Now I see a light shining from the inside

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A fairly uneventful start to the week, with something of a bounce in stocks on Monday, despite continued weakness in US treasuries. The NASDAQ tech index having a particularly good day on Monday. Most asset classes are treading water, oil is around 80 dollars a barrel and the 10-year US treasury yield remains close to 4.3%. The gold price lingers around 1900 dollars an ounce, as the dollar index remains just above 103. The Vix fear gauge traded a little lower at the start of the week, and at present suggests investors are still not rushing to protect their portfolios through the options markets.

Today we get the results of the monthly flash Purchasing Manager Surveys from all the developed markets. The Composite index combining manufacturing and services is expected to indicate the economy remains in expansion territory for the UK, if only just, and likewise for the US. The data for Europe is expected to reflect the impact higher rates are having on that region. We also get later today the earnings from Nvidia, the bell-weather for the growth in AI.

The US consumer has taken much of the responsibility for supporting the US economy this year, however, there were some cautionary notes from several retailers on Monday including Macy’s, as they all reported a slowdown in discretionary spending.

It’s hard to tell what mood markets are in when it comes to the reaction to economic data. At certain times bad economic news is good news for stocks as it will encourage investors to anticipate a more relaxed monetary stance from central banks. Perversely good economic news can have the opposite effect. The Citi economic surprise index, having had a resilient few months, has stalled in recent weeks. That would indicate that economics reports from the largest economy in the world are currently coming in line with expectations, no longer beating them. The index and the 10-year US treasury yield tend to trend in line with each other, which would make sense. Weaker data lower yields and vice versa. That would suggest if the 10-year yield was to start to fall back towards 4%, that the bond market once again anticipated weaker economic data. Therein lies the next conundrum, lower yields make equities more attractive, weaker growth less so. Stocks in Europe are starting the day largely unchanged from overnight.