Cracks appearing as Fed ponders more easing

European stocks are back in the red while US futures are slightly paring Tuesday's losses, as we continue to see a struggle for any meaningful direction.

We're not short of volatility in these markets, that has been perfectly evident this week alone. But the rally has clearly lost momentum as the grand reopening runs into the kind of challenges we all feared. The use of targeted lockdowns will no doubt alleviate the pain but a number of states in the US in particular seem to be struggling with the spread.

The Fed has repeatedly reiterated that it stands ready to act and Loretta Mester added her voice to those warning of a levelling off in the economic rebound as case numbers rise. This may prove to be supportive to these equity markets just as they're looking a little vulnerable and ensure the dips are still attracting buyers. I guess we'll soon see whether that's enough as the cracks are appearing at a time when there is a huge gap between stock markets and reality.

Eat out on the UK government

The UK government's mini-budget today announced a raft of measures to get the UK public spending once again and shield the ravaged hospitality industry from more permanent damage as a result of the COVID lockdown. While there was a small amount of volatility in the pound as Chancellor Rishi Sunak unveiled the measures, most have been leaked prior to today's event so didn't come as a great surprise. The "eat out to help out" policy was a nice surprise and gave another boost to a hugely important industry for the UK economy that relies on consumer spending, while the stamp duty and VAT changes will also be welcomed.

Oil struggling around recent peaks

Oil prices are edging higher but continue to face significant resistance around the same peaks that it has over the last month. The risk of more targeted shutdowns is a clear risk to local economies and oil consumption around the world, even if to a lesser degree than the nationwide lockdowns that we've seen since March. How OPEC+ responds will determine whether oil prices can be sustained at or above these levels.

Gold finally having a pop at $1,800

Gold is finally taking a proper run at $1,800, having dragged its feet for weeks. Coming as it seemingly decouples from the stock market moves and as the dollar continues to be well supported is interesting, to say the least. With tensions rising between China and a growing list of countries around the imposition of the national security law in Hong Kong, it's possible that we're seeing a bit of a safe haven drive, only time will tell. I'm sceptical given its performance over the last number of months. This is a major resistance level, a break could be hugely significant.