Rebound gathers momentum

Earnings give cause for optimism

We’re seeing decent gains in stock markets again on Wednesday, with the strong sell-off at the start of the week not quite the deterrent some feared.

To put things into perspective, we’re basically back at Friday’s close but importantly, we are seeing real resilience after a troubling start to the week. The Delta variant remains an ever-present downside risk for the markets in the near-term but as long as inflation remains only a temporary problem, it also keeps central bank hawks at bay. And we know how investors love that.

Momentum has been easing as we’ve moved into the summer so it’s perhaps no surprise to see a small corrective move on the back of some negative Covid headlines. The fact that the FTSE held above 6,800 is encouraging, a close back above 7,000 would be even more so after just falling short today. But even in the absence of that, there doesn’t appear to be anything to panic about at this stage.

Earnings season is off to a solid start, with results beating bumper expectations in the second quarter. The positivity that’s driving is clearly offsetting fears about another wave for now, aided no doubt by belief in the vaccine to stop surges turning into severe lockdowns in most cases.

Bitcoin’s resilience paying off

Bitcoin’s resilience on Tuesday appears to be paying dividends, with the cryptocurrency making strong gains and back above $30,000.

Whether that will last or inspire further gains, we’ll have to wait and see. The trend prior to the breakout wasn’t favourable so the path of least resistance still looks below but a move above $32,000 could be an encouraging sign.

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Craig Erlam

Craig Erlam

Former 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.