Kim Hyun-seok’s Wall Street Now Unbelievable Putin The Scarier Powell… SP500 exceeded 10

The New York Stock Exchange on the 22nd (local time) exhibited the epitome of rapid volatility driven by geopolitical risks. Whenever there was news regarding Ukraine, the market changed direction and fluctuated.

On the followingnoon of the 21st, when the US stock market was closed for President’s Day, Russia approved the independence of the Donetsk People’s Republic (DPR) and Lugansk People’s Republic (LPR) in the Donbas region of eastern Ukraine. I decided to enlist in the military. As expected, they invaded right following the Beijing Olympics in China. Tensions have risen sharply, with the Dow Futures falling more than 500 points at one point and Nasdaq futures dropping close to 3%. Also, oil prices soared, causing Brent oil to once soar to $99.5 a barrel, and the price of non-ferrous metals that Russia mainly exports, such as nickel and palladium, also surged.

However, following 4 a.m. on the same day, the index futures sharply reduced the extent of the decline. Ukrainian President Vlodimir Zelinsky condemned Russia, but said, “The Russian Federation has actually legalized the existence of its own soldiers who have been stationed in pro-Russian rebel areas since 2014. I support it,” he said. Putin also said there are no plans to retake Russia’s former territories. It has been observed that if Russia annexes only some eastern regions and withdraws, it may not escalate into a major conflict. The United States and Europe announced that they would announce sanctions, but in this situation, the level was not expected to be very high. President Joe Biden said last month that Russia might impose more restrictive sanctions on local invasions.

“The results so far have been better than we feared,” Vital Knowledge founder Adam Krasapelli said in an early morning report. “The eastern part of Ukraine has been moving very autonomously over the past few years, and Russia already exists there. So I think what Putin announced yesterday is just technical. Actually, the reality of the region doesn’t change,” he said. explained. The Donbass region was actually under Russian control. “I don’t think Ukraine will fight back militarily once morest the Donbas region,” he added. “I don’t think Putin will move beyond the Donbass,” Vital Knowledge said. “That’s why the stock has reduced its decline so much,” said Vital Knowledge. Russia, the United States and NATO will provide an exit ramp,” he added.

“I think this will help alleviate the crisis, but what is clear is that we have to wait and see what happens over the next few days. There is still a lot of stuff floating in the air,” said Chrysapelli. “It will be very interesting to have a meeting with Russian Minister Lavrov, and I think it is definitely a positive sign that diplomatic efforts are continuing,” he said.

At 9:30 a.m., the New York Stock Exchange’s leading index opened lower in the 0.4-0.9% range. Much better than last night when it plummeted. And soon the rise reversed. However, around 10:30 am, the market began to slide sharply.

The Associated Press reported that Putin had received approval from the Russian parliament to send troops abroad. President Putin declared that the ‘Minsk Peace Agreement’ signed in 2015 to resolve the Donbass problem no longer exists, and the possibility of resolving disputes through implementation of the agreement has disappeared.

NATO Secretary-General Jens Stoltenberg said: “All the signs show that Russia continues to plan a full-scale invasion of Ukraine.” “I’m seeing more troops coming out of the barracks, in battle formations and ready to attack,” he said.

“We see this as the beginning of an invasion,” said John Fine, deputy national security adviser at the White House, on CNN. There is,” he said. This is a change from the previous day, who strongly condemned Russia’s dispatch of troops to Ukraine, but showed a somewhat ambiguous attitude regarding whether it was defined as an ‘invasion’.

The market widened the decline. The Dow and Nasdaq were down more than 2% at one time. And yet another inflection point was made when President Joe Biden stood at the podium at 2:20 pm.

