A look at the day ahead from Danilo Masoni.
The days of wild swings aren’t over. And with bears and bulls still fiercely wrestling for control, investors could see their nerves tested again this week as geopolitical tensions build up and policy tightening remains centre stage.
So while the Bank of England is set to raise rates for the second time in a row and the Fed’s Bostic said a supersized rate hike may be needed, the U.K. warned it was “highly likely” that Russia was looking to invade Ukraine and NATO voiced concern over Europe’s energy security.
And if it weren’t enough, North Korea tested an intermediate-range nuclear-capable missile for the first time since 2017. The U.S. said the test was part of an “increasingly destabilizing” pattern and urged Pyongyang to join direct talks.
With Chinese markets closed, European stock futures were up 1.5% ahead of the cash market open, powered by Friday’s late rally on Wall Street to its best day this year following a frantic week of topsy-turvy trading.
World shares have erased nearly $5 trillion of market cap this year and are set for their worst month since April 2020, in a downtrend partly cushioned by positive soundings from the earning season.
Weekend political events also brought some relief.
The re-election of outgoing 80-year-old Italian President Mattarella means former ECB boss Draghi will carry on as prime minister. And in Portugal the Socialists won an outright parliamentary majority in a snap election, defying all odds.
As a result, Italy’s 10-year bond yields saw a chunky drop of over 6 basis points, narrowing the spread against the safer German equivalent.
GRAPHIC: World shares market cap, https://fingfx.thomsonreuters.com/gfx/mkt/egpbklyznvq/Morning%20bid.PNG Key developments that should provide more direction to markets on Monday:
* Goldman Sachs ups forecasts on U.S. Federal Reserve ratehikes to five times in 2022 from four earlier * Japan’s factory output shrank for the first time in threemonths in December * Growth in China’s factory activity slowed in January as aresurgence of COVID-19 cases and tough lockdowns hit productionand demand, but the slight expansion offered some signs ofresilience * Ryanair reported a loss of 96 million euros for the finalthree months of 2021 but said it was hopeful that rivals’ cutsto capacity may help push prices up in the key summer season * Shares of Macau Legend, which owns and operates a casinoresort in Macau, fell more than 20% to an all-time low on Mondayafter its chief executive was arrested and detained by police inthe world’s largest gambling hub * German Q4 flash GDP/prelim CPI and HICP * Fed speakers: San Francisco Fed President Mary Daly;Kansas City President Esther George * Chicago PMI * European earnings: Evraz, Ryanair, Siemens Healthineers
(Reporting by Danilo Masoni; Editing by Saikat Chatterjee)
