Markets Today – The Great Slowdown » PACA’s economic and political newsletter

Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA.

Stocks are poised to end the week on a positive note after Thursday’s US inflation report gave hope that a major slowdown is well under way.

This inflation report was delayed for some time and investors breathed a huge sigh of relief in response. The reaction to this number seems a bit extreme, even exaggerated, but in all honesty, investors have been waiting for the opportunity to do this for a long time, and during that time, a lot of negativity was placed.

The fact that the stock markets are turning green again today highlights this fact. In the coming weeks, once the dust settles and the rhetoric changes, we may see sentiment cool again: inflation has peaked and the Fed will ease its tightening efforts, but we need more data to confirm this. But it’s a fantastic start.

Often times in recent months, the market has turned bullish as these key releases have come close only to be beaten again because the reality doesn’t match the fantasy. Well, this report made that dream come true and more. If it can be backed by another strong report next month and some decent numbers in between, the Fed will have every excuse to slow next month and even hint at a rate cut early next year.

Is the UK already in recession?

It will come as no surprise to anyone to learn that economic data released this morning suggests that the UK may already be in recession. I mean, I’m not sure it’s big enough to make headlines in the UK at this point.

The Bank of England has been waiting for this for some time and when it is confirmed in a few months we should have a better idea of ​​how serious the situation is. As we can see in its latest forecast, which will be based on old data a week from now, the range of current recessions is quite wide, and this is before taking into account the new fiscal plans.

Until it is confirmed, we will at least know what the peak of inflation will be, how severe the winter energy crisis is and what the likely level of interest rates will be. There are so many elements that I have had to live without knowing for the last 12 months.

Can oil break the $100 mark again?

It’s been a pretty volatile week for oil, with China rumors not dying down, restrictions and massive testing being implemented once again, and the global economic landscape changing daily. There’s never a dull week these days.

Today, improving economic sentiment following inflation data, as well as some easing of Chinese quarantine measures, are boosting prices. A press briefing is expected tomorrow, which may shed further light, but if all goes well, investors are excited.

Brent remains in the middle of the $90-$100 range for now, but higher developments like this or a further easing of Chinese restrictions on Saturday could test the upper end of that range.

Gold shines once more

Gold fans have been waiting for this week for a long time. A week (almost) of the Fed hinting at a potential slowdown in rate hikes and CPI data showing a significant and broad-based decline. The yellow metal is shining again, returning to levels not seen in almost three months. It is now facing some resistance around $1,760 and may see more resistance around $1,780, but gold bulls may have their eyes on $1,800 at this point.

Cryptocurrencies were weighed down by FTX uncertainty

Even bitcoin had a strong rally yesterday, along with gains in other risk assets. Of course, in the days before the inflation data, other risky assets did not fall by 25%, and by 3% today. The collapse of FTX and the uncertainty it brought to the industry was another blow. How damaging this will be will depend on further details emerging in the coming days, but for now prices remain under pressure and vulnerable to sharper declines.

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