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Germany

If Russia stops supplying gas now, Germany’s reserves would only last until late summer. According to the German network regulator chief, speaking to Die Zeit newspape:

The reserves would only last until late summer or early fall, and German households would have to forego heating privileges in the event of a gas supply emergency. With wholesale prices also surging today, there’s doubt that lawmakers will be persuaded to change their stance on an embargo on Russian oil and gas for the time being.

The EU will continue to apply pressure on that front, but Germany is likely to stand firm, and the situation described above speaks for itself.

Dollar

• The dollar remains slightly firmer in European morning trade
• The dollar is mostly higher, albeit slightly weaker against the antipodeans.
• The main pair to watch is the USD/JPY, which is trading up 0.2 percent to 125.60 levels, with the high touching 125.75 at the start of the session. Buyers are keeping an eye on a break above 125.00, which remains the key level to monitor this week.
• The next key risk event to watch will be US consumer inflation data later in the day, so keep an eye on the market reaction to that. Aside from that, the euro and pound remain marginally lower against the dollar.
• EUR/USD is down to 1.0865 from around 1.0880 earlier, while GBP/USD is approaching the 1.3000 level from around 1.3030 at the start of the session.
• The Australian and New Zealand dollars are little changed against the US dollar, but nothing really stands out. The AUD/USD is up 0.2 percent to 0.7435, with buyers holding a 0.7400 defence for the time being. Overall, the dollar remains supported as stocks remain sluggish and bond yields continue to rise this week.

China

According to a Chinese health official, COVID-19 infections in Shanghai are still not under effective control. COVID-19 infections are expected to remain high in the coming days. While infections remain high (the most recent figure is available here), the good news is that lockdown restrictions are being eased slightly, as previously reported here. However, the city is not yet fully operational, and there is still a risk of further lockdowns across China if the virus spreads. As a result, the global economic outlook is jeopardised, which is already under stress due to supply chain disruptions, rising inflation, and central bank policy tightening.

Equities

European equities begin the day on a softer note A rough start to the new week for stocks.

Eurostoxx -1.3 percent, Germany DAX -1.7 percent, France CAC 40 -1.5 percent, UK FTSE -0.8 percent & Spain IBEX -1.6 percent.

Since last week, equities sentiment has been sour, and the slump is continuing today, with global growth concerns plaguing markets in general. Following a 1.7 percent drop in the cash market yesterday, the S&P 500 futures are down 0.3 percent.