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Notes from the Trading Desk – Europe

Debate still rages on where we go from here. January is typically considered a good predictor for stock market performance for the rest of the year—the so-called “January barometer”.

Notes from the Trading Desk – Europe

This week, investor focus is firmly on central bank meetings, with the Federal Reserve’s policy meeting on Wednesday, and Bank of England and European Central Bank on Thursday. These meetings face greater scrutiny, given we have seen signs of inflation peaking in several regions, leading to hopes we may soon see a tilt from some central banks.

Notes from the Trading Desk – Europe

Last week was choppy as investors digested central-banker commentary, macro data and corporate earnings. Of note, a number of Federal Reserve speakers stuck to their hawkish narrative and some weak US macro data raised doubts over a “soft landing” for the US economy.

Notes from the Trading Desk – Europe

The new market consensus for Federal Reserve (Fed) rate hikes is for 50 basis points (bps) to be added in the first half of 2023, followed by 200 bps of cuts over the following 18 months. It remains to be seen whether the market will eventually give in and follow the hawkish central bank tones, or whether the central banks will pivot to a more dovish stance than they have adopted until now.

Notes from the Trading Desk – Europe

2022 was a crazy year for global financial markets amidst escalating geopolitical risk, record levels of inflation and the highest central bank hiking cycle ever witnessed. Geopolitics in Europe and the subsequent knock-on effect for energy prices will likely continue to be a focus for investors. China’s COVID reopening is another focal point for investors at the start of the year.

Notes from the Trading Desk – Europe

The week ahead has the potential to set the tone for markets into year end and into the first quarter of 2023. We have central bank meetings from the Federal Reserve, European Central Bank, Bank of England and Swiss National Bank (SNB) throughout the week

Notes from the Trading Desk – Europe

This year has been a bit of a bloodbath for investors, apart from those who are weighted towards energy. This is leading many investors to chase performance into year-end.

Notes from the Trading Desk – Europe

With the US Thanksgiving holiday, all the US macro data is out Monday-Wednesday, including the Fed meeting minutes, which will be a focus. In Asia, COVID-19 cases are on the rise in China, so this is a dynamic to keep a close eye on.

Notes from the Trading Desk – Europe

Last week, the United Kingdom took centre stage for all the wrong reasons. Following the controversial “fiscal statement” from the UK government on the prior Friday, financial markets took fright at the sweeping range of unfunded tax cuts and spending proposals, as many felt the plans lacked in detail and costing.

Notes from the Trading Desk – Europe

The Federal Reserve (Fed), the Bank of England (BoE), the Swiss National Bank (SNB), Norges Bank and the Riksbank all raised interest rates last week and paved the way for further hikes at upcoming meetings.

Notes from the Trading Desk: Europe

Headwinds persist and volatility remains, and investors seem to be looking beyond the immediate issues that have been weighing on stocks, giving the market short-term, risk-on moves higher.

Notes from the Trading Desk: Europe

The ECB will be a key focus on Thursday as it considers accelerating the pace of interest-rate hikes. The market is placing about a 70% probability on a 75-basis-point increase, which would be the ECB’s single biggest hike since its inception. Sticking with Europe the energy crisis will remain front and centre given the Nord Stream 1 shut down. Markets will also be watching German Industrial Production data, out on Wednesday.