There is a certain relief in the Ukraine-Russia crisis as the two sides seem willing to continue their diplomatic efforts to avoid a military action. The latter could help reversing a part of yesterday’s aggressive selloff in the European markets, and the FTSE 100 could outperform its peers on the back of firm energy and oil prices.
BP, which lost 4% on Monday’s session due to worries that its Russian operations could weigh on the overall performance could recover a part of losses.
Gold gains at risk
Fresnillo jumped 7% in London yesterday as gold advanced to $1880 per ounce, yet the latest gains in gold and oil are vulnerable de-escalation at the Ukrainian border. Any durable relief could pull the gold prices as low as low as $1800 mark, as the rising sovereign yields play against the gold bulls.
Base case: No war
Ukrainian president criticized news giving a date for a potential Russian invasion and said that it could eventually drop its dream to become part of NATO, as a powerful sign of its commitment to de-escalate the tensions at its Russian border.
Lower tensions should have an immediate easing effect on the commodity space as Russia accounts for 45% of the world’s palladium supply, 15% of platinum supply, slightly than 10% of global gold supply, some 8.5% of the global oil supply and 6% of global gas supply.
US producer prices
US indices made a positive attempt on Monday, but the bears were more aggressive than the bulls given the Ukrainian tensions, and the hawkish Federal Reserve (Fed) fears – and the rising oil prices due to the Ukrainian tensions that further fueled the hawkish Fed fears.
The S&P500 slid 0.38% and closed just near the 4400 mark, the Dow dropped near 0.50%, as Nasdaq closed Monday’s session flat. The index fell 5% from last week’s peak, as the post-inflation data trading pulled the interest-sensitive index aggressively down.
Today, the inflation talk continues with the US producer prices due later in the session. Analysts expect a certain easing in the PPI index to 9.1% from last month’s surprise to 9.7%.
Given the rise in oil and commodity prices, there is a higher chance of seeing a positive than a negative surprise.
Any positive surprise could send the PPI index above the 10% psychological mark and keep the bears in charge of the market, regardless of a more hopeful mood due to the diplomatic efforts between Russian and Ukraine.
