The S&P 500 increased on Tuesday as rising hopes for a de-escalation of the Ukraine-Russia conflict helped stocks shrug off further bond market signals of a potential recession. All three US indices closed in green territory yesterday. The Dow Jones Index (US30) gained 0.97%, the S&P 500 Index (US500) increased by 1.23%, and the NASDAQ Technology Index (US100) added 1.84%.
The yield on 10-year Treasury bonds temporarily fell below the 2-year Treasury yield for the first time since 2019. Such an event is called a yield curve inversion. It's should be noted that a yield curve inversion has preceded every recession in the past 40 years.
The US Federal Reserve is trying to weigh what strategy to choose to suppress inflation in a way that does not stop economic growth. Many analysts believe that it will be difficult to find a middle ground here, and the US Fed will have to sacrifice economic recovery to reduce inflation. This week's employment data will also be taken into account by the Fed when deciding at the May meeting. Bank of America is forecasting three consecutive 50 basis point interest rate hikes.
Yesterday, major European indices jumped significantly against the background of the first steps in the negotiations between Ukraine and Russia. The German DAX (DE30) jumped by 2.79%, French CAC 40 (FR 40) added 3.08%, Spanish IBEX 35 (ES35) increased by 2.98%, British FTSE 100 (UK100) gained 0.86%. Germany's consumer confidence index fell to a 14-month low amid the Russian-Ukrainian conflict. The consumer confidence index in France also declined. Spain's consumer price index unexpectedly jumped from 7.6% to 9.8% year on year. This is the highest value in 30 years. Rising inflation in European countries may force the ECB to revise monetary policy towards tightening.
Some progress was made during the talks in Istanbul between Ukraine and Russia. Ukraine is secured in a non-bloc and non-nuclear status without foreign military bases but with security guarantees from guarantor countries (UN Security Council+ states) under the principle of NATO Article 5. Among the guarantors are the countries of the UN Security Council, the United States, France, Turkey, Germany, Canada, Poland, and Israel. With such guarantees, which are equivalent to article 5 of NATO, Ukraine will also not join military-political alliances. But nothing should contradict Ukraine's right to join the EU. The issue of Crimea is resolved non-military through a bilateral negotiation process, which is given 15 years. The issue of ORLO (LNR and DNR) is resolved separately at the level of the meeting of the presidents of Ukraine and Russia.
Russia is taking two steps to de-escalate the conflict in Ukraine. The Russian Ministry of Defense stated that Russia had decided to reduce hostilities in the Kyiv and Chernihiv directions. However, this does not mean a ceasefire. The General Staff of the Armed Forces of Ukraine believes that the withdrawal of Russian-fascist troops is probably a rotation of individual units and is intended to mislead the military leadership of the Armed Forces of Ukraine (AFU) and create a false image that the occupiers abandoned the plot to encircle the city of Kyiv. At the same time, British intelligence reports that having been convinced of the impossibility of encircling Kyiv, Russia decided to reduce its activity in this direction and transfer part of its forces to the Donetsk and Lugansk sectors of the front to get the South-East of Ukraine and create for itself a land corridor to the Crimea. At the same time, US sources indicate that Russia is not withdrawing troops, but is moving them around Kyiv.
Despite some negotiations, the shelling of Ukraine from the territory of Belarus has become more frequent. Almost all missile launches on Ukrainian territory yesterday were made from Belarus, from the areas of Mozyr and Khoiniki.
Every day Russia confirms that it is a terrorist state. By starting the war in Ukraine, Putin has already created a global food crisis. Deputy Secretary of State Wendy Sherman said Russia's war in Ukraine has led to critical food shortages in Ukraine, and the effects of the "global food crisis" are being felt around the world.
Sherman also noted that Russia attacked at least three civilian ships carrying supplies from the Black Sea. The Russian Navy is blocking access to Ukrainian ports, depriving Ukraine of its ability to export grain and preventing 94 food ships from entering the Mediterranean Sea. It should also be noted that in Ukraine, the Russians are purposefully destroying food warehouses, thereby increasing the humanitarian catastrophe.
Asian markets closed higher yesterday. Japan's Nikkei 225 (JP225) gained 1.10% yesterday, Hong Kong's Hang Seng (HK50) added 1.12% and Australia's S&P/ASX 200 (AU200) ended the day with +0.70%. Asian stock indices are also generally growing today. The exception is the Japanese market, where negative investor sentiment was caused by fears of a new outbreak of COVID-19 disease. Retail sales in Japan fell 0.8% in February from the same month a year earlier. The fall was recorded for the first time since last September.
Main market quotes:
S&P 500 (F) (US500) 4,631.60 +56.08 (+1.23%)
Dow Jones (US30) 35,294.19 +338.30 (+0.97%)
DAX (DE40) 14,820.33 +402.96 (+2.79%)
FTSE 100 (UK100) 7,537.25 +64.11 (+0.86%)
USD Index 98.42 -0.67 (-0.68%)
- – Japan Retail Sales (m/m) at 02:50 (GMT+3);
- – Eurozone ECB President Lagarde Speaks at 11:00 (GMT+3);
- – Germany Consumer Price Index (m/m) at 15:00 (GMT+3);
- – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
- – US GDP (q/q) at 15:30 (GMT+3);
- – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
- – US FOMC Member George Speaks at 20:00 (GMT+3).
by 2022.03.30, We advise you to get acquainted with the daily forecasts for the major currency pairs.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.Open Account