The downward correction in equity markets continues

US futures have rallied overnight, but for now it is only a hypothetical rebound after a sharp downward correction in US equities last week, particularly in technology stocks, with the Nasdaq now down 15% from its November highs. Long rates have stopped rising for the time being, as we await the Fed meeting this week.

If the Japanese PMIs gave the trend, it is not a good one: the drop in services in January (from 52.1 to 46.6) reflects the impact of restrictive measures against the Omicron wave. From a monetary policy point of view, this does not change much, as activity should rebound quickly, except that it has delayed a little more the resolution of bottlenecks and thus contributed to reinforce inflationary pressures. Services PMIs are also expected to decline in Europe and the US. 

The USD is stabilising between 1.13 and 1.1350 against the euro. It is not really benefiting from favourable conditions (geopolitical tensions and expected Fed rate hikes).