Stock Market Today
Risk appetite continues its struggle to attract attention, and looking at the stock futures in the US and Europe; it’s becoming clear that the bear market rally has stalled for now. Investors and traders are worried about the soaring inflation situation and weak economic growth, and these two factors continue to flash red signs on their trading dashboards. Yesterday, we saw all the major US stock indices dipping again and staring the weak on the back foot, and bears are ready to build on that momentum today.
The question that traders are asking is if the bear market rally is over. The answer to this billion-dollar question depends on several factors. Firstly, we are almost closing the first half of the year, which has been bad for the equity markets, and it doesn’t seem like the second half will be any better due to recession fear. More importantly, more and more companies are reporting that they are freezing their hiring process or cutting their headcount.
This particular element is adversely influencing the unemployment rate in the US, and the upcoming data release will provide further confirmation of this. A weak employment reading and feeble economic growth will increase traders’ pessimism. Finally, as the current earnings quarter comes to a close and a new one is about to begin, the next quarter will likely bring more bad news for the markets as companies are likely to issue strong profit warnings and cost cuts which will most definitely involve job losses.
The House of Commons decided to enable Boris Johnson’s bill to overrule the Brexit agreement he negotiated to go on to the next stage of the legislative process, despite opposition from within the prime minister’s own Conservative Party, including his immediate predecessor, Theresa May. The Northern Ireland Protocol Bill passed its second reading in the Commons by a vote of 295 to 221; as a result, it has advanced to the committee stage, where the text will be examined line by line, and modifications will be taken into account. However, the discussion made clear the divisions that still exist within Johnson’s Tories about EU ties.
The prices for the precious metal continue to consolidate, but they have not fallen off a cliff as investors and traders are worried about a recession. Traders know that it is only a matter of time before the economic data officially confirms that the US economy has fallen into a recession. That headline would spur more interest in a risk-off asset, gold.
The reason that we do not see a steep sell-off in gold prices isn’t only about recession fear about the US economy. Traders are concerned about the European Central Bank’s and the Bank of England’s policy moves, which are pushed against the corner and have little to no room for monetary policies. Inflation continues to soar, and traders are unsure when inflation readings will peak, let alone return to a normal level.
Gold prices will likely remain volatile this week as several central bankers, such as Fed Chairman Jerome Powell and ECB President, Christine Lagarde, are speaking at the annual forum in Sintra.
Bulls are back with a vengeance, and bargain hunters have been able to bag great bargains since the sell-off in oil prices last week. Oil prices are rising again today, and yesterday, we saw a decent rally for both Brent and Crude oil prices. Today, traders are ready to build on that momentum. There are concerns about oil supply, and traders will be paying close attention to US government oil inventory data which will be released tomorrow. In addition, OPEC member Libya has created more uncertainty on the oil supply side as it looks to suspend its oil exports due to the ongoing unrest.
Bitcoin prices continue to consolidate while the risk is still massively tilted to the downside as the price is consolidating near an important price level of 20K. Investors have been waiting for a strong rally at this level, and consolidation shows a lack of conviction among the BTC bulls. In terms of news flow, there has been more positive news about the bitcoin’s spot ETF, a factor that will heavily involve Wall Street. Rumours are that the SEC is more likely to give the green light for bitcoin’s spot ETF. Suppose such a rumour becomes a reality during a bear market. In that case, it will lift the sentiment among crypto traders as it would show further signs of confidence and adoption among regulators and Wall Street.