Financial markets exhibit less excitement this week, possibly due to overbought conditions and some volatility stemming from month-end and quarter-end rebalancing. While the current atmosphere doesn’t signal the end of the recent rally, investors seem cautious, possibly waiting for better entry points.

The Asian trading session on Tuesday mirrored Monday’s themes: China continued supporting the yuan, while a Japanese official hinted at possible intervention due to excessive moves in the FX market. USD/JPY remains above 151.00, but talk of intervention hasn’t curbed yen weakness. The S&P 500 is poised for a higher open, while European indices like the FTSE 100 might open slightly lower.

FTSE 100 Outlook:

The FTSE 100 might target the critical 8,000 level, nearing its high from February 2023. The index’s rally could broaden, with 70% of FTSE 100 stocks above their 200-day moving averages.

US Stock Market Sentiment:

In the US, two sentiments prevail: some anticipate a pullback due to overbought conditions, while others believe the market can sustain its rally on the back of a strong economy. Tuesday’s confidence, manufacturing, and house price data release could sway short-term stock movements.

BOE Rate Cut Speculation:

Expectations of rate cuts dominate, with increasing bets on the Bank of England being the first major central bank to cut rates. Sterling’s struggle to rally, coupled with the potential to boost the FTSE 100 above 8,000, underscores this sentiment shift.

US Debt Concerns:

Concerns about US debt levels grow, with warnings about the high debt load risking market turmoil. Pimco favors Gilts over Treasuries, suggesting the Fed won’t cut rates as swiftly as the BOE due to inflation pressures.

Economic Data Impact:

Friday’s core PCE inflation reading will test the market’s belief in the Federal Reserve’s three rate cuts this year. Fed member Raphael Bostic’s view of only one rate cut this year highlights varying opinions within the FOMC.

US/China Tensions:

US/China tensions persist, with China limiting US-made chips in government computers. However, a meeting between US executives and Chinese leaders could thaw relations, benefiting US stocks.

Boeing’s Future:

Boeing’s CEO departure could mark a turning point for the company, though safety concerns linger. The upcoming Q1 earnings season will shed light on the market’s next moves, with AI and ESG themes under scrutiny.

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