Week in a Glance: ECB, US inflation, El Salvador and Bitcoin

13 sept 2021

Formally, the main event of the past week for financial markets is the announcement of the results of the ECB meeting. The Central Bank of Europe left the basic parameters of monetary policy unchanged (the rate at minus 0.5%, and purchases under the Asset Purchase Program at the level of 20 billion euros per month). But at the same time, the Pandemic Shopping Program (PEPP) was decided to be phased out until its complete cessation in March 2022. And although the central bank did not provide numerical guidelines for the rate of closure, it is still a clear signal in favor of the end of the era of ultra-soft monetary policy.

This is where we attribute the weakness of the US stock market last week. Since in a week and a half the Fed should make its decision and it is far from a fact that the stock markets will be delighted with it, therefore the most impatient ones are fixing profits right now. There is still something to fix, because according to Citi, half of the longs in the SP500 will turn into a pumpkin when the index goes below 4200.

Inflationary data from the US finished off the rest of the optimists in the stock market. Manufacturing inflation does not even think to decline (why should it decline if commodity markets continue to go up, and prices for transportation of goods remain prohibitively high?): 8.3% year-on-year growth is the maximum value in the entire history of observations. In general, it will be very difficult for the FOMC to say that inflation is under control and does not pose a threat.

Well, how not to recall the gamble of El Salvador to recognize Bitcoin as a legal tender in the country. The cryptocurrency market felt it needed to be reminded in this regard of its basic feature: extreme volatility. To do this, he exponentially collapsed by 20% during Tuesday, showing that your $ 100 in Bitcoin is just an illusion, since it could well be $ 80. Such money of Schrödinger - it seems to be there, but it does not seem to be.

The UK is going to raise taxes, which is quite unfortunate for buyers in the country's stock market, and for the British pound too. However, the US is next in line, so do not think that the drop in the US stock market last week is all that sellers are capable of. Plus, Yellen reminded last week of an unclosed gesheft in the form of a public debt ceiling, which in a few weeks could lead to a US default.

The coming week promises to be extremely saturated with all sorts of macroeconomic statistics from literally everywhere: consumer inflation and retail sales in the United States, as well as Great Britain. Retail sales and manufacturing from China, and consumer inflation in the Eurozone. In general, it will not be boring, but the markets will be thinking on September 22 and everyone will look at the data through the prism of a possible FOMC decision.