Wall Street is proving very resilient, but will open almost unchanged in a shortened trading session and after being closed yesterday due to Thanksgiving. This week, the Dow and the S&P 500 are both up 0.9%. The Nasdaq is up 1% in that time – even if there is profit taking, we expect the major indices to close higher for the week resulting in a four-week winning streak. Equities in Europe also remain robust and received a tailwind after ECB Chair Christine Lagarde said that policy makers are in a position to pause after the long tightening cycle that threatens to plunge the eurozone into recession – in reality, most economic data, including purchasing managers' indices or negative GDP growth in Germany in the third quarter, show that the Eurozone is already in or remains in contraction territory.
The broad Stoxx Europe 600 is up 0.2% today and on track for its best month since January. However, the best performing index is still the Nasdaq, which is up more than 36% this year, driven largely by big tech stocks and enthusiasm for artificial intelligence.
The main driver of this year's rise, which was boosted by November's gains, is optimism that interest rates in the US (as well as the Eurozone and UK) have already peaked and that rate cuts are on the cards in H1/2024. Government bond yields in particular have reached multi-month lows as hopes that disinflation will continue have also extended the rally.
One problem, however, is that if economic growth (and equities) remain solid at the current policy rate, monetary policy is almost by definition not constraining the economy, which means the Fed has little reason to cut rates – I still see too much optimism here that rate cuts will come as early as March.
Asian equities were mixed. Stocks in Hong Kong and mainland China fell, reversing Thursday's rally triggered by Beijing's extended property bailout campaign. Japanese shares rose after a public holiday, while Australian stocks also rose. In China, shares in construction companies fell 1.9% in the afternoon after rising 8.9% on Thursday. The previous rise came after news that Chinese banks will be allowed to grant unsecured short-term loans to qualified builders for the first time – the latest attempt to stem the housing slump.
We also see ongoing concerns about an economic slowdown in still very weak oil prices – which received some support after OPEC+ said it will hold its meeting online only (which in my mind means there will be no major policy changes) – but remain bearish. Falling yields are also a sign of rising demand for bonds, which still have very attractive yields.
I expect some profit taking at the end of the shortened US trading session. The NYSE closes three hours earlier today (at 13:00 NY time (=18:00 UTC+0) instead of 16:00). Overall, however, we will see mostly sideways movement on all markets, including the currency and commodity markets.
👁 ROB'S MARKET OVERVIEW:
November 24, 2023
🌐🇺🇸 Global/US Markets ↗️/➡️/↘️ (basically sideways movement with some early gains and some profit taking at the end of the US (shortened) trading session)
Cyclical Stocks ↗️/➡️/↘️
Tech/Growth Stocks ➡️/↘️
Financial Stocks ➡️
Defensive Stocks ↘️/➡️
Energy Stocks ➡️/↘️
GBP, EUR, CHF ➡️/↗️
JPY ➡️ (but remains in recovery mode medium-term)
USD, CAD ➡️/↘️
⚒ Commodity Markets ↘️
Oil prices ➡️/↘️ (trimming gains from yet another small recovery attempt)
Natural Gas prices ↘️ (headwinds due to still oversupply in Europe)
Metal prices ➡️/↘️
Gold ➡️ (little change – still hovering around $2,000 – remains slightly bullish as yields cool down)
⚡️Cryptos ➡️/↗️ (remain slightly bullish; BTC broke sideways range and moved above $38K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)