European shares drift lower amidst continuing market volatility
Shares drifted lower in Europe on Tuesday, extending losses registered during the Asian trading session, amid continuing market volatility. The sell-off in Chinese shares due to renewed lockdowns to combat a coronavirus outbreak as well as the prospect of economic sanctions from the West raised by the possibility of a military support to Russia, weighed market sentiment down despite positive macro figures published overnight. On the other hand, monetary tightening, especially from the FED, is also coming back as a major market driver in investors’ minds this week. Investors anticipate a quarter basis point rate hike during tomorrow’s meeting while six further increases are widely expected for the rest of 2022. This is in line with expectations of a much less accommodative Federal Reserve which is about to bring two years of extremely dovish policies to an end. Investors are now torn between increasing geopolitical tensions and key monetary decisions with one crucial question in mind : how will global growth be impacted ? With such uncertainties on the short, medium and long-term outlook, it is no surprise to see market operators looking for safety trades, driving riskier assets such as equities back to new lows.
Pierre Veyret– Technical analyst, ActivTrades
WTI crude oil prices continue to recede from the highs reached during the previous week, as hopes that talks between Russia and Ukraine may lead to a de-escalation of the conflict, while a rise in the number of covid cases in China is forcing new lockdowns in the country. A peaceful resolution of the conflict in Ukraine could lead to less severe sanctions on Russia and alleviate supply side pressures, while the restrictions to economic activity in China, resulting from the lockdowns, will cause a reduction in demand that will be welcomed by traders that have been struggling amidst a very tight market, and contribute to a drop in prices.
Ricardo Evangelista – Senior Analyst, ActivTrades
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