The Trader: FTSE hits post-pandemic high, Bitcoin leaps on Musk tweet

  • European markets continue to rise
  • Eyes on the Fed for inflation action indicators this week
  • Bitcoin gave (another) Musk bounce

European stock markets rose in early trading on Monday, with the DAX hitting a new all-time high in Frankfurt and the FTSE 100 making a new post-pandemic high above 7180. reached as the generally positive sentiment in the equity markets continued to outweigh inflation concerns. Travel shares how IAG and EasyJet fell as the full reopening of England appears to be delayed for another 4 weeks. Markets are now between last week’s big inflation readings and this week’s Fed meeting. Despite the high inflation rates from the US, inflation expectations are not really rising, which should allow the Fed to maintain its cautious stance. Government bond yields have stayed below 1.5 percent, suggesting investors are buying the transition story for now. Nevertheless, I would expect them to accept the offer at some point and test 2 percent again for 10s in the coming months.

The Federal Reserve’s statement on Wednesday is unlikely to include fireworks. but it is an important meeting as it will provide evidence of the central bank’s response function to rising inflation. We know the Fed likes to let inflation run hot in the summer as it is betting everything on its employment mandate. Labor market data are therefore arguably more important than inflation figures at the moment. On that front, the latest NFP job report was something of a Goldilocks number – not too hot to worry about an early $ 120 billion monthly bond-buying program, but not so cool to worry about worrying about recovery. The truth is that the Fed is looking at both, and this meeting comes at a time of great uncertainty as to whether inflation will in fact prove to be as transitory as policymakers believe.

In the minutes of the FOMC meeting in April, the Fed floated a test balloonas these indicated that some policymakers are considering cutting down on asset purchases. “A number of participants suggested that in the upcoming sessions it may be appropriate to begin discussing a plan to adjust the pace of asset purchases at some point in the upcoming sessions if the economy continues to make rapid progress towards the goals of the economy Committee makes “, it says in the minutes. Members of the FOMC also stressed the importance of “communicating your assessment of progress toward your longer-term goals well in advance of when it could be considered material enough to warrant a change in the pace of security purchases”. The question remains: when does the Fed think it has reached the economic landing zone and is inflation picking up in the meantime? This week’s session is unlikely to bring any surprises – employment numbers are currently positive, but the labor market is far from where the Fed is aiming, while the inflation story is pretty well understood right now. Anything to suggest that the Fed might pick up sooner would create volatility.

Meanwhile, Bitcoin soared this weekend, trading nearly $ 40,000 after Elon Musk hinted that Tesla could accept the crypto asset for purchases. “If there is a confirmation of a reasonable (~ 50 percent) clean energy consumption by miners with a positive future trend, Tesla will allow Bitcoin transactions again,” tweeted the “Technoking” of Tesla. Tesla’s decision last month to stop accepting Bitcoin caused significant volatility in the asset, while it was the company’s major investment announced in February that helped propel it to an all-time high of nearly $ 65,000. This latest tweet only confirms what insane relationship Musk has with Bitcoin and its incredible impact on prices.

Oil prices hit new highs as the outlook for demand improves and supply remains tight. WTI broke out at $ 71, its highest level in nearly 3 years. It comes after the International Energy Agency (IEA) urged OPEC and its allies to increase production. “OPEC + has to open the taps to keep the world oil markets adequately supplied,” it said last week.

Neil Wilson is the Senior Market Analyst at Markets.com

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