Global equities were mixed on Thursday with European markets falling heavily while U.S. equities reversed initial declines to trade higher after Russia invaded Ukraine while energy prices soared.
As of 07:27 am AEDT the S&P500 was +0.67% higher having traded as lower as -2.5% in earlier trade in mixed breadth with 47% of stocks trading higher. The biggest contributor to the index’s gains was technology which rose +2.41% followed by communications also rising +2.41% while financials fell -2.01%. The Nasdaq Composite also reversed similar declines to trade +2.42% higher, while the Dow Jones weakened -0.57%, the Russell 2000 rose +1.67% and the VIX declined -1.23% to 30.64. As Russian troops, tanks and aircraft pushed closed to Kyiv, President Biden announced further sanctions while warning Kyiv could fall within hours. Sanctions included Sberbank, Russia’s largest lender and four other financial institutions representing an estimated $1 trillion in assets, as well as Russian elites and their family members. Further sanctions are expected to limit Russian access to semiconductors and other advanced technology as well as targeting Russia’s largest state-owned enterprises preventing them from raising money from U.S. and European investors.
Shorter-dated Treasury yields declined as investors sought havens, with the 2-year yield down -4.8 basis points to 1.554% along with the 10-year which declined -1.9 basis points to 1.970% and the 30-year yield was little changed at 2.293%. Inflation break-even rates across the curve rose following higher energy prices, with the 1-year rate rising +12.9 basis points to 5.068%, as did the 5 and 10-year rates up +2.6 and +3.0 basis points respectively. That pushed real yields across the same tenors down -6.8 and -5.2 basis points respectively, while the U.S. dollar index benefited from its status as a haven rising +0.88% to 97.04. In economic news, the second estimate of Q4 2021 GDP was in line with estimates showing the economy expanded at a +7% annualised rate from +2.3% the prior quarter, and initial jobless claims were in line with estimates for the week ending 19th February, at 232k vs 235k expected from 249k previously.
European equities were broadly lower in a risk-off move echoing similar moves in Asia and following U.S. futures which initially traded lower. The Euro Stoxx 600 declined -3.28% with 86% of stocks declining and all sectors negative with financials -6.0% and consumer discretionary -4.44% weighing the most. The DAX also declined -3.96%, as did the CAC -3.83% and FTSE100 -3.88% with major benchmarks across Europe lower, while Russia’s MOEX slumped -33.28%. 10-year government bond yields declined across Europe as investors sought havens, ranging from a -12.6 basis point drop in Italy to -2.3 basis points in Switzerland, while the Euro weakened -0.98% to 1.1196 as did the Pound -1.12% to 1.3392.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to open higher this morning with ASX200 futures up +58 points or +0.83% to 7,003. The index slumped -2.98% on Thursday tracking U.S. futures lower on the invasion of Ukraine, with 90% of stocks lower for the session weighed by materials -4.33% and financials -2.83% while technology -6.4% was the worst-performing sector. Gold miners were notable performers as the precious metal rose with PRU up +12.26%, as was NST +5.9%, EVN +4.77% and RSM +4.71%. Travel stocks fell as the situation in Ukraine was seen as weighing on sentiment for travel, with QAN -5.05%, as was WEB -6.50% while FLT slumped -10.13%. Elsewhere Life360 slumped -28.8% after initially falling as much as -46% after the company reported its full-year loss widened to US$33.6m despite sales rising +39.5% to US$112.6m. The Australian dollar is -0.93% weaker this morning at 0.7167 while the 10-year government bond yield declined -11.2 basis points to 2.158%.
Oil prices rose with both WTI and Brent crude up +0.10% and +1.57% respectively to US$92.24 and US$98.36 a barrel, paring back initial gains that saw prices rise above US$100. Natural gas futures for delivery in the U.K. and Netherlands soared +50.93% and +51.10% respectively, with German power prices also surging as much as +51%. Iron ore futures in Singapore declined -0.24% on Thursday and are down a further -0.77% this morning at US$137.70. Gold weakened -1.18% to US$1,886 after initially rising as much as +3.42% with silver down -1.99% to US$24.06 while Bitcoin rose +3.54% to US$38,872.
Economic data:
• Australian Retail Sales (QoQ Q4) 08:45
• Eurozone Consumer Confidence (MoM Feb) 21:00
• U.S. Core PCE Prices (YoY Jan) 00:30
• University of Michigan Consumer Sentiment (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.
