A record end to the week

Stock markets are ending the week on a positive note, with earnings continuing to surprise to the upside and Covid fears being brushed aside as the S&P and Nasdaq hit fresh record highs.

Whether both of these things will continue, we'll see in the coming weeks, but for now investors are extremely enthused by what they've seen and optimistic about what's to come.

Central banks continue to play their part, with the ECB on Thursday reaffirming its commitment to ultra loose monetary policy, driven largely by its inability to get inflation even close to target, beyond the transitory price pressures we're currently seeing.

Next week it's the Fed's turn and that will be far more interesting, with it being a central bank that actually has recent experience of tightening monetary policy. The strong second quarter we're currently seeing from corporate America will make taper discussions all the more interesting.

Oil traders nerves to be tested

Oil prices have bounced back strongly after a rocky start to the week. OPEC+ struck a deal to slowly ramp up production each month by 400,000 with a view to erase all cuts by the end of next year.

The week got off to a rocky start following a surge in Covid cases that led to questions about the strength of the recovery in the near term. That was quickly replaced by optimism on the back of a number of strong earnings reports and risk appetite has been strong since. 

WTI climbed quickly back above $70 and has held above here, with sights set back on this month's highs around $76. While earnings have given cause for optimism, Covid cases are likely to continue to surge which may test the nerves of investors over the coming weeks.

Gold remains in consolidation

Gold has entered into a consolidation period around $1,800 where it has been trading for most of the week. The yellow metal enjoyed a strong start to July but has struggled to maintain it over the last week as risk appetite has improved and US yields have crept higher. 

It has shown some resilience around these levels though so it would appear gold remains in favour. And with central banks in no rush to start paring back their support, it’s easy to understand why. A significant move back below $1,800 may open up a move back towards $1,750-1,760. Resistance above comes around $1,840, with $1,860 the next level of interest. 

Brighter outlook for bitcoin

Cryptocurrencies were given a helping hand by their old friend Elon Musk this week and it couldn’t have come at a better time. Just as bitcoin was pushing below $30,000 - a level which if significantly broken could have sent the price tumbling back towards $20,000 - Elon rode to the rescue. 

His declaration that Tesla could u-turn on its u-turn and start accepting bitcoin again in the future, combined with his disclosing of personal holdings of bitcoin, ethereum and dogecoin, was enough to send prices soaring again. Now back above $32,000, the near-term outlook is looking a little brighter for cryptos.