Marketmind: Red alert

A look at the day ahead in European and global markets from Anshuman Daga

Hopes of a quiet close to the final weeks of 2022 are being firmly squashed as rare, widespread protests across China following strict coronavirus curbs fuel risk-off sentiment and batter stocks, while pushing up the safe-haven dollar.

To make matters worse, COVID-19 infections hit a fifth daily record in the country just as restrictions had become less onerous earlier this month and spurred expectations of a full reopening soon.

European markets are likely to take a cue from the wave of red splashed across Asian markets on Monday, while investors will also scrutinise Wednesday’s euro zone inflation data to see if the worst of the price surge is behind.

While economists at Citi expect headline inflation to post the first decline since mid-2020, driven by falling energy inflation, European Central Bank’s top economic thinkers have been sparring on the outlook for inflation and rates.

Though U.S. inflation may be close to peaking, euro area price pressures remain strong. Inflation in the euro zone was 10.6% in October, more than five times the ECB’s 2% target.

Markets are betting on a 50 to 75-basis-point increase at the next Dec. 15 meeting.

Weak oil prices could however stem inflation in the near-term, with U.S. West Texas Intermediate (WTI) crude futures falling to an 11-month low of $81.16 a barrel on Monday.

Meanwhile, British property market activity stalled in October and house price growth slowed to its lowest quarterly level since February 2020 due to a disastrous “mini-budget” and a cost-of-living crisis, according to a survey released on Monday.

On the corporate front, Andre Helfenstein, the head of Credit Suisse’s Swiss unit said in an interview with Swiss newspaper SonntagsZeitung that “some customers have withdrawn some of their money, but very few have actually closed their accounts.”

The comments come after Switzerland’s second-largest bank flagged a hefty loss last week as wealthy clients turn their back on the embattled bank.

Key developments that could influence markets on Monday:

Economic data: Euro zone Oct household loans, UK CBI Nov survey

Speakers: ECB president Christine Lagarde at European Parliament, ECB bank supervisor Elizabeth McCaul speaks about crypto assets, Fed Reserve Bank of New York President John Williams speaks

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