Market Outlook - a quiet week

Except for the debt ceiling charade in the U.S., preciously little has been going on in the financial markets lately. As for negotiations on the debt ceiling, an agreement between the president and the majority leader (opposition) was reached over the weekend. The vote on the deal will take place Wednesday this week, and it’s hard to see why this should fail at the final hurdle.

When we look at it closer, we notice how the US markets are moving in different directions, with tech rallying while the Dow continues to be under pressure. Last week, chipmaker Nvidia released a stellar earnings report that blew away the consensus estimates. Subsequently, the share price reached an all-time high. This helped lift the whole sector, and tech stocks at large.

In Europe, Germany has officially entered a technical recession following the release of the latest GDP data. The reaction to this has been relatively muted, mainly because it was widely anticipated. We may even see a new attack on all-time high in the Dax soon.

On the data front, the Core PCE number on inflation which Federal Bank is known to watch very closely, came out slightly hotter than expected. Normally, this would make the market participants readjust their positioning before the upcoming FOMC meeting. However, it seems that the overriding view remains the same – that the Fed will now end its rate hiking cycle. The issue seems to be more about the size – and length – of the forthcoming economic downturn in the U.S.

Regarding news this week, only the batch of data from the U.S. on Friday – including NFP, unemployment rate, and change in Average Hourly Earnings – seems able to having a material impact on the markets.
NFP udvikling