US stocks climbed the most since June on Tuesday after unexpectedly weak labor market and consumer confidence data fueled hopes that the Federal Reserve could suspend further monetary tightening and is nearing the end of its tightening cycle. Recent strong signals that Beijing is fully focused on supporting the economy and Chinese equity markets also improved market sentiment.
Asian markets were mixed today, however, although there were further signs of more stimulus as China's state-owned lenders may be preparing to cut interest rates on much of their outstanding mortgages to ease China's heavy debt burden. Europe was also under pressure as there were signs that inflation in the eurozone has become entrenched. Data from Germany and Spain showed that inflation was unchanged or even accelerating in August.
In the USA, weak economic data were again published. Gross domestic product growth was lower than expected and ADP reported that U.S. private companies hired the fewest number of new employees since March of this year, reinforcing the picture of an easing U.S. labor market.
HP slumped nearly 10% in premarket trading after the technology company lowered its full-year cash flow and profit forecast. Much attention will be on Salesforce's earnings report after the market closes.
We see mixed bonds. Yields in the U.S. continue to fall after weak economic and labor market data. In the Eurozone, yields rose on expectations that the ECB will need to raise rates further to cool inflation.
Data is the name of the game right now. In particular, data that lowers Fed rate hike expectations can extend the stock market rally – which is shaky, however, given the prospects of recession in the economies. With the ratio of puts to calls still high, there may be short squeezes if prices continue to rise, meaning bulls can push stocks higher.
In commodities, oil prices continue to rise as expected. There are still signs of a tight oil market and the USD is losing some of its recent gains, which has put the USD in an overbought condition. Gold rose above $1,940 in response to the weak economic data and will continue to benefit from lower US Treasury yields.
👁 ROB'S MARKET OVERVIEW:
August 30, 2023
🇺🇸 US Markets ↗️/↕️ (we see gains to continue but markets become increasingly mixed in the second half of the day)
Cyclical Stocks ↗️/↕️
Tech/Growth Stocks ↗️/↕️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️/↗️
Energy Stocks ↗️
Materials Stocks ↕️/↗️
AUD, CAD ➡️/↗️
EUR ➡️/↗️ (benefiting from high inflation readings)
GBP ↗️/➡️ (earlier gains to lose as market sentiment becomes worse in second half)
JPY, CHF ➡️
USD ↘️/➡️ (further losses before stabilizing in second half of US trading)
⚒ Commodity Markets ↕️
Oil prices ➡️/↗️ (remaining bullish – testing $82.00)
Natural Gas prices ↕️
Metal prices ➡️
Precious Metal prices ➡️/↗️ (benefiting from lower US Treasury yields)
⚡️Cryptos ➡️/↘️ (confidence in cryptos remains negative after recent losses; optimism from ETF approval to fade)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)