US equity markets put in a bullish session yesterday, with most S&P 500 sectors finishing the day towards their highs. The exception was the utilities sector, but that can probably attributed to its defensive properties, and weakness here could suggest that risk-off sentiment is fading.
If we were looking for clues about market sentiment towards risk assets, one place we could look would be at the only factor that has outperformed the S&P 500 in recent times, namely the iShares MSCI USA Momentum Factor ETF [MTUM], and the fund finished the day up by 3.85%. True, it's still down by 1.59% on the week and by 8.39% over the last month, reminding us that the roots of the recent sell-off run much deeper than just the carry trade unwind. However, what happens to assets that track momentum, from here, could prove to be a useful yardstick.
European equity markets were broadly flat on Thursday, though the broad-based STOXX 600 index was among the best performers, rallying by 0.80% on the day. Continued interest in midcap names across Europe could act as a barometer for sentiment. The best medicine for the equity markets would be to close out the week at, or towards the highs.
Chip designer Arm Holdings jumped by 10.59% yesterday, one of a number of well-known tech stocks that rebounded strongly. Arm was upgraded to outperform by analysts at Japanese bank Daiwa. In contrast, Monster Beverage appeared to have run out of energy, falling by more than 10% after missing on both revenue and earnings per share in its latest results. Dating app Bumble got dumped, falling by 29.16% and picking up a string of broker downgrades, as it sharply cut guidance for its full-year revenue.
German stocks took the lead in Europe yesterday, with Siemens, Allianz and Deutsche Telekom occupying the top three slots in the Euro Stoxx 50 index. However, another German blue-chip, Deutsche Post, was the index's biggest loser, giving back 1.90%, taking its weekly losses to -6% and its year-to-date performance to -19%. Only BMW, Bayer, Pernod Ricard and Kering have a weaker 2024 track record than Deutsche Post among Europe's top 50 stocks.
In early European trade today, crude oil has edged lower, while gold has opened flat. US 10-year bond yields are are up on the week by around 0.18%, while the yen has strengthened modestly against the US dollar. CFDs on US equity indices are higher by a few tenths of a percent, the IBEX 35 has added 0.44% the CAC 40 0.25% and the FTSE 100 just 0.15%.
There is no high impact macroeconomic data due out today. In fact there is a void in the calendar until Wednesday next week, when we have UK and US inflation data, which could create excitement.
Point of interest
Flows into ETFs had a record month during July, according to data from fund manager BlackRock, report the Financial Times. With the US capturing the lion's share of these funds. “Net inflows into ETFs globally hit $195bn in July, totally eclipsing the monthly record of $169bn in December 2023. About $124bn of that flowed into US-listed ETFs, the second-highest amount on record behind December’s $129bn."
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