Stocks rally as Russia-Ukraine talks progress, 2s10s curve briefly inverted, bitcoin depletion
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US stocks rallied after talks between Russia and Ukraine raised hopes that a possible de-escalation is drawing near. Initially, risk appetite rose after Russian negotiator Medinsky said Russia would “drastically and cardinally” reduce military activity near kyiv and Chernihiv. Progress in the talks was not widely expected, so Wall Street reacted vigorously. The shares returned some of the gains after Medinsky clarified that de-escalation around Kyiv and Chernihiv does not mean a ceasefire.
Equities will have a bumpy road even if a major de-escalation occurs, as inflationary pressures will persist into next year. It looks like Wall Street thinks the economy is still on solid footing even after the 2s10s curve inverted for the first time since 2019. The countdown to a recession is beginning, but growth is still expected to be strong in the less for the next quarters. The reversal didn’t last long, but that was to be expected given the optimism of large parts of Wall Street.
Bitcoin is running out of steam
Bitcoin bulls have run out of steam after hitting overbought territory. Even today’s risky session on Wall Street after progress was made in Russia-Ukraine talks, Bitcoin was unable to stage a rally. It looks like Bitcoin is going to consolidate here and might be vulnerable to profit taking towards the USD 45,000 level.
The long-term bullish case for Bitcoin is still in place, but exhaustion during the recent surge is setting in.
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