Markets roared ahead for 2022 and speedbumps began to emerge quickly. As the U.S. earnings season begins, U.S. Treasury yields have fallen due to growing speculation about the Federal Reserve starting its rate increase cycle in March.

Unrest in Kazakhstan is putting geopolitical risk back on the agenda. China fights to maintain its zero COVID strategy ahead of the Winter Olympics.

This week’s market outlook is from Tom Westbrook (Singapore), Lewis Krauskopf (New York), Dhara Ranasinghe & Tom Wilson https:// as well as Karin Strohecker (London).

1.QUARTERLY 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 would like to learn about inflation. Companies should also discuss whether they believe supply chain bottlenecks, which contributed to the rise in prices last year, will improve over time and what their forecasts are for 2022. S&P 500 profit growth is expected to slow to 8.4% from 49.7% in 2021.

For a related graphic on S&P 500 overall corporate results, click https://graphics.reuters.com/USA-STOCKS/RESULTS/mopanwjmjva/chart.png

2/HOW HIGH?

It has been a busy week for world’s largest bond markets. Ten-year Treasury yields rose to record highs in the short term, while 10-year yields are now up more than 20 bps. Germany’s Bund yield, -0.06%, is getting closer to zero, and sovereign borrowing costs are at all-time highs from Australia to Britain.

It is obvious that tighter monetary policies are likely to be implemented sooner than expected, and the United States is leading the charge. This is despite the fact that data or statements from central banks do not support it. However, 10 year Treasury yields might reach the milestone of 2% soon.

Real yields are also something investors will be closely watching. The risk asset rally has been fuelled by the belief that inflation-adjusted returns will stay low. Some may be disappointed by the 30 bps increase in U.S. Real Yields during week 1.

For a related graphic on U.S. Treasury yields shoot up at start of 2022, click https://fingfx.thomsonreuters.com/gfx/mkt/xmpjobrbqvr/themejan7.png

3/NEW YEAR, OLD RULES

Millions of Chinese people began the new year in China as it ended. While COVID-19 is rare in China, especially for Omicron, there are many other variants. However, authorities are enforcing tight controls to ensure that the Winter Olympics are not disrupted.

Xian, which is now more than 2 weeks in the lockdown, has harsh guidelines being enforced across central China. After the virus detected at a railway turntile in Yongji Province, Shanxi Province this week, all 400,000 residents were asked to stay inside.

If they cause new supply chain disruptions around the globe, these measures could make any further ease in zooming producer price increases in December data due Wednesday moot.

4./KAZAKHSTAN and BEYOND

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

Russia is again a major player. It is generally believed that Russia deployed troops to protect its oil- and uranium-producing Central Asian country interests.

As Russia is once again the center of attention, reverberations can be felt across commodity markets. Tensions over Ukraine are looming large over Russia’s markets. Unrest in Kazakhstan’s outcome is still uncertain, however markets will need to sort through geopolitical risks and diplomatic alliances over the coming months.

For a related graphic on Protests in Kazakhstan, click https://graphics.reuters.com/KAZAKHSTAN-PROTESTS/zjvqknwrwvx/chart.png

5/BITCOIN HANOVER

The bitcoin new year hangover, after a crazy 2021, has continued into week one of 2022. It might even get worse.

This week, the computing power of the network fell sharply as Kazakhstan’s internet went down in its revolt. It also hit its cryptocurrency mining industry which is the second largest 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.

The stock market has plunged below $41,000 since mid September, with Fed signs of hawkishness adding to the misery. Many see the price dropping further to $30,000 range. Investors in crypto will look for signals that bitcoin is able to get out of its current rut.

For a related graphic, click https://fingfx.thomsonreuters.com/gfx/mkt/zgpomanwxpd/Bitcoin%20volatility.PNG