RISK-OFF PIVOT

Editorial Markets swung into risk-off mode this week with another correlation shock. The bond sell-off continues, with a global bond index now in bear market ( i.e. 20% fall) while risky assets, quite logically, are lagging, with a rise in real rates and a recession looming. China’s new lockdown in Chengdu did nothing to improve things. While the next US employment and inflation figures will determine the extent of the Fed’s next move (50bp or 75bp) at the end of the month, the ECB is likely to hike its key rates by 75bp next Thursday in the face of persistently spreading and rising inflation.