Positive weekly performance for major stock indices, thanks to sustained risk appetite triggered by expectations of limited upside for interest rate hikes, China stimulus, and the resilience of the US economy despite higher borrowing costs and the most severe banking crisis since 2007-2008.
The CBOE VIX index, dived and reached a level seen on March 2020 before the Covid19 selloff. At 14.35 implied volatility signaling the same complacency seen on years of ultra loose monetary policy and QEs.
The following is the performance of major US indices in the latest 5 trading sessions: Dow Jones closed at 34,299.12, + 1.25% while S&P 500 closed at 4,409.59 , +2.58% and the Nasdaq kept its relative strenght advancing by 3.25% to 13,689.57.
Weekly advances also for the DAX , up 2.56% , the Eurostoxx50 ,+2.45% and the Nikkei225, which advanced by 4.47%.
Considering the shares traded on NYSE, Nasdaq and AMEX , 54% closed on Friday above their 200 day SMA. If this bullish market would continue, there are some companies that are clearly lagging behind. Apple AAPL, Microsoft MSFT and Nvidia NVDA are clearly not among this group since these Mega cap made an all time high last week and given their weight on indices this bullish leg is driven by big names in tech and AI.
In the FX market USD/JPY would likely reach 150 before to see some change of attitude from the BoJ. Changing the way the yield curve is managed would have some dramatic effects on carry trade, the strenght of JPY due to portfolio effects and a selloff on the Nikkei. All stuff for Global Macro, thus decreasing shorts on JPY and long on Nikkei and/or start to profit take from previous position is not a bad idea if someone does not have the timing or the know how of a specialist that can ride the potential surprise of governor Ueda.
Commodity currencies advanced and EUR/USD is likely to test its 2023 high at 1.1094 soon, as it is only 150 pips away from Friday close.
The US Treasury yield curve is still inverted, with the spread between the 10 year and the 1 year note negative at (3.76% – 5.23% ) -1.47%.
Short term framework look positive for both Crude Oil and Gold since they made multiple bottoms and technical buying it may offset some potential weakness of fundamental traders.
In China the PBoC will decide interest rate level on Tuesday . On the same day will be released the BoJ minutes.
UK CPI on Wednesday : the Pound may test 1.3 in the short term, if the BoE will continue to be hawkish without any political pressure from a government that is very likely to lose at the next general elections there the possibility to test area 1.42 by end of the year is not a remote one.
Unless serious alarms of global growth slowdown without any government countermeasures is quite difficult to see Crude Oil getting on a selloff below 60$/barrel. Geopolitical tensions remain and the transition to electric vehicles would affect most families in the medium to higher income brackets.
