Cause for optimism?

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European equity markets are making decent gains on the final day of the week, buoyed by a suggestion that there has been progress in talks between Ukraine and Russia.

We were already seeing stock markets making cautious gains in morning trade but they were given a boost by comments from Vladimir Putin. While I would love nothing more than to believe what he said to be true, I would caution that Putin has said a lot in recent weeks, almost all of which has been untrustworthy.

With that in mind, I’m hesitant to feel in any way optimistic and while we have seen a bump in the markets, it would appear I’m in the majority on this one. That said, stock markets have made decent recoveries this week after enduring heavy losses in the weeks before. It’s too early to get carried away but more comments like this from all sides could spur some relief moves.

It will be interesting to see how investors behave into the close though given the heightened level of weekend risk. We’re continuing to see Russia intensify its attack on Ukraine and Western sanctions are increasing all the time. That may encourage some caution as we near the end of the day.

Downside risks mount for the UK despite strong omicron rebound

Understandably, economic data has taken a back seat this week as all of the focus rightfully falls on Ukraine. At a time when the outlook is becoming gloomier by the day, any data that covers the period before the war already looks incredibly outdated and borderline irrelevant.

It was interesting though that the UK GDP data this morning far exceeded expectations, with the economy growing 0.8% on the month in January, bouncing back strongly from the omicron-driven decline in December. What’s more, it far exceeded the 0.1% consensus and meant the economy was finally bigger than before the pandemic. The pound edged higher on the release and has continued since on the improvement in broader risk appetite.

As already mentioned though, the data is outdated and is no reflection on the outlook for the rest of the year. The cost of living crisis and energy prices that will surge in the months ahead will put immense pressure on household budgets and businesses. And the BoE is likely to keep raising rates in order to counter the inflation threat, at least over the next couple of meetings, regardless of the worsening economic outlook.

Bitcoin struggles as risk appetite improves

Bitcoin is flat on the day and looks set to end the week below USD 40,000. As with other risk assets, bitcoin was handed a boost by Putin’s comments but it appears to be giving some back now as it struggles to break back above USD 40,000. It’s been a very choppy session which could continue in the coming hours as we continue to get plenty of updates in what is a very headline-driven market.

For a look at all of today’s economic events, check out our economic calendar:

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