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Marketmind: No capitulation yet

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© Reuters. A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., May 20, 2022. REUTERS/Andrew Kelly

A look at the day ahead in markets from Julien Ponthus.

Capitulation in financial jargon refers to a moment when investors lose all hope in a market rebound and simply try to save whatever is left by dumping their holdings.

Clearly, Friday’s volte-face on Wall Street during the last hours of trading showed that this dreaded moment hasn’t materialised yet after the S&P 500 pulled itself out of bear market territory.

One ray of light for investors during the latest market turmoil has been volatility which has stayed well below the levels reached during previous selloffs.

Still, even if the S&P 500 has managed so far to avoid closing 20% down from its January highs, its 18% slump year-to-date, combined with its longest losing streak since the dotcom crash of 2001 is fuelling fears for what’s to come.

As long as the inflation genie is out of the bottle, it would arguably take a carnage across stock markets to trigger the so-called ‘Fed put’ and see the U.S. Federal Reserve to abandon its aggressive policy tightening path.

Short term however, stock futures are pointing towards an upbeat session in Europe and in the U.S. despite losses in Asia, particularly in China where Beijing reported the most number of cases seen during the current COVID-19 outbreak.

The usual mix of slower growth and rising inflation was also weighing on markets with Singapore reporting a key consumer price gauge rising at its fastest pace in a decade while Vietnam warned reaching its 2022 growth targets would be very challenging.

Key developments that should provide more direction to markets on Monday:

– Asking prices for UK homes see biggest May jump in since 2014

– -Vietnam facing ‘huge challenge’ to meet 2022 growth target, deputy PM says

– Germany’s IFO survey

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– Speaker corner: European Central Bank’s Robert Holzmann, Joachim Nagel. Bank of England Governor Andrew Bailey. Federal Reserve’s Bostic.

– Euro zone finance ministers meet on fiscal rules reform, banking union.

Graphic: S&P 500 bear markets – https://fingfx.thomsonreuters.com/gfx/mkt/klpykodqmpg/Pasted%20image%201653065756392.png

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Marketmind: No capitulation yet

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