Stock Market Today
European and US futures are pointing to a higher open despite the fact that the Eurozone’s PMI data confirmed yesterday that recession is almost guaranteed. The PMI number plunged to a 20-month low, and today the focus will be on the ECB minutes. The European Central Bank is likely to show its hawkish side, and traders believe that a bulk of interest rate hikes will be coming from the bank, which means that each upcoming meeting could easily result in an interest rate hike of 75 basis points.
Over in the US, there is optimism about the strength of the US labour market, and it has set a positive tone for the most important event of the week, which is the US NFP data coming out tomorrow.
OPEC+ decided yesterday that the best way to support oil prices is to cut its oil production. OPEC and non-OPEC allies concluded yesterday at their first face-to-face meeting since 2020 that the best way to keep the oil prices table is to cut oil production aggressively now. This was the largest production cut since the Covid crisis, and the message the cartel has tried to send to the industry is that the cartel is monitoring the markets very closely, and this time they mean business. Failure to act quickly and promptly led the oil prices to crash last time.
The big question for traders is how far OPEC will go this time in terms of cutting its production. OPEC’s strongest member, Saudi Arabia, has sent one message very clear they do not want oil prices to go below $70, and in order to keep the price stable, the cartel will do whatever is necessary.
The recent bounce in oil prices has also increased the price of oil on pumps in the US which the US lawmakers aren’t very pleased about. Higher oil prices feed into inflation which is already hoovering near the 40-years high. We may likely see more pressure coming from the Biden administration in the coming days should oil prices continue to rise from their current levels.
The British Pound
The damage is already done to the British pound, and yesterday’s Conservative Party Conference didn’t do much good to the British pound. We saw the pound selling off on the back of the Prime Minister’s speech and it seems that traders are still in the mood.
One thing is pretty clear when it comes to the Sterling and that the rally is certainly fizzling out, and it more and more looks like the recent surge in prices was nothing more than a dead cat bounce. The upcoming Construction PMI numbers, which are scheduled to come in at 08:30 GMT, will provide more colour about the health of the UK’s economy. If the number is strong, we may have a bit of rally, but it is unlikely that the rally will last for long.
Overall, traders were still digesting the message from Liz Truss from her speech yesterday. A series of debt-funded economic reforms that have sparked fighting within the party and market turmoil have been doubled down on by British Prime Minister Liz Truss on Wednesday. Truss insisted that lowering taxes was the right thing to do morally and economically, doubling down on a series of economic reforms that have been criticised by many.
Truss said during her speech at the Conservative Party Conference that she was committed to levelling up our nation in a Conservative manner. This was done in an attempt to unify MPs in support of her proposals to slash taxes and shore up her diminishing authority.
Truss said that lowering taxes is the ethically and economically responsible thing to do and added that the Conservative Party will always be the party of low taxation.
In her first major address as Conservative Party leader, she said that lowering taxes would help the country meet the global economic crisis and send a message that Britain was open for business.
Our economy has not expanded as strongly as it should have for far too long, she said. We need to bring our nation back to its previous level in a conservative manner.
Bitcoin and other cryptos are trading in an interesting space. Speaking from a technical price perspective, what we see is that the Bitcoin price is once again challenging the 50-day SMA on the daily time frame, which is currently trading at 20K. This is an encouraging sign for bitcoin.
On the fundamental side, what matters is the dollar index and the monetary policy stance of the Fed. The US ADP data was strong, and this has brought more life to the dollar index, which isn’t too great for the BTC price, but despite this, the BTC price has resisted against the strength of the dollar. But the main event of the week remains the US NFP which will be coming on Friday at 12:30 GMT. If we hear an echo of the US ADP data in the US NFP, it will give more confidence to the Fed to take a more aggressive approach with monetary policy to tame inflation. Such a scenario may not be that healthy for the BTC price, which has a close correlation with the Fed’s monetary policy.