Markets in Europe and the U.S. are little changed after a brutal sell-off and continue to trade in the red for the month. Stock markets ended last week significantly weaker after the world's most influential central banks surprised with a very hawkish stance and promised to continue to fight inflation decisively. 

Investors were shocked by yesterday's (and early today's) performance on Wall Street, especially in tech stocks. Most analysts, investors and traders had expected a rebound after three days of losses - encouraged by optimistic investment banks. Instead, we saw the fourth negative day in a row as concerns about a deepening recession and (longer-term) higher interest rates weighed heavily on interest rate-sensitive stocks.

Chip stocks, especially Nvidia, performed very well since Fall and are still far from their 2022 lows. Although Nvidia still looks very attractive at current valuations after the steep losses since all-time highs from December 2021, the chip giant is still expensive - and nearly 60% above the 2022 lows. 

We expect the near-term earnings outlook to still disappoint and not show recovery in sales and growth-rates investors are hoping for. Falling (still good) margin will also weigh on Nvidia. The world's mist valuable chip company is trading at a steep premium to other chip stocks. 

Nvidia continues to struggle with major growth concerns - demand from cryptocurrency miners is not coming back, gaming has slowed significantly, and margins are lower. In addition, higher interest rates make future revenue streams less valuable and U.S. regulation is hurting Nvidia's China business. We also expect a revenue warning from chip company Micron later this week, which will weigh on the chip industry. 

Again, investment banks which remain largely positive in particular on the tech-sector, we see stocks extending last weeks loses. The Nasdaq is trading more than 1.5% (!) down. U.S. Treasury yields continued to rise as investors are worried about how high the Federal Reserve will hike interest rates and how long they will remain at restrictive levels in its battle against inflation. Gold sees slight safe haven support but will remain under pressure from rising US Treasury yields. I see only limited further short-term downside potential in the USD. 

Recession fears in the U.S. increased as the Fed raised its forecast for future rate hikes beyond previous expectations, saying it now expects rates to rise to 5.1%.

Today's markets are supported by gains in energy and mining stocks after Beijing pledged to boost the economy next year by reviving consumption and supporting the private sector. News of another rapid rise in Covid cases in China capped gains in Asian markets.

Tesla is trading higher in premarket trading, supporting the Nasdaq and S&P 500 in anticipation of Elon Musk's withdrawal from Twitter, the social media company that has distracted him from running Tesla for months. Twitter users voted 58% in favor of Musk stepping down from the leadership role. 

We may see some dip buying, but we remain in a bear market where further signs of slowing corporate earnings will likely weigh heavily on stocks early next year.

Elsewhere, the dollar weakened slightly against its peers, but rising Treasury yields and expectations of further rate hikes will continue to support the USD. The EUR will be supported by very aggressive comments from ECB President Lagarde.

The USD and recession concerns will continue to weigh on commodity prices. However, Chinese stimulus plans and expectations of rising oil demand in China support a recovery in oil prices. Fears of an economic slowdown are keeping gains in check and we will continue to see gains and profit taking in oil prices.

Stock Picks: Nivida, Telsa, Micron

Commodity Pick: Gold