Global stocks continued to rise, with the S&P 500 up 0.5% and the Stoxx 600 up 1.4% in a geopolitical reversal trade, according to Danske Research Team. Although investors are still cautiously hopeful, cyclicals outperformed defensives. Overnight increases in oil prices had a negative impact on Asian markets and equity futures, which showed declines in both the US and Europe.
Cyclicals do better, but be wary of optimism
"Yesterday, stocks continued to rise, with the S&P 500 up 0.5% and the Stoxx 600 up 1.4%. This was a geopolitical reversal trade, with cyclicals outperforming defensives, but it was a selective one because investors are at best cautiously hopeful. Industrial, consumer discretionary, health care, and materials all increased by 1% to 2%.
"Yesterday's IT sector had some interesting characteristics. Software was once again weaker, while big tech, semis, and memory companies were generally higher. The action was prompted by Broadcom's announcement yesterday that it is facing severe supply chain limitations as a result of increased demand for AI chips, which is taxing production capacity.
"Capacity constraints are causing lead times to increase from roughly six weeks to six months, and these pressures are increasingly extending beyond semiconductors into PCBs and other components. The situation farther down the value chain is likely to appear considerably more difficult if a business of Broadcom's size is experiencing these limitations.
In a similar vein, CPU behemoths AMD and Intel informed consumers of price hikes. The background is the same, with delivery lead times increasing from 1-2 weeks to 12 weeks or more due to deteriorating supply limitations. A lack of components could affect numerous industries, therefore this is a trend to keep a close eye on before the forthcoming Q1 results season.
Asian markets are down 1% to 2% this morning due to the slight increase in oil prices overnight. This morning, US and European share futures are down 0.5%.
Cyclicals do better, but be wary of optimism
"Yesterday, stocks continued to rise, with the S&P 500 up 0.5% and the Stoxx 600 up 1.4%. This was a geopolitical reversal trade, with cyclicals outperforming defensives, but it was a selective one because investors are at best cautiously hopeful. Industrial, consumer discretionary, health care, and materials all increased by 1% to 2%.
"Yesterday's IT sector had some interesting characteristics. Software was once again weaker, while big tech, semis, and memory companies were generally higher. The action was prompted by Broadcom's announcement yesterday that it is facing severe supply chain limitations as a result of increased demand for AI chips, which is taxing production capacity.
"Capacity constraints are causing lead times to increase from roughly six weeks to six months, and these pressures are increasingly extending beyond semiconductors into PCBs and other components. The situation farther down the value chain is likely to appear considerably more difficult if a business of Broadcom's size is experiencing these limitations.
In a similar vein, CPU behemoths AMD and Intel informed consumers of price hikes. The background is the same, with delivery lead times increasing from 1-2 weeks to 12 weeks or more due to deteriorating supply limitations. A lack of components could affect numerous industries, therefore this is a trend to keep a close eye on before the forthcoming Q1 results season.
Asian markets are down 1% to 2% this morning due to the slight increase in oil prices overnight. This morning, US and European share futures are down 0.5%.
