We start hearing the cracks in market optimism | MarketTalk: What’s up today? | Swissquote

Show notes

We start feeling the cracks in market optimism: the bonds extended their rally yesterday after the inflation data in Britain surprised to the downside, but major US indices saw a sharp retreat. A 12% plunge in FedEx – which acts like a gauge of economic activity, the overbought market conditions in major global stock indices and the awareness that a further fall in bond yields weaken the idea of soft landing triggered a much-needed retreat in equity valuations.
We know that a further correction in equity valuations is on the cards. We just don’t know what the trigger will be.
In energy, the barrel of US crude is still working on clearing the $74/75 resistance. Yesterday’s rising US inventories somehow broke the positive momentum. But strengthening trend and momentum indicators hint that a positive breakout is possible, and a potential rally could send the barrel of crude to 200-DMA, which stands a touch below the $78pb. Yet the upside is seen limited as any significant rally in oil prices will boost global inflation expectations, crush the dream of seeing the central banks call the end of policy tightening and increase recession odds. And rising recession odds are negative for oil.
BUT, Investors could still enjoy a soft US inflation read for November, and the latter could keep the bond rally intact into Xmas. If that’s the case, the US dollar will remain under pressure. The latter will allow the euro to extend its gains against the US dollar. The pair could make another attempt on the 1.10 mark.
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