Morning Brief – European traders await PMI’s

Traders are waiting for the release of European manufacturing and services PMI data this morning, with expectations from most economists that we will see a slight uptick from the previous month.

Notably, the PMI data is expected to stay in contraction, with below 50 readings, however, a minor improvement from the previous trading month should be taken positively.

Risk-on sentiment is finally balance today, with the US dollar slightly lower alongside bond yields. The S&P 500 closing at multi-week highs further underscores the bullish sentiment.

In-turn we are starting to see market reports turning bullish from investment banks. Goldman Sachs are no exception, and today they have a positive outlook report.

Goldman Sachs has a very bullish outlook on commodities. Analysts at the bank say commodities will show “superior total returns” through this year, citing economic “macro and micro dynamics re-aligning again”, low inventories.

Goldman Sachs have also noted on Oil and Over a 12-month period, the bank forecast returns of 46.9% from energy, 29.6% from industrial metals and 5.7% from precious metals.

They note that “Oil markets are not pricing the expected uplift in demand combined with the downturn in Russian production” and “China’s reopening is a game-changer”. Goldman Sachs forecasts WTI averaging $92.00 in 2023. 

Also Goldman likes gold. They state that they “While central bank tightening and the USD have been macro headwinds for commodities in second half of 2022, we believe a sustained inflection in the USD provides an ingredient for a fairly significant upside in commodities.”

In terms of trades, Goldman note that Gold, in particular, is likely to be on a cusp of sustained upside as de-dollarisation is very bullish gold.