Equities: Tech-led rally faces growing caution – Danske Bank

The global equities market has seen a notable 5% increase over five sessions, primarily driven by the tech sector, according to the Danske Research Team. Cyclicals and growth stocks have outperformed defensives and value stocks, indicating a tech-centric rally. The VIX, a measure of market volatility, has only slightly decreased, from just above 17 to just below 16 over the same period, suggesting little relief for investors concerned about potential market turbulence.

The underperformance of US tech and the Nasdaq, coupled with cautious Asian sentiment, has sparked growing caution among investors regarding the tech trade. This tech-driven rally, however, has not been fueled by macroeconomic factors, but rather by market enthusiasm for technology stocks. Yesterday's performance echoed this trend, albeit to a lesser extent, with tech-related enthusiasm waning during the US trading session.

Despite being higher this morning, European and US futures were outperformed by Nasdaq futures, which lagged slightly. The divergence between tech-sensitive South Korea and other markets continues, with the latter showing stronger performance. European and US futures are currently higher, but Nasdaq futures remain marginally behind.

In forex, GBP/USD is slightly on the defensive, trading at the low 1.3600s after reaching fresh highs past 1.3670 earlier in the week. The decline in GBP/USD follows a series of poor UK economic data, which have contributed to the currency's slump. EUR/USD, on the other hand, is experiencing modest losses around 1.1670 after failing to surpass the 1.1700 level convincingly.

The decline in EUR/USD is a result of the US Dollar showing resilience amid ongoing assessments of recent US economic data and developments in the US bond market.

Gold prices experienced a resurgence on Friday, briefly surpassing $4,600 per troy ounce to hit three-month peaks, despite marginal gains in the US Dollar and rising US Treasury yields. Meanwhile, the cryptocurrency market remains bullish, with Bitcoin breaking past $77,000, followed closely by altcoins such as Ethereum and Ripple.

The US Treasury, in a move on Wednesday, announced an increase in liquidity support buyback operations, doubling the size of buybacks for 10-year to 20-year and 20-year to 30-year bonds, effective September 9 and running until November 4.