Don’t win one thing else correct because US stocks are costly! | MarketTalk: What’s up this day? | Swissquote

The week kicked off slowly as the US and Canadianmarkets were shut for holiday on Monday. Chinese stocks failed to gain enough momentumas European stocks extended gains in a slow session despite news that France cut its growthoutlook for this year. The headlines will quicken with big US retailerearnings from today, but most investors will certainly prefer to see how Nvidia did lastquarter before making important decisions before Wednesday. Welcome, this is Swissquote’s daily MarketTalk! Yesterday was a slow and an eventless day,as the US and Canadian markets were shut for holiday, and volumes were thin.

The Chinese returned from their Lunar NewYear holiday having traveled and spent more this year than before the pandemic, the earlytrading hours were quite cheery but that cheer left its place to doom and gloom quickly asthe Chinese equities found it hard to extend gains on the back of looming Chinese problems,like deflation, aging population, a deepening property crisis and lost investors confidence. As such, yesterday’s 1% advance couldn’tgain enough momentum this morning, even though China cut its 5-year LPR rate – which isthe reference rate for mortgages, by most on record since the rate was introduced in2019, to prop up demand for its tumbling property market and hoping to stop the downturn.

In vain, the equity markets didn’t reactmuch. Nasdaq’s China real estatv e index continuesits race to the bottom. Equities in Europe however extended gainsto a fresh ytd high, and the Stoxx 600 index continues to trade at a spitting distancefrom an ATH even though France lowered its growth forecast for 2024 to 1% and Germanyannounced a 0.3% contraction lately. The energy crisis and higher rates are eatinginto the old continent and the ECB is not even sure it could start cutting the ratessoon enough, given that inflation risks remain tilted to the upside. Shipping costs increase, and even though Lagardehad mentioned in her post-ECB press conference.

That maritime transport costs make up to 1.5%of the total transport only, combined with a certain upside pressure in oil prices andthe softening Fed cut expectations which lead to a stronger dollar threaten the price stabilityand some European policymakers think it’s not a good idea to declare victory beforetime. That means, it’s safer to wait for moreevidence that inflation is easing sustainably than acting prematurely and looking foolish. This is certainly what keeps the US dollarappetite contained, and the other currencies somehow supported: the fear that a delay inFed rate cut would translate into a stronger dollar, a stronger dollar would send a freshwave of high inflation across the globe and.

The latter would delay other central banks’r ate cut plans as well. But the latter reasoning should be just enoughto contain the buying pressure in the dollar, and not to reverse the greenback’s positivetrend. The dollar index saw support near its 100-DMAyesterday and the EURUSD failed to clear its own 100-DMA to the upside. The diverging fortunes between the US – wheregrowth remains strong and the euro area – where growth is nowhere to be found – justifiesan earlier ECB cut compared to the Fed. But the ECB will cut only and if only inflationremains on a falling path. And there is nothing less certain than thatat the moment.

Anyway, back to the European stocks, the Stoxx600 perform surprisingly well at the moment despite the sputtering economies and no guaranteethat the ECB will start cutting rates before summer. Some think that the European valuations arejust below their long-term average which make them much cheaper than their American peers– where valuations went through the roof. Of course, AI is what makes the American stocksshine brighter than the European diamonds. Nvidia, for example, is worth more than theentire German DAX index today. I will repeat that, Nvidia has a bigger marketcapitalization than the entire German DAX index as of today.

And that premium is justified by massive andconcrete AI investments that happen in a fast and furious manner, money is flowing in, moneywill continue to flow in. So even if the European stock valuations aremore reasonable than the tech-heavy US peers, the upside potential that the US tech giantsoffer is incomparable to the European businesses. Anyway, across the Channel, the energy andfinance-heavy British FTSE 100 refused to return to last year’s negative trend andrallied 3% since last week, Cable remains under pressure as the BoE doves stand up againstBailey’s cautious stance regarding premature cuts. The Bank’s former economist said that ‘it’sone thing to have missed inflation on the.

Way up, it’s quite another to then havecrushed the economy on the way down’. But anyway, that’s not a risk that the centralbankers are willing to take. The latest RBA meeting minutes revealed thatthe policymakers there considered to hold rates steady or a case for a 25 bp hike (scary!). And the latest FOMC minutes that will be releasedtomorrow will give more clarity on if and how the Fed members reacted to last year’sskyrocketing rate cut expectations. From what they publicly say, they think thatthe expectations went well ahead of themselves and that’s true for all the central bankdoves. There will hardly be a rate cut announcedfrom a major central bank before June, imo.

Today, the US will return from their holiday,and spice up the news headlines with Walmart and Home Depot earnings. It will serve as a tiny appetizer before Nvidia’smuch-expected results that are due tomorrow. Elsewhere, nat gas futures took another diveyesterday while American crude cleared the 100 and 200-DMA offers last week and is testinga major Fibonacci resistance to the upside. Trend and momentum indicators remain supportiveof a further rise toward the $80pb level as tensions in the Middle East, the Chinese stimulus,and OPEC’s efforts to restrict supply are supportive factors for the bulls. On the opposite camp, the rising supply fromcountries outside OPEC, China’s inability.

To boost growth and slowing demand growthfor fossil fuel are arguments that will make the bulls’ life harder above the $80pb mark. This is all for today! I am Ipek Ozkardeskaya and thanks for joiningme. I hope this episode of Market Talk has beenhelpful to you. Please do not hesitate to leave your comments,reactions, and questions below and follow us on Instagram, X and Linkedin for regularmarket updates and subscribe to our Youtube channel for daily market comments and don’tforget to hit the ‘like’ button to let us know that you enjoy these videos.

I will meet you again tomorrow, and untilthen, good day trading!

Sharing is caring!