The weekend's big story was Italy's descent into political chaos after the country's president blocked the appointment of a eurosceptic candidate for finance minister and the populist/anti-establishment pairing working to form a government abandoned their attempt.
"The big question now is whether we'll get an election or a technocrat government. What is certain is that this isn't good for the market and it's not good for Italian BTBs and corporate bonds," says Althea Spinozzi, from Saxo’s bond trading desk.
However, the possibility of a technocrat government rather than a deeply anti-EU one saw the euro break higher with the common currency bounding up from a six-month low early Monday. But one should be cautious here, says John J Hardy, Saxo’s head of forex strategy. "This situation is far from over and I'd be wary of going with the relief rally for now," he says, adding that headline risks are probable throughout the week.
The other big story in markets today is a dramatic reversal of fortune for crude oil which saw Brent take a deep dive as hedge funds accelerated their selling on the outlook to Opec and Russia relaxing their production cuts. The key level of $71.40 is now back in play, barring any modifications by Opec or Russia to their comments last week about loosening their restrictions on output.
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.