Investors should prepare for another poor day on the stock market. The futures indicate a 0.5% lower opening for the AEX index. Elsewhere in Europe the picture is similar.
Things are not going well elsewhere in the world either this year. The stock markets in Asia were quite cautious last night. A plus for the Nikkei, minuses in China:
- Nikkei +0,4%
- Shanghai: -0,8%
- Hang Seng: -0,6%
- KOSPI (South Korea): -0.3%.
Investors seem to be keeping their powder dry in view of the US labor market report.
Tensions are rising in the China/Taiwan region, with elections in Taiwan (where the world’s largest chip manufacturer is located) in sight. On January 13, the people of Taiwan will go to the polls to elect a new parliament and president. It will then become clear whether China should continue to view Taiwan as a renegade province, or whether that annexation fantasy will become reality. The US position is also precarious.
Wall Street has had its weakest start to the year since 2016
Wall Street continues to make do. The Dow Jones index ended virtually unchanged. But the indexes that matter – the S&P 500 and the Nasdaq – took another step back. For the Nasdaq, this is the fifth decline in a row: the biggest losing streak since October 2022. And for Wall Street as a whole, this is the weakest start to the year so far since 2016.
- S&P 500: -0.3% at 4,688.68 points
- Nasdaq: -0.6% at 14,510.30 points
- Dow Jones index: virtually unchanged at 37,440.34 points.
It was mainly big tech companies such as Alphabet, Apple and Microsoft that took a step back. Nvidia did keep its feet dry. Investors seem to be getting a fear of heights for many shares after the sharp increases in 2023. But the cause could also be a lot more prosaic:
Especially for shareholders of Apple – accounting for 7% of the S&P 500 – the grapes have been sour so far: the price is already more than 5% underwater this year. This is attributed to a cocktail of bad news: concerns about disappointing demand for iPhones and two advisory downgrades (from Barclays and Piper Sandler). According to Bloomberg, the number of analysts who are still bullish on the stock is at the lowest level in three years.
The FD reports that the Magnificent Seven stocks (Apple, Amazon, Alphabet, Microsoft, Meta, Tesla and Nvidia) have seen $383 billion in market value evaporate since the turn of the year. A stark contrast to 2023, when they could add 60 to 240% price gains. The poor start may be related to the expectation that interest rates will remain high for longer than hoped. Such a prospect often puts pressure on tech stocks in particular.
Interest rates go through the roof: American above 4%
In a sense, long-term interest rates remain daily rates. But if you squint through your eyelashes, you will see that the trend is still undeniably upward, despite the prospect of interest rate cuts during the course of this year. The American ten-year interest rate is flirting with the 4% limit and has now exceeded it.
The Dutch trend is also trending northwards on balance:
First five days of the year barometer
Anyone who believes in calendar wisdom will be slightly nervous. According to the ‘first 5 days of the year’ barometer, the first five trading days of the year could be an indication for the rest of the stock market year. If the stock markets are on the rise in the first five trading days of the year, there is a good chance that the stock market year will also end in the green, and vice versa.
The American asset manager Putnam Investments once calculated that of the last 46 times the S&P 500 ended the first five days with a profit, the annual return was also positive in 82.6% of the cases. In that respect, the signs are unfavorable, with the AEX down 0.8% and the S&P 500 down even 1.6%.
But since the stock market rises in the vast majority of stock market years, it would be better to take that calendar wisdom with a grain of salt. So no reason to worry. In addition, the first five days are not over yet, you should think.
The indicators:
- European futures indicate a red opening.
- Asia closed mostly lower last night
- The CBOE VIX index (volatility) is increasing slightly, but at 14.03 it is not yet a cause for concern
- The euro rises slightly to 1.0932 dollars.
- The US ten-year yield has risen to just above 4%
- The gold price is 0.1% higher at $2,045.85
- Oil prices are also on the rise. WTI +0.4% at $72.61, Brent also +0.4% at $77.86
- Bitcoin is suffering a significant loss of 1.1% and is trading at $43,847.47
The AEX is expected to open 0.5% lower.
News, advice, shorts and agenda
Not much news today. Dutch inflation fell further in December to 1.2% on an annual basis, compared to 1.6% in November. The European figure will follow later in the morning.
