Wall Street is struggling to gain momentum and U.S. stocks are slightly lower today, although European stocks are having a very strong session after a sharp improvement in Chinese economic data and increased expectations that the ECB has ended its tightening campaign.
Investors are still trying to evaluate the numerous data, some of which point in different directions. General optimism that interest rates have already peaked has helped market sentiment recently. But ahead of the Fed's rate decision next week, the data picture is unclear. I think a rate hike is unlikely – but unlike the ECB, the Fed certainly won't give a dovish outlook and instead will remain wait-and-see.
However, according to Bank of America, equity funds saw their largest weekly inflows in 18 months as investors grew increasingly confident that the U.S. economy is headed for a soft landing after recent data reinforced the picture of a resilient U.S. economy.
China's economy gained momentum in August as a summer travel boom and extensive stimulus measures boosted consumer spending and factory output, contributing to early signs of stabilization. Industrial production and retail sales growth were well above expectations last month, while the urban unemployment rate fell slightly. European markets benefited more from signs of an improving Chinese economy than the Chinese markets themselves, which surprisingly closed negative (with the exception of the technology-heavy Hang Seng).
Investors also prepared for Friday's Triple Witching Options Event, which will provide additional volatility. Options worth $4 trillion (!) expire today. It may be that some investors are repositioning as signs mount that central banks are nearing the end of monetary tightening.
Overall, we see European markets in a short-term overbought condition. Rising Treasury yields will limit gains in growth stocks. I expect Wall Street will not be able to follow the strong gains in Europe. Tech stocks are likely to underperform today, which could lead to slight losses in New York overall.
The EUR remains weak after the ECB's dovish statement, which indicated that the ECB will not raise interest rates again. The improving risk sentiment will further boost commodity and oil prices and help commodity-linked currencies like AUD.
👁 ROB'S MARKET OVERVIEW:
September 15, 2023
🇺🇸 US Markets ↕️
Cyclical Stocks ↕️/↗️
Tech/Growth Stocks ➡️/↘️
Financial Stocks ➡️/↗️
Defensive Stocks ➡️
Energy Stocks ➡️/↗️
Materials Stocks ➡️/↗️
EUR ↗️/↘️ (first rebound attempt after sharp losses, but EUR remains bearish)
GBP ➡️/↘️ (after ECB dovish push, rising expectations that BoE follows)
⚒ Commodity Markets ↕️/↗️
Oil prices ↘️/➡️/↗️ (slight losses first; Oil prices remain bullish)
Natural Gas prices ↕️
Metal prices ↗️ (on China optimism)
Precious Metal prices ↗️/➡️/↘️ (benefited from stronger CNY, rising yields weigh on gold)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)