- Confusion over Ukraine situation weighs on investors' minds
- Eyes also on Fed's rates strategy
- Oil cools, but is it temporary?
Timid start for equity markets in Europe as investors digest the competing views on the Russian position in Ukraine and the bigger macro picture regards inflation and the Fed. The FTSE 100 was a little lower, shares in Frankfurt and Paris around the flatline. Asian shares were mixed. Minutes from the FOMC’s last meeting revealed it “expects it will soon be appropriate to raise the target range for the federal funds rate”. As for Russia, the White House remains adamant that claims of troop withdrawals are false. Gold is catching some bid this morning, above $1,850 with reports of an exchange of fire in eastern Ukraine between Russian-backed forces and Ukraine. Ukraine’s military said Russian-occupying forces fired on a village in Luhansk region, a few hours after Russia-backed rebels accused Ukraine of carrying out mortar attacks…. drama unfolds.
The S&P 500 rose 0.1 per cent but it had been down 0.7 per cent earlier in the session; the Nasdaq and Dow Jones both fell by a similar amount. US retail sales were stronger than expected but indicate no demand destruction yet. Futures in the US are a tad lighter this morning.
Oil tumbled 5 per cent in about 4 hours last evening amid increasing nervousness crude prices are in overbought territory and leaning too heavily on the geopolitical situation regards Ukraine and Russia. WTI bounced hard off $90 and sits just under $93 this morning, having hit a high yesterday at $95 in the wake of the EIA inventory report, which showed stocks at Cushing, Oklahoma were at their lowest since September 2018.
Minutes from the FOMC lifted stock markets off their lows of the day. There was not anything in them we didn’t know already and as argued earlier, events have rendered these minutes somewhat backward-looking. Nevertheless, little talk around any need to hike by 50bps in March gave the stock market an excuse to bounce.
There was a degree of urgency about the situation, but hardly anything close to what the market is pricing. “Most participants noted that, if inflation does not move down as they expect, it would be appropriate for the Committee to remove policy accommodation at a faster pace than they currently anticipate,” the minutes said.
Today we are looking to Philly Fed mfg index and US unemployment claims (13:30 GMT) plus more from the Fed’s Mester and Bullard (‘100bps by July 1st’).
Finally, on this short selling investigation by the Justice Department... Carson Block’s Muddy Waters is being probed... if you are a short-seller you are the natural bad guy... I’ve written about this at length in the past... suffice to say I am convinced – by inclination and by the evidence– that short selling is an important part of price discovery and often critical in sniffing out frauds. Bill Ackman tweeted: “I can’t think of an example of a regulator finding a public fraud first. It takes well resourced and incentivized market participants, ie, short sellers or whistleblowers.” Heads up Tesla.
Neil Wilson is the Chief Market Analyst at markets.com
