Stocks lose traction despite improved US data

Stocks are on the slide once again, as fears of prolongued periods of high interest rates cast aside recent optimism on falling inflation. However, todays improved US data does help ease some of the fears that we could be facing a sharp economic collapse this month, says Joshua Mahony.

Markets slump, although the dollar struggles to follow through

“The bears have re-emerged after a near three-week period of hibernation that allowed the DAX to push an impressive 10% higher. However, US markets appear to have led the drive lower, with the Tuesday declines on the other side of the pond feeding through into Europe yesterday and today. Fortunately for the FTSE 100, we continue to see the declines in GBPUSD provide some protection to the index. However, we are yet to see any major appreciation for the dollar despite this week’s equity losses, with the sharp declines in US inflation signalling the potential for a relatively resilient outlook for the likes of EURUSD and GBPUSD. In the absence of any major resurgence for the dollar, we continue to see strength for the likes of Gold and Silver. ”

US data improves, alleviating economic fears somewhat

“Improved economic data out of the US has helped highlight a relatively resilient economy despite mixed earnings reports thus far. Unemployment claims dropped to the lowest weekly reading in eight months, easing fears of a sharp uptick in unemployment as recessionary pressures take hold. The typical relationship between economic growth and unemployment looks to be cast aside on this occasion, with the US economy entering this period in an environment where employers had struggled to fill their roles. Meanwhile, the rise in Philly Fed manufacturing survey brings about a five-month high for the economic gauge. Coming off the back of a collapse in the Empire state figure in New York, this does at least allay some fears that the manufacturing PMI will follow suit next week. ”