Stock Market Today
Futures in the United States are higher, while those in Europe are lower, as investors watch the Russia-Ukraine conflict. According to the United States of America, Russia has already begun its invasion of its neighbour. The U.S. has already started imposing sanctions on Russia to pressure it and prevent further aggression. On the other hand, Russian President Vladimir Putin has repeatedly denied allegations that Russia intends to invade its neighbour. However, Russia’s upper house has approved the deployment of troops to Ukraine’s separatist-held regions. As a result, Russia’s communication contradicts its actions on the ground, implying that an invasion is likely imminent.
Historically speaking, aggression events usually add to the volatility in stock markets and drag stock market indices down. This is precisely what we are seeing right now. Furthermore, fears that the invasion will disrupt commodity supply chains have increased commodity prices.
The Dow Jones Industrial Average fell 1.42% in yesterday’s session, and the S&P 500 index slumped 1.01%. The Nasdaq, the tech-savvy index, dropped 1.23%, while the Russell 2000 dipped 1.45%.
The United States has decided to start imposing sanctions on Russia following reports that Moscow has begun invading Ukraine. In addition to this, the United States is also coordinating with Germany to make sure that the NordStream 2 pipeline between Russia and Germany is not operational. President Joe Biden also warned that sanctions could be imposed quickly if Russia continues its aggression against Ukraine. However, it seems that the sanctions put in place, as of now, do not appear as hostile as we initially feared. Having said that, this situation could quickly change with further on-ground developments.
Investors were already on edge before the Russia-Ukraine conflict because of the monetary policy tightening being carried out by the Federal Reserve. The Fed is moving to raise its interest rates as soon as March to tackle rising consumer prices. However, fears that raw material prices will likely climb over the next few weeks, if not months, because of potential supply chain bottlenecks triggered by hostile measures undertaken by Russia. This could potentially put the Fed in a difficult position in deciding by how much interest rates should be raised in the coming months.
The price of bitcoin, the global benchmark for digital coins, has fallen as investors shift away from risky assets and toward safe-haven assets to hedge against equity market uncertainty and rising inflation. Previously, bitcoin was thought to be a digital safe-haven asset, protecting investors’ wealth during periods of volatility in global financial markets. However, with more and more institutional investors entering the blockchain arena, the correlation between the crypto markets and traditional financial markets is rising. Hence, the negative sentiment in stock markets also seeped into crypto markets. Currently, bitcoin is trading at around $38,000.
Moving onwards, investors should understand that supply-side pressure remains the most significant issue facing markets. At the same time, demand for crude oil continues to rise as economies continue to expand. The Russia-Ukraine dispute is fuelling crude oil prices as Russia was the biggest supplier of crude oil in 2021 within the European Union. Thus any further restrictions on the country could hinder the much-needed oil supply.
Crude oil prices have gone up by nearly 80% since 2021 and by almost 20% this year alone, pushing oil prices above $90 per barrel. If tensions between Russia and Ukraine continue to rise, oil prices could reach $110 per barrel in the future. However, suppose a deal between the U.S. and Iran is reached concerning Iran’s nuclear agreement in 2015. In that case, Iran’s 1 million barrels of oil could be added to the global supply, protecting markets from a massive blow.
Over the past few weeks, investors have been rushing towards the precious metal to seek refuge against a rise in stock market volatility stirred by uncertainty related to the Fed’s future monetary policy and tensions between Russia and Ukraine. It is currently hovering at the critical $1,900 mark. Moving onwards, the price of the yellow metal is likely to be fluid in anticipation of further developments in Ukraine.
Investors should remember that GBP is likely to remain volatile today as investors are awaiting monetary policy hearings in the United Kingdom. Investors should closely watch comments to be made by the Governor of the Bank of England and MPC members to find clues on how the economy of the U.K. is likely to perform in coming months. Hawkish remarks by BOE officials could prompt GBP to appreciate.
Asian Pacific Markets
Chinese stock traders expect Beijing to resume its crackdown on big technology companies in the country. As a result, the nation’s three most prominent tech companies, Meituan, Alibaba, and Tencent, have bled nearly $100 billion over just three days. Alibaba’s stock price will be relatively more volatile as investors expect a fall in company earnings.
As of 12.53 a.m. EST, the Nikkei dipped 1.71%, and the Shanghai index climbed 0.80%. The Hang Seng index in Hong Kong hopped 0.54%. The ASX 200 index jumped 0.62%, while the Seoul Kospi rose 0.51%.