Abstract:Bears are on the prowl in markets while a different sort menaces Europes eastern flank.
A look at the day ahead from Sujata Rao.
Its probably futile to expect the Russian bear to retreat the way Wall Street bears did late on Monday, when sentiment turned on a dime, allowing the S&P 500 which was 4% in the red at one point, to close higher.
Clearly dip-buyers havent entirely fled equity markets. Or was it a function of all those short Nasdaq positions, which suddenly found themselves in the money?
The impulse hasnt carried through, with Asia deep in the red and Wall Street futures down almost 2%. Option market readings are not reassuring either; trading in put options, used to place bearish bets, outnumbered bullish call options by 1.1-to-1 on Monday, apparently the most bearish that ratio has been since March 2020.
Away from markets though, the global economic picture isnt looking too bad. PMIs advance readings on Monday did show an Omicron-driven slowdown in December business activity but signalled a peaking in supply chain delays. South Korean GDP expanded at the fastest pace in 11 years and of the U.S. companies that have reported Q4 earnings, 77% beat forecasts.
In the middle of this market churn, the Fed starts a two-day meeting which may well be the last before a March interest rate liftoff. Many hope it will pay attention to the tightening in financial conditions such large equity selloffs inevitably cause. JPMorgan cite the robust earnings season to argue the bearishness is overdone. And after all, they add “the worst-case scenario could see the return of the Fed put”.
Graphic: Nasdaq mktcap, https://fingfx.thomsonreuters.com/gfx/mkt/xmvjobazqpr/nasdaq%20mktcap.JPG Key developments that should provide more direction to markets on Tuesday:
-Singapore tightened monetary policy settings in its first out-of-cycle move in seven years
-South Koreas economy expanded at the fastest pace in 11 years in 2021
-Australias core inflation flew to its fastest annual pace since 2014 in the December quarter
-Credit Suisse warns of Q4 net loss
-Germany IFO survey
-Emerging markets: Hungary central bank
-U.S. consumer confidence January/
-U.S. 5 year Note auction ($55 bln)
-U.S. earnings: General Electric, Johnson & Johnson, 3M, Xerox, Invesco, American Express, Verizon, Microsoft, Capital One
European earnings: SEB, Remy Cointreau, Logitech, Ericsson
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Wednesday's major data releases and macroeconomic events are expected to cause volatility to increase after another day of erratic trading in the financial markets. The Spring Budget for the UK will be released, and January Retail Sales figures for January will be made available by Eurostat. ADP Employment Change for February and January JOLTS Job Openings will be discussed later in the session on the US economic docket.
Major currency pairings are still trading in familiar ranges early on Tuesday after the erratic trading on Monday. The US economic docket for the American session will include the factory orders data for January and the ISM Services PMI survey for February. Final updates to the February PMI for the US, Germany, the UK, and the EU will also be released by S&P.
Weekend trading has gained great popularity in recent years due to the rise of online and mobile trading platforms that provide retail investors easy access to markets outside of regular working hours. For traders with Monday-Friday, 9-to-5 jobs, trading on weekends allows them to be active in markets at convenient times.
West Texas Intermediate (WTI) oil price pauses its two-day winning streak but is anticipated to conclude the week on a positive note, trading near $77.00 per barrel during the Asian session on Friday.