Markets Suffer amid Sustained Selling

Bearish mood persists

The DAX, CAC 40, and FTSE 100 all closed over 2% down on Monday, while the pan-European STOXX 600 index hit two-month lows. The US benchmarks also suffered - Nasdaq dropped to 17-month lows at 12,200 USD, and the SP500 index fell below 4,000 USD for the first time since March 2021.

A disappointing earnings season has prompted questions about how corporate profits would perform amid continuing macroeconomic disruptions, adding to the challenges. According to data from FactSet, the percentage of SP500 corporations surpassing EPS projections was above the five-year average on Friday, but the amount of the positive surprises was below the five-year average.

However, it looks like today's trading could bring a relief rally to the markets as futures were up circa 1% during the London session and EU bourses opened with even stronger gains. 

In the United States, Federal Reserve member Raphael Bostic indicated that a 75 basis point rate rise is unlikely, but that nothing is off the table. In any case, he expects two or three 50 basis point rate increases as a baseline.

The focus now shifts to Germany's carefully regarded ZEW mood index due later in the day, projected to have declined further in April from a level that was already the lowest since the COVID outbreak began in 2020.

On Monday, Russian President Vladimir Putin remained calm on plans for an escalation in Ukraine as he commemorated the Soviet Union's World War II triumph over Nazi Germany, but the war in Ukraine continues.

Commodities under pressure

Elsewhere, commodities cratered on Monday, sending silver below 22 USD, gold to 1,850 USD, and copper toward the 4 USD level. At the same time, oil lost 7%, pushing the WTI benchmark toward 100 USD. 

As a result, commodity-linked currencies crashed too - the AUDUSD pair fell to its lowest in tow years when it lost the 0.70 threshold, while USDCAD jumped above 1.30 for the first time since November 2020.