A disappointing end to the week

Stock markets have turned negative on the final trading day of the week, with Europe tracking Asia lower and US futures eyeing a similar open on Wall Street.

Whether this is the start of a late summer pullback or just a bit of profit-taking following an eventful week isn’t clear at this stage. It’s been a funny old week of incredible earnings, downbeat outlooks for the current quarter, mixed data and a cautious Fed. The buzz around the second quarter is fading and it may well be affecting investor sentiment.

It seems most of the big tech companies that have been reliably growing at an extraordinary rate for numerous quarters are all facing issues in the coming quarters either related to supply chains, advertising, sales growth or a combination of these. It’s far from a doom and gloom story but things may become a little more challenging than they have been.

Add to that the surges we’re seeing in the delta variant and what that will mean for the recovery in the third quarter and there may well be a case for these markets to come off a little. I don’t think it would be anything more than a small corrective move but if we are heading into a quiet month, it wouldn’t come as a huge surprise.

There’s still plenty to come from earnings season, with just over a quarter of the S&P 500 reporting next week. The US jobs report and a broad selection of PMI data next week, not to mention rate decisions from the Bank of England and Reserve Bank of Australia, means there’s still plenty to look forward to that could give more cause for optimism.

As for today, income, spending and inflation data from the US stands out. The latter in particular as the Fed has shown a willingness to look beyond recent spikes as they view it as transitory. But as we saw on Wednesday, there are split views and with the economy recovering strongly, it may not take much for the balance to swing in favour of the hawks on the committee.

Bitcoin preparing to launch?

Bitcoin is back below USD 40,000 at the end of another eventful week for the cryptocurrency. Bitcoin is never too far from the headlines these days and even in a week like this, it’s been right up there. But amid all of the excitement, it continued to stumble around USD 41,000, where it has struggled since late May. And the risk aversion we’re seeing at the end of the week won’t be helping. Although it’s not significantly hindering it either.

The near-term outlook continues to look much brighter for the bitcoin price. Especially compared to the days leading up to the B Word conference when it was threatening to break USD 30,000 and potentially suffer heavy losses. With bitcoin now appearing to have found its floor, the question becomes where its near-term ceiling is and how long it will take to get there. It could be a really interesting few weeks for cryptos.

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

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