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

Take it easy. That seems to be the message from global markets to policymakers at the start of a busy week.

But, with Russia set for a sovereign default and its missiles striking Kyiv for the first time in weeks, investors will find it hard.

U.S. Federal Reserve officials have kept up their hawkish rhetoric with San Francisco Federal Reserve Bank President Mary Daly saying on Friday that another 75 basis point interest rate hike in July is her "starting point,". But markets have dialled down bets of aggressive rate hikes.

Fed fund futures contracts rallied towards the end of last week, implying a terminal U.S. interest rate of around 3.5% by mid-2023, well below a peak of more than 4% seen two weeks ago.

Even a 75 bps rate hike is not seen as a surefire bet next month as economic data surprise indexes in Europe and the United States have collapsed in recent weeks. Citibank forecasts a near 50% probability of a global recession.

Markets are liking the mood music with world stocks extending gains after posting their biggest single day rise in more than three months on Friday. The dollar is struggling versus its major rivals and 10-year Treasury yields are hovering around 3.13%, well below more than decade highs of 3.46%.

There is plenty of events this week that can trip up the fledgling rally. First up, the European Central Bank's annual forum in Sintra will be a key highlight with ECB President Christine Lagarde and Federal Reserve Chair Jerome Powell both attending the meeting.

Hopes inflation may be peaking will be tested this week when the U.S. PCE price index, the Fed's favoured inflation gauge, is out on Thursday and closer home, the UK will be releasing Q1 GDP, current account and final June manufacturing PMI.

And finally, Russia looked set for its first sovereign default in decades as some bondholders said they had not received overdue interest on Monday following the expiry of a key payment deadline a day earlier.

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

Profits at China's industrial firms shrank at a slower pace in May following a sharp fall in April.

Ryanair says less than 2% of flights affected by strike

Pfizer/BioNTech say Omicron-based COVID shots improve response vs that variant

Four of the Group of Seven rich nations moved to ban imports of Russian gold to tighten the sanctions squeeze on Moscow.