Stock markets are in positive territory once more on Tuesday as investors continue to see value after a substantial sell-off in recent weeks.
I’m not particularly convinced about the sustainability of such a move against the backdrop of high inflation, much higher interest rates and probable recessions but there’s no doubting that the scale of the declines recently was bound to attract some back in.
There’s plenty of economic data and central bank speak to come this week that could easily make investors nervous once again but for now, there may be a belief that a lot of bad news is priced in.
A mixed bag from the UK labour market
The UK labour market report can be viewed as okay or bad depending on which way you look at it. From a cost-of-living perspective, bonuses boosted average earnings to 7% and closed the gap between income and inflation which could ease some of the pressure on households across the country, albeit while still pointing to a squeeze on real incomes. Excluding bonuses, the data was a concern with earnings rising only 4.2% and falling well short of inflation, ramping up the pain for many.
From a central bank perspective, the data isn’t ideal. Higher earnings may ease some pressure on households but, as Governor Bailey alluded to, they also contribute to the inflation spiral and makes their job of achieving price stability all the more difficult. The spikes we’ve seen in UK yields and the pound this morning suggest markets are anticipating more rate hikes as a result, and at a time when a recession is already the base case.
Hanging in there
Bitcoin is hanging in there above USD 30,000 after coming under pressure amid widespread risk aversion and the Terra debacle. The break of USD 30,000 could have been much worse for bitcoin and still could, with the cryptocurrency struggling to make any headway above it. I’m not convinced in the broader market to remain in a more bullish mood which could ultimately hamper bitcoin’s chances of staying above this important level.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
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