Sujata Rao gives a look at what’s ahead for markets.

Christine Lagarde (ECB President) used these words to lessen her message’s hawkishness last week. However, after three days with violent repricing of euro debt markets’ prices, more is expected.

Since the rise in borrowing costs on Europe’s southern flank, investors are now demanding 160 basis points of yield premium to buy 10-year Italian bonds. These Italian bonds have been more expensive than their safer counterparts. This is 30 bps higher than the ECB’s last Thursday meeting.

European corporate debt might need a correction; Citi believes that top-quality spreads of credit could increase to 90 bps, from 70 bps at 2021.

Recent moves raise the possibility of fragmentation of national debt markets, and derailment in the recovery of the southern European economy. This is especially true given the post-COVID increase in deficits. Now the question is, how far will the selloff continue before policymakers provide reassurance – or, in other words, the ECB put’ along with the U.S. Fed’s backstop that is usually seen as providing equity markets?

Is it? But it might not be over in the foreseeable future. While yields are rising in absolute terms, they remain low and Europe has the protection net provided by the EU recovery fund. Lagarde stated that the ECB would “obviously respond” to any increase in sovereign spreads. JPMorgan (NYSE) analysts observe that the market could be open to testing this pledge as yields climb again Tuesday.

Softbank’s $60 billion sale to Arm designer Arm fell through due to regulatory issues. SoftBank has decided to drop the Arm sale to Nvidia (NASDAQ) and seek an IPO amid regulatory challenges. Berlin thwarted a deal to buy Siltronic’s German Siltronic for $5 billion from Taiwan’s GlobalWafers.

(Graphic: Italy, https://fingfx.thomsonreuters.com/gfx/mkt/akveznnwqpr/Pasted%20image%201644271537354.png)

There are key developments which should give more direction to the markets Tuesday

British shoppers slow down the pace of spending in last month

-France’s BNP surpasses Q4 profit forecasts. BP (NYSE: ) sets new record for highest profit in eight year in 2021

New York Fed Issues Q4 Household Debt Report and Credit Report

-U.S. trade balance

-U.S. 3-yr notes auction

-US earnings Coty (NYSE :), DuPont(NYSE :), Harley Davidson Thomson Reuters (NYSE:), Pfizer (NYSE:), S&P Global (NYSE:), Omnicom, Chipotle (NYSE:), Lyft Peloton, (NASDAQ:),

-European earnings: Qiagen (NYSE:), Banco BPM, Evolution Gaming, BP, Ocado (LON:), BNP Paribas (OTC:), TUI

-Emerging market central banks: Poland, Moldova