Stock selling continues, Europe in focus, bitcoin back above $20,000 for now

US stocks are down after a weekend filled with warmongering from global central banks, which reinforced the message that global central bank tightening will hurt households and businesses. Friday’s strong selloff continues as expectations of the global energy crisis persist, which will keep inflation risks elevated and lead to rapidly deteriorating economic data.

Powell sent a short and direct message that there will be no pivoting from the Fed anytime soon and that markets are positioned for further weakness in equities. Investors expected that once the US got some ugly data, maybe a few negative NFP reports, the Fed would come to the rescue, but that may not be the case. Premature easing will not occur at the first signs of a rapid economic slowdown, raising doubts for anyone who bought stocks earlier this month.​ ​

All about Europe this week

The ECB’s rate decision will show that the current inflation rhetoric will force them into massive rate hikes that will kill growth. Over the weekend, the ECB’s Rehn said the next step was a significant rate move in September and it should be at least 50 basis points. The latest round of talk from the ECB has been hawkish and that should prompt markets to expect a 75 basis point rate hike.​ ​

European Commissioner Ursula von der Leyen is preparing an emergency intervention and a structural reform of the electricity market. Drastic measures are needed to save the European economy, as the risks of extremely high energy costs could trigger a serious recession. Czech officials have suggested capping natural gas used for power generation. The EU is set to meet on September 9e and should show a plan to deal with the energy crisis.

Bitcoin​

Over the weekend, Bitcoin fell below the coveted $20,000 price as risk aversion grew following more hawkish talk from the world central bank in Jackson Hole. Bitcoin is showing some resilience here as it has recovered above the $20,000 level, despite the widespread weakness in the stock market. Crypto traders aren’t used to seeing bitcoin weather a rout on Wall Street, so this could be a promising sign. Crypto bulls will be tested here as the risk of further risk aversion is high given the trajectory of the global economy.​ ​

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With over 20 years of trading experience, Ed Moya is a senior market analyst at OANDA, producing up-to-the-minute cross-market analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. . His particular expertise covers a wide range of asset classes, including currencies, commodities, fixed income, equities and cryptocurrencies. During his career, Ed has worked with some of the major forex brokerages, research teams and information services on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently, he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks, including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His opinions are endorsed by the world’s most renowned news agencies including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

Ed Moya
Ed Moya

Mary I. Bruner