Powell momentum fades

Stock markets are making small losses on Tuesday, giving back earlier gains to trade slightly in the red with US futures also seeing marginal losses.

Equities earlier appeared to still be riding the Powell wave in the absence of much else so late in the summer. But that appears to have faded throughout the morning in Europe. Things should pick up again going into the Fed meeting in a few weeks and the coming days do have a lot of data on offer. But the start of this week is lacking a little, especially when combined with the UK bank holiday on Monday.

The Chinese PMIs overnight didn’t appear to have undone any of Powell’s work, despite the non-manufacturing number worryingly slipping to 47.5 – well into contraction territory. This is the lowest reading, and first below 50, since February last year. Of course, targeted lockdowns and restrictions to contain the Covid delta outbreak are behind the slowdown, which has since been brought under control once more.

So perhaps it’s no surprise that markets have overlooked the blip in the data, although there are some underlying trends that could weigh going into the end of the year that are harder to ignore. Supply chain bottlenecks, higher prices and lower demand is a real challenge for China and others as numerous countries contend with their own delta surges.

Another correction warning?

Bitcoin struggled around USD 50,000 once more over the weekend and, crucially, failed to reach the highs it did a week earlier. There have been many signs recently that the cryptocurrency is preparing for a correction, with the technicals all seem to be pointing the same way.

Rallies fading quicker, momentum indicators displaying divergences, a failed new high being a few. Don’t get me wrong, none of this means its best days are behind it and that we’ve seen the top, but perhaps that a decent correction could follow. A move below USD 46,000 could see that accelerate with the key area then becoming USD 40,000-41,000.

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

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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.