A look at the day ahead in markets from Saikat Chatterjee.

Investors hoping the second half of the year would bring some relief after a bruising six months, may not be feeling very optimistic after the last 24 hours.

The newsflow has been relentlessly gloomy. Talk of gas rationing in Europe, a political crisis in Britain and a fresh flare up of COVID-19 cases prompting fresh restrictions in Shanghai has put the boot firmly into risk appetite.

World stocks are on the back foot, the dollar is comfortably perched at a two-decade high versus its major rivals and the U.S. Treasury bond yield curve is screaming recession risk.

Though sliding bond yields offered a boost to U.S. stock markets overnight, futures point to a bleak start. A gauge of European stock market volatility is nearing two-month highs.

Recession talk has also buffeted commodities with prices of copper, gold and oil sliding overnight on top of heavy losses this year.

But markets hoping for a break from the doom loop of falling asset prices forcing traders to cut positions and dragging in momentum-chasing hedge funds may not find any immediate relief.

On top of economic data this session, is the Federal Reserve’s minutes for the June meeting where it announced the sharpest hike in the U.S. benchmark interest rate in nearly 30 years.

It is likely to foreshadow more hikes as Fed officials have said their top priority is fighting inflation, even at the cost of growth with markets betting on another 75 bps rate hike later this month.

A battered sterling meanwhile was starting European trade on a weak footing (again) against a backdrop of political turmoil — British Prime Minister Boris Johnson has been gravely wounded by the resignation of ministers who said he was not fit to govern.

Key developments that should provide more direction to markets on Wednesday:

– ASML shares fall on report US wants to restrict sales to China

– Telecom Italia is looking to fetch a valuation of at least 25 billion euros including debt.

– Scandinavian airline SAS has filed for bankruptcy protection in the United States to help cut debt.

– Macro corner: Germany May factory orders, Sweden May GDP, UK construction PMI, euro area May retail sales.

Graphic: world stocks market cap, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzygxrjpw/world%20stocks%20market%20cap.JPG

(Reporting by Saikat Chatterjee; editing by Dhara Ranasinghe)

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