Stock markets are back in the red on Tuesday, with US futures also pointing to a negative start on Wall Street in a couple of hours.

These wild swings from one day to the next have become the norm as investors try to pick the bottom in the markets only to be dealt another blow from one negative headline or another. And they continue to come thick and fast, leaving equity markets vulnerable to further drops.

Pessimistic Chinese growth forecasts and a profit and revenue warning from Snap appear to have been behind the latest tumble, although there are so many headlines pouring out, you could probably pick another half a dozen reasons to explain the selling. Ultimately it comes down to the fact that the level of economic uncertainty is immense and while recessions are not the base case, they are a very realistic prospect.

Not least in the UK, where PMIs slipped back to levels not seen since lockdown. Except that the economy is fully open and operating without any restrictions at all, which is deeply concerning. The cost-of-living crisis is already having an impact and is expected to hit the economy hard, with the BoE anticipating double-digit inflation and a possible recession.

The PMI data appears to be backing that up, with the services survey falling heavily from 58.9 last month to 51.8 this. That's barely in growth territory and a hugely negative shift. The squeeze on household budgets is going to intensify later in the year which creates a feeling of inevitability about a recession. Perhaps that's why we're starting to see attitudes shift within government although as yet, we haven't seen any new measures announced.

Oil rally stalls

Oil prices are relatively flat on Tuesday as global economic fears and the prospect of tighter restrictions in Beijing take some of the heat out of the rally. Brent and WTI are trading right at the upper end of the range they've been within the last couple of months, with tight supplies, easing restrictions in Shanghai and a potential EU ban on Russian oil imports driving the price higher.

As has been the case for months now, there are so many countering forces in the market that it can be hard to keep up. Not to mention sentiment in the broader markets drastically changing from one day to the next. It's quite a challenging market right now but one thing is clear, it's still extremely tight and those pressures will keep prices elevated. Just not quite as much as it would if not for the recession warnings and Chinese Covid cases.

Gold edges higher

Gold is aiming for a fifth consecutive winning day on Tuesday as a softer dollar and slightly lower US yields have allowed for a recovery in the yellow metal. It is trading back above $1,850, with $1,875 and $1,900 being the next big tests. If $1,850 fails to hold as support, the next test below falls around $1,835, with $1,800 then being the key support below that.

Consolidation continues

There hasn't been much change over the last week or so on the bitcoin front. It continues to bounce around $30,000 with moves below not gaining much traction to the downside and those above the same. It continues to look vulnerable below as there simply isn't much of a bullish case for it in a monetary tightening and risk-averse environment. If we start to see markets pricing in fewer hikes then it may change but that looks a little hopeful at this point.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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