Global risk appetite swung wildly last week. Wall Street[1] saw a recovery into the weekend, with the S&P 500[2] seeing its largest surge since June 2020. Futures tracking the Dow Jones, S&P 500 and Nasdaq[3] closed +1.33%, +0.73% and +0.03% respectively. The VIX ‘fear gauge’ closed slightly lower, but remains elevated. Equities in Europe and the Asia-Pacific were in the red.
A hawkish Federal Reserve continues to be a key fundamental theme, with markets now starting to price in 5 rate hikes this year after the Fed’s January policy announcement. Quantitative tightening is also just around the corner. The US Dollar[4] broadly outperformed its major peers. This is as the sentiment-linked Australian and New Zealand Dollars wobbled.
A combination of rising Treasury yields and the stronger Greenback weighed on gold prices[5]. While earnings surprises from companies in the S&P 500 continue to cross the wires mostly to the upside of estimates, the overall market was seeing negative price action in 24 hours following the data. Crude oil prices[6] also remained elevated.
The week ahead is filled with more central bank monetary policy announcements. We will get those from the RBA, ECB and BoE. This is leaving AUD/USD[7], EUR/USD[8] and GBP/USD[9] facing elevated volatility in the coming days. If these central banks follow in the footsteps of the Fed, offering hawkish outlooks, market volatility risk could remain higher than usual.
The earnings season is still in full swing. Key companies that will report include Meta Platforms (Facebook), Amazon and Alphabet (Google). US non-farm payrolls will also conclude the week, where traders will be closely eyeing wage data to gauge inflationary trends. It is thus
