Asian & European stocks are rising, supported by further Chinese stimulus measures and signs that Beijing is doing all it can to accelerate or support its struggling economy. Market sentiment – including in the U.S., where Labor Day keeps markets closed today – remains mostly positive on hopes that the Fed and global interest rates are nearing their peak.
After a strong Chinese trading day that helped markets in China and Hong Kong close in the green, European stocks also performed well, with China-sensitive stocks and sectors such as materials and luxury goods outperforming.
Oil prices also extended gains as confidence grows that China's economic crisis can be overcome with Beijing's massive stimulus measures. Oil prices rose to new 2023 highs in Asian trading, but were sold off slightly during European trading hours as U.S. traders were mostly on vacation. Oil prices continue to be supported by expectations that OPEC+ will keep oil production and exports curbed for longer.
Last week's economic data painted a picture of a cooling U.S. economy and the U.S. labor market in particular continues to rapidly unwind. The latest U.S. jobs report on Friday showed that the U.S. labor market is cooling and the unemployment rate rose sharply to 3.8% (from 3.5%) – the highest level since February 2022.
The Fed has seen the tight labor market and rapid wage inflation as one of the main problems in containing inflation. Signs of a slowdown in the labor market may encourage the Fed to refrain from further rate hikes.
Expectations for a pause in rate hikes in September and November have continued to rise. Only 7% expect another 25 basis point rate hike on September 20.
Relatively robust U.S. economic data – even if showing a slowdown – keep hopes for a soft landing alive. The recent rally is likely to last a bit longer as hopes are high that the interest rate peak has already been reached. Central banks in Australia and Canada are expected to leave rates unchanged this week, reinforcing expectations that the Fed will wait for more data before deciding on another rate hike.
In a holiday-thinned trading day, we see markets higher overall and the general positive market sentiment continues. The USD remains strong for now as US traders are mostly absent. However, we see an increasingly limited further upside for the USD as hopes/expectations rise that the Fed interest rate peak has already been reached.
👁 ROB'S MARKET OVERVIEW:
⚠️ US (& Canadian) Markets remain shut due to Labor Day holiday
September 04, 2023
🌍 Global Markets ↕️/↗️/➡️ (earlier gains, turning side ways during late European trading)
Cyclical Stocks ↕️/↗️/➡️
Tech/Growth Stocks ↕️/↗️
Financial Stocks ➡️/↗️
Defensive Stocks ➡️
Energy Stocks ➡️/↗️
Materials Stocks ↗️
AUD, CAD ➡️/↗️ (benefiting from China stimulus / higher commodity/oil prices)
JPY, CHF ➡️
EUR ➡️ (stabilizing after recent weakness)
USD ➡️/↘️ (after recent gains, light reversal likely)
⚒ Commodity Markets ↕️/↗️
Oil prices ➡️/↗️ (still bullish – could quickly rise another $1-2 after extended OPEC+ production/export restrictions).
Natural Gas prices ↕️/↘️
Metal prices ↕️/↗️ (benefiting from China's stimulus measures)
Precious Metal prices ➡️/↗️ (rising support at $1,940 / resistance at $1,950)
⚡️Cryptos ➡️/↘️ (Recent optimism after ETF approval wanes).
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)