US markets are ending October on a down note as Wall Street waits for any indications from the Fed that the tightening cycle is about to come to an end. The economic recession is becoming worse, according to all the main global manufacturing indices. The poor manufacturing numbers from China and the soaring inflation in Europe are making people less willing to take risks today. The termination of the grain agreement by Russia also fuels worries that the conflict in Ukraine may cause future interruptions in wheat exports.
China was the beginning, and Chicago was where it ended up. There is currently a global manufacturing contraction. As China struggles with COVID, Europe is headed for a recession, and the US economy finally feels the effects of inflation and Fed tightening, factory activity is suffering significantly.
Given the present COVID difficulties, China’s October PMIs were incredibly dismal, and they indicate that November won’t bring much improvement. The official reading for Chinese manufacturing dropped from 50.1 to 49.2.
The October Chicago PMI survey showed a decline, which for some may reinforce expectations for an even bigger decline with tomorrow’s ISM manufacturing number. While prices paid increased, Chicago’s commercial activity decreased from 45.7 to 45.2.
The ISM manufacturing survey due out tomorrow should indicate that US factory activity is certainly going through a hard period and may even decline. For the first time since June 2020, the crucial ISM reading would need to slip into contraction range.
A brief opportunity for a pump-and-dump action with GameStop was created by the possibility of a stock market bottom and expectations that the Fed would reveal additional information about the end of its tightening cycle. After a trading stop, the rally for the video gamer rapidly evaporated. The parabolic trap may have many retail traders taking the wrong side of this trade because there doesn’t appear to be much support for higher support levels to persist.
Bitcoin is still trading at approximately $20,000 as Wall Street waits for the Fed to give hints that the tightening cycle is almost done. Some traders are becoming more certain that a bottom has been reached since activity on the options market indicates a decreasing need for downside protection. The next two months of the year will be crucial and should cause a move outside of the $17,500 to $25,000 trading area.
Stagflation appears to be the bearish case for cryptocurrencies, but that is not the base case for Wall Street at the moment. The latest flood of poor economic data allays expectations that we would see stagflation akin to the 1970s, and the present stability is set to continue. A slowing economy’s impact on demand destruction should help keep inflation under control, which will be good for riskier assets.
This article was originally posted here.