President Biden announced the sanctions, saying that “the Russian invasion of Ukraine has begun”. Four. △ Ban on transactions with two of Russia’s state-run banks, the Foreign Economic Bank (VEB) and the Military Bank (Promsvyazbank) △ Sanctions on Russian leadership and their families △ Comprehensive sanctions on Russia’s state debt △ Cooperation with Germany for Nordstream 2 interruption, etc. “It looks like Russia will go into further invasions, but there is time to avoid the worst-case scenario. We have no intention of fighting Russia,” Biden said. “The United States and its European allies are still hoping for a diplomatic solution.”

As Biden’s speech progressed, the market began to rebound. The drop was significantly reduced. “The sanctions announced by President Biden were not as harsh as originally anticipated,” a Wall Street official said. He pointed out that large commercial banks were excluded from financial sanctions, there was no mention of the withdrawal of SWIFT, and there were no energy-related sanctions other than Northstream 2. As a result, Russian stock futures, which had plunged more than 30% since the outbreak of the Ukraine crisis, surged to 6% shortly following. The Russian ruble also gained in value.

The same was true of the UK, which announced sanctions earlier this morning than the US. The UK has frozen its assets in five Russian banks. In this regard, William Broder, founder of Hermitage Capital, pointed out on Twitter, “I wonder why the mega banks such as VTBbank and Sberbank are not subject to sanctions.” “If you ask me regarding the UK sanctions, I’ll say ‘pretty lukewarm’.”

A Wall Street official said, “The sanctions were the first, and the level was lower than expected. If Russia accelerates the invasion, the level of sanctions will be raised. In fact, how effective will the sanctions be unless Europe’s energy supply is blocked or Russian banks are excluded from SWIFT? “I wonder if there will be such a thing. Moreover, even if Russia receives energy-related sanctions, it may not have much effect if China purchases all of Russia’s energy,” he said.

The rebound sparked by Biden’s speech did not last long. Sales began pouring out around 3:05 pm as news broke that Ukraine had ordered a call for reserve forces and the US decided to deploy additional F-35 fighters and Apache attack helicopters to Eastern Europe, as Archyde.com reported. As a result, the Dow was down 1.42%, the S&P 500 fell 1.02%, and the Nasdaq closed 1.23%.

The S&P 500 entered a correction zone today, dropping more than 10% from its January 3 highs. The index rebounded from the bottom of 4267.11 on the day and closed at 4304.76. Wall Street worries that a break below the 4222 low of the 24th of January might technically initiate a long-term decline. The ‘head and shoulders’ shape is complete. On the other hand, if you keep this line, you can make a double floor and go upstairs. By the way, the situation in Ukraine must be resolved quickly if it is to become a double bottom.

Regarding the Ukraine crisis, there are relatively many voices of concern on Wall Street. “I don’t think the Ukraine crisis is over,” said Doug Peta, a strategist at BCA Research, in an interview with Hankyung Global Market correspondent Young-yeon Kang today. “We’ve been warning our customers not to trust every single ‘positive’ piece of news,” BCA Research said. There is a possibility that Putin will declare victory following occupying only eastern Ukraine, but it is necessary to keep in mind the possibility of resuming the military conflict, full US sanctions, and partial EU sanctions until a significant amount of troops is withdrawn.

“Historical geopolitical events have only had a relatively short-term impact, and while the S&P 500’s decline this year is approaching its average decline during the geopolitical crisis, more risk remains in financial markets,” BCA Research notes. BCA Research still sets a 75% chance of war and a 25% chance that diplomacy will be resolved. “In conclusion, we maintain our recommendation to invest defensively until we know the full scale of Russian military action and Western retaliatory sanctions,” the BCA said in a statement. (Fed) imminent rate hike and China’s recession.”

UBS, which has consistently presented a positive view, said on the same day, “Despite the Russian military’s entry into the eastern part of Ukraine, the escalation of the crisis so far is not yet an all-out conflict that can trigger serious sanctions from the West and threaten energy flow to Europe. I don’t think it’s tilted,” he said. “It is too early to draw any final conclusions regarding what will happen under the current circumstances,” he added. Larger wars and long-term disruptions to Russia’s energy exports are still likely to be tail risks.

