Equity markets are gearing up for a bulldog rally

Traders on the floor of the NYSE in New York work on the floor.

With the Dow Jones coming out of its longest weekly losing streak in nearly a century and scoring its best week since 2020 last Friday, the narrative across stock markets has moved from meltdown fears to hopes of a rebound.

There are contrasting expectations at play: some strategists believe that the S&P 500' s 9% bounce back from its May 20 lows could hide a bear rally or in other words, a money trap before a deeper spiral lower.

The biggest inflow in 10 weeks has been made by capital, according to BofA, with $20 billion flowing to equity funds last week, the largest inflow in 10 weeks.

The U.S. dollar index fell 3% from a two-decade high in mid-May and investors puzzled with the direction of travel for equities.

The Fed may slow down the pace of interest rate hikes after the summer, despite the whiff of optimism for stocks and the dollar's rivals.

Money markets have rushed to cut bets on the total interest rate hikes expected in the US this year from over 190 basis points to just over 180 basis points this morning.

The recession signals are forcing a shift in Britain, with 120 basis point of rate rises priced until June 2023 against 165 at the beginning of May.

The war in Ukraine could lift energy and grain prices even further, as have COVID 19 outbreaks in China, which could cause more disruption to global supply chains.

German import prices surged 31.7% in April, the strongest increase since September 1974, according to Europe's data.

Key developments that should give more direction to markets on Monday should be:

Japan Q 2, full-year growth is expected to be weaker than previously estimated.