European markets regain ground as tech sell-off hits US markets

• European markets regain ground as tech sell-off hits US markets.
• Silver stabilises after yesterday’s collapse.
• Dollar weakens after JOLTS and Challenger jobs data.

European markets are in a largely upbeat mood this morning despite the volatility that has been evident across the spectrum of financial assets this week. What appeared to have started as a concern around a more hawkish pathway for the Federal Reserve soon rolled into a fully blown freak out in financial markets as investors sold anything with the potential to lose business in the world of cheap AI services and data. For Europe this period has highlighted the relative safety of assets aligned with the real economy rather than technology, with the FTSE 100 hitting its highest level relative to the Nasdaq in nine-months. Unfortunately, the data seen this morning from Germany doesn’t exactly embolden the story of economic strength in Europe, with industrial production in the country falling by 1.9%. Notably, one of the biggest European losers off the back of the Anthropic-led selloff has been Relx, with the global data and analytics company falling 5% to result in a whopping 30% drop over the past month alone.

The volatility seen in the precious metals space has continued apace, with silver losing 20% over the course of yesterday. Concerns around the potential speculative efforts to drive down the price of this commodity have been highlighted by the historic short position from famous billionaire Chinese commodity trader Bian Ximiing who has built SHFE’s largest silver net short position at 450 tons. In a world of dwindling physical supplies, the speculative efforts taking place in the paper markets have helped cause huge swings in price of late. However, efforts in China appear to have provided some stability for now, with prices rising after the Shanghai Futures Exchange restricted trading activities from six groups of traders that had engaged in “abnormal trading behaviours”. With the CME ramping up their margin requirements on precious metals yet again today (third time in 10-days), there are clear efforts underway to restore calm to a market that has become hugely volatile owing to speculative paper trading on both sides. 

One positive driver for precious metals over the course of the past 12-hours has been the turnaround in the dollar, with DXY currently on track for its biggest daily decline since Warsh’s nomination. Concerns around his desire to shrink the Fed’s balance sheet has helped drive a rebound in the dollar, but many are waking up to the notion that we could see oversized rate cuts in the event of economic weakness and controlled inflation. With that in mind, yesterday’s Challenger and JOLTS job data provided grounds for dollar weakness, after job openings fell to the lowest level since 2020 and we saw the highest January job cuts figure since 2009. Undoubtedly this is something that we will have to grow accustomed to as the AI boom further develops, with the Anthropic-led selloff highlighting how jobs throughout a host of industries suddenly become obsolete. In a world of high unemployment, it looks likely that easy monetary policy and high government fiscal spending becomes a necessary. Both of which are dollar negative and positive for precious metals.