American markets today, Wednesday. viewed several hours before the 9:30 a.m. EST opening, appear poised for a strong start with major indicators strongly positive and likely to stay there for the day.
Canadian markets are also poised for a higher open with the TSE 60 firmly in positive territory.
European markets are open at time of writing and are also strongly positive, picking up on yesterday’s American rally, according to Joshua Mahony, Senior Market Analyst at London-based brokerage IG Group. “European markets are following their US counterparts higher in early trade today, with reopening stocks finally finding the kind of love many had expected in a week dominated by the UK’s removal of Covid restrictions.”
Mahony cautions that ‘the love’ is occurring despite Chinese efforts to undermine prices in key commodities, with the government laying out plans to auction reserves of zinc, aluminium, and copper.
Amongst currencies the Euro and Canadian dollar are down against the American greenback while the British pound sterling is up. The Euro and pound sterling may be on a collision course of sorts, according to Jeremy Thomson-Cook, Chief Economist at London payments specialist Equals Money. “Sterling’s focus for once today will not be on Covid, but on yet another harmful issue that has spread uncontrollably: Brexit,” he says. “The Johnson government is set to publish a policy paper on the post-Brexit trade in Northern Ireland today which, given form and expectation, is set to put the UK and EU back on a path of conflict over the Withdrawal Agreement and the ongoing trade links between the two,” he explains. In turn, that may hinder the ability of sterling to rebound especially against the Euro.
Amongst precious metals gold is dropping slightly but silver is slowly edging up.
The last two days have again proven conclusively that volatility will continue overhanging the stock markets for some time. On Monday, North American markets plunged with a sharp sell-off. The Dow Jones Industrial Average dropped 2.09% to 33963.29 while the S&P 500 lost 1.58%, dropping to 4,258.8 and the Nasdaq dropped 1.06% to 14,274.98. Investors worried about the spread of COVID 19, especially the Delta variant, tensions between the United States and China and inflation, all of which pose a potential threat to the recovery.
Even stalwart blue-chip stocks took a hammering. JPMorgan Chase & Co. dropped on Monday to close at $146.97, down from Friday’s close at $151.91 while General Motors Co. closed at $54.18, down from Friday’s close at $55.46. Apple Inc. closed at $142.45, down from Friday’s close at $146.39 and last Wednesday’s close at $149.15. Bitcoin closed at $29,610.94 down $30,817.83 and from the previous Wednesday’s close at from $32,822.35.
However, even though virus woes, geopolitical tensions and inflationary concerns did not change in 24 hours, the markets opened yesterday with all major indicators in the green. Gold, silver and the major currencies were all up at the opening. JPMorgan Chase & Co. rose as soon as the market opened and closed yesterday at $149.65, up $2.68 on the day. General Motors closed at $56.02, up $1.84 on the day and beating Friday’s close. Apple rose as soon as the market opened and closed at $146.15, up $3.70 on the day and close to Friday’s closing price. At 4:00 p.m. yesterday afternoon, Bitcoin had climbed to $29,878.44, exceeding Monday’s price at the same time.
Overall, the three major U. S. stock indices gained, with the DOW up 1.62%, the S&P 500 up1.52% and the NASDAQ up 1.57%.
At least one analyst believed that the selloff was understandable but not worrisome. "There should be a normal natural pullback in the market. So, we needed a trigger, and it was the Delta variant, and it made everyone pause," said Eric Diton, president and managing director of the Wealth Alliance in New York, in a Reuters analysis.
In the same report, Diton suggested that the Delta variant was serious but unlikely to derail the economy recovery. "This could be a reflex rally. We might have more of a sell-off, but at the end of the day, nothing has really changed. If the Delta variant wreaks havoc, that doesn't mean we're not going to have an economic recovery,” he suggested. “Perhaps, it is not as strong, it's just delayed."
Events of Monday and Tuesday prove that it is reasonable to believe that volatility will overhang the markets for at least as long as COVID 19 fears trouble us, the U.S. and China continue their disputes and the financial world waits breathlessly for Federal Reserve Chairman Jerome Powell’s next statement about inflation.
However, there is a bigger economic picture, according to Paul Bates, capital markets participant and adjunct professor (finance) at McMaster University in Hamilton. “While many, rightly, have focused on the devastation of the pandemic and the many responses to it by scientists, by governing bodies around the world, and by our truly extraordinary health care responders, I have also been thinking about underlying structural development faults and opportunities, that this time may have unmasked,” he says.
In Bates’ future view, we need to think and re-think business issues such as the supply chain for goods and components, communications, the very structure of work, and the ethos of leadership. He argues that innovation and prudent management will always be the key to unlocking a return on investment.
As the recovery unfolds, with or without another sell-off, everyone in the market has a lot to consider.
Disclosure: I do not own and have never owned Bitcoin nor any shares in any company mentioned in this column.
Al Emid is a financial journalist broadcaster and author. His next book. The 2022 Emid Report on Volatility is scheduled for a Winter release.