Stocks edge lower as quarter draws to a close

Stock markets are a little lower on Thursday, bringing an end to a disappointing quarter and going into a new one fraught with risk.

There’s an enormous amount of uncertainty in the markets at the moment and that’s clearly taken its toll. There’s still clearly plenty of appetite to buy the dips but the risks are becoming impossible to ignore.

Central banks are doing their best to reassure us that inflation remains just a temporary, supply-side issue but there also seems to be less conviction in their views. Pandemic stimulus measures are being withdrawn at a time of real uncertainty for the markets, whether that be around Covid, the energy crisis or Evergrande, to name just a few.

And that’s before we even consider events in Washington, where lawmakers look set to back a continuing resolution to prevent a government shutdown until early December. While that may relieve some pressure, there’s still the small issue of the debt ceiling and not defaulting in less than three weeks to resolve.

With Republicans refusing to aid Democrats in lifting the debt ceiling, insisting instead on using reconciliation – a process deemed extremely risky by Senate majority leader Chuck Schumer. There’ll be plenty of theatre around the debt ceiling over the coming weeks before a solution is inevitably found. Although the closer we get to the deadline, investors may become more nervous.

Numerous Fed policymakers are due to speak again today, including Chair Jerome Powell who’s making appearances on a daily basis at the moment. I don’t expect to hear anything new from them today, with the message being clear and consistent in recent weeks. The conditions are almost met to start paring back net asset purchases and an announcement is likely in November.

Data encouraging despite jobless claims miss

There’s been plenty of economic data for traders to get their teeth stuck into today, although nothing that’s sent any shockwaves. The second-quarter GDP readings from the US and UK were revised a little higher, while inflation continued to creep higher in Europe as unemployment ticked lower.

Jobless claims, meanwhile, spiked again hitting 362,000 up from 351,000 last week and well above expectations of 333,000. The rise is not likely anything to be concerned about, with the after-effects of Hurricane Ida potentially behind it.

Bitcoin remains in consolidation

Bitcoin continues to consolidate between USD 40,000 and USD 45,000 as bullish traders refuse to concede defeat no matter how short-lived these rallies are becoming. And who knows, their incredible resilience may eventually be rewarded, but for now, bitcoin remains in a corrective move and one that looks more likely to continue than not.

Of course, every failure to break USD 40,000 casts further doubt over its ability to do so and bulls may be encouraged by the resilience displayed so far. And a break of USD 45,000 would certainly give them more confidence, should that occur before USD 40,000 falls.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam