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European equity close: Bounce back continues

  
Analysis, Global Indices

The rebound started midway through yesterday’s trade

European gas prices are down another 10% today after the huge reversal yesterday. That’s taking the pressure off margins, particularly for manufacturers and industrial companies. I flagged the buying opportunity in the DAX yesterday.
  • UK FTSE 100 +1.3%
  • German DAX +1.8% — best session in 5 months
  • French CAC +1.6%
  • Spain IBEX +1.7%
  • Italy MIB +1.6%
This is a nice three-candle reversal in the DAX:
The rebound started midway through yesterday's trade

Oil slumps further after the surge in energy prices cools

  
Analysis, Crude

A setback for oil at least in the short-term

WTI crude is now down over 2% to $75.50 levels while Brent is also marked down to just below $80 on the day, as the retreat from yesterday continues.
The retreat in energy prices is playing some part in all of this as the hype cools off but in the case of WTI, it comes as price came close to testing the key $80 mark this week. The high hit $79.76 before things started turning around in favour of sellers.
Right now, the shove lower even sees buyers lose near-term control on a drop below the key hourly moving averages @ $77.04 and $76.04 respectively. The weekly chart has a gnarly-looking candle forming as well so that’s something to be wary of:

 

WTI
We’re also seeing price fall back below key resistance @ $76.88-96 so that is knocking some wind off the sails of buyers in the short-term at least.
A tighter market going into next year may keep prices underpinned but for now, perhaps we have seen a short-term high posted before the next catalyst comes along.

Ex-Fed New York President Dudley says the Fed is fighting the last war on inflation

  
  Analysis
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Says excess dovishness at the Federal Open Market Committee increases the risk of a major policy error at the Fed.

Bill Dudley is a past resident of the Federal Reserve Bank of New York (2009 to 2018) and is now at Princeton University’s Center for Economic Policy Studies.
Says Fed officials:
  • anticipate that inflation will fall back close to 2% in 2022 … even as supply chain disruptions, energy costs and rising rents threaten to make the current price surge bigger and longer lasting than expected. 
  • And they expect inflation to keep decelerating in 2023 and 2024
  • if inflation proves more persistent than anticipated and even accelerates as the economy pushes beyond full employment, they’ll have to tighten much more aggressively than they expect. 
  • The result could more resemble what happened from 2004 to 2006 – when the Fed raised its short-term interest-rate target by 4.25 percentage points, to 5.25% from 1%, with quarter-percentage-point increases in 17 consecutive policy-making meetings – than what they currently have pencilled in. 
Here is the link to the Bloomberg piece (may be gated)  for much more.
Dudley, Yellen and Fischer, all since departed from the Fed:
Says excess dovishness at the Federal Open Market Committee increases the risk of a major policy error at the Fed. 
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