Lagarde signals summer hikes

The week has started on a positive note, with investors having another stab at buying the dip following a further wave of selling in recent sessions.

The S&P 500 joining the Nasdaq in bear market territory naturally has everyone wondering whether the market has bottomed. It's not been the best year for dip buyers but equity markets are now trading at such a discount from their highs that it's natural for investors to be asking the question.

The economic headwinds remain a major concern though and while a lot of the pessimism is now priced in, there may be a few more surprises on the inflation front. Recessions are being discussed as a far more realistic prospect and if inflation falls at a more gradual pace than anticipated, it could take a further toll on equity markets.

Lagarde breaks with policy of ambiguity

In a highly unusual move, ECB President Christine Lagarde has gone into great detail about plans for interest rates at the coming meetings in a blog post. From a policy of ambiguity to effectively telling the world when interest rates will rise and how much, it's quite the strategy shift from Lagarde.

Liftoff will come in July and the central bank will exit negative rates by the end of September as the central bank looks to get to grips with inflation which is now running at almost four times its target. The blog post generated quite the response in the markets with the euro more than 1% higher on the day against the dollar.

Economic fears slow rally in oil

Oil prices are only marginally higher at the start of the week as Europe's failure to agree on a ban on Russian oil and economic fears offset the Shanghai reopening. Hungary is still holding out against the deal but the bloc is confident that it will get over the line. Whether it happens in time to have an actual impact is another thing.

The reopening of Shanghai is a bullish development for oil but recession fears could be stopping prices from rallying much higher. The cost-of-living crisis has arrived and higher oil prices will further exacerbate the pain on household budgets and eventually weigh on demand.

Gold higher as USD pares gains

Gold is continuing to recover on Monday, although it has given back the bulk of its gains from earlier in the session. It's now trading around $1,850 after peaking around $1,865, still a little higher on the day. Gold has performed well over the last week as interest rate anxiety has been replaced by recession fears, lowering yields and forcing the dollar lower.

That has continued today, with the dollar off around 1% and allowing for gold to continue its recovery. Gold may be able to build on recent momentum in the short-term but I'm not convinced it's a good environment for it beyond that. Much higher rates are coming and that has been weighing on the yellow metal over the last month.

Treading water

Bitcoin is continuing to tread water around $30,000 where it has traded over the last couple of weeks. The shift from interest rates to the economy as a driver of sentiment in the markets has come at a good time for bitcoin, which was suffering under the strain of monetary tightening. The worst may not be over for cryptos though as central banks continue to fight back against rapidly rising prices