Tense situation in Eastern Europe prompts investors to move into defensive assets

Yesterday, the US stock markets traded in the red area as the geopolitical situation in Eastern Europe deteriorated sharply, with the level of information tension remaining extremely high. "Fuel to the fire" was also added yesterday by US President Joe Biden, who said the probability of a Russian invasion of Ukraine remains very high, and it will happen in the next few days. Western countries said that Russia was trying to conduct an operation under a false flag to create a pretext for an attack. For its part, Russia accused Joe Biden of stoking tensions and issued a sharply worded letter saying that Washington was ignoring its security requirements and threatening unspecified "military and technical measures." Adding to the concerns, the State Department reported that Russia had expelled the deputy head of the US diplomatic mission in Moscow. At the close of the day, the Dow Jones (US30) decreased by 2.12%, the S&P 500 (US500) lost 1.78%, and the NASDAQ (US100) tech index fell by 2.6%. But stock indices rebounded slightly in the Asian session after the US secretary of state agreed to a meeting with Russia's foreign minister, raising hopes for diplomacy.

The Russia-Ukraine conflict has overshadowed concerns about the Federal Reserve's plans to tighten monetary policy since the Federal Open Market Committee (FOMC) meeting in March. Fed spokesman Bullard said yesterday that he would like to see a 1% (100 basis points) interest rate hike by mid-summer.

Meanwhile, the number of new jobless claims in the US was 248,000, with analysts expecting 218,000. This is the highest number in four weeks. The number of US construction starts in January fell by 4.1% from the previous month's revised data.

Yesterday, NVIDIA shares fell by 7.5% on the report despite record quarterly earnings, which also came in above the market forecast. Shares of Cisco Systems rose by 2.7% yesterday after the company reported a 17% increase in fiscal Q2 net income and a 6% increase in revenue and raised its adjusted earnings guidance for the current fiscal year. Walmart stock increased by 4% yesterday. The company unexpectedly increased revenue and also raised its dividend. The company Meta (formerly Facebook) has moved beyond the top 10 of the most valuable companies in the world.

European stock indices finished Wednesday's trading with a decline. Germany's DAX (DE30) decreased by 0.67%, France's CAC 40 (FR40) lost 0.26%, Spain's IBEX 35 (ES35) decreased by 0.76%, and the British FTSE 100 (UK100) fell by 0.87%. In January, auto sales in the European Union continued to fall for the 4th month in a row due to continued global shortages of semiconductors.

Gold and silver prices are skyrocketing higher despite the rise in the dollar index, which tends to correlate inversely with precious metals. On Thursday, Gold hit an eight-month high as investors bought up the yellow metal and other safe-haven assets amid escalating tensions over the Russia-Ukraine conflict.

Yesterday, Oil prices fell on the prospect that Iran could soon renew its nuclear deal with world powers and lift US sanctions, which could return a million new Iranian barrels or more to the global market. On the other hand, supply disruptions due to a geopolitical crisis with a supply shortage in the world market could push oil prices as high as $100 a barrel.

Asian markets are decreasing today. Japan's Nikkei 225 (JP225) decreased by 0.41%, Hong Kong's Hang Seng (HK50) lost 1.57%, and Australia's S&P/ASX 200 (AU200) fell by 1.02%. The Japan nationwide core CPI increased to 0.2% in annual terms, and the consumer inflation rate reached a 0.5% annualized rate. Despite strong economic stimulus, inflation in Japan remains at the lowest level in the world.

Main market quotes:

S&P 500 (F) (US500) 4,380.26 −94.75 (−2.12%)

Dow Jones (US30) 34,312.03 −622.24 (−1.78%)

DAX (DE40) 15,267.63 −102.67 (−0.67%)

FTSE 100 (UK100) 7,537.37 −66.41 (−0.87%)

USD Index 95.84 +0.14 (+0.14%)

• – US FOMC Member Mester Speaks at 00:00 (GMT+2);
• – Japan National Core Consumer Price Index at 01:30 (GMT+2);
• – UK Retail Sales (m/m) at 09:00 (GMT+2);
• – Canada Retail Sales (m/m) at 15:30 (GMT+2);
• – US Existing Home Sales (m/m) at 17:00 (GMT+2);
• – US FOMC Member Waller Speaks at 17:45 (GMT+2);
• – US FOMC Member Williams Speaks at 18:00 (GMT+2);
• – US FOMC Member Brainards Speaks at 20:30 (GMT+2).

by JMarkets, 2022.02.18

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.