Treading water

Stock markets in Europe are treading water in thin trade at the start of the week amid a light economic calendar and a US bank holiday.

It was always likely to be a slow day under the circumstances and that’s exactly what it’s turning out to be. Stock markets remain in a surprisingly strong position despite the uncertain outlook and rising interest rate expectations due to stubborn inflation.

While other areas of the market appear to have adopted a more defensive position, equity investors remain undeterred. It would appear it’s going to take a lot more than a few nasty economic releases to put a dent in their optimism.

China optimism remains

The outlier is once again China, where stocks have enjoyed a very good start to the week. That came despite one and five-year loan prime rates remaining unchanged, as was widely expected following last week’s MLF hold.

The bullish case for the Chinese economy remains solid and the likely release of stimulus over the next couple of months as it gathers pace could super-charge that. Domestic demand is going to be the cornerstone of the economic revival and policymakers appear poised to unleash that to its full potential. How they plan to do so should become clearer over the next month although we’ve already seen big steps in the right direction.

Eternal optimism

Cryptos are seemingly existing in a world of their own with bitcoin rising 2% again on Monday and eyeing the highs of the last week once more. This could be a really pivotal level for bitcoin and a break of it could generate plenty more enthusiasm. And we’ve all seen what happens when enthusiasm and euphoria exist in cryptos. The price can take off regardless of fundamentals or broader sentiment. That isn’t to say we’ll necessarily see that on this occasion but the 50% recovery so far this year does suggest something may be happening.

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

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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.