A look at the day ahead in markets from Julien Ponthus.
One might think that with CNN’s popular gauge of investor sentiment stuck on ‘extreme fear’, it would take some seriously good news to lift up markets these days.
But all it took yesterday was a whiff of COVID-19 optimism from China and decent U.S. retail data to send global equity markets back into a jolly bullish risk-on mode.
Tech and growth stocks that many investors would no longer touch with a barge pole outperformed with Microsoft, Apple Tesla and Amazon lifting the S&P 500 and the Nasdaq higher.
The upbeat mood was hard to reconcile with BofA’s self-described “extremely bearish” monthly survey which showed fund managers had not been as underweight on stocks since May 2020.
Supposedly weary traders were also more than happy to knock the dollar further away from last week’s two-decade high and dash into riskier currency bets across Oceania, Asia, Europe and even cyberspace with bitcoin claiming back $30k.
Adding to the upward thrust enjoyed by the dollar’s rivals were fast rising bond yields displaying confidence central banks would be able to carry on monetary tightening despite lingering recession fears and Citi’s economic surprise index falling in negative territory.
Even U.S. Federal Reserve Chair Jerome Powell insisting interest rates would go as high as needed to tame inflation didn’t deter the buy-the-dip crowd.
As it stands this morning in Europe though, the latest batch of data might have the bulls hesitate before seeking to pursue this tentative bounce any further.
Consider this: in the last few hours Japan announced its economy shrank in the January-March period, China said new-home prices in April fell and Britain just unveiled its highest inflation reading since the 1980s with a whopping 9% in April.
(Reporting by Julien Ponthus; Editing by Saikat Chatterjee)
