US equities finished a shortened week lower with Dow Jones losing 1.3% to 34,265, the S&P 500 declining 1.9% to 4,398 and the Nasdaq finishing 2.7% lower at 13, 769. This was a third-consecutive week of losses in a volatile start of 2022. Early gains succumbed to concerns over the implications of a potentially more aggressive Fed amid persistent inflation pressures and expectations of rising interest rates. The rebound in the Information Technology sector fell, while Energy stocks trimmed a recent rally. Treasuries traded sharply higher with the yield on the 10-year not decreasing 8bps to 1.75% and the 30-year bonds rate declining 7 bps to 2.07%. US dollar firmed slightly on Monday with traders nervous about tensions in Ukraine and possible hawkish tilt at FOMC meeting this week. DXY is currently trading around 95.74. Leading Economic Index posted tenth-straight monthly gain and rose 0.8% in December on Friday. The focus this week will be on the outcome of the FOMC meeting on Wednesday and US fourth quarter GDP numbers on Thursday.
European stocks dipped at the open with FTSE 100 losing 0.6%, CAC 40 trading 1.2% lower and DAX dropping 1.14%. Geo-political concerns and an upcoming FOMC are driving the markets lower today. The State Department has instructed the families of US diplomats in Ukraine to leave the country, suggesting that the US still attaches a high probability to the risk of a conflict. The UK followed suit on Monday. Rubble fell to 77.479 against the dollar. Development in Eastern Europe are, however, are likely to take a back seat to FOMC starting on Tuesday. In terms of data, the focus in Europe today in on preliminary purchasing indices for January. Also, of note there will be a Deutsche Bundesbank’s monthly report, given concerns about the 30-year high in inflation in Germany and the unwillingness of ECB to raise rates. In the UK Prime Minister faces the most critical week in his premiership, as he is awaiting the outcome of an investigation that could lead to his resignation. EURUSD is lower at 1.1319 and pound is lower at 1.3537.
Asian shares slipped on Monday with MSCI’s broadest index of Asia-Pacific shares outside Japan easing 0.7% and Japan’s Nikkei falling 0.1%. Chinese Blue chips added 0.4%, aided by the recent easing in policy by Beijing. China Evergrande Group shares rose on Monday after it named a state firm official to its board, rising 6.2%. Singapore is reviewing its official inflation forecasts after data showed its key price gauge climbed in December by the fastest pace in nearly eight years, driven by a steep increase in air fares.
Oil prices rose on Monday with Brent rising 0.7% to $88.47 and WTI gaining 0.7% to $85.71. Both Brent and WTI fell around 0.5-0.6% on Friday. The prices rose on worries about supply disruption amid rising tensions in Eastern Europe and Middle East, while OPEC and its allies continued to struggle to raise output.