Dhara Ranasinghe shows us the market day ahead.

The yield on Germany’s Bund benchmark, which is considered to be one of the most safest assets worldwide, drops by its largest one-day drop since 2011, as it did Tuesday.

German borrowing costs fell, and 10-year yields are back in negative territory. This is indicative of investor thinking shifts.

German Bund yield, absolute change in bps https://tmsnrt.rs/3HEolUS

Russia’s invasion of Ukraine less than a week back changes the investor landscape. Stay with safety and U.S. Dollar, avoid risk assets.

Even more striking is the doubt growing over central bank’s commitment to remove post-pandemic stimulus. It is complicated because inflation is high, but the new surge in oil prices is likely to slow down growth and harm consumption.

The Bank of Canada is expected to raise rates on Wednesday. However, it’s likely that the Bank of England and the U.S. Federal Reserve will follow suit in March. The markets price in more caution, particularly in the euro zone where pricing has taken a sharp turn on Tuesday.

Money market prices now reflect only 14 basis points of ECB rate rises per year, a decrease from 50 bps in the last month.

The Flash inflation data for the eurozone due later in session will therefore not change that view. Even if they do show the headline rate increasing to new records — which analysts expected — it won’t alter this opinion.

The mood on world markets remains bleak, with Russia bombing cities in Ukraine and the United States banging Russian flights from their airspace.

The close was 1.7% less than expected, U.S. stocks futures fell by almost 1%, while European stock futures have fallen nearly 2%. Oil prices are up 7 years to $110 more than they were seven years ago. Meeting of the Organization of the Petroleum Exporting Countries and Russia with their allies (known as OPEC+) could prove to be an interesting event.

On Wednesday, key developments should give more direction to the markets:

OPEC and non OPEC ministerial meetings via videoconference

German employment

– Euro zone flash HICP

Meeting of the Bank of Canada Policy Committee

Fed Speakers: Chicago President Charles Evans

Fed releases Beige Book economic conditions

European earnings: Telekom Italia. Just Eat. Polymetal. Entain. Aviva (LON:), Persimmon (LON:),

Earnings in the USA: Abercrombie and Fitch, Dollar Tree (NASDAQ) and American Eagle