Equity markets bounce back
Stock markets are rebounding strongly on Wednesday, with Europe posting gains of up to 5% as investors question whether the worst is already priced in.
I’m certainly not convinced that this is the case but stocks have fallen a lot in recent weeks and comments from President Zelensky around NATO membership could be viewed as a first and important step towards a compromise between Ukraine and Russia.
Perhaps what we’re therefore seeing is a hopeful rally rather than one built on solid foundations but it’s the first glimmer of hope we’ve had in weeks. I’d be surprised if it’s sustained for any significant period of time unless we see actual progress towards a ceasefire and Russian exit.
It comes at an interesting time as well. Europe this week entered into bear-market territory at the same time as gold came within a few dollars of record highs. There could be a technical element at play here as well which combined with Zelensky’s comments is exacerbating any move to the upside.
All of this has investors asking themselves if a lot of the escalation is now priced in and whether further downside will be much less severe than what we’ve seen in recent weeks. And if so, whether it’s time to dip back in given how discounted the market is compared to the beginning of the year.
Obviously, that’s very hard to say as we don’t know what Russia’s ultimate intentions are, what will bring them to the negotiating table and what, if anything, they’ll accept. It’s all been smoke and mirrors from Russia until now which makes anticipating this extraordinarily difficult.
Bitcoin riding the risk wave
Having realigned itself with risky assets, bitcoin is riding the risk wave higher and in true crypto fashion. Bitcoin is up around 10% on the day and back above USD 40,000. As I’ve stated with equities, oil, and metals, the optimism we’re seeing in the markets looks fragile at best so while crypto traders may be excitedly looking at USD 45,500 and asking “what if”, we’re one headline away from these gains being quickly wiped out. As has been the case for weeks now.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/