Surprisingly Optimistic

It’s been a promising start to the week in financial markets, albeit one built on surprising optimism ahead of tomorrow’s US inflation report.

I would expect to see a little more apprehension, even anxiety, in the run-up to the release after the jobs report left investors on edge. In an ideal world, slack would be gradually appearing in the labour market as inflation steadily fell to 2%, allowing the Fed to take its foot off the break. As soon as one of these isn’t playing ball, the other has to up its game.

So far, inflation has done that to some extent. The decline from the peak has been very welcome and led to a repricing of the terminal rate. But that was undone to an extent by the latest jobs report that confirmed the labour market remains extraordinarily tight. Suddenly there’s no wiggle room in the inflation data. A slight setback could be a major blow and leave at least two more hikes, maybe more, on the cards. Which makes this buoyant start to the week all the more intriguing.

A seller’s market in the Premier League

I couldn’t pass up the opportunity to include a little football commentary in my note, with Manchester United shares rising once more amid takeover speculation. Investors are understandably happy about the prospect of a Qatar bid being prepared to rival that of Sir Jim Ratcliffe, who is also reportedly very interested in acquiring his boyhood club.

With the Glazer family reportedly demanding a high price for the club – around £5 billion – this could be the perfect outcome, alongside any other interest, as it could trigger a bidding war among people with more than just business in mind. No doubt the owners of rivals Liverpool, FSG, will have a keen eye on how the process evolves having previously indicated an interest to sell a part or all of the club. Following the sale of Chelsea to Todd Boehly last year, it would appear the seller’s market has extended beyond transfers.

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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