As uncertainty is so high, Goldman Sachs analyzed that the S&P 500 might decline by 6.2% if the Ukraine crisis turns into an all-out crisis, and rise 5.6% if the situation subsides. In the case of the Nasdaq, I thought it might fall 9.6% or rise 8.6%.

Besides, Wall Street has another big concern. That is the fear of aggressive tightening by the US central bank (Fed). In particular, a geopolitical crisis may end in the short term, but monetary policy changes have a more lasting and long-term impact. Chris Harvey, head of equity strategy at Wells Fargo, said: “We believe the geopolitical stresses surrounding Russia and Ukraine will add volatility and some short-term declines to risky asset markets, including equities. “Geopolitical factors may cause short-term disruptions, but changes in monetary policy will be longer lasting and more pervasive.”

JP Morgan strategist Dubrako Lakos-Bujas, who has recommended the most aggressive buying on Wall Street, maintained a positive view, saying, “The risk that Russia-Ukraine tensions will affect the profits of US companies is low.” It has the potential to grow,” he said cautiously. He also emphasized that “authentication still remains a key risk for equities.” JPMorgan changed its forecast over the weekend that the Fed would raise rates in a row at each of the next nine Federal Open Market Committee (FOMC) meetings through early next year.

Just the day before, Fed Director Michel Bowman kept the possibility of a 50bp (1bp = 0.01 percentage point) increase in March. He said at the next central bank meeting in March that he would evaluate incoming economic data over the next three weeks to determine whether a 0.5 percentage point rate hike is necessary.

If tensions in Ukraine continue and the economy shrinks due to various sanctions, if the Fed, driven by inflation, continues to raise interest rates sharply, the chances of the US economy falling into a recession will increase.

Energy stocks plunged on the New York Stock Exchange that day. It showed an uptrend at the beginning of the market, but it turned downward during the day. In the end, BP fell 2.23% and ExxonMobil fell 1.16%. West Texas Crude Oil rose 1.3% to close at $92.27 and Brent closed at $96.34, up 1%. Why did energy stocks plunge? A Wall Street official said, “The surge in oil prices caused by the war does not last long. This is because demand decreases due to the economic downturn.” In addition, the funds that had already been betting on the possibility of war would have started to take profits when the news broke. Metal stocks such as Alcoa (-5.26%) and Nuco (-3.42%) also fell sharply, although non-ferrous metal prices soared, with aluminum and nickel prices soaring. Also, Home Depot, which released good results the day before, plunged 8.78%. The stock is down nearly 24% this year, the highest since March 2020. This is because the benefits of the pandemic have ended and the possibility of margin decline due to inflation has surfaced, and the overall retail stocks, including Wal-Mart (-1.12%) and Costco (-2.05%), were sluggish due to concerns regarding an economic downturn.

The Conference Board’s Consumer Confidence Index for February also recorded 110.5, lower than the previous month’s 111.1. IHS Markit’s preliminary manufacturing Purchasing Managers’ Index (PMI) for February (seasonally adjusted) was 57.5, higher than the previous month’s 55.5. Chris Williamson, chief economist at IHS Markit, said: “Inflationary pressures are mounting while growth and demand are recovering.

Bond yields plunged amid escalating war tensions the day before and then closed slightly higher once more. The yield on the 10-year US Treasury note, which was trading in the mid-1.8% range until dawn of the day, finished trading with a 1bp increase to 1.934% at 4 pm. While expectations for a rate hike by the Fed are growing due to soaring inflation, the bond market has also become more volatile as the preference for safe-haven assets following the Ukraine crisis overlaps. “As long as the Ukraine crisis continues, it is likely to stay below 2% a year for the time being,” said a Wall Street bond trader.

New York = Correspondent Hyunseok Kim [e-mail]