Mixed tones in the market to start the new week

A bit of a noisy start so far in European morning trade

Hedge funds. Block trades. Rising virus cases. Suez Canal unblock.

All part of the picture as we get things going in the new week. The early jitters from the Archegos Capital news is still percolating across the market, with US futures marked lower – S&P 500 futures seen down 0.5% currently.

That said, the risk of contagion is rather low and market participants should recognise that sooner rather than later. European indices are slightly higher but the DAX has pulled back after touching a record high earlier to start the session.

Banking stocks are the ones more heavily impacted for now as Credit Suisse warned that they could take a material Q1 hit from the hedge fund liquidation episode.

Treasuries are keeping more bid but action in the bond market continues to look to trend more sideways with yields holding just above 1.60% ahead of the month-end.

In FX, there is a lack of enthusiasm for the most part as the dollar trades more flat with the yen giving up its earlier gains on the day as well. The loonie is trailing as oil prices are keeping lower with efforts to unblock the Suez Canal gathering pace.

That said, trading ranges are still relatively narrow for the most part. EUR/USD is still sitting within a 25 pips range at 1.1780, but sellers are still poised under 1.1800.

Oil is down 1% but is back above $60 after having traded down 2% on the Suez Canal news earlier. Meanwhile, gold is still failing to find much support as it is down 0.4% despite lower Treasury yields as the lack of investor appetite persists.

With month-end and quarter-end in focus as well, we might just be in store for more noise this week before the dust settles and a clearer trend develops moving forward.

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