The most important news from ABM Financial News:
- 7:28 am: Inflation dropped to almost one percent
- 10.53pm: Galapagos in the sea with Thermo Fisher
An overview of the most important news in the morning newspapers can be found here.
Then to the advice. Two price target increases for ASML include:
- Shell receives a price target increase from Barclays, but a price target reduction from RBC
- UBS increases the price target for Relx
- Deutsche Bank lowers Akzo Nobel price target to €85 from €90, but maintains its buy recommendation
- Wells Fargo raises ASML’s price target to €782 from €713 and advice remains Buy
- UBS also increases the price target of ASML, but to € 785 from € 770, if the buy recommendation is repeated.
- Barclays increases Adyen’s price target to € 1,300 from € 900 if it maintains a buy recommendation.
The AFM reports this shorts:
American jobs and European inflation on the radar
Today, three macroeconomic figures could cause some turmoil on the stock market, and with a bit of luck, a turn to the upside.
First of all, the inflation in the eurozone, which will be announced at 11 a.m. In November, inflation fell unexpectedly sharply from 2.9% on an annual basis to 2.4%. On a monthly basis, consumer prices even fell.
This was mainly due to the lower gas price, which reached a huge peak last year. However, this effect is now waning, meaning inflation is likely to rise again. The consensus is 2.9%. That is still a long way from the 2% target that the ECB has set, but ECB President Christine Lagarde indicated some time ago that it will probably take until 2025 before inflation returns to that level. The current interest rate would be high enough to push inflation there.
It will be the second target US labor market report at 2:30 p.m. Investors are looking for the ultimate Goldilocks scenario: no overheating (which could still trigger an interest rate increase), but also no excessive cooling (resulting in a recession).
That seems to be the case. In November, 199,000 jobs were added. This is probably too high for December: the consensus is for job growth of 170K. Will that cooling be enough for the Federal Reserve to cut interest rates early?
The Fed also keeps a close eye on the unemployment rate. After all, it has a dual mandate and strives not only for price stability, but also for full employment. The limit is about 4%. That level is slowly approaching. A month ago, 3.7% was measured and that is expected to rise to 3.8%.
Also keep an eye on wage growth, with a view to a possible wage-price spiral, although that danger appears to be slowly fading away.
Hopefully good news (read: a continued robust labor market) is now really good news (read: no fear of a further interest rate increase). After all, the message from the Fed is clear that the period of interest rate increases is now behind us.
The third target point will be the US Purchasing Managers’ Index for Services, measured by ISM (at 4 p.m.). Yesterday, S&P Global came through with a similar figure. That was a positive surprise: the index rose from 50.8 to 51.4, indicating continued growth. But don’t celebrate too early: the measurements of both agencies can sometimes differ considerably.
From agenda
08:00 Retail Sales – November (Germany)
11:00 Inflation – December (eur)
11:00 Producer prices – December (eur)
13:00 Constellation Brands – Third quarter figures (US)
2:30 PM Job growth and unemployment – December (US)
4:00 PM Factory Orders – November (US)
4:00 PM Services Purchasing Managers Index ISM – December (US)
And then this
Why you shouldn’t always be looking over your shoulders
Market psychology pic.twitter.com/ahneK0U6hD
— ishmohit (@ishmohit1) January 4, 2024
The sale has not only started in Kalverstraat; also on the bond markets
Bond sell-off continues on pared rate bets w/US 10y yields now back at almost 4%. pic.twitter.com/f2sLv7A3l6
— Holger Zschaepitz (@Schuldensuehner) January 5, 2024
Who laughs last…
Musk once laughed off BYD as a threat. Now the Chinese giant has taken Tesla’s EV crown — here’s how
— CNBC (@CNBC) January 4, 2024
The coke is expensive.
European supermarket giant pulls PepsiCo products due to high prices
— MarketWatch (@MarketWatch) January 5, 2024
Apple feels Microsoft’s hot breath on its neck:
Microsoft gets closer to overtaking Apple as most valuable U.S. company
— MarketWatch (@MarketWatch) January 4, 2024
Are the doomsday scenarios about China perhaps exaggerated?
Contrary to the claims made by some Western observers, China’s economy has not exhausted its development potential, nor has it matured to the point that it has lost its vitality, writes Zhang Jun.
— Project Syndicate (@ProSyn) January 5, 2024
2024-01-05 07:36:14
#AEX #expected #open #IEX.nl
