Joshua Mahony MSTA
Scope Markets
European markets have been on the front-foot today, as rising US Treasury yields dampen sentiment around tech stocks. Meanwhile, crude oil continues to rise after a push into multiyear highs.
- European markets lead the way as value comes back into focus
- Rising treasury yields and chip shortages highlight tech fragility
- Crude hits multi-year highs, as traders look ahead to Thursday’s infrastructure vote
European markets are enjoying a positive start to the week, as traders look with optimism at recovery prospects and a potential bullish play for cyclical stocks. US tech dominance has helped drive major outperformance for the Nasdaq over the course of this pandemic, yet we are starting to see that unravel as the Fed moves towards a new tightening cycle. Concerns over the possibility that tech stocks have been pumped up by easy money brings a potential shift towards pro-cyclical laggard which often rise as yields improve. Meanwhile, the well publicised chip shortage shows little sign of slowing after Goldman Sachs seeing struggles on that front until next year. The surge in US Treasury yields seen over the course of the past week highlight the shift in focus towards value stocks, with the likes of the FTSE 350 and small-cap stocks expected to provide relative outperformance as a result. It is somewhat unsurprising to see the financial sector perform well, with stubborn elevated inflation expected to see the Fed raise rates next year.
Energy prices are on the rise once again today, with Brent crude hitting the highest level in almost three-years. Supply constraints appear to be coming at the wrong time, with demand gradually picking up steam. The restart of transatlantic flights does highlight how we are likely to continue seeing demand for different types of crude products rise as the economic recovery gathers steam. With the House of Representatives due to vote on Biden’s proposed infrastructure bill this Thursday, there is still plenty of grounds for further economic activity despite concerns over monetary tightening.
This material is a marketing communication and shall not in any case be construed as an investment advice, investment recommendation or presentation of an investment strategy. The marketing communication is prepared without taking into consideration the individual investors personal circumstances, investment experience or current financial situation. Any information contained therein in regards to past performance or future forecasts does not constitute a reliable indicator of future performance, as circumstances may change over time. Scope Markets shall not accept any responsibility for any losses of investors due to the use and the content of the abovementioned information. Please note that forex trading and trading in other leveraged products involves a significant level of risk and is not suitable for all investors.
Recommended Content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.