Bond markets continue to struggle after the ECB's hawkish turn on Thursday and the surprising revisions to U.S. employment data on Friday. Stocks are also set to open lower, but Peloton is bucking the trend after reports suggesting that both Amazon (NASDAQ: AMZN) and Nike (NYSE: NKE) are looking at bidding for the company.
German Chancellor Olaf Scholz visits Washington as the west scrambles for a unified line to take on Russia's threats to Ukraine. At the same time, oil prices barely come off the boil as diplomats prepared to resume talks on lifting sanctions on Iran. Here's what you need to know in financial markets on Monday, 7th February.
After Friday's U.S. employment data, bond markets worldwide remained under pressure, which showed that the labor market had been far more robust in the last three months than initially expected.
That reinforced expectations that the Federal Reserve may raise interest rates by 50 basis points at its March meeting, rather than just the 25 basis points, which is still – just – the consensus.
U.S. Treasuries have stabilized in the ranges they fell into on Friday. Still, in Europe, yields continue to rise - and spreads between core and peripheral Eurozone markets continue to widen - following the European Central Bank's meeting on Thursday, when ECB President Christine Lagarde pointedly refused to rule out an interest rate hike this year. Lagarde speaks in the EU Parliament at 9:45 AM ET (1445 GMT).
In an interview at the weekend, Dutch central bank head Klaas Knot, a noted 'hawk,' expects a hike as early as October.
Italian 10-Year government bond yields rose 11 basis points, while their Greek equivalents rose 22. The benchmark German 10-Year yield rose three basis points to 0.24%, its highest in three years.
According to various reports over the weekend, Amazon and Nike are both considering a bid for Peloton Interactive (NASDAQ: PTON). The stock responded by rising 22% in premarket trading.
The maker of connected fitness equipment has come into play after losing over 80% of its value since peaking at the end of 2020, due to widening losses that have forced it to abandon its niche as a high-end hardware maker and seek a broader base customers.
The group is already under pressure to shake up performance from activist shareholders. However, any acquisition by a Big Tech name would be likely to provoke substantial interest from antitrust regulators, who appear less inclined than before to accept Big Tech's relentless expansion.
U.S. stocks are set to open lower again on Monday, having had a mixed day on Friday in response to the labor market report.
By 6:15 AM ET (1115 GMT), Dow Jones futures were down 81 points, or 0.2%, while S&P 500 futures were down by a similar amount. NASDAQ 100 futures were down a little less, by 0.1%.
With only second-tier economic data due – consumer credit numbers for January come at 3 PM ET – the focus is likely to be on earnings, where Tyson Foods (NYSE: TSN), Loews (NYSE:L), Hasbro (NASDAQ: HAS), and ON Semiconductor are all due to report.
Also in focus will be Alibaba (NYSE: BABA), amid reports of a possible share sale by Softbank (OTC: SFTBY) coming down the line.
German Chancellor Olaf Scholz visits U.S. President Joe Biden to iron out a sanctions package in case of a Russian invasion of Ukraine. U.S. sources briefed again at the weekend that such a scenario is likely, despite Russian insistences to the contrary.
Various reports suggest that the U.S. and its European allies are struggling to find alternatives to Russian natural gas supplies, which would give them the leverage to refuse flows through the Nord Stream 2 pipeline. That pipeline is currently awaiting final approval from German regulators.
EU Commission President Ursula von der Leyen said Monday that Europe's gas prices are likely to remain high for some time.
French President Emmanuel Macron, meanwhile, is to visit his Russian counterpart in Moscow. Putin received an endorsement of his position in Ukraine from Chinese President Xi Jinping when he visited Beijing last week.
Crude oil prices continue to trade well above $90, despite the lack of significant disruption to Texas' energy complex from the winter storm at the end of last week.
There was only minor relief from the news that talks on lifting sanctions on Iran will resume on Tuesday.
By 6:30 AM ET, U.S. crude futures were down 0.9% at $91.50 a barrel, while Brent crude was 0.4% at $92.86 a barrel. -- Investing.com