Shares Eye Policy Signals From Central Banks This Week

After quickly recovering from the Omicron-related scare, shares markets look prepared to start to receive, digest and handle a busy week for central banks.

With some hawkish signals expected, markets could be in for a session of volatility in the closing days of 2021 even though some of the policy shifts, particularly by the US Federal Reserve have been well-telegraphed in advance, leaving investors somewhat prepared.

European stock futures are in the black after gains in Asia, and US futures also are heading to the green territory after the S&P 500 clocked its 67th closing record high of the year on Friday and investors started watching for Apple (AAPL.O) becoming the first $3 trillion company.

But it is not just about US policy this week. Interest rate hikes are in store for a raft of central banks in emerging markets from Russia to Mexico, and then there’s also the European Central Bank and the Bank of England.

So while inflation surprises haven’t stopped the shares bull run whilst firms have been able to pass on to consumers rising costs and corporate margins have reached record highs, they have stepped up the pace of rate hikes globally.

There have been 59 rate hikes across investable markets so far this year with a cumulative net increase of 2,570 basis points.

Also, in the US, moderate democrats are becoming increasingly worried about the political fallout of high prices and are pushing for more aggressive policy tightening, according to the Financial Times.

Reflecting bets of early 2022 rate hikes after US inflation rose to the strongest reading since 1982, 10-year US Treasury yields edged up towards the psychological 1.5% mark.

Elsewhere, the pound was set for a beating after PM Johnson warned of Omicron “tidal wave”, while oil prices extended their rally, suggesting little worry about the variant.