Stocks slide further after negative week; Euro plunges

📰 Stocks continue to fall despite modest gains on Friday, some dip buying during yesterday's thin trading activity and ongoing talks between the U.S. and China on rolling back some of the trade tariffs imposed by former U.S. President Donald Trump. Wall Street is trading negative in pre-market trading in the U.S. today – U.S. traders have returned after the U.S. Independence Day.

Cyclical stocks such as automakers or mining/commodity companies are leading losses as investors remain concerned about a global (esp. US) recession. While a recession in Europe is already widely expected in 2022 (it has taken a long time to get there), there is still downside potential in the U.S. as analysts, the Fed and investment banks continue to downplay the likelihood of a U.S. recession. However, stubborn inflation and the prospect of further monetary tightening continue to spook investors. 

Markets will come under even more pressure later this month as more companies report declining earnings per share (EPS) and lower their full-year forecasts and 2023 earnings expectations. 

At this point, I still expect the Fed to be very aggressive in raising interest rates or fighting inflation. But at the same time, we will see more and more signs of a sharp slowdown in Europe (and then in the U.S.), which will further fuel growth concerns. 

The deterioration in risk sentiment and the underperformance of the European economy is also reflected in the slide of the EUR and GBP. The euro extended its losses against the USD, falling to its lowest level since 2002, and both the EUR and GBP are facing headwinds as expectations rise that the ECB and BOE will be more cautious in tightening monetary policy (than the Fed).

Recession concerns are also making themselves felt in commodity prices, which continue to fall and weigh on the commodity-linked AUD. The RBA raised its policy rate to 1.35%, as expected – meaning that tightening will continue, but not at the pace of the Fed. Oil prices again faced headwinds on growth concerns and Citi's warning that oil prices could fall to $65 by the end of the year – an absurd forecast given the supply deficit, in my view. In the short term, oil and gas prices could face some headwinds, but in the medium to long term, they remain bullish. Energy companies will also report record profits and issue positive forecasts, unlike the vast majority of industries.


🇺🇸 US Markets ↘️
Cyclical Stocks ↘️
Tech/Growth Stocks ↘️
Financial stocks ↘️
Energy Stocks ➡️/↗️

💱 Forex Markets
JPY ➡️/↗️
CAD ➡️

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

⚡️Crypto Market ➡️/↘️

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

Yours, Robert 🇪🇺🇺🇸🇬🇧🇨🇳😱