As a tumultuous quarter approaches its end, markets will watch U.S. and euro zone data to gauge just how aggressive central banks might get in their fight against inflation.
Also in focus will be Europe’s dilemma whether or not to sanction Russian energy exports, potentially causing further price surges and economic difficulty.
Here’s your week ahead in markets from Ira Iosebashvili in New York, Alun John in Hong Kong, Sujata Rao, Tommy Wilkes and Dhara Ranasinghe in London. ..
1 HAWKISH ENOUGH?
Is the Federal Reserve’s aggressive trajectory for tightening monetary policy too hawkish, or not hawkish enough? Friday’s March U.S. jobs report might show.
Despite that, the S&P 500 has managed to nearly halve its year-to-date losses. But watch the U.S. Treasury yield curve, which is getting close to inversion as investors fret about a Fed-induced recession. The bond market rarely gets it wrong.
2 HARD TO SAY NO
But as pressure grows to announce a ban, there’s been a new twist — President Vladimir Putin’s demand that “unfriendly” countries need to pay for gas in roubles is raising yet more concerns about Europe’s energy crunch.
EU leaders could soon agree to buy gas jointly and secure additional U.S. gas supplies. But in the meantime, the debate is causing unease in all kinds of quarters. Oil producing group OPEC, for one, has warned the move could hurt consumers .
Inflation is already at a record high 5.9% and could hit 7% in the coming months. Given the ECB target of 2%, it’s unsurprising that some officials are urging one or even two rate moves this year.
4 THE BEST AND WORST
It was less rewarding on equities; with a 5% loss, the S&P 500 looks set to break a seven-quarter winning streak. Nasdaq euro zone stocks fared worse while Chinese markets had to cope with renewed COVID-linked lockdowns in many cities.
Bond markets hit milestones unseen, in some cases, for decades. The 140 basis-point rise in two-year U.S. yields is the biggest since mid-1984; the German equivalent will post its largest quarterly rise since 2011.