that poor relations could improve. The White House has cited a resumption of military communications between the US and China as a priority. Hong Kong-listed Chinese stocks gained 1.3%, but this was mainly due to strong gains by tech companies in New York on Friday.
We see continued weakness in oil prices – but I see further downside as limited, especially as temperatures cool. However, the weakness in energy prices and other commodities is mainly due to demand concerns – a sign that oil/commodity traders continue to expect a weak/slowing economy.
We will see a quiet day with mostly sideways movement. I expect some profit-taking as the gains in technology stocks on Friday went (too) far.
👁 ROB'S MARKET OVERVIEW:
November 13, 2023
🇺🇸 US Markets ➡️/↘️
Cyclical Stocks ➡️/↘️
Tech/Growth Stocks ↘️/➡️
Financial Stocks ↘️/➡️
Defensive Stocks ➡️
Energy Stocks ↗️/➡️
Materials Stocks ↗️/➡️
AUD, GBP ↗️/➡️
EUR, CAD ➡️
JPY, CHF ↘️/➡️
⚒ Commodity Markets ➡️
Oil prices ↗️/➡️
Natural Gas prices ↗️/➡️
Metal prices ➡️
Gold ➡️/↘️ (remains slightly bearish due to higher yields; strong equities)
⚡️Cryptos ➡️ (BTC hovers around $36.5K – $37.5K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)