Markets
US stock markets ended the week in the way they started: with serious volatility. Opening gains quickly faded into <1% declines before a furious late-session rally hurled the likes of the Nasdaq to more than 3% higher. Solid big-tech earnings (Apple) helped counter geopolitical and Fed policy uncertainty. Core bonds parted ways. USTs gained, bull steepening the curve with changes ranging from -2.6 to 4.6 bps at the short end and -1.8 to -2.9 bps for long tenors. German yields added 0.4 bps (2y) to 1.4 bps (10y). The USD held on to its gains and in some cases (AUD, NZD) extended the bull run on Friday. The trade-weighted dollar index eked out a new recovery high at 97.27. EUR/USD stuck near recent lows around the 1.1163 support (March 2020 interim high). EUR/GBP traded similarly with the pair unable to leave the two-year lows near the 0.83 zone behind.
 An FT weekend interview and Chinese data are talk of the town this morning. About the former: Atlanta Fed governor Bostic told the Financial Times that every option is on the table, including a 50 bps rate hike if the data warrant it. He’s the first Fed member to mention it this explicitly. On the date front, Chinese PMIs signaled further loss of economic momentum. The Caixin gauge (from Markit) for manufacturing even fell into contraction territory (49.1 vs 50 expected). A factory slowdown is not unusual in the run-up to the one-week holiday for China’s Lunar New Year. It’s testament to the overall economic easing (Covid nonetheless. Anyway, Asian-Pacific stocks kick off the week in good spirits with gains of 1%. Core bonds decline with the short end underperforming, probably in response to the Bostic interview. The dollar is catching a breath after a stellar run last week.  Trading in Europe and the US is bound for a slow start given the bulging economic calendar, allowing a currently optimistic sentiment and technical considerations to take the driver’s seat for now. That’s to change later this week though. The Bank of England is due for a back-to-back rate hike on Thursday. The ECB is likely to keep looking the other way even if inflation, published the day before, will remain way above target. It will probably prevent the euro a meaningful comeback, if any. We’re keen to see rates markets react though. They will probably keep the pressure high. Euro area money markets are currently discounting more than two 10 bps rate hikes by end 2022. ISM business confidence and the first payrolls report of 2022 are due in the US. Central banks in Australia and the Czech Republic fill in some of the remaining gaps.New Headlines
Slovenian parliament will today vote on a measure which puts a retroactive cap on the FX losses suffered by borrowers in low-yielding foreign currencies like the Swiss franc. Several other CEE-countries are already dealing with this problem. Under Slovenian the proposal, which was labelled problematic for the local banking sector by a non-binding ECB-opinion, banks would need to repay for any extra costs incurred beyond 10% going back to 2004. Banks warn that costs will be much larger than the €300mn estimated by in the proposed bill. The latter also includes penalties and potential revocation of banking licenses if financial institutions fail to repay borrowers in time.
 Eighth time is a charm. The eight ballot to find a new Italian president finally delivered an (unexpected) winner on Saturday. The outgoing president, 80-yr old Mattarella, who previously said that he was no longer the best fit and unwilling to stand for re-election, will stay on. “Duty of the nation, must prevail over my own personal choices”. Mattarella’s re-election means that the ultimate goal – keeping Draghi on as PM of the government as national unity – was reached. The presidential ballot showed how fragile the collaboration between centre-left and centre-right blocs is. They hope that Draghi will steer them through a difficult 2022 reform year, avoiding snap elections and political chaos ahead of the planned ballot in 2023.