It’s been a shocking week for European equity markets, on course to shed almost 5% and it could get worse if the US jobs report reflects what we saw yesterday from ADP.
You wouldn’t always guess it when looking at the performance of stocks but there is mounting anxiety about the resilience of the economy and what that will mean for interest rates going into the end of this year and 2024.
Investors always seem to find a way to look on the bright side which may explain the disconnect between economic fears on the back of rapidly rising interest rates and the performance of indices. And that may be rewarded if central banks can achieve the soft landing they’re hoping for but with every piece of resilient data and additional rate hike, that’s looking harder and harder. And you can see it reflected in their language more and more.
That’s not to say investors have suddenly turned bearish on the basis of this week, although it has been quite a sharp sell-off, but we may have reached a point in which they are questioning whether markets are no longer reflecting reality.
The ADP report doesn’t always attract that much attention, in fact for years it’s been borderline disregarded, but it’s impossible to ignore yesterday’s release. It smashed expectations and once again indicated we may be looking at another consensus-beating NFP number. Further signs that the labor market is red-hot and resilient.
Choppy trading in bitcoin but ultimately range-bound
Trading has remained choppy in bitcoin over the last week or so but we haven’t yet seen any significant developments, with it still largely contained to the $30,000-$31,000 range it’s traded within since bursting higher last month. There’s more cause for optimism on the back of the ETF filings but there’s no guarantee they will yield a positive outcome even if the chances are enhanced by the backing of those involved. It could also be a lengthy process which may explain the stall we’ve seen over the last couple of weeks.