Asian stocks fell, U.S. equity futures and oil dropped, and the U.S. dollar rose as the highly transmittable BA.5 Omicron variant was discovered in Shanghai, China’s commercial hub. The incident and the mass screening sparked worries about the risk of more COVID curbs in China. New lockdowns could clog global supply chains and hurt international trade and the global economic outlook.
U.S. & European Markets Under Pressure
Price pressures, tightening of monetary policies with possible new interest rate hikes, and a slowing global economy outlook continue to loom over the markets.
European indices closed higher on Friday in signs of recovery from a sharp drop in the first two quarters of 2022. The recovery could be short-lived as upcoming CPI reports in the U.S. and Europe are expected to come in at or close to record levels while the U.S. consumer price index is expected to increase. The upcoming reports along with Friday’s higher-than-expected NFP figure could signal a possible 75 basis point interest rate hike by the Fed – an increase that could affect global growth. At the same time, company earnings to be released starting this week will be shedding light on recession concerns that dragged global equities down. U.S. treasuries remained steady while an inverted yield curve could be pointing to a possible recession.
In British pound news, the currency dropped after British prime minister Boris Johnson quit office, and the U.K. is looking to replace him. Germany and its allies are preparing for a possible gas flow cut from Russia as the main conduit will be down for maintenance. The event could provide President Vladimir Putin with the opportunity to cut off the flow for good in retaliation for Europe’s support for Ukraine after Russia’s invasion.
Oil Falls as China may Close Down
In oil market news, oil prices dropped on Monday as markets are preparing for new COVID curbs in China that could hit demand. The first case of a new Omicron subvariant was discovered in Shanghai. Worries about lowered demand outweighed tight supply concerns.
Gold Drops as U.S. Dollar Rises
Gold was trading lower on Monday morning in Asia due to a strong dollar. The U.S. dollar went up after healthy U.S. non-farm payroll data strengthened interest rate hike bets. In other precious metals, silver edged higher, platinum recorded losses, and palladium plunged.
What to Watch out for this Week:
Throughout the whole week
Earnings from Wells Fargo, Morgan Stanley, JPMorgan, Citigroup
Monday
New York Fed President’s speech
BOE Governor’s speech
Tuesday
BOE Governor’s speech
Wednesday
South Korea Rate Decision
New Zealand Rate Decision
Feral Reserve Beige Book
China Trade
Thursday
US PPI
US jobless claims
Friday
China GPD
China key economic data
G-20 finance ministers’ meeting launch
Atlanta Fed President’s speech