Julien Ponthus gives a look at what lies ahead for markets today.

It was quite an important policy pivot at the European Central Bank’s last week meeting.

The euro zone’s inflation rate was above 5%. Money market bets were already placed that the ECB would awaken, taste the coffee and signal its intention to tighten policy.

By opening up the possibility of a rate rise in 2022 President Christine Lagarde unleashed massive adjustment, with German 10-year government yields experiencing their greatest jump since the March 2020 COVID-19 collapse.

Klaas Knot (ECB governing Council member) doubled down on the weekend and stated that he anticipated rates rising in quarter four.

Let’s just say this: This looks to be a new cycle in financial markets, as the ECB is now also onboard for tightening policy.

Berenberg analysts state that the days of excess liquidity, low growth and inflation are gone.

Lagarde’s address to the European Parliament Monday night will draw all attention. Strategists have been adapting equity risk premium models in preparation for this paradigm shift.

European banks’ shares reached their highest point since 2018. The tech index for the continent has fallen 20% since November.

Wall Street is currently on an up-and-down roller coaster following the historic plunge of $200 billion in market value by Meta Platforms Inc (NASDAQ:) and also the $190 billion increase by Amazon.com.

However, overall there is little to worry about — 78% have exceeded forecasts thus far according RefinitivI/B/E/S. The U.S. also generated more jobs in January than was expected.

Although Asian stock prices fell, European futures and U.S. futures suggest a more optimistic outlook. This is due to the Ukraine diplomatic crisis as well oil prices exceeding $90/barrel.

Markets should be more informed by key developments on Monday

Indonesia’s GDP grows at a faster pace

China’s Jan Services Activity expands at the slowest pace in 5 months

German Industrial Production Drops in December

The UK’s house prices have risen at the slowest rate since June

Chinese Caixin Services PMI/FX reserve

-Euro zone Sentix index

(Graphic: German two-year yield surges, https://fingfx.thomsonreuters.com/gfx/mkt/klvykmqjyvg/german%202%20yr%20weekly%20feb%204.png)