STATE OF THE MARKETS

Stocks wavered as the Dollar weakened. US stocks wavered on Thursday despite news of cooling inflation from the figures in personal consumption and expenditures. Nasdaq (+0.13%) continued to climb higher though Dow (-0.56%), Russell (-0.26%) and S&P (-0.09%) pulled back lower as the Dollar weakened further, below the 104.80 barrier as at writing. Investors continue to demand bond’s safety, sending yields lower, with the shorter 2Y note now breaking 4.25% and the 10Y benchmark dropping to 3.50% in early Asian trading on Friday.

In the commodity markets, crude oil continued its upward trajectory for the fourth day as the Dollar weakened and higher demand expectations from China’s easing on its zero Covid policy. The black gold settled near $81.35 after piercing $83.25/bl in the London session. Gold jumped and broke the $1,800/oz handle after reports of heavy central banks buying in the last few weeks. Similarly, iron ore continues to climb higher past $103/tn as speculators continue to see demand from China Covid re-opening in March 2023 and Dollar weakness.

In the FX space, overall sentiments turned bearish as safe haven Yen seized the helm of demand in the short and medium term while Swiss continued to advance further into the demand territories. Loonie remained sold off while supporting King Dollar as Aussie flipped to offer across all horizons. Demand for Kiwi and Sterling eased off while Euro advanced.

On Friday, markets expect a cautious session with heavy liquidation as investors continue to rebalance as the month ends while waiting for the latest NFP reports. Earnings to watch are thin as only Cracker Barrel (CBRL) and Genesco (GCO) are of interest to long term investors as well as the very much awaited NFP figures and employment situations in the United States.

OUR PICK – No New Picks

No new picks going into the weekend. News of central banks now piling the highest on gold reserves in the last 10 years reverberates in the capital markets especially when the Federal Reserve could back down on its aggressive rate hikes plan as early as this month. Dollar weakened despite the rush to bond’s safety which saw yields tumble in the hope that inflation is easing off. US equities (-$4.7b) continue to report outflows alongside taxable bond funds (-$10.1b) while inflows reported to the short term money markets (+$15.4b). We see strong demand for commodities and commodities related stocks in the coming quarters.

Trades updates: 

Equities:  WBA (16% undervalued, 4.63% yields) and M (42% undervalued, 2.68% yields) pulled back over the week, while SQ (about fairly valued with 4.96 z-score), CRON (31% undervalued with 23.21 z-score), AUY (12% undervalued, 2.20% yields) and VIPS (37% undervalued with 3.92 z-score) jumped higher after Feds turned dovish. T (about fairly valued, 5.76% yields) was little changed.

FX & Commodities:  No new trades this week.

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