Wall Street defies recession worries & signs; Strong earnings

📰  While global equities remain positive overall but on shaky ground, recession worries in the USA are receding. Equities, particularly in the U.S., are proving resilient to rising bond market fears and the inverse U.S. Treasury yield curve, which are signs of recession. Wall Street is on track for its highest level in two months. 

Another set of strong earnings reports from ConocoPhillips, as well as from very global, cyclical companies like Toyota and Glencore, continue to improve market sentiment. Chinese e-commerce giant Alibaba reported better-than-feared quarterly results, also leading to strong share price gains. Eli Lilly disappointed after missing estimates and the pharmaceutical giant lowered its full-year guidance. 

I still believe that the current rally is on shaky ground, as economic data, especially in Europe and Asia, show a different picture and point to a continued slowdown, which could be more pronounced in the third quarter – nevertheless, the markets remain positive for now. The Bank of England raised its key interest rate by half a point for the first time since 1995, but it was mainly its forecast for inflation and a prolonged recession that caused a stir. 

Oil prices surprised investors yesterday after falling sharply despite OPEC+'s intransigence to increase output further. Gold prices continue to rise, supported by falling U.S. Treasury yields – I see precious metals outperforming other commodities.

Another risk factor remains and could bring the rally to an abrupt end: Tensions between the U.S. and China, and in particular the situation surrounding Taiwan. The island nation, which China views as just another province of China, must reckon with the Chinese military firing around the island in “drills.” The risk of further escalation is higher than most analysts predict, especially as the Chinese are expressing disappointment on social media with how Beijing handled Pelosi's Taiwan visit.

I expect good U.S. jobs data, which could reinforce the impression that the U.S. economy remains healthy and continues to outperform Europe, which is struggling with the energy crisis, and Asia, which is struggling with rising tensions in the region and China's zero-COVID policy.

The euro can benefit from GBP weakness. Currently, we see a slight improvement in risk sentiment overall, but I think it will be short-lived. Despite the Bank of England's strong rate hike, the GBP is pointing to further weakness – partly due to the Bank of England's very gloomy outlook, which also limits further rate hikes by the central bank.


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

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

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

⚡️Crypto Market ➡️/↘️

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

Yours, Robert 🇺🇸📈🇪🇺🇬🇧🇨🇳