Market Update – February 14 – Geopolitical tensions top of the agenda

Stock markets crushed into close Friday (NASDAQ -2.78%), Asia lower too (Nikkei -2.2%) and European FUTS down -1.92%. Oil at new 7-yr high, Yields & Gold cool a tad, USD & JPY bid, NZD clobbered. Key FED hawk Bullard called for 1% hike over next 3 meetings, 72% chance of 50bps in March on Friday cooled to 38% today. Daly – danger of moving too fast.  Ukraine asks for meeting with Russia within 48hrs, Biden: Russia possible fake invasion pretext as early as Tuesday/Wednesday, most foreign nationals advised to leave, – a possibly pivotal week ahead.

Economic Week Ahead – Closed FED meet today – possible move on discount rate, (the rate the FED lends to banks) but not the main Fed Funds rate (the rate banks lend to each other). Top of the week – FED Minutes (Wednesday) supported by more global inflation and Retail Sales data.

USD (USDIndex 96.05) stronger USD weaker EUR on unrest on its border and possible energy shortages.
US Yields 10-yr closed Friday at 1.955 down from over 2.0%, trades at 1.94%.    
Equities – USA500 -85pts (-1.9%) 4418 -(TSLA -4.93%, APPL -2%, GOOG -3.23%, XOM+2.52%. US500 FUTs now 4416
USOil – Futures spiked over 3.6% to $93.10 and trades at $92.40 now. 
Gold – Futures spiked 1.97% to $1862 back to $1854 now.    
Bitcoin remains in the $45,000 to $42,000 range. 
FX marketsEURUSD down to 1.1345 USDJPY down to 115.35 & Cable to 1.3535.  

Overnight –  NZD inflation much firmer than expected (+2.7% vs 0.6%), Business outlook weaker, CHF PPI 3 x higher than expected.

European Open – The March 10-year Bund future has rallied 99 ticks, with yields set to slide at the open as European bourses prepare for a decisive week over the Ukraine conflict with Russia. Treasuries are underperforming and the US 10-year rate has already backed up 2.1 bp this morning, suggesting that the likely rally in bonds may not last too long. The same delayed reaction is likely in stocks. ECB head Lagarde is set to speak in the afternoon and will likely to continue to try and balance the need to acknowledge inflation risks, with a cautious tone, designed to keep markets from running away with the tightening story.

Today Fed Closed Board Meeting, Fed’s Bullard, ECB’s Lagarde, German-Ukrainian meeting. Earnings Michelin, AvisBudget Group

Biggest FX Mover @ (07:30 GMT) EURNZD (+0.45%) Volatility continues from over 1.7200 last week to 1.7020 Friday to 1.7100 now. MAs aligned higher, MACD signal line & histogram at 0 line, RSI 49.50, H1 ATR 0.0027 Daily ATR 0.0130.

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Stuart Cowell

Head Market Analyst

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