Equities can reduce losses by taking advantage of soft yields and avoiding major negatives from Russia.
FOMC Minutes: Russia-Ukraine story became the main catalysts of the week.
Global markets are still slowing down after a volatile Friday. Monday’s Asian trading session will see them remain so for the first hour of Monday. The main reason for inactivity is a lack of significant data/events. However, momentum traders are also challenged by mixed updates regarding Russia’s invasion and the Fed’s rate hike.
The US 10-year Treasury yields are at 1.95% today, having lost over 11 basis points (bps), the day before. The S&P 500 Futures also posted mild gains at press time.
Friday’s market sentiment deteriorated after Joe Biden, the US President raised concerns about a possible military attack from Russia on Ukraine. The much-debated geopolitical event was not only a concern for US President Joe Biden, but also the leaders of the UK and Eurozone.
The risk-off mood affected US Treasury yields, equities and gold prices.
The Fed’s March rate hike was also a factor in the yields’ weakness. CME FedWatch Tool predicts that there will be 50-50 probabilities of a Fed rate-hike in March, compared to a move of 0.25%. The market seemed almost certain that the Fed would raise rates, particularly after the release of the US Consumer Price Index(CPI). However, preliminary readings of US Michigan Consumer Sentiment for February fell from 67.2 to 61.7 Friday.
It is worth noting that Russian President Vladimir Putin called such claims ‘provocative speculation’ according to AFP News. Bloomberg stated that the “Standoff With Russia Over Ukraine Heads into Most Tense Week Yet” but market players didn’t believe Putin’s comments.
A light schedule and a cautious mood could limit market movements in the first days of the week. The Federal Open Market Committee’s (FOMC), Meeting Minutes will be published on Wednesday and should be viewed for any indications of near-term direction. Russia-Ukraine headlines will also be important.
