By Naeem Aslam
European and US futures are trading modestly higher to kick off the week, while investors are wondering what is in store for the markets in H2 of this year, as H1 is almost coming to an end.
There is no doubt that the equity markets have performed extremely well against all the pessimism, such as weak earnings, a hawkish monetary policy stance, and threats of recession and stagflation.
We believe that H2 will be even better for the equity markets as inflation will continue to move closer to central banks’ desired levels, which should ease some pressure on central banks.
For now, traders are feeling relief that the Russian mutiny was aborted. The incident had all traders worried, as no one wants to see another unrest, and what we really need is a peaceful situation so global growth can thrive.
The biggest panic on the back of the Russian situation was mainly in the oil market, as Russia is a major player among the OPEC+ cartel, and no one really wants to see oil prices soaring again as this adversely influences inflation and global growth.
Economic data is also going to remain in focus among traders this week.
We are going to hear from ECB President Christine Lagarde later Monday evening.
It is clear when it comes to the European Central Bank that the bank will continue to hike rates this year, and there is no plan for them to throw in the towel.
But again, what is quite important from the housing markets’ perspective is that higher interest rates may not have that much influence, and the reason for this is that most people have mortgages that are over 10 years old and have been on fixed rates.
The German IFO business Climate number will be released early Monday, and the forecast is for the number to slow down a little further. The forecast is 90.7, while the previous reading was 91.7.
If the data actually prints a weak reading, we could see some weakness creeping into the market, as Germany is the economic engine of the eurozone and no one wants to see weakness there.
Gold awaits Powell comments
Gold prices are trading higher Monday, but only by a small margin. The main focus for traders on gold prices is the US consumer confidence data due Tuesday and the Fed Chairman’s speech on Wednesday.
It is clear that Chairman Jerome Powell is likely to send the market the very same signal that he has been sending, which is that there are more than one interest rate hikes on the table for this year.
In terms of price levels, the most important is $1,900, and bulls are hoping that the price will continue to remain above this price point. If the price fails to reach this support level, then it is likely that we will see it moving towards the 1850 price mark.
Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.