Equities drift lower

Equity markets are a little lower on Thursday, as the broad consolidation continues against the backdrop of gradual progress on Ukraine, fluctuating energy prices and inverting yield curves.

There’s plenty out there at the moment to make us nervous but at the same time, glimmers of hope after a nightmare start to the year. Talks between Ukraine and Russia are moving at a snail’s pace and it’s worth taking positive steps with a pinch of salt, but the noises coming from Turkey are as promising as we’ve seen.

Yield curve talk is prominent once again as investors fret about the flashing recession warnings. The most widely watched 2-10 spread remains positive but is basically treading water at this point. It may not take much to tip it over the edge at which point, what will investors do?

I’m not sure they’ll be hugely deterred as lower growth is already priced in as central banks rush to get inflation under control and commodity prices spike. Ultimately it comes down to what kind of recession bond markets are potentially pricing in, what impact massive central bank balance sheets have on that and what the imminent shrinking of them will do.

Which brings us nicely to the commodity markets, where all of the action seems to be at the moment. And it would appear it is the Kremlin that blinked first after threatening to cut its “hostile” customers off if they refused to pay for gas in roubles, regardless of what the contracts stipulated.

After a week of consideration, it seems there’s been a certain amount of backtracking and/or modification to the demands which will allow Europe to purchase its gas in euros as it did before. That may change when contracts come up for renewal but for now, it removes any imminent threat and shows the G7 was correct to stand strong knowing the terms were in their favour.

Bitcoin slightly pares gains ahead of resistance

Bitcoin is continuing to pare gains on Thursday but has only given up a tiny amount of Monday’s surge in the sessions since. It seems there’s plenty of belief in the breakout and while we haven’t seen it build on that in any way, the lack of a significant pullback could be a bullish signal as it faces further resistance around USD 50,000 and USD 52,000.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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