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Global stock rally pauses amid mixed corporate earnings & higher yields as euphoria about a potentially dovish rate outlook fades

Olusegun Enujowo


In Europe, the Stoxx 600 Index stagnated (-0.25%) after three consecutive days of gains. Notable movements include Burberry Group 6.7% drop due to revenue target concerns. Siemens, however, climbed on the back of a strong quarterly report, reporting a 10% rise in revenue growth for its fiscal fourth quarter, with a revenue of €21.39B. The GBP fell sharply in the previous session and overnight following yesterday's cooler-than-expected UK inflation data.

 US markets are flat in US pre-market trading. We have seen increasing profit taking after a significant rally. US 100 (-0.1%) and US 500 futures (0.0%) are flat. Investors are now focusing on upcoming US initial jobless claims, industrial production figures, and a series of Fed speakers. Corporate earnings, particularly from Walmart, are also under scrutiny to gauge the economic outlook. Treasuries have seen a rise following a recent selloff, and the USD has experienced a slight pullback.

 Chinese shares in Hong Kong led the losses in Asia down 1.41%, influenced by the falling home prices and the lukewarm response to the Xi-Biden summit. Technology stocks in Hong Kong, notably Xiaomi and Tencent, faced a selloff after recent gains. Investors are also awaiting earnings reports from Alibaba and NetEase, following uplifting results from JD .com and Tencent Holdings yesterday. Japan’s trade deficit narrowed significantly, while its core machinery orders rose.  In Australia, unemployment rates saw a slight increase to 3.7%, with consumer inflation expectations rising to 4.9%.

Oil prices are little changed after some losses yesterday amid mixed US inventories. WTI Crude Oil is currently trading below $76.3/barrel. The gold price benefited from falling US Treasury yields but gave back some of yesterday's early gains - it is currently trading 0.45% higher at $1,967/oz.  

 The recent cooling of the US inflation has sparked debates about the Fed's future actions, creating an uncertain environment for investors. The current market sentiment is cautiously optimistic yet mixed, driven by the US 500 exceeding bullish expectations. Robust U.S. retail sales created some concerns that the Fed may not see enough evidence that the economy is slowing down enough to cool inflation despite a significant drop in the Producer Price Index signaling easing inflation and weaker demand. The outlook for an economic slowdown is generally not positive for stocks and the valuation of the stock market. Despite recent gains in risk-sensitive stocks and a pullback in yields, there's a prevailing caution for the medium term, with expectations of a short-term downtrend in yields and potential impacts on currencies and commodities due to a likely rebound in the USD - according to the fundamental & sentiment analysis of our chief analyst Robert Lindner.

Key events today:   

AUD Consumer Inflation Expectations - 00:00 UTC+0 (released)

AUD Unemployment Rate - 00:30 UTC+0 (released)

CNY House Price Index - 01:30 UTC+0 (released)

EUR ECB President Lagarde Speech - 11:30 UTC+0

USD Initial Jobless Claims - 13:30 UTC+0

USD Philadelphia Fed Manufacturing Index - 13:30 UTC+0

USD Industrial Production - 14:15 UTC+0

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