It’s another big week in markets as a combination of new and recurring themes are expected to continue to drive volatility in the second quarter.
New themes include the start of earnings season in the US and the upcoming French elections, which will bring fresh impetus to markets.
Meanwhile, first-quarter themes such as central bank rate decisions and inflationary data will continue to be a main driver in pricing action during this quarter.
This week saw the release of the all-important US inflation figures on Tuesday, while UK inflation numbers will be released on Wednesday.
Inflation and the US Federal Reserve’s sensitivity to further price pressures will continue to drive stock pricing. Investors expect the Fed to maintain its hawkish stance and stick to the path of increasing interest rates more aggressively this year, especially if inflation continues to surge in the US.
The Reserve Bank of New Zealand, the Bank of Canada (BoC) and the European Central Bank (ECB) will announce their interest rate decisions this week.
The headline will be the BoC’s rate decision on Wednesday. The expectation is that it will increase rates but this time we can expect it to double the rate of increase.
The forecasts are for an increase of 0.5 per cent, taking the overall interest rate to 1 per cent. If this materialises, the Canadian dollar will come in for a nice bout of strength.
The ECB’s interest rate decision follows on Thursday. At present, markets are not positioning for an increase as the ECB maintained in its previous statement that the requirements for raising interest rates have been fulfilled.
Slowing growth and inflationary threats in the euro-area coupled with the continuing Russia-Ukraine crisis are weighing heavily on the common currency
Gaurav Kashyap,
risk manager at Equiti Securities Currencies Brokers
The euro has come under pressure against its major counterparts. Slowing growth and inflationary threats in the euro-area, coupled with the continuing Russia-Ukraine crisis, are weighing heavily on the common currency.
Add to this another key emerging theme — the French elections — and it could become a very bumpy ride for euro bulls.
While incumbent President Emmanuel Macron won the first-round ballet against Marine Le Pen on Sunday, opinion polls suggest that the presidential run-off is much closer than expected.
The EUR/USD has not taken much confidence from Mr Macron's first-round win and it is expected to remain under pressure until the climax of the run-off, which culminates with a second round of voting on April 24.
In the commodities market, oil prices moved below $100 a barrel last week as a significant emergency release announced by the International Energy Agency weighed heavily on prices.
The recent gains for oil will remain capped as a combination of resurgent Covid-19 cases in China, global economic slowdown concerns and more hawkish central banks keep prices in check.
Gold has continued to consolidate at $1,920 an ounce.
With the bulk of the central banks’ interest rate decisions already priced in, keep an eye out for inflationary data.
If we continue to see higher inflationary prints in developed economies, the current bull run in the precious metal will persist in the interim.
Finally, earnings season is set to kick off with banking giants JP Morgan, Goldman Sachs, Bank of America and Citigroup all reporting this week.
It will be interesting to note the continuation of the current cyclical rotation in US stocks.
The build-up of positions in tech and communication stocks at the onset of the coronavirus pandemic in 2020 continues to be unwound. This theme is set to remain as losses on the Nasdaq outpace the S&P 500 and Dow Jones, which is seemingly the most resilient.
This trend shows that American equity traders are continuing their pivot from tech-heavy stocks into more traditional industries such as energy, industrials and financials. Expect this rotation to persist.
The more hawkish Fed has also affected US Treasuries. Last week, the benchmark 10-year US Treasury yield inched past 2.7 per cent for the first time in three years.
Higher borrowing costs will also continue to weigh heavily on tech stocks and on the broader stock market in general as investors look to higher Treasury yields.
Gaurav Kashyap is risk manager at Equiti Securities Currencies Brokers. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti Securities Currencies Brokers
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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