Between a rock and a hard place

European stocks are making decent gains on Thursday, while US futures look a little flat ahead of the open on Wall Street.

US equities rallied as the session wore on yesterday and we're seeing Europe playing a little catchup this morning. Overall, the mood remains a little downbeat in the markets, with investors torn between the "buy the dip" approach that has fared so well in the past and the growing list of economic and market risks that are increasingly evident.

We may see more of this over the coming months as countries get to grips with winter Covid surges, higher energy prices and higher inflation, among other things. Which makes the positions of central banks all the more uncomfortable, with many seemingly determined to persevere with paring back their pandemic stimulus measures.

Of course, if they are becoming more of the view that inflation is not as transitory as they previously believed, then they're caught between a rock and a hard place and may be forced to act. But that will only pile on the pressure and disrupt the economic recoveries that many have enjoyed.

Next week we should learn a lot more about what the world's most important central bank thinks of recent developments and how it perceives the risks posed by inflation. It may not be surprising therefore if equities err on the side of caution between now and then as an undesirable response could trigger a nasty reaction in the markets.

US data delivers gains for stocks, yields and USD as gold tumbles

Today's data from the US has done little to clear things up, with both retail sales and the Philly Fed manufacturing index smashing expectations while jobless claims popped a little but only just exceeded forecasts. Retail sales have been volatile for a number of months but an August increase of 0.7% was the reverse of the decline that was expected.

Philly Fed has been trending lower since March and that trend was expected to continue but a surprise jump may be cause for optimism. While new orders and employment indicators softened, firms remain optimistic about the next 6 months as current general activity and shipments saw large increases.

US futures got a small lift on the back of the data while the dollar continued to rally as US yields drifted higher once more. Gold, which has been through a rough patch over the last 48 hours, didn't fare well with the data and continued to trend lower on the day.

Oil sees profit taking at summer highs

Oil is pulling back a little on Thursday after enjoying another strong rally in recent days. Hurricanes hitting the Gulf Coast in recent weeks have disrupted production in the region which has given a boost to prices. And with two more months of Hurricane season remaining, more disruption could follow.

Inventory data from EIA gave prices another lift on Wednesday, with WTI and Brent also rallying ahead of the release after API also reported a large drawdown a day earlier. With prices now back around summer highs, we are seeing some profit taking kicking in but the rally continues to look well supported.

WTI fell a little short of its summer highs around $75, stumbling around $73, while Brent saw resistance around $76. A break through these levels could see the rally gather even more momentum. If we do see a small pullback, the first test of support could come around $70 in WTI, where it had previously seen resistance.

Tough times ahead for gold?

Gold has fallen out of favour and fast, with the yellow metal slipping more than 1.5% today and below a key support level. This comes only a couple of days after it broke back above $1,800 on the back of softer US inflation data but that celebration was short-lived and it's suddenly looking rather vulnerable.

From a technical perspective, $1,780 marked the neckline of a head and shoulders that formed over the last month, peaking at $1,833. The next major test below could come around $1,750 but further downside could be on the cards.

The fact that this has come ahead of the Fed meeting doesn't bode well for the yellow metal. Recent data has given the Fed room to be more patient with tapering but the commentary we had late last week from officials suggested many aren't discouraged. Gold could feel the love once more should policymakers change course next Wednesday but it could be a long week for the yellow metal in the interim.

Bitcoin struggling at $48,000 once again

Bitcoin has steadied once more around $48,000 which remains an interesting technical level. A rotation off here back towards $44,000 could see correction pressure grow. I say this having talked about the prospect of a correction for weeks now and yet, bitcoin has shown remarkable resilience.

It obviously hasn't burst higher in that time either but it's certainly dragging its feet. With that in mind, there isn't much to add at this point. A significant break below $44,000 could make things interesting, while a move above $48,000 will put the focus back on $50,000 and may even trigger a shift in momentum that has been absent in previous rallies.