Senior Relationship Manager
Summary: Markets in Limbo ahead ud US CPI
Good morning,
Markets are in Limbo ahead of the key US Inflation data at 14:30 CET today. Expected at 6.8% the number will give an idea of the Feds action next week. The expectations are for faster tapering and hints at earlier rate hikes. As Japan just released a record 9.0% wholesale inflation in November, we could see a higher-than feared number in the US.
Rate sensitive equities were under pressure yesterday, the Nasdaq fell 1.7%, the Dow was unchanged and the S&P500 in the middle at -0.71. The USD Index and rates moved little but precious metals traded under pressure. Silver fell below the 22.00 support, Gold is trading above support at 1772.
The Dax has retreated to mid range at 15530 after German Inflation data case exactly as expected with the annual CPI at 5.2%
Bitcoin hovers below 50k at 48.000 and oil fairly stable at 70.7 USD.
Besides the US CPI the University of Michigan survey at 16:00 CET could be of interest.
Trade carefully
2024: The wasted year
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.