Markets with little optimism ahead of key US inflation report

📰 US stocks and Treasuries stabilized in pre-market trading ahead of the US CPI report, which could bolster the case for a hawkish Fed. Wall Street started the week with more losses, with the growth/technology sector in particular taking heavy losses. The key 10-year Treasury yield rose yesterday to its highest level since 2018.

Asian markets slipped for another day, while Chinese equities rallied on hopes of further stimulus measures and continued talk of a possible easing of strict lockdown measures.

European stock markets slipped, but recovered from very poor openings. Bank stocks were among the biggest decliners in Europe as concerns about the impact of the war in Ukraine and the possibility of a recession affected earnings estimates. European banks appear somewhat oversold and have attractive valuations. Deutsche Bank and Commerzbank (Germany's largest credit institutions) led losses in Germany and Europe after selling shares worth a combined €1.75 billion. The tech sector outperformed in Europe, which could indicate a stabilization of the tech sector – also in the US.

However, the most important influencing factor today is the US inflation data (consumer price index), which will be released before the NYSE opens (12:30 GMT). Inflation is expected to be above 8% for the first time since 1981. I am in the upper range of analysts' expectations and think a reading between 8.4% and 8.7% is very likely. Anything above 8.5% could add to selling pressure, although expectations of a very hawkish Fed are already in place. 

While most analysts are still bullish – such as JPMorgan's Marko Kolanovic, who says market bubble corrections are almost over – I am much more pessimistic, expecting a recession (also in the US; 100% in Europe) and believe recession fears will continue to weigh on market sentiment.

Oil prices have made a small comeback due to increased expectations of a European embargo on Russian oil and increased optimism that China will ease restrictions (which I disagree with).

The dollar remains strong due to the ultra-loose Fed. The US dollar index, which tracks the greenback against a basket of six world currencies, was 0.25% higher in overnight trading at 100.185, its highest level in more than two years. Commodity-linked currencies such as the AUD and CAD could see a (likely short-lived) bounce today on higher commodity prices. The Japanese yen remains in free fall due to the Bank of Japan's accommodative stance. The euro is losing some of yesterday's gains as investors are still uncertain whether the ECB will tighten monetary conditions to fight inflation (which it desperately needs to do!).

Bitcoin rallied above $40,000, regaining some ground after falling in seven of the last eight days. Cryptocurrencies will continue to move in high correlation with the tech sector (= Nasdaq).


👁 ROB'S MARKET OVERVIEW:

🇺🇸 US Markets ↕️
Cyclical Stocks ↕️
Financial Stocks ➡️/↗️
Energy, Materials Stocks ↗️
Tech/Growth Stocks ↕️/↘️

💱 Forex Markets 
AUD ↗️
USD, CAD ➡️/↗️
GBP ➡️
EUR, JPY, CHF ➡️/↘️

⚒ Commodity Markets ➡️/↗️
Oil prices ➡️/↗️
Gas prices ➡️/↗️
Metal prices ➡️
Precious Metals ➡️

⚡️Crypto Market ➡️

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 💸🔍📈🧐