- European markets up marginally after Wall Street sell off
- But eyes remain on Ukraine
- First signs inflation is topping out?
Markets continue to chop around on these Russia headlines. European equities are a tad higher this morning after a sharp fall for Wall Street yesterday. The S&P 500 declined more than 2 per cent, taking it back under 4,440 and near Monday’s low. Speculative tech took another big hit with ARKK down 6 per cent and Tesla off 5 per cent. Roku – number two holding in ARKK – fell 12 per cent after hours. Another mixed bag from Asia, while oil is sharply lower with WTI back under $90, mainly it seems on hopes Iranian crude will return to the market. Bonds enjoyed a strong rally on Thursday, pushing the US 10yr back under 2 per cent, apparently on geopolitical haven bid. This also helped gold hit $1,900.
The FTSE 100 added about 0.2 per cent in early trade as it tried to repair some of the –0.9 per cent damage done yesterday. Global stock markets are mildly lower this week, on the whole holding up pretty well against these Russia-Ukraine headlines. As stated before, save for some very specific cases the geopolitics matters only on the margins; you’re not making a 1yr+ investment decision based on what Putin might or might not do; that’s all about interest rates and earnings. Nevertheless, equity markets remain sensitive to the headline risk and will be tricky to navigate.
Joe Biden says Russia is set to invade Ukraine ‘within days’, whilst the headlines coming from the ground certainly don’t paint a picture of de-escalation. But diplomacy continues, with Russia’s foreign minister Sergei Lavrov set to meet US secretary of state Antony Blinken for talks next week.
Data yesterday: Philly Fed prices paid down to 69.3 from 72.5 … inflation cooling? The headline manufacturing index was down to 16 from 23.2 and below the 20 expected. Initial jobless claims a bit higher than expected at 248k. Housing starts were a big miss at –4.1 per cent...growth and inflation slowing down? This is at odds with that super-hot retail sales and PPI numbers...getting a grip on where the US economy is right now is not easy, and only adds to uncertainty over the course of policy actions from the Fed, which = more rates volatility. Freddie Mac reported that US 30-year fixed mortgage rates have climbed to 3.92 per cent from 3.69 per cent a week ago.
UK data out this morning was encouraging as retail sales rose 1.9 per cent month-on-month in January, up 9.1 per cent annually. France’s unemployment rate fell to its lowest level since 2008 in the final quarter of last year. Japanese inflation weakened, with CPI ex fresh food slowing to 0.2 per cent vs f/c 0.3 per cent and 0.5 per cent prior.
US existing homes sales figures out later plus we hear from the Fed’s Waller, Williams and Brainard. US stock markets will be closed on Monday for Washington’s Birthday holiday.
Gold pushed above $1900...the MACD crossover worked a treat, though I still believe structural headwinds from rising real rates
Neil Wilson is chief market analyst at Markets.com