Markets Look Beyond Russian Events

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 certainly 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 something that is going to remain in focus among traders this week. We are going to hear from President Christine Lagarde later in the evening today. It is very 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 at 9:00 AM, 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

Gold prices are trading higher today, but only by a small margin. The main focus for traders on gold prices is the US consumer confidence data due tomorrow and the Fed Chairman’s speech on Wednesday. It is pretty clear that the Fed Chairman 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 hike on the table for this year.

In terms of price levels, the most important price level that everyone is looking at 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 the price moving towards the 1850 price mark.