It didn't take long for the early week optimism to fade, with Europe posting decent losses on Tuesday and Wall Street coming back to steep declines after the bank holiday weekend.

Once again, it seems, the fault lies in the bond market where yields have been rising across the board which is unsettling investors and taking a heavy toll on risk assets. We have seen some of those rises in yields pared back, which has eased some of the pressure in stocks but anxiety still very much remains.

Markets are now heavily pricing in four rate hikes this year, on the day when the US 10-year yield hit a two-year high. The question now becomes whether we're nearing peak Fed fear or if there's more pain to come. JP Morgan CEO Jamie Dimon seems to think so, suggesting late last week that there could be six or seven hikes.

There's also some talk that we could not only see the first rate hike in March, but that it will be 50 basis points, the largest hike in more than 20 years. That would be quite the shift and miles from where markets and the Fed were positioned just a few months ago. If we do see markets pricing anything like these scenarios, we could see plenty more pain in stocks.

BoJ stands by extraordinary stimulus measures

Despite recent speculation, the Bank of Japan appears to have no appetite at all for raising rates. It did raise its inflation expectations slightly for this year and next but to 1.1% in both cases, well below its 2% target and nowhere near the levels being seen in other countries that are tightening monetary policy. While the Bank did change its assessments of inflation risks from being skewed to the downside to balanced, it remains committed to maintaining its stimulus which weighed a little on the yen.

Goldman slides after profit miss

Goldman Sachs shares are down 8% after reporting lower than expected profits in the fourth quarter, with higher operating costs and weaker trading revenues being key drivers. As we saw last week with JP Morgan, significantly higher compensation has been necessary to retain staff in a competitive market and after a strong performance. Higher wage demands will no doubt be a key theme as we make our way through earnings season, as the banks have already highlighted.

Oil jumps as OPEC see a well-supported market

Oil is trading at a seven-year high and the latest OPEC report offers little hope of that trend reversing course, with the group confident that demand growth will remain strong this year. OPEC sees demand hitting 100m barrels per day in Q3, surpassing pre-pandemic levels this year. This comes despite headwinds created by omicron and rising interest rates which they don't believe will have an overly detrimental impact.

They did revise up US shale output, which given OPEC's failure to hit production targets will be welcome. Producers surely won't be able to resist these prices but to what extent they can make a difference remains to be seen. For now, prices are continuing to rise with only very minor corrections along the way.

Gold could slip if markets continue to price in more rate hikes

Gold is marginally lower on Tuesday, although it's been quite volatile since the US joined. The yellow metal has been well supported in recent weeks despite bond yields rising to reflect an expectation of increasingly aggressive tightening from central banks. That's not something that's typically associated with higher gold prices which may suggest higher inflation expectations and more risk aversion. But with talk now starting around more than four Fed hikes or a kick start in March, we could see some of those inflation hedges - if that's what they are - unwound.

Bitcoin looks vulnerable as risk assets get hit again

It's been a bit of a choppy session for bitcoin, with prices gyrating between $41,000 and $42,000. It appears to have found some support around $40,000 over the last couple of weeks but it's still struggling to generate any upside momentum. It continues to look vulnerable, especially at a time when risk assets are getting hit so hard.

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