A look at the day ahead from Danilo Masoni.
After recovering quickly from the Omicron scare, equity markets look set to kick off a busy week for central banks on the front foot.
With some hawkish signals expected, markets could be in for a bout of volatility in the closing days of 2021 even though some of the policy shifts, particularly by the U.S. Federal Reserve have been well-telegraphed in advance, leaving investors somewhat prepared.
European stock futures are in the black after gains in Asia, and U.S. futures also point north after the S&P 500 clocked its 67th closing record high of the year on Friday and investors started watching for Apple becoming the first $3 trillion company.
But it’s not just about U.S. policy this week. Interest rate hikes are in store for a raft of central banks in emerging markets from Russia to Mexico, and then there’s also the European Central Bank and the Bank of England.
So while inflation surprises haven’t stopped the equity bull run – as firms have been able to pass on to consumers rising costs and corporate margins have reached record highs – they have stepped up the pace of rate hikes globally.
There have been 59 rate hikes across investable markets so far this year with a cumulative net increase of 2,570 basis points, according to central bank data collected by financial services firm Black Cuillin. Also, in the U.S., moderate democrats are becoming increasingly worried about the political fallout of high prices and are pushing for more aggressive policy tightening, according to the Financial Times.
Reflecting bets of early 2022 rate hikes after U.S. inflation rose to the strongest reading since 1982, 10-year U.S. Treasury yields edged up towards the psychological 1.5% mark.
Elsewhere, the pound was set for a beating after PM Johnson warned of Omicron “tidal wave”, while oil prices extended their rally, suggesting little worry about the variant.
Key developments that should provide more direction to markets on Monday:
* Chinese artificial intelligence start-up SenseTime Grouppostponed its $767 million Hong Kong IPO after being placed on aU.S. investment blacklist * Credit Suisse announced a wide-ranging overhaul of itsexecutive board as the Swiss bank seeks to move on from ahorrendous year where it has been battered by a stream ofcontroversies and losses * Australian biopharmaceutical giant CSL confirmed it is intalks to buy Swiss drugmaker Vifor Pharma in a deal reported bymedia to be worth about A$10 billion * German wholesale price index * BOE Financial stability report 1700 GMT * France’s Macron attends summit of four Visegrad countriesPoland, Hungary, Czech and Slovakia * Canadian Finance Minister Chrystia Freeland and Bank ofCanada Governor Tiff Macklem hold presser on 5-year monetarypolicy framework
(Reporting by Danilo Masoni; editing by Saikat Chatterjee)
