On Monday, there were some modest gains recorded in the stock markets, after the hefty losses suffered last week. Investors are now bracing for several speakers of the US Federal Reserve to shed light on what to expect from the central bank in the future in order to combat inflation. Trading volumes were also thin because of a holiday in the United States.
European stocks and Currency
There was not much movement in the euro after the elections in France over the weekend, which saw the President Emmanuel Macron not get control of the National Assembly. This could turn out to be a major setback and the country could end up in a political paralysis. In an indication of nervousness from investors, there was a rise in the bond yields of the French government.
There was a 0.5% increase in the European STOXX 600 index. A 0.43% gain was recorded in the German DAX, while French shares were 0.25% higher, even though they did underperform for a bit due to Macron’s setback. Market analysts said that Macron’s party would now need to compromise for moving ahead with its policies.
They said that Macron’s ability of promoting the European agenda would now become even more limited than before. This is because most mainstream forces in the country and the Republicans are not very interested in strengthen integration with the rest of Europe.
There was a 0.78% increase in the Nasdaq futures, while a 0.69% rally was recorded in the S&P 500 futures. This bounce comes after the S&P 500 had declined by almost 6% in the previous week, which brought it 24% lower than its high recorded on January 3rd.
Shares declined on Monday in Asia trading. There was a 0.1% fall recorded in the MSCI index for Asia-Pacific shares that does not include Japan, while a 0.74% fall was seen in Japan’s Nikkei. There was a 0.5% increase in Chinese blue-chip shares, boosted by the news that some tariffs may be removed by President Joe Biden.
This week, markets are likely to be dominated by focus on the future path of central banks in terms of hiking interest rates in order to combat inflation. Last week, there had been a series of hikes by the central banks, which included a surprise one by the Swiss National Bank (SNB). It is expected that there will be further tightening by the policymakers in order to control soaring prices.
Investors believe that volatility will remain high until inflation reaches its peak and there is some clarity on monetary policy tightening by central banks. Several central bankers are also going to speak this week, led by the Fed’s Chairman Jerome Powell testifying to the House of Representatives this week.
Analysts said that markets were still digesting the expectations of higher interest rates from the Fed and there may not be a sustainable rebound in global risk assets for now. There will be strong demand for the safe-haven dollar.