It’s been a day of small moves in equity markets, with Europe ending the day broadly flat and the U.S. marginally higher.
Focus has very much shifted to earnings season as investors ponder an impending central bank tightening cycle at a time of sluggish growth and numerous downside risks. All of this will be much easier to absorb if companies remain optimistic on the outlook despite all of the challenges they’re facing.
Earnings season is off to a strong start, which is continuing to buoy stock markets and keep investors on board. It’s early days, but the reports we had from the major banks last week were encouraging. The number of companies reporting will ramp up substantially over the next couple of weeks, at which point we’ll have a much better idea of how well-positioned the economy is to withstand the coming challenges.
The inflation data we’ve seen today highlights the challenges facing central banks over the coming year. Much of the price pressures may well be transitory, but the growing concern among policy-makers is that those pressures may become more entrenched, leading to higher inflation expectations and wages.
While there may be little evidence of that now, there seems to be little appetite to wait and see after more than a decade of unprecedented stimulus. Whether central banks will go as far as markets are currently anticipating, I’m not sure, but it’s certainly another headwind for the economy, so a strong earnings season and outlook could be coming at just the right time.
No Repeat Of 2017 For Bitcoin
Buy the rumour and the fact seems to be the message in the crypto-verse, with Bitcoin hitting new record highs the day after the launch of the ProShares ETF. It's a landmark moment for the cryptocurrency space as it continues to strive for mainstream adoption. But not one, it seems, that’s triggered any significant profit-taking.
Often in situations like this, the build-up to an event can spur a buying frenzy before profit-taking quickly kicks in, just as we saw when Bitcoin futures launched back in 2017. Of course, the crash that followed was extreme and looks much less likely this time around. It’s interesting to see price not taking off though, which may suggest it won’t be plain sailing for crypto enthusiasts. But it’s hard to imagine further gains not following in the coming months.
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