Stock Market Today
US and European futures are highly sensitive to Russia and US-related news over a possible attack on Ukraine. Every single headline seems to be moving markets, and traders are watching all developments and comments around it. The geopolitical tensions have given birth to vast volatility, and stock indices are constantly making wild moves several times during the last few days. This is no short of a nightmare for traders as they are already highly concerned about the aggressive monetary policies adopted by central banks around the globe.
One of the biggest dilemmas for many investors is how many rate hikes they will see from the Fed this year and, more importantly, how much interest rate hike will take place next month. It is complicated to price these complex scenarios despite several cycles of monetary policy easing and tightening. One particular reason is higher inflation, making the unwinding of the easy monetary policy problematic for the policymakers. In the upcoming FOMC minutes, traders will be looking for interest rate hike clues. It is highly likely that the Fed may indicate a half percentage interest rate hike.
Biden’s Pledge
President Joe Biden stated yesterday that the US is ready to defend NATO members as the conflict on Ukraine’s border with Russia escalates. “Make no mistake; the United States will defend every inch of NATO territory with the full force of American power. An attack against one NATO country is an attack against all of us,” Biden said. The president stated that he would not send American troops to Ukraine but NATO member countries.
Biden also stated that if Russian President Vladimir Putin chooses to deescalate tensions, his government is open to high-level engagement. Biden repeated many other consequences that the US would impose on Russia if it moved against Ukraine, including his threat to delay a new Russian-German gas pipeline.
The Nord Stream 2 natural gas pipeline between Russia and Germany was completed in September of last year, but it has yet to deliver any gas. In the case of an invasion, German authorities have been purposefully ambiguous regarding the fate of Nord Stream 2, but Biden has been categorical.
Geopolitical Tensions
With the entire planet speculating whether Russian President Vladimir Putin will order an invasion of Ukraine’s smaller neighbour, speculators say that China is keeping a close eye on the situation given its claims on Taiwan.
China has consistently stated its desire to reunify with Taiwan, an island off China’s coast democratically self-governed but claimed by the People’s Republic of China. With ongoing tensions between Russia and the US, China is looking at the pressure put on Russia by the US and its European allies. China has no intentions to attack Taiwan, but tensions between China and Taiwan, especially US involvement, remain a significant concern for investors.
If there is an attack by Russia on Ukraine, Beijing may take some aggressive measures to claim Taiwan. Under that scenario, the US will be fighting with Russia and the second biggest economy globally. Having any sanctions on China, the world’s second-biggest economy, isn’t the same as putting sanctions on Russia. This is keeping traders alert and on their toes.
Commodities
Oil prices have come off their highs on the back of some de-escalation of geopolitical tensions. However, Brent and Crude oil prices are likely to remain sensitive as Russia and Ukraine are developing. Another reason we are seeing a pullback in oil prices is because of oil inventory data which doesn’t show as much strain on demand as before
Asia
Investors have been worried about the Chinese mainly because of the economic impact of the epidemic and increased regulatory uncertainty since last summer. However, this has begun to change in recent months for certain investment companies. An increasing number of overseas investment professionals believe it is time to purchase mainland Chinese equities ahead of projected government growth assistance.
At the summit, which takes place every five years to pick senior government leaders, Chinese President Xi Jinping is generally anticipated to seek a historic third term. Chinese authorities underlined the need for stability during a December economic planning conference for 2022.
Financial variables, such as how far the stocks have fallen concerning their projected earnings capabilities, also add to analysts’ favourable outlook on Chinese equities.