Markets roared ahead for 2022 and speedbumps began to emerge quickly. The rising U.S. Treasury yields prompted by speculation that the Federal Reserve might begin its rate-hike cycle in March, have dampened early optimism just as the U.S. earnings seasons is about to start.

Geopolitical risks are back in the news due to unrest in Kazakhstan. China is trying to preserve its zero COVID strategy for the Winter Olympics.

Here’s your week ahead in markets from Tom Westbrook https://www.reuters.com/journalists/tom-westbrook in Singapore, Lewis Krauskopf https://www.reuters.com/journalists/lewis-krauskopf in New York and Dhara Ranasinghe https://www.reuters.com/journalists/dhara-ranasinghe, Tom Wilson https://www.reuters.com/journalists/tom-wilson and Karin Strohecker https://www.reuters.com/journalists/karin-strohecker in London.

1 Quartly Check Up

    Massive profit increases from U.S. companies helped fuel last year’s 27% gain in the . Companies will have difficulty posting comparable numbers in the fourth quarter as the earnings season begins.

    Earnings for S&P 500 companies are expected to jump 22.3%, according to Refinitiv IBES — a robust increase, though a lower clip than in the first, second and third quarters.

    Big Wall Street banks JPMorgan (NYSE:), Citigroup (NYSE: Wells Fargo (NYSE:) is the first company to announce. Investors want to know about inflation and whether or not companies think that supply chain bottlenecks which drove prices up in 2017 will be lessened over the coming months. They also need forecasts for 2022. S&P 500 profit growth is expected to slow to 8.4% from 49.7% in 2021.

2/HOW HIGH?

For the largest bond markets in the world, 2022’s first week has not been dull. Short-dated Treasury yields shot up to highs not seen since early 2020, 10-year yields are up over 20 bps, Germany’s -0.06% Bund yield is lurching closer to 0% and sovereign borrowing costs https://www.reuters.com/markets/europe/uk-bond-yields-leap-after-holiday-break-hit-highest-since-2019-2022-01-04 from Britain to Australia are at multi-month highs.

The message is clear: tighter monetary policy is likely sooner than anticipated, with the United States leading the way https://www.reuters.com/markets/europe/investors-brace-quantitative-tightening-fed-sends-hawkish-message-2022-01-06. This is not confirmed by data and central bank talk. However, the 10-year Treasury yields may reach the 2% mark soon.

Investors will also keep a close on real yields since a view that inflation-adjusted yields will remain low has fueled the risk asset rally https://www.reuters.com/markets/europe/some-investors-turn-cautious-big-tech-fed-hikes-loom-2022-01-05. Some may not be happy with the 30 bps increase in U.S. Real Yields during week 1.

3/NEW YEAR, OLD RULES

For millions in China the new year began as the old ended – under lockdown https://www.reuters.com/world/china/chinas-henan-imposes-more-covid-curbs-cases-spike-though-numbers-small-2022-01-06. COVID-19 cases are few, particularly of the Omicron variant, but restrictions are spreading fast as authorities keep a zero-tolerance policy before next month’s Winter Olympics https://www.reuters.com/lifestyle/sports/olympics-fast-spreading-omicron-test-beijing-winter-games-bubble-2022-01-03.

Xian has been in lockdown for more than two weeks. In central China, harsh regulations are being implemented. After the virus detected at a railway turntile in Yongji Province, Shanxi Province this week, all 400,000 residents were asked to stay inside.

The measures could render moot any further easing of zooming producer prices in December data due on Wednesday, especially if they trigger fresh supply-chain disruption https://www.reuters.com/markets/us/global-supply-pressures-may-be-nearing-peak-new-york-fed-index-shows-2022-01-04 around the world.

4/KAZAKHSTAN & BEYOND

In addition to other flare-ups across the region, deadly protests in Kazakhstan have been added.

Russia again plays an important role. The Kremlin deploying troops https://www.reuters.com/world/asia-pacific/troops-protesters-clash-almaty-main-square-kazakhstan-shots-heard-2022-01-06 is widely seen as a gamble to secure its interests in the oil and uranium-producing Central Asian https://www.reuters.com/markets/currencies/stability-turmoil-whats-going-kazakhstan-2022-01-06 nation.

Reverberations are felt throughout commodity markets and weighed on the rouble as Russia finds itself again in the limelight — tensions over Ukraine have loomed https://www.reuters.com/world/uk/britain-warns-russia-over-ukraine-were-working-high-impact-sanctions-2022-01-06 large over its markets. The outcome of unrest in Kazakhstan https://www.reuters.com/world/asia-pacific/kazakh-president-says-constitutional-order-has-mostly-been-restored-2022-01-07 is yet unclear, but markets will have to sift through the fallout for geopolitical risk and diplomatic alignments for some time to come.

5/BITCOIN HANOVER

After a wild 2021, bitcoin’s new year hangover has lingered https://www.reuters.com/markets/currencies/bitcoin-ether-near-multi-month-lows-following-hawkish-fed-minutes-2022-01-06 into the first week of 2022 – and might get worse.

The computing power of its network dropped sharply this week as Kazakhstan’s internet was shut down during its uprising, hitting its cryptocurrency mining industry https://www.reuters.com/markets/europe/bitcoin-network-power-slumps-kazakhstan-crackdown-hits-crypto-miners-2022-01-06 – the second biggest in the world.

In theory, bitcoin’s “hashrate” could drop, which would impact its price. To mine bitcoin new coins, there are always more miners. The network can be weakened if miners leave, which in theory will increase the supply of new bitcoins.

It has dropped below $41,000, its lowest level since September. This is despite Fed hawkish signals. Others see it falling further below $30,000. Blockchain investors are looking for indicators that Bitcoin can rise.