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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)
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