Hey Everyone, get my take on the current markets and price action in this week’s round-up.
WEEKLY SOUND BITES:
Equity markets ended lower over a volatile week, as investors continued to weigh developments in the crisis in Ukraine. VIX, the CBOE Volatility Index, reached its highest point in over a year…day to day price action fluctuations continue to baffle traders while news coming out of Ukraine continues to worsen.
Domestic policy events seemed to have a secondary role in shaping sentiment during the week, although investors did pay close attention to Fed Chair Jerome “Power Ranger Boom Boom” Powell’s Congressional testimony on Wednesday and Thursday. “Boom Boom” Powell stated that it was “too early to say” if Russia’s invasion would change the Fed’s policy over the medium term, but that policymakers would “move carefully.” Powell also said that he was inclined to stick with a quarter-point increase in the federal funds rate in March, dispelling fears of a 50-basis-point (0.50%) increase. His comments were taken as more Dovish than Hawkish stance. On Friday, the Labor Department reported that employers added 678,000 nonfarm jobs in February, well above consensus expectations of around 400,000. Average hourly earnings remained steady, however, defying expectations for a 0.5% increase. The ISM gauge of factory activity in February indicated slowing growth in the services sector, although the IHS gauge indicated a solid acceleration.
The risk-off environment due to the Ukraine crisis and Powell’s comments pushed the yield on the benchmark 10-year U.S. Treasury note to its lowest intraday level in two months. At the beginning of the week, investment-grade corporate bonds weakened amid deteriorating economic sentiment and elevated forward supply expectations.
Shares in Europe fell sharply, as investors weighed the possible implications of Russia’s ongoing invasion of Ukraine. Core eurozone bond yields declined overall in a volatile week of trading. They fell sharply on Friday as ceasefire talks between Russia and Ukraine failed and fighting intensified. The European Union (EU) and the UK joined the U.S. in imposing sanctions on Russia for invading Ukraine, headlined by measures seeking to curtail Russian access to their capital markets and financial system via SWIFT payments system. The European Central Bank (ECB) officials appeared to signal a change in tone on monetary policy. Meanwhile, inflation in the eurozone in February accelerated to a record 5.8%, up from 5.1% in January, as costs of energy and food surged, according to preliminary data from Eurostat.
The Japanese government also imposed more sanctions on Russia, coordinating its actions with other Western nations.
Escalating sanctions against Russia and caution ahead of a weeklong annual meeting of China’s parliament starting Saturday restrained investor sentiment. China will reportedly announce an official 2022 gross domestic product (GDP) target of 5.0% to 5.5%, the first time since 1991 that the country’s economic growth target will be below 6%. The People’s Bank of China may also cut interest rates in the near term to battle the economic slowdown, reported the state-run China Daily. In economic news, factory activity returned to expansion as the Purchasing Managers’ Index (PMI) rose to 50.4 in February, up from January’s 49.1 reading, a two-year low.
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Trade Smart !
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