U.S. markets were closed for a public holiday on Monday, while equity futures declined with global equities on continued geopolitical tensions.
U.S. equities futures swung between gains and losses on Monday before finishing lower with contracts for the S&P500 e-mini down -1.24% with similar contracts for the Dow Jones and Nasdaq100 also lower by -0.91% and -1.86% respectively. Futures initially gained during Asian trading after it was reported President Joe Biden and President Putin agreed in principle to a summit over Ukraine offering a possible path to a de-escalation of tensions. However, contracts and global equities turned lower after Putin signed a decree officially recognising the independence of pro-Russian separatists in Ukraine increasing tensions.
European stocks slumped with Russian equities the worst performer down -11%, paring an intraday drop of as much as -14% the largest decline since November 2008. The Euro Stoxx 600 declined -1.3%, as did the DAX -2.07%, CAC -2.04% and FTSE100 also -0.4% lower. European Union leaders joined calls on Monday for Russia not to annex or recognise breakaway Ukrainian regions, threatening to impose sanctions in response. Despite tensions, government bond yields generally rose across the region on strong economic data, ranging from +7.2 basis points in Italy to +1.5 basis points in Germany, the exceptions were Switzerland and Greece where yields declined -1.6 and -1.0 basis points. PMI data showed an economic pick up in February in the Eurozone with the composite measure rising to 55.8 from 52.3 previously, above forecasts for a modest gain to 52.7. U.K. PMI reports showed similar figures, with the composite measure jumping to 60.2 from 54.2 previously, well above estimates of 55. Easing bottlenecks and rising demand spurred stronger orders and job growth, although pointed to higher inflation along with rising energy costs.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australian equities are set to follow global markets lower this morning with ASX200 futures down -1.1% or -79 points to 7,080. The index reversed initial declines to rise +0.2% on Monday after reports of an agreement in principle to a summit between Presidents Biden and Putin. AGL Energy jumped +10.6% after rejecting a $5 billion bid from Atlassian co-founder Mike Cannon-Brookes and Canada’s Brookfield Asset Management, saving the $7.50 per share offer undervalued the company. Technology shares led losses with the sector down -2.8% after disappointing earnings from local companies. Zip, the Buy now pay later provided fell -7.8% to reach an 18-month low after warning cash earnings, bad debts and operating costs were worse than the market was expecting for the first half of the financial year ahead of the scheduled announcement of results on Thursday. Shares in Tyro Payments also fell -25.9% after saying COVID-19 lockdowns “significantly impacted transaction value growth” in the first half with losses declining to $11.2 million from $2.8 million a year earlier. The Australian dollar is trading +0.15% higher at 0.7188 while the yield on 10-year government bonds declined -2.7 basis points to 2.220% on Monday.
Oil gained on tensions of Ukraine with both WTI and Brent crude +3.16% and +2.94% higher respectively at US$93.95 and US$96.29 a barrel. Iron ore futures in Singapore rose on Monday, up +5.01% and a further +0.69% higher this morning at US$140.85. Gold rose +0.35% to US$1,905 while silver was little changed at US$23.93 and Bitcoin edged -0.31% lower to US$38,133.
Economic data:
- German Ifo Business Climate (MoM Feb) 20:00
- U.S. Manufacturing PMI (MoM Feb) 01:45
- U.S. Consumer Confidence (MoM Feb) 02:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
