Midweek Trading Update
The week so far
April 6, 2023
European stock markets fell for a third straight session on Wednesday with uncertainty over the global economic outlook at the fore.
The FTSE was the only market to post gains but was a little weaker yesterday due to the strengthening of the pound. A strong pound is bad for the UK’s top 100 companies due to the amount of earnings created in dollars.
The pan-European Stoxx 600 index closed 0.16% lower, with various sectors pointing in different directions.
Telecoms led gains with a 1.8% uptick, followed by healthcare stocks, up 1.7%. Meanwhile, construction and material stocks plunged 2.6% and tech fell 1.8%.
Banking stocks were down 0.7% as investors digested UBS’ first shareholder meeting since its controversial takeover of Credit Suisse.
Asia-Pacific markets were also lower, as New Zealand’s central bank hiked rates by more than expected after Australia’s kept them level.
Japanese stocks fell -1.68% overnight, dragged by falls in auto and steel stocks as the yen strengthened amid uncertainty over the economic outlook. Investors are focusing on economic data and their implications for monetary policy.
The Hang Seng in Hong Kong also fell -0.66%.
The global picture yesterday was dominated by data out of the US, which suggested the economy is slowing. Markets are now pricing in around a 59% chance the Fed will hold interest rates steady in May, according to CME’s FedWatch tool.
The Fed not raising could provide a big boost for growth stocks although we’re of the opinion that last year’s collapse of the Nasdaq was simply the market predicting the current scenario, so most of the finer tweaks to interest rates will make little difference overall.
Treasuries climbed on the back of the news.
Two-year yields headed toward their lowest levels since September, slumping as much as 11 basis points to around 3.7%. Financial shares weighed on equities, with Western Alliance Bancorp tumbling as the regional bank updated its financial disclosures without saying more about its deposit balance.
FedEx climbed on plans to cut $4 billion in costs.
Gold extended its surge past $2,000 an ounce.
US companies added fewer jobs than forecast while wage growth slowed, underscoring labour demand that’s showing some signs of cooling.
Private payrolls rose 145,000 last month after an upwardly revised 261,000 increase in February, according to figures from ADP Research Institute in collaboration with Stanford Digital Economy Lab.
“ADP private employment tally was much weaker than expected, and with other high-frequency labour market metrics, suggests deteriorating labour-market growth,” said Stan Shipley, economist at Evercore ISI. “Whisper fears suggest a tepid jobs report on Friday.”
The upcoming government jobs report is forecast to show US employers added about a quarter of a million jobs last month and the unemployment rate held at a historically low level.
The market will actually be closed this Friday when the non-farm payroll figure is released giving us traders a chance to go through it without the usual volatility that is associated with it.
One thing of note yesterday was Fed Bank of Cleveland President Loretta Mester said officials will need to raise interest rates “a little bit higher” and then hold them there for some time to bring inflation back toward their goal. “We certainly are focused on inflation and making sure that inflation gets back down to 2% over time,” she told Bloomberg Television.
However, this is the standard response any time anyone from the Fed is asked to give comment. They have to talk inflation down as much as act.
Today is the last trading day of the week for most markets. We’ll see an interest rate decision out of India, German Industrial production, Halifax House prices in the UK and US jobless claims.
Then, it’s a long weekend for many of us where we’ll see The Portfolio Platforms long awaited 1stquarter performance results.
The current TPP market bias:
The majority of our traders have just completed an excellent Q1, in what has been a very challenging trading climate.
It seems that many of the ‘buy or flats’ and the ‘active’ strategies have timed many of the short/mid term moves fantastically well.
A few strategies which are mainly long have struggled but in time- we would expect they’ll be back. In fact, they've already started to climb.
This current level in many global stock markets most likely provides a great long term buying opportunity. This banking issue is not the same as 2008 and shouldn’t be treated as such. There isn’t a problem within the banking system itself, just a few mismanagement issues in a couple of places.
For most portfolios globally the recent drops have been painful, and the drops have been big, but ultimately, at TPP we like these drops so that we can buy in cheaper or buy back the shorts. Picking the bottom or the top is just not an option, but making money from something close is.
One thing is for sure, our traders will be looking to continue recent momentum in this new quarter.
If you have an underperforming portfolio or are sitting in cash waiting for an opportunity- contact our team for a FREE consultation.
Don’t just hear about the investment revolution:
“TPP might just be about to revolutionise investment for the retail market.”
- London Stock Exchange 2020