A look at the day ahead in European and global markets from Rae

Wee

European shares look set to track Asia's negative lead on

Monday after a weekend dominated by news of escalating tensions

in the Middle East and fears of a wider regional conflict.

The flight to safety began with talk last week of an Iranian

strike on Israel and, after a raid with some 300 drones and

missiles, the focus now turns to Israel's reply.

Gold and the U.S. dollar were firm, though the

erstwhile safe-haven yen sank to a three-decade low -

a reminder that market participants are still treating the

Middle East primarily as a risk, albeit a growing one, while

interest rates remain the main theme.

Going some way to keeping that risk capped, U.S. President

Joe Biden told Israeli Prime Minister Benjamin Netanyahu the

U.S. will not take part in a counter-offensive against Iran.

Still, the Cboe Volatility Index, or VIX - known as

Wall Street's fear gauge - is hovering near five-month highs.

Oil prices were trading lower in Asia, though some analysts

said that was because the risk of what Iran called retaliation

had already been priced in last week and as traders wait to see

if worries of a wider war actually precipitate.

Brent futures hovered around $90 a barrel, after

touching a roughly six-month high on Friday. It has risen 17%

for the year, while U.S. crude futures have gained 19%

year-to-date.

Any further increase in oil prices towards $100 a barrel is

going to be unwelcome news for central bankers battling rising

consumer prices, with last week's hotter-than-expected U.S.

consumer price report continuing to reverberate through markets.

Later in the day, traders will get a sense of the strength

of the U.S. consumer with retail sales data for last month due.

A slew of Federal Reserve speakers are also on the docket

this week, with comments from Chair Jerome Powell on Tuesday

coming under the spotlight.

With U.S. inflation having topped forecasts for three

successive months, it's hard to imagine the world's most

powerful central banker sticking to his same, somewhat-dovish

tone from last month.

While the geopolitical backdrop is likely to set the tone

for the week, there are also plenty of economic events for

traders to take cues from, from China's first-quarter economic

growth figures to British consumer prices.

The U.S. earnings season is also underway, though that got

off to a lacklustre start after reports from the three big banks

- JPMorgan Chase & Co ( JPM ), Wells Fargo ( WFC ) and

Citigroup ( C/PN ) - disappointed investors and sent Wall Street

lower.

Key developments that could influence markets on Monday:

- Euro zone industrial production (February)

- U.S. retail sales (March)

- Goldman Sachs, Charles Schwab earnings

- Fed's Mary Daly, Lorie Logan speak