It's been a volatile couple of days for the markets, with Powell's renomination sending shockwaves across asset classes and the prospect of more lockdowns in Europe piling pressure on equity markets in the region.
Europe has recovered much of its earlier losses after trading deep in negative territory shortly after the open but most of the region remains in the red. The PMIs gave some cause for encouragement, bringing an end to the slump in recent months, although supply and price pressures very much remain.
The coming months will be very challenging though, especially as a number of countries are now facing the prospect of more severe restrictions, perhaps even lockdowns if they follow in the footsteps of Austria. Germany could be next which would quickly see sentiment slump once more.
The UK PMIs looked quite good on the face of it and will only pile the pressure on the BoE to take firmer action and follow through on their warnings before they begin to fall on deaf ears. The economy still has plenty of issues, even if the risk of restrictions doesn't appear to be on the list, such as high energy prices, higher taxes and an end of support measures. A consumer that's not willing to spend isn't going to help the economy.
The US PMIs fell a little short of expectations in November but the economy remains on a positive trajectory and recent consumer data suggests things will improve after the summer dip on the back of the latest Covid wave.
Lira spirals out of control after months of clueless policy decisions
The day that's been coming for months has finally arrived. Three large rate cuts, the prospect of another next month, a complete disregard for inflation and a spineless Governor that's happy to be the President's puppet on an issue in which he clearly has no experience. The lira has spiralled out of control, falling 20% on the day at one point and the time for desperate measures has finally arrived.
Unfortunately for Governor Şahap Kavcıoğlu - although entirely deservedly - that will likely mean, either today or some point in the near future, being thrown under the bus. This is the reality of Erdoganomics and the results are there for all to see. Sky high inflation and a currency that's fallen more than 30% against the dollar since the start of September. Another disastrous experiment at blurring the divide between poor politics and weak monetary policy.
Oil rebounds after warning shot from consuming countries
Oil prices are recovering despite the coordinated efforts of the US, China, India, Japan, South Korea and the UK to release oil reserves and rebalance the market to ease prices. The move wasn't the game-changer that it could have been and only provides short-lived support. Instead it appeared to serve more as a warning to OPEC+ to not ignore consuming countries.
These countries have vast reserves but they are intended for emergencies, not to start price wars with producers every time they get a little high. The question now is how OPEC+ will respond as the group can easily wipe out any benefits of the releases by slowing their planned monthly output increases. This isn't what the White House wants which may explain why the estimates look a little on the low end.
The markets are rebounding because what was announced didn't surpass expectations so markets were more than positioned for it. If OPEC+ responds, we could see WTI back above $80 in no time. The bigger downside risk for crude is lockdowns and if other European countries will follow Austria's lead.
Gold smashed as US rate hikes priced in
Gold has been pummeled over the last couple of days as real yields have spiked in the aftermath of Jerome Powell's renomination, alleviating some inflation concerns. Markets are now pricing in a rate hike in June, maybe earlier, and up to three next year. We could see those expectations backed up by the Fed dot plot in a few weeks.
The yellow metal has broken below $1,800, a major psychological blow, and could come under further pressure after seeing some support around $1,780. The next big level below is $1,760 but momentum is not gold's friend at the moment.
Bitcoin continuing to struggle
Bitcoin isn't having a much better time although it is worth noting that it didn't get the same lift from the inflation trade as gold and as a result, isn't getting hammered to the same degree. It is continuing to correct though after breaking key support at $58,000. It has found fresh support around $55,500 which could offer some encouragement but only a move back above $60,000 really puts us back into bullish territory.
Related: The Return of Lockdowns