Stubborn Inflation

Another miserable day for European equity markets as the prospect of recession becomes ever more real.

US markets aren't faring any better after the jobless claims data that showed the labour market is still performing remarkably well despite all of the challenges the economy faces. While that would ordinarily be celebrated, on this occasion that resilience could translate to stubborn inflation and more rate hikes.

Focus will now shift to inflation, income and spending figures tomorrow. Another batch of stronger data could tip investors over the edge given how fragile sentiment already is. It will be interesting to see how they react to any positive surprise (lower inflation, weaker income and spending) considering how burned they were by the July CPI data.

Oil choppy amid OPEC+ rumours

The battle between the economic outlook and OPEC+ continues in the oil market, with prices boosted by reports of discussions between producers around an output cut ahead of the meeting next week. This shouldn't come as a huge surprise under the circumstances as the alliance has previously alluded to its willingness to cut further if fundamentals change.

The question is whether they'll take the leap given the enormous uncertainty in the economic outlook at this point. Or whether they'll opt for another, slightly more forceful, warning to the markets to not get carried away speculatively pushing prices lower. Brent and WTI have been trading at pre-invasion levels recently, something the group may not be comfortable with. With Russia reportedly backing a one million barrel per day cut, a substantial option will at least be on the table which could push prices back to late summer levels.

Gold recovers to trade a little higher

Gold managed a small recovery on Tuesday as US yields pared recent gains and the dollar eased off its highs. It may have been overly optimistic to hope that would continue in the current environment although after slipping earlier it has recovered to trade flat on the day. While we could see some upside in the near-term as the dust settles, I don't think policymakers are in the mood to soften the hawkish rhetoric and the data doesn't yet support such a move. That could maintain pressure on the yellow metal for now.

Bitcoin struggling at $20,000 again

Another volatile session in bitcoin which is trading more than 1% lower on the day after failing just shy of $20,000 earlier in the day. The rally at the start of the week will have gotten some excited but it couldn't hold onto gains and now it's struggling at that psychological threshold once more. A recovery in risk appetite may give it the boost it needs but that may be hard to come by in this environment.