Senior Relationship Manager
Summary: ISM spooks traders but volumes low.
Good Morning,
Yesterday was an interesting trading day as risk sold off heavily after a higher than expected ISM Survey caused US rates to gain. Interest rate futures trade 89% chance that the U.S. central bank will increase interest rates by 50 basis points next week with a peak at 5% in May 2023. 10 year Yields rose from below 3.50 to 3.6%.
Stocks fell significantly and the USD gained in value across the board. The US 500 fell below the 200 day moving average again to 4000, closing 1.8% lower yesterday, the Nasdaq gave up 1.93% and the Dow 1.4%. Significant losers were Tesla and VF as well as energy stocks. , Tesla lost 6.4% on an expected lower output and VF 11% on a cut outlook. Curiously, volumes were quite low and below the 20 Day average, indicating little panic.
The USD Index rose from a low of 104.15 to 105.40, so far remaining below the 200d MA at 105.70. EURUSD fell to 1.0480, GBPUSD 1.2180 and USDJPY 137.30. Gold and Silver fell to now 1770 and 22.30, Gold fell below the 200d MA and Silver remains above. AUDUSD fell to 0.6715 on a hawkish RBA
Oil fell massively as well with the CL contract dropping from 82.70 to 77.
Markets will look for orientation ahead of next weeks rate decisions, there is little tier one data until the US PPI and the University of Michigan consumer confidence on Friday.
Key news could come from China where Peking dropped he requirement to show negative Covid tests when entering many buildings and more easing is expected.
According to Reuters, Goldman Sachs is planning to pick up Crypto companies on the cheap int eh current environment,
Trade safely.
2024: The wasted year
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.
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.