Markets bounce back strongly

It’s not been a bad 24 hours for the stock markets, with two unlikely heroes emerging late on Wednesday to deliver gains late in the US session which has carried over to today.

A surge in the price of natural gas put investors on the defensive early on Wednesday, setting the stage for our first unlikely hero of the day, Vladimir Putin. The Russian President was keen to reassure everyone that the country remains a reliable natural gas supplier to Europe, despite the bloc apparently being in a crisis of its own making.

He then uttered the words governments around the world have been desperate to hear, they are ready to stabilise the global energy market. A ray of hope just as everything was beginning to look rather bleak. A miserable blast from the past. The only issue being that, while it has increased transit via Ukraine and will exceed obligations, it just isn’t profitable and new routes reduce with lower CO2 emissions. What a conundrum.

Fortunately, there is a new pipeline awaiting approval that could facilitate a boost to Russian supplies. Nord Stream 2 has been the source of fierce political debate, with some including the US concerned about Europe’s growing energy dependence on Russia.

But with excess US LNG supplies most likely heading to Asia, the highest bidders, Europe may have little choice but to buckle. Like central banks around the world, European’s find themselves between a rock and a hard place and when all is said and done, keeping the lights on is always going to take precedence.

It would appear Congress has successfully managed to kick the debt limit can down the road today after our second unlikely hero, Mitch McConnell, offered the Democrats a way out, a little over a week before the Treasury ran out of cash. I’m actually a little surprised this hasn’t gone closer to the wire but then, we may well be doing this all over again in a couple of months.

And given the uncertain period we’re now heading into – Covid, global energy crisis, slowing economic recovery, tapering, etc. – it feels apt that Congress would throw a potential (albeit highly unlikely) default into the festive mix. Just the kind of excitement we all crave when we’re meant to be easing our way into the holiday season.

US jobless claims were below market expectations last week, falling to 326,000, below the consensus of 350,000. It would appear the impact of Hurricane Ida is wearing off and the downward trend in claims is continuing, an encouraging sign for the labour market ahead of tomorrow’s jobs report.

There’s been a huge focus on the jobs report this week, despite the reality being that it’s going to take something extraordinary to force a Fed to rethink tapering. They’ve communicated the taper excessively in recent weeks. I can’t imagine a number so bad that the central bank would slam on the breaks. Unless, of course, this little outburst we’ve seen in the markets morphs into a full-blown taper tantrum, which may give policymakers pause for thought.

Bitcoin has incredible momentum

Bitcoin has generated some incredible momentum this month, surviving an assault on USD 40,000 before tearing higher and bursting through major technical resistance along the way. We saw USD 50,000 fall with relative ease, similar to USD 52,500 and suddenly it seems a question of when we’ll see new highs, not if. We’re seeing a modest pullback today but momentum remains very much with the rally. We may not have to wait long to see USD 60,000.

For a look at all of today’s economic events, check out our economic calendar:

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Former Craig

Former Craig

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.