Market focus remains on Ukraine and Russia, as the US warns that Russia moving its army to the separatist regions in Donbas could mean a larger-scale invasion in the coming days. Russia is suffering from a first round of sanctions. The Nord Stream Pipeline project, which has been one of Putin’s priorities, has been put to coma, and Britain announced some sanctions targeting the banks. Lavrov and Blinken will no longer meet on Thursday.
More sanctions are expected in the coming days, but the measures that have been announced so far are not as heavy as feared.
Market mood is not cheerful but the softer-than-feared sanctions somewhat help lifting the mood. The risk appetite is limited, of course, except in some key assets including oil and commodities.
European natural gas futures jumped 8% yesterday, the barrel of Brent crude flirted with the $100 mark, as the US crude spiked above $96 before easing back to the $93 level this morning. Although we had news that oil prices are high enough to boost the US production throughout the year, Iraq and Nigeria are apparently not willing to pump faster, even the prices hit three-digit numbers. Price pullbacks are seen as interesting buy opportunities as the trend remains comfortably positive.
Elsewhere, gold steadied and slipped below the $1900 mark, while iShares Diversified Commodity ETF advanced to a fresh high.
S&P 500, Nasdaq selloff is only partly due to Ukrainian tensions
The European stock indices recovered earlier losses and closed yesterday near flat; even the Russian index rebounded after losing 10% the day before.
The US indices however traded down to catch up their Monday absence, and all three major indices closed the session between 1 and 1.50% lower. The US and European futures hint at recovery today, but the winds could change direction rapidly.
The S&P500 stepped into the correction territory after losing 1% at yesterday’s session, as Nasdaq fell to the lowest level since the beginning of the year. Although an improved sentiment regarding the Ukrainian tensions could lead to short term recovery, the US equity selloff is not only due to the Russian tensions. The most of the decline is explained by a quick hawkish shift in the Fed expectations and the prospects of tighter monetary policy remain in play.
Looking at the technicals, we are about to see a death cross formation in Nasdaq, which should add a further downside pressure to the tech-heavy index in the foreseeable future. The next important support stands a touch below the 13000 mark, where the major 38.2% Fibonacci retracement on the post-pandemic rally will either give support to keep the index in the bullish market, or will let it fall to the medium term bearish consolidation zone.
Speaking of raising the rates, the RBNZ hiked its official cash rate by 25 basis points to 1%. It was the third straight rate hike that brought the borrowing costs to the pre-pandemic levels in New Zealand. The bank also said it would start reducing its bond holdings and gave a more aggressive projection regarding the rate hike path that it will follow to tame the rising inflation and soaring home prices. The kiwi gained on the hawkish news, and advanced to a month-high against the greenback. The greenback on the other hand didn’t move much, the EURUSD traded a touch above the 1.13 level, while the USDJPY advanced past the 115 as safe haven flows left the yen yesterday, but the risk of them coming back prevail.
Bitcoin is back above the $38K mark, but gains could be fragile as a further rise in geopolitical tensions could pull the price all the way down to the $30K level. This is what’s being said in the market. So caution with cryptocurrencies!
