After a volatile start to the week, the markets seem a little calmer today.
Investors continue to worry about the Covid-19 pandemic and the possibility that the US central bank will cut its stimulus program faster than expected, if Joe Biden’s multibillion dollar stimulus package does the trick .
But hopes of an economic recovery as vaccines roll out are also supporting markets, although the World Health Authority has warned that we are not getting herd immunity this year.
Oil, a traditional indicator of economic hopes, is up today after falling on Monday. Brent gained nearly 1% to $ 56.12 a barrel, retreating to 10-month highs from last week.
Goldman Sachs predicting prices could hit $ 65 a barrel by this summer, crude prices could continue to rise as Saudi Arabia cuts production and Democrats implement a new stimulus package.
As Stephen Innes of Axi puts it:
Oil prices are cautiously returning to the vaccine path, and the hyper-stimulus of least resistance as structural catalysts for vaccine delivery and normalization of activity remains intact. Oil will not be a standing asset class.
Speaking of volatile assets… bitcoin rebounded after a jerky sell off yesterday.
After falling from more than a fifth to just over $ 30,000 on Monday, the cryptocurrency is now back to around $ 36,500 today – falling back to the record high of nearly $ 42,000 on Friday.
Monday’s crisis, however, highlighted the reasons regulators are concerned about the crypto market, with the UK FCA warning investors could be wiped out in shady “get-rich-quick” schemes.
Jeffrey Halley, analyst at OANDA, writes that yesterday was a “hard lesson” in the crypto market:
Equities, precious metals and energy all beat a slight pullback, as investors took advantage of concerns over Covid-19 and U.S. yields to record profits and eliminate some risk. Bitcoin fell 20% at one point overnight, as a hard lesson on the difference between tradable assets and investable assets was handed out.
I noted that some “institutional investors” called it a correction after its recent galactic speculative rally with some puzzlement. It looks like Emperor’s New Clothes Syndrome is alive and well in 2021.
- 10am GMT: Speech by Bank of England Deputy Governor Ben Broadbent: Covid and the Composition of Spending
- 3 p.m. GMT: US JOLTS vacancy survey in November