European stocks continued their recovery on Tuesday, although that momentum was lost heading into the close as they gave back a portion of their gains.
The US, meanwhile, is seeing large losses on the back of a couple of days of yields rising and some disappointing economic data. The CB consumer confidence reading was a blow, with the expectations component suffering a particularly large drop which doesn’t bode well given how resilient spending has been until now.
While the labour market remains in a very good position, areas of weakness are appearing in the economy – such as the property market – and perhaps consumer spending will be next. This would be a massive setback and potentially the strongest signal yet that the US is heading for a recession.
Stocks had been given a boost earlier by a relaxing of quarantine restrictions in China that may be the first move towards a softening of its zero-Covid policy.
Perhaps investors are getting carried away with a very modest easing of restrictions but the policy is a big potential headwind for the global economy so any loosening will be celebrated.
Of course, these are extremely anxious times in the markets so the celebrations didn’t last very long. And that will be even more evident from tomorrow when the economic data ramps up and we hear from the heads of the Fed, ECB and BoE at the Forum on Central Banking in Portugal.
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