Inflation fears weigh

US futures are marginally lower ahead of the open on Wednesday, tracking similar moves in Europe after an uninspiring start to the week.

We're seeing nerves creeping in after a spike in US Treasury yields that has seen the 10-year hit a 12 month high. It's pulled back a little today but the trend appears to have accelerated in recent sessions and investors are going to be very wary.

The reflation trade that has been good for stock markets as it's driven by optimism around the recovery. But that will only continue to a point and if yields start rising at a rate considered too fast, sentiment will quickly change in stock markets.

There's already been plenty of talk of taper tantrums this year so the seed has already been planted. We haven't seen a pullback, per say, in equity markets so far, but it is stalling. And further yield spikes could weigh on sentiment in the near-term and lead to losses in stock markets.

With plenty of US data to come, investors will likely be a little sensitive to the numbers. PPI numbers today are an example of that. Unexpected increases here could make investors very uneasy and fearful of higher inflation this year, exacerbated by President Biden's massive stimulus plans that are on course to make their way through Congress largely in tact.

Retail sales, industrial production, capacity utilization and other figures will also be released ahead of the open. But with fears seemingly rising around inflation, the Fed minutes later in the day may be of more interest, even if they are a little out of date at this point.

Oil prices rise as big freeze hits US output

Oil prices are climbing once more, with the cold snap in Texas the latest bullish catalyst for crude prices. Oil wells and refineries offline, we could be facing a significant shortfall for a number of days, further tightening supply at a time when it has already been restricted and demand is expected to return.

This is only a short-term glitch though which is why we're not seeing a more signficiant impact on oil prices, which are starting to show signs of being overbought. This shouldn't come as a major shock after a 70% rally since early November. A lot of optimism around the economic recovery is now priced in so the market may be primed for a minor correction.

Brent and WTI above $60 and vaccines being rapidly rolled out will make the next phase of the production agreements all the more interesting. At these levels, Russia will be more anxious than ever about the recovery in US shale and Saudi Arabia surely won't want another repeat of the January meeting when it effectively did all the heavy lifting on its own. It should set up an interesting face off throughout the spring and summer months.

Gold slides as US dollar jumps on higher yields

The dollar rebounded strongly once again on Tuesday after coming under early pressure and its building on that momentum again today. Higher yields are making investors a little nervous and are generally positive for the dollar. A move back above 91 in the dollar index could be a bullish signal, being the neckline of the inverse head and shoulders that was broken earlier this month.

This is naturally a negative development for gold which is once against testing lows from two weeks ago. A break of $1,785 will turn attention back to the late November lows around $1,765 and this may not put up too much of a fight. The dollar appears to be generating momentum and rising yields is further fueling it. A move back towards $1,700 may be on the cards for gold.

The death cross - 50 day SMA moving below the 200 day SMA - isn't an ideal development for gold either. The last time it was below is more than two years ago.

Microstrategy gambles on more bitcoin

Bitcoin has broken $50,000 after a number of days of falling just short - a lifetime in the world of crypto - and it seems it's finding a fresh new wave of upside momentum. It's not exactly soaring, as it has with other major technical breakouts but another 3% gain isn't to be sniffed at.

The latest story of note in the space is MicroStrategy, buoyed by its previous foray into bitcoin, selling $600m in convertible bonds to fund more purchases. It's one thing using reserves to buy bitcoin - which is still a very questionable strategy that may pay off as gambles can do - but to do so by raising funds? That's extremely worrying, especially if more companies follow.

Suddenly it feels like 2017 again when everyone wanted blockchain in their name in order to get a price boost and ride the crypto wave. The most ridiculous example I remember being Long Island Iced Tea or "Long Blockchain". If companies fundamentals are going to become closely tied to movements in bitcoin because they've suddenly become speculators on the side, we're going to be in bubble territory before you know it. Good luck.