The escalating Ukraine war and more intense sanctions from the West on Russia are the main forces driving the markets, causing them to be volatile. The demand for the US dollar, gold and Treasuries rose highlighting the increased demand for safe-haven assets during these times of uncertainty. The attacks threaten to push inflation further to higher levels as the flow of already strained resources such as grains, energy, and metals could be disrupted.
The Stock Market Today
In the US, Treasuries rallied. In the meantime, European and US stock futures plummeted. Nasdaq 100 and S&P 500 contracts declined suggesting that US equities could be under stress during Monday’s trading session. In the Asia-Pacific regions, markets were mixed. Japan’s Nikkei 225 gained while Hong Kong’s Hang Seng (HK50) fell.
US Dollar Reigns
The US Dollar is trading higher against almost every other currency as the sanctions levied against Russia boost demand for the global reserve currency. At the same time, the euro fell as investors are worried that the European economy could face risks due to its dependency on Russian energy.
The Ruble Tumbles
The Russian currency, the ruble fell 8% at the opening of Moscow’s Exchange. Liquidity across Russian assets is diminishing as Western sanctions intensify with the intention to isolate Russia from global finance. In the meantime, citizens in Russia have been queuing at cash machines to withdraw foreign currencies worried about a possible ruble collapse. Ukrainian President Volodymyr Zelenskiy remains skeptical about the talks between Ukrainian and Russian officials in Belarus.
Oil News
Oil prices surged on Monday over fears that oil shipments from Russia, one of the major producers, could be disrupted and as Western nations impose sanctions against the nation causing President Vladimir Putin to put the country’s nuclear deterrent on high alert.
Amid the tense Ukraine situation, OPEC+ is planning to meet this week and is expected to keep its 400,000 barrels per day supply unchanged for April. OPEC+ has been struggling to meet the agreed upon demand and a report showed that the organization produced 972,000 barrels per day less than their target levels for January. At the same time, OPEC+ lowered its 2022 oil market surplus forecast by about 200,000 barrels per day.
Metals
Gold soared on Monday morning in Asia rising more than 1% to record its highest monthly increase in nine months. Following gold’s upward trend, palladium also jumped.
Inflation Fears
Any key resource supply interruptions could push prices further than their already high levels. Investors are speculating as to how this could affect the Fed’s plan for interest rate hikes. They are now expecting less interest rate hikes in 2022 and a milder liftoff.
What to Watch out for this Week:
Tuesday
Joe Biden’s State of the Union Address
Reserve Bank of Australia Policy Decision
Wednesday
OPEC+ Meeting
Eurozone CPI
Bank of Canada Rate Decision
Fed Chair’s Policy Report to the Congress
Thursday:
ECB’s February meeting account published
Fed Chair’s Policy Report to the Congress
Friday:
US NFP