A volatile day in the markets

It’s been a volatile couple of days for the markets, with Powell’s renomination sending shockwaves across asset classes and the prospect of more lockdowns in Europe piling pressure on equity markets in the region.

Europe has recovered much of its earlier losses after trading deep in negative territory shortly after the open but most of the region remains in the red. The PMIs gave some cause for encouragement, bringing an end to the slump in recent months, although supply and price pressures very much remain.

The coming months will be very challenging though, especially as a number of countries are now facing the prospect of more severe restrictions, perhaps even lockdowns if they follow in the footsteps of Austria. Germany could be next which would quickly see sentiment slump once more.

The UK PMIs looked quite good on the face of it and will only pile the pressure on the BoE to take firmer action and follow through on their warnings before they begin to fall on deaf ears. The economy still has plenty of issues, even if the risk of restrictions doesn’t appear to be on the list, such as high energy prices, higher taxes and an end of support measures. A consumer that’s not willing to spend isn’t going to help the economy.

The US PMIs fell a little short of expectations in November but the economy remains on a positive trajectory and recent consumer data suggests things will improve after the summer dip on the back of the latest Covid wave.

Lira spirals out of control after months of clueless policy decisions

The day that’s been coming for months has finally arrived. Three large rate cuts, the prospect of another next month, a complete disregard for inflation and a spineless Governor that’s happy to be the President’s puppet on an issue in which he clearly has no experience. The lira has spiralled out of control, falling 20% on the day at one point and the time for desperate measures has finally arrived.

Unfortunately for Governor Şahap Kavcıoğlu – although entirely deservedly – that will likely mean, either today or some point in the near future, being thrown under the bus. This is the reality of Erdoganomics and the results are there for all to see. Sky-high inflation and a currency that’s fallen more than 30% against the dollar since the start of September. Another disastrous experiment at blurring the divide between poor politics and weak monetary policy.

Bitcoin continuing to struggle

Bitcoin isn’t having a much better time although it is worth noting that it didn’t get the same lift from the inflation trade as gold and as a result, isn’t getting hammered to the same degree. It is continuing to correct though after breaking key support at USD 58,000. It has found fresh support around USD 55,500 which could offer some encouragement but only a move back above USD 60,000 really puts us back into bullish territory.

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

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