All markets were quietly lower yesterday for a myriad of reasons. Market leader NVDA slid as China opened a probe over suspicions the chipmaker broke anti-monopoly laws. Concerns that Middle East tensions could further escalated given the unexpected toppling of the Syrian government. To more mundane topics such as tomorrow’s release of November’s CPI that could alter monetary policy assumptions.
Friday’s strong jobs report may suggest that this week’s inflation reports may be stronger than anticipated and that could alter the expected monetary policy path.
Generally speaking, equities are regarded as overbought thus suggesting any data point that misses expectations, or external event can elicit some selling.
Oil however rebounded from oversold levels as China signaled bolder than expected stimulus for the next year as well as from the a fore mentioned change the Syrian government. Assad fled to Russia as his backers which include Russia, Iran and Hezbollah were routed by Al Quida and Taliban proxied.
Is this only noise or something of more significance?
Bloomberg wrote yesterday the momentum trade which has been the outperforming for all of 2024 had its worst day since 2020 when the vaccine announcement sent the big COVID winners spiraling lower. One day does not make a trend but the large decline is indicative of the lack of liquidity in a very crowded trade.
Conversely both oil and gold had strong days. Bloomberg reports that China bought 160,000 ounces last month, the first purchase April. Oil is up on the Syrian news and continued reduction in OPEC production. The Cartel again indicated that supplies are 94% of demand but prices fail to recognize this disparity.
What will happen today?
Last night the foreign markets were mixed. London was down 0.50%, Paris down 0.54% and Frankfurt up 0.08% . China was up 0.59%, Japan up 0.53% and Hang Seng down 0.50%.
Futures are flat. The 10-year is off 7/32 to yield 4.23%.
