Global equities fell on Thursday with safe-haven assets rising as investors assessed the geopolitical risks around Ukraine.
Risk assets declined on Thursday after Russia expelled the U.S. deputy ambassador and released a strongly worded letter accusing the U.S. of ignoring its security demands and threatened unspecified “military-technical measures”. U.S. President Joe Biden said there was now every indication Russia was planning to invade Ukraine after Russian-backed rebels and Ukrainian forces exchanged fire, with Western officials described as a possible pretext by Russia to invade.
As of 07:21 am AEDT the S&P500 was -1.91% lower weighed by technology -2.77%, consumer discretionary -2.27% and financials -2.44% with 84% of stocks trading lower. The Dow Jones also retreated -1.69%, as did the Nasdaq Composite -2.59% and Russell 2000 -2.45% with the VIX spiking +13.54% to 27.58. Treasury yields declined with investors seeking safe-havens with the 2-year yield down -4.4 basis points to 1.477%, as did both the 10 and 30-year rates down -6.6 and -3.3 basis points respectively with the U.S. dollar index edging +0.09% higher to 95.79. In economic data, initial jobless claims for the week ending February 12th were higher than forecast, rising to +248k vs +219k expected from a revised higher +225k the prior week. Meanwhile, Federal Reserve Bank of St. Louis President James Bullard said bringing down inflation may require the Federal Reserve to overshoot the neutral rate, which he sees around 2% while reiterating his view rates should increase by 1% by July 1st and begin a balance-sheet reduction in the second quarter.
European equities were also broadly lower with the Euro Stoxx 600 down -0.69% weighed by financials -1.57% and industrials -0.996% with 76% of stocks lower. Benchmarks across Europe weakened with the DAX down -0.67%, as did the CAC -0.26% and FTSE100 -0.87% with tensions over Ukraine weighing on sentiment. Investors also sought the safety of bonds with 10-year government yields across the region down between -3 basis points in Sweden to -7.5 basis points in Italy. The Euro edged lower by -0.11% while the Pound gained +0.24%.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set for a weaker open this morning with futures down -64 points or -0.89% to 7,149. The index rose +0.15% on Thursday lifted by health care +2.97% and materials +0.56% with 45% of stocks trading higher. CSL led markets gains rising +5.1% following several broker upgrades pointing to an upbeat outlook following two years of underperformance. BHP rose +1.4% after with Chinese inflation data coming in lower than expected, opening the door for stimulus to boost the economy. Equities rallied during the session before paring gains after January employment data was in line with expectations as +12.9k jobs were added and the unemployment rate unchanged at a 14-year lower of 4.2% while participation ticked higher to 66.2%. The Australian dollar is trading -0.15% lower this morning at 0.7184 and the 10-year government bond yield weakened -2.5 basis points on Thursday to 2.207%.
Oil prices declined overnight as talks to resurrect the Iranian nuclear deal entered their final stages which would see the countries oil production return to the market, although declines were limited by tensions around Ukraine. Both WTI and Brent crude weakened -2.38% and -2.17% to US$91.48 and US$92.79 a barrel. European gas futures spiked over geopolitical tensions with contracts for delivery in the U.K. and the Netherlands up +7.64% and +7.33% respectively. Iron ore futures weakened -6.15% in Singapore on Thursday and are a further -4.91% weaker this morning after China’s state planner told some iron ore traders to release excessive inventory to reduce stocks to reasonable levels. Gold benefited from its status as a haven, rising +1.54% to US$1,898 as did silver +0.87% to US$23.80 while Bitcoin retreated -6.68% to US$41,148.
Economic data:
- U.K. Retail Sales (MoM Jan) 18:00
- Eurozone Consumer Confidence (MoM Feb) 02:00
- U.S. CB Leading Index (MoM Jan) 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.
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.
