Oil prices rose and stock prices fell as Iran stepped up its rhetoric against Israel after an explosion at a Gaza hospital complicated diplomatic efforts to contain the Middle East conflict.
Contracts on the S&P 500 and Nasdaq 100 are trading more than 0.4% lower in premarket U.S. trading. Crude oil prices accelerated to more than 3% higher as the foreign minister of Iran, a major exporter, called for an oil embargo on Israel. Oil prices cooled by 1% after the price spike. Gold prices rose as investors fled to safer assets, testing $1,950 for the first time in more than 45 days.
Amid geopolitical concerns, traders are also tracking recent corporate earnings. Morgan Stanley fell ~3.0% in premarket trading after third-quarter asset management revenue missed estimates. Recession-resistant Procter & Gamble rose in pre-market trading (currently +1.5%) after organic sales beat expectations. In Europe, ASML, Europe's most valuable technology company, slumped 1.7% after third-quarter orders slumped. Adidas rose more than 5% after the sportswear maker raised its forecasts. The overall mixed results add to concerns about worsening revenue forecasts – especially ahead of key earnings reports from Netflix and Tesla, both expensive stocks.
In Asia, a key index of Chinese property developers fell to its lowest level since 2009 after troubled Chinese developer Country Garden Holdings signaled it was close to its first default – which would trigger a vicious cycle.
Inflation in the UK beat forecasts, boosting GBP after recent weakness, as it restored the likelihood of another rate hike by the Bank of England. I consider the GBP gains to be likely short-lived. However, the still shaky risk sentiment and strong indications that the situation in the Middle East will deteriorate further despite US President Joe Biden's visit to the region will continue to weigh on market sentiment – keeping demand for safe havens, including the USD and in particular gold up. Combined with recurring fears that interest rates will remain high for longer and that U.S. Treasury yields are near their 16-year high, we see a high risk of further selling in stocks today.
Losses will be harsher in rate sensitive / tech stocks – due to the very high bond yields and concerns about weak earnings reports / forecasts from Tesla and Netflix.
👁 ROB'S MARKET OVERVIEW:
October 18, 2023
🇺🇸 US Markets ↕️/↘️
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↘️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️
Energy Stocks ↗️ (strong outperformer today)
Materials Stocks ↘️ (CN property crisis weighs)
JPY, CHF, CAD ➡️/↗️
USD ↘️/↗️ (trimming earlier losses – gains during US trading)
GBP ↗️/↘️ (likely unable to hold gains – due to worsening risk sentiment)
AUD, EUR ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ↗️
Natural Gas prices ↗️
Metal prices ↕️/↘️
⚡️Cryptos ➡️/↘️ (as markets remains nervous; cryptos remain unattractive)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)