We see stocks in Europe and the U.S. rising (pre-market) after hitting multi-month lows the previous week. The broad European Stoxx 600 is trading 0.6% higher after hitting a 10-month low. Sentiment remains fragile but has improved slightly as oil prices eased and Israel's military action in Gaza was viewed more cautiously than some investors had feared.
The slightly improved market sentiment is also reflected in safe-haven assets such as bonds, gold, and the USD, all of which weakened somewhat. However, with the equity market still fragile and earnings reports showing signs of slowing corporate profits, macroeconomic headwinds remain.
Instead of a massive ground invasion, the Israeli military has started “slowly” and so far there are few signs that the conflict will spread to the entire Middle East region. This is seen by investors as good enough news to get back into the markets after last week's sharp sell-off, which sent the S&P 500 into correction territory on Friday after the index closed 10% below its recent high. All major U.S. indexes are still trading well below the 200-day moving average, which means there is some recovery potential from the (short-term) oversold condition. We anticipated this market reaction on Friday and therefore closed all of our index SHORTs near the daily lows – congratulations! We continue to be well ahead of the markets.
We also have a number of potentially market-moving events coming up this week that we will be watching closely, including central bank meetings in Japan, the U.S. and the U.K., as well as the announcement of the U.S. Treasury's quarterly bond selling plan. Recent demand for bonds has been weak, leading to a rise in yields and putting additional pressure on equities (especially those sensitive to interest rates / yields).
Among individual stocks, HSBC, Europe's largest bank by market capitalization, held steady after news of a pre-tax profit of $7.71 billion, which fell short of analysts' estimates, was offset by up to $3 billion in further share buybacks.
Markets in Asia also closed slightly higher despite the ongoing problems in the Chinese real estate sector.
We expect a quiet start to the week, with stocks likely to recoup some of the recent sharp losses. However, I believe investors expecting a strong year-end rally will be disappointed – there is little sign of improving macroeconomic conditions. I also believe that the Fed is yet to send a signal that further rate hikes are off the table. Signs of that, however, may well help to start November on a positive note. Much attention will also be paid to Apple's earnings report on Thursday.
👁 ROB'S MARKET OVERVIEW:
October 30, 2023
🇺🇸 US Markets ↗️/➡️ (reducing some of recent sharp losses – not start of recovery-rally)
Cyclical Stocks ↗️/➡️
Tech/Growth Stocks ↗️/➡️
Financial Stocks ↗️/➡️
Defensive Stocks ↗️ (also benefiting from strong McDonald's earnings)
Energy Stocks ↗️/➡️
Materials Stocks ↗️ (benefiting from CN gains; temporarily improved risk sentiment)
AUD ↗️ (benefiting from CN gains; temporarily improved risk sentiment)
CAD, GBP ↗️/➡️
EUR ↗️/➡️/↘️ (losing some of today's gains with ECB sending signal being done with hikes / falling Eurozone inflation)
USD ↘️/➡️ (stabilizing after edging lower in early trading – USD remains bullish)
JPY, CHF ➡️/↘️
⚒ Commodity Markets ↕️
Oil prices ➡️/↘️ (concerns about escalating tension in Middle East reduced)
Natural Gas prices ↘️ (concerns about escalating tension in Middle East reduced)
Metal prices ↗️ (benefiting from CN gains; temporarily improved risk sentiment)
Gold ↘️/➡️ (giving back some recent gains)
⚡️Cryptos ➡️/↗️ (in sideways with interest about cryptos slightly elevated after recent gains / ETF optimism)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)