Slow start to the week for equities

It’s been a relatively calm start to trading on Tuesday and equity markets are looking a little flat once more, perhaps a sign of things to come in the weeks ahead.

There’s been a lot to take in these last few weeks; major earnings, a hawkish Fed and some knockout economic readings. Everything it seems is now pointing towards the Fed tapering its asset purchases in the coming months, with delta the only things potentially standing in its way as it spreads across the US (and many other countries).

With tapering now so heavily priced in and an announcement in September so widely expected, it just becomes a question of whether the economy can sustain its momentum and keep Covid at bay. Which, in turn, impacts the pace it will allow the central bank to taper and the timing of the first rate hike.

The Jackson Hole event later in the month is the ideal opportunity to learn more and, arguably, the perfect platform for Chairman Jerome Powell to lay the groundwork for a September announcement. We are hearing from various policy makers on a daily basis and there seems to be an increasingly broad agreement on what’s needed. Charles Evans is up next today and typically aligns more with the doves on the committee, having previously urged patience. I wonder whether recent data will make him more open to tapering in September.

Euro slips after poor ZEW surveys

The euro dipped this morning following the surprisingly weak ZEW readings from Germany and the euro area. German sentiment slipped to 40.4 in August, from 63.3 a month earlier, with the eurozone falling to 42.7 from 61.2. While a slight drop was expected, it was nothing on that scale.

Current conditions remain strong but it would appear that concerns around slowing Chinese growth and the anticipated next wave of Covid is responsible for the downbeat expectations, despite high vaccination numbers. Not to mention the belief that growth will be softer due to the level already acheived. As you can see from the numbers, this survey can be volatile which may explain why the euro has only seen a modest dip, albeit enough to make it an underperformer on the day.

Bitcoin overcomes major moving average on ascent to $50,000

Bitcoin is a little lower on the day as it continues its ascent towards $50,000. It has had strong momentum behind it since Elon Musk arrested the slump last month and nothing seems to be standing in its way. We’ve seen these rallies before and extraordinary gains are very much the norm, so it’s anyone’s guess where price will be a month from now.

It does appear to be losing a little momentum on the approach to $50,000, with the crypto seeing resistance today just shy of $47,000 at the 50 fib level – 2021 highs to lows. That said, it also closed above the 200-day SMA on Monday, widely viewed as a bullish indicator, so the longer-term prospects remain promising.

Events in Washington could easily have been viewed as a setback and another time, it may have. But sentiment is strong at the minute and rather than be discouraged, crypto backers may be buoyed by the support and understanding they’ve seen that hasn’t always been present in the past.