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It's been a bruising month for risk assets but a range of technical indicators say it's time for investors to jump back in, even though geopolitical and rate jitters are here to stay.
JP Morgan says its Vix signal entered "buy territory" last week, a move which historically has been a prelude to stock market gains over the following 1-6 months in 100% of the times outside recessions.
Also, according to strategists at the U.S. investment bank, equities have plunged to oversold levels and the market internals are "encouragingly staying pro-risk"..
"We continue to believe that one should be using the dips as the opportunities to add, and favour Cyclicals, Banks, Commodities, against Defensives such as Healthcare, and Tech," they conclude.
Some earlier reading on buy signals: GRAPHIC-Market signals scream buy after world stocks tumble read more
(Danilo Masoni)
Equities in Europe kicked off another big week for central bank meetings on the right foot with the STOXX 600 rising over 1% in early deals helped by Wall Street's late bounce on Friday.
Italian stocks stood out, up 1.6% after the re-election of outgoing President Mattarella averted a political crisis, offering relief to investors and boosting local banking stocks (.FTITLMS3010), as the country-s borrowing costs fell.
Tech (.SX8P) was the biggest gainer, up 2.8% from an 8-month low, while travel and leisure (.SXTP) lagged after Ryanair reported a Q4 loss but said it was hopeful that rivals' cuts to capacity may help push prices up in the summer season.
Profit warnings at oil services firm Saipem and French retailer Casino added some gloom, sending their shares down as much as 27% and 9% respectively.
(Danilo Masoni)
The days of wild swings aren't over. And with bears and bulls still fiercely wrestling for control, investors could see their nerves tested again this week as geopolitical tensions build up and policy tightening remains centre stage.
So while the Bank of England is set to raise rates for the second time in a row and the Fed's Bostic said a supersized rate hike may be needed, the U.K. warned it was "highly likely" that Russia was looking to invade Ukraine and NATO voiced concern over Europe's energy security.
And if it weren't enough, North Korea tested an intermediate-range nuclear-capable missile for the first time since 2017. The U.S. said the test was part of an "increasingly destabilizing" pattern and urged Pyongyang to join direct talks.
With Chinese markets closed, European stock futures were up 1.5% ahead of the cash market open, powered by Friday's late rally on Wall Street to its best day this year following a frantic week of topsy-turvy trading.
World shares (.MIWD00000PUS) have erased nearly $5 trillion of market cap this year and are set for their worst month since April 2020, in a downtrend partly cushioned by positive soundings from the earning season.
Weekend political events also brought some relief.
The re-election of outgoing 80-year-old Italian President Mattarella means former ECB boss Draghi will carry on as prime minister. And in Portugal the Socialists won an outright parliamentary majority in a snap election, defying all odds.
As a result, Italy's 10-year bond yields saw a chunky drop of over 6 basis points, narrowing the spread against the safer German equivalent .
Key developments that should provide more direction to markets on Monday:
(Danilo Masoni)
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