Stock markets have endured another negative day in Europe as investors await tomorrow’s hotly-anticipated ECB meeting.
Much like the other two days this week, it’s hard to read too much into today’s trading as there’s very little of note driving it. And with the ECB tomorrow, US inflation on Friday and the Fed next week, there are far more pressing matters ahead than the selection of headlines of recent days.
The World Bank warning of potential recessions, a UK Prime Minster barely surviving a confidence vote and a major US retailer lowering profit guidance as a result of excess inventory have been among the focal points this week but they all comfortably play second fiddle to what’s to come over the next seven days.
The ECB is up first tomorrow and the central bank has a lot of questions to answer. When will net asset purchases officially end? How many rate hikes can we expect this year? How will they manage the fallout in the bond markets? The task is far from straightforward but the cost of inaction is potentially severe. The central bank will have to tread carefully in the coming months to prevent unwanted consequences.
Oil higher despite surprise inventory build
Oil prices are edging higher once more even as the EIA reported a surprise increase in inventories last week. The market remains extremely tight and that is keeping the upward pressure on crude prices. The OPEC+ increase was more a token gesture than one of substance and the continued reopening of China means demand is going to rise further. To make matters worse, oil workers in Norway could begin strike action this weekend causing supply disruptions to a relatively small amount of output, to begin with.
Steady ahead of US inflation data
Gold is back above $1,850 but continues to fluctuate in the same ranges it has for many weeks now. For gold, it’s all about the US inflation data on Friday and the Fed next week. Any surprises in the inflation data could shake things up in the markets and see the yellow metal break the recent range, perhaps even quite aggressively. While a US recession isn’t the base case at the moment, a few more nasty surprises on the inflation front could see that change.
Volatile but not going anywhere
We’re continuing to see plenty of volatility in bitcoin but very little actual direction. The daily ranges are wider but the end result is the same. This could be another that is awaiting the inflation data before deciding where to head next. The set-up is still bearish at this point but as ever, it may not take much to tilt that the other way and a significant break of $32,000 could deliver just that.