STOCK MARKET: THE IMPACT OF GEOPOLITICAL TENSIONS IS MITIGATING
by Marc Angrand
PARIS (Archyde.com) – Wall Street is expected to open with a limited decline on Tuesday and the main European stock markets are back in the green or have sharply reduced their losses at mid-session, investors seeming to relativize the economic and financial fallout from the latest developments in the crisis Ukraine despite the heightened risk of armed conflict.
Futures contracts on the main New York indices, which at the start of the day foreshadowed a drop of more than 1%, now signal a decline of only 0.37% for the Dow Jones, 0.2% for the Standard & Poor’s 500 and 0.6% for the Nasdaq after the long Presidents’ Day weekend.
In Paris, the CAC 40 gained 0.09% to 6,794.19 points around 11:55 GMT after having lost up to 2.28% to return to its lowest level since October. In London, the FTSE 100 gained 0.16% and in Frankfurt, the Dax fell 0.13% after falling in early trading to its lowest level in nearly a year.
The EuroStoxx 50 index rose by 0.14% while the FTSEurofirst 300 lost 0.06% and the Stoxx 600 was stable.
The latter posted at its lowest, in the early morning, a decline of 9.99% compared to its peak in early January, bordering on the correction zone, but it then gradually regained ground.
The tension related to Ukraine suddenly increased on Monday evening with the announcement by Russian President Vladimir Putin of the recognition of two self-declared breakaway republics in eastern Ukraine and of an operation to “peacekeeping” of the Russian army, which could justify for Moscow an invasion of Ukrainian territory.
But investors are now waiting to know the extent of the sanctions promised to Moscow by Western countries.
In Russia, the Moscow Stock Exchange’s MOEX index fell 5%, but the ruble regained some ground against the dollar after falling to its lowest level in nearly two years.
VALUES IN EUROPE
While almost all of the major sectors of the European rating fell at the start of the session, they are now almost evenly divided between upside and downside. The most marked decline is for the food and beverage compartment (-0.79%), the largest increase for the automobile (+1.52%).
At the top of the Stoxx 600, Porsche SE and Volkswagen jumped 12.63% and 8.57% respectively after the announcement of discussions on a possible IPO of the Porsche brand.
Renault, on the other hand, yields 3.78%, penalized by its exposure to Russia, where it controls the local brand Avtovaz.
Among the major groups that published their results at the start of the day, Worldline won 9.41% after a turnover above expectations in the fourth quarter.
RATE
Yields on US Treasuries, which fell at the start of the day with the general decline in safe havens, are now on the rise, at 1.9477% for ten-year securities and 1.5408% for two years. .
The European bond market follows the movement: the yield of the ten-year German Bund, which returned at the start of the session to 0.146%, rose to 0.23%, up more than a basis point on its closing level of Monday.
Despite the unfavorable evolution of the geopolitical context, the money markets continue to anticipate a rate hike by the European Central Bank (ECB) by July.
CHANGES
On the currency market, the geopolitical context is above all benefiting the yen and the Swiss franc, resulting in a decline in the dollar against the other major currencies (-0.12%).
The euro, meanwhile, is regaining ground against the greenback at 1.1343 but its one-month implied volatility has risen to its highest level since November 2020, a sign that traders are expecting a prolonged period of uncertainty for the euro. economy of the euro zone and the monetary policy of the ECB.
OIL
The price of oil has reached its highest level since 2014, the politico-military escalation between Russia and Ukraine amplifying the risks of tensions between supply and demand for hydrocarbons.
Brent gained 2.37% to 97.65 dollars a barrel after peaking at 99.50, very close to the symbolic $100 mark, below which it has been trading since September 2014. American light crude (West Texas Intermediate, WTI ) takes 3.49% to 94.25 dollars.
“The potential for a rally above $100 a barrel has been given a huge boost,” said Tama Varga of broker PVM.
(XXXX report, French version Marc Angrand)