Marketmind: The bears are taking control
A look at the day ahead from Dhara Ranasinghe.
The S&P 500 looks set to end the week down almost 4% in its biggest weekly drop since late 2020. Trade in futures suggest no reprieve from the pain stocks globally are feeling now.
Angst that the U.S. Federal Reserve could slam on the brakes faster than anticipated to contain sticky inflation continue to dominate world markets.
And Netflix (NASDAQ: NFLX ) forecasting weak first-quarter subscriber growth after the close of markets on Thursday, sending its shares sinking almost 20%, doesn't bode well for the Nasdaq. After all the tech-heavy index closed Wednesday more that 10% below its November all-time high, confirming it was in a correction. [.N]
Add geopolitical risk into the mix, with tensions over Ukraine soaring, and it's not hard to see why the bears have their claws out this morning.
European equity futures are down sharply and Asian stocks markets shed around 1%. Risk off is evident across other markets, with the Aussie dollar and cryptocurrencies taking a beating.
Back to inflation for a minute: Friday data shows even Japanese inflation rose 0.5% in December from a year earlier, up for a second month running at the fastest pace in nearly two years in a sign of broadening inflationary pressure from rising fuel and raw material costs.
U.S. Treasury Secretary Janet Yellen said on Thursday she was confident the Fed and the Biden administration would take steps needed to bring down inflation during 2022.
One market not feeling the inflation angst are sovereign bonds. Germany's Bund yield is back below 0% and U.S. Treasury yields are down 5 basis points early in London. After all investors need somewhere safe to hide from carnage elsewhere.
Key developments that should provide more direction to markets on Friday:
- Top diplomats for U.S., Russia meet in Geneva on soaring Ukraine tensions
- Rio Tinto (LON: RIO ) shares plunge as Serbia pulls plug on its $2.4 bln lithium project
- UK retail sales slump in December after early Xmas shopping, Omicron spread
- Euro zone flash consumer confidence
- ECB president Christine Lagarde speak at Davos
- ECB bank supervisor Edouard Fernandez-Bollo
- Bank of England's Catherine Mann speaks
- Emerging markets: Pakistan, Kazakhstan
- US earnings: Schlumberger (NYSE: SLB ) Graphic: S&P 500 stock index set for biggest weekly fall since late 2020, https://fingfx.thomsonreuters.com/gfx/mkt/byvrjmylyve/MB2101.png
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