Global equities continue to face headwinds from further indications that the economic problems in Europe and Asia will last longer and may even worsen before they get better. Trade in China continues to decline rapidly, but at least less badly than expected. German industrial production has entered a sharp downturn that will plunge the entire economy into recession. House prices in the UK are falling at the fastest annual rate since 2009.
In the U.S., economic data looks different, with domestic demand in particular remaining strong. Yesterday's services PMI was much better than expected and today's initial jobless claims paint a different picture of the labor market than other labor market data has recently, with initial jobless claims coming in below expectations and below last week's data.
Investors are increasingly uncertain whether the Federal Reserve believes an interest rate cut is needed soon, as the U.S. economy remains stable and consumer prices remain high due to robust consumer spending.
We see the trio of Apple, Nvidia and Tesla extending yesterday's losses. Concerns are growing that China will expand bans on U.S. technologies and extend the ban on iPhone use even further (including to state-owned enterprises and government agencies).
The different pace of the economies is also reflected in the foreign exchange market. The USD rose slightly after hitting a nearly six-month high earlier in the week. The EUR weakened further as the region barely grew in the second quarter. The onshore yuan slipped to a 16-year low as pessimism about China's economy increased. We see stronger demand for the CHF and especially the (still very weak) JPY, other safe-haven currencies, and the scope for further rate hikes by the ECB or BoE is also limited given the sharp slowdown in economic activity.
We see some headwinds for commodity prices as concerns about weak economic growth increase and expectations for a Fed rate cut in 2024 continue to decline. However, the overall outlook for oil prices remains bullish as we continue to see excess demand.
👁 ROB'S MARKET OVERVIEW:
September 07, 2023
🇺🇸 US Markets ↕️/↘️
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↘️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️/↗️ (defensive stocks will continue to outperform – rotation growth to defensive)
Energy Stocks ➡️/↗️
Materials Stocks ↘️
USD ➡️/↗️ (USD remains in demand – and will continue to edge higher in upcoming sessions)
AUD, CAD, CHF ➡️
GBP, EUR ➡️/↘️ (Outlook for Europe's economy pessimistic)
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️/↗️ (oil prices to stabilize; oil remains bullish)
Natural Gas prices ↕️
Metal prices ↕️/↘️ (optimism boost about China's property sector to fade further)
Precious Metal prices ➡️/↗️ (finding a bottom, more safe haven demand)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)