MARCHES-SUMMARY-1: Net downturn in sight in Europe with fears over Ukraine and the Fed
© Archyde.com/Kai Pfaffenbach
NET DROP IN VIEW IN EUROPE WITH FEARS ON UKRAINE AND THE FED
by Blandine Henault
PARIS (Archyde.com) – The main European stock markets are expected to fall sharply on Monday at the opening against a backdrop of heightened tensions around Ukraine and concerns about the tightening of American monetary policy.
Futures contracts signal a drop of 1.43% for the Dax in Frankfurt, 0.58% for the FTSE in London and 1.57% for the EuroStoxx 50. First indications available also give the CAC 40 Parisian down 1.57%.
The United States again warned over the weekend that a Russian invasion of Ukraine could begin at any time.
US President Joe Biden spoke to his Russian counterpart Vladimir Putin on Saturday and warned him that an invasion of Ukraine would lead to severe and swift economic sanctions from the United States.
The exchange between the two men, the third since December, took place as Moscow began large-scale military maneuvers in Belarus, on the northern border of Ukraine, and in the Black Sea, on its eastern flank.
German Chancellor Olaf Scholz travels to Ukraine on Monday to meet President Volodimir Zelensky to express Berlin’s solidarity with Kiev and help avert war in Europe. He will then travel to Moscow on Tuesday for talks with Vladimir Putin.
Beyond these geopolitical tensions, investors are worried about a faster and more marked tightening than expected of the Federal Reserve (Fed) monetary policy after the inflation figures in the United States which showed an increase 7.5% over one year in January, unheard of since February 1982.
The prospect of a closed meeting of the Fed’s Monetary Policy Committee (FOMC) on Monday (4:30 p.m. GMT) has fueled speculation of an emergency rate hike – outside the schedule of scheduled FOMC meetings – even though the event seems usual.
San Francisco branch president Mary Daly tried to allay fears by saying in an interview Sunday that monetary policy “too abrupt and aggressive” would be counterproductive.
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A WALL STREET
Fears about the situation in Ukraine weighed on Wall Street on Friday evening, when only the energy sector stood out thanks to soaring oil prices.
The Dow Jones index fell 1.43% to 34,738.06 points. The S&P-500 lost 1.90% to 4,418.64 points and the Nasdaq Composite fell 2.78% to 13,791.15 points.
Futures contracts on the three indices are signaling virtual stability for the Nasdaq at the opening on Monday and gains of more than 0.1% for the Dow and the S&P.
IN ASIA
The Tokyo Stock Exchange fell 2.23%, caught up in the general climate of risk aversion.
In China, the indices are also moving in the red, penalized by the decline in financial stocks and real estate after the People’s Bank of China announced that it would not use real estate as a short-term tool to stimulate the economy.
The CSI 300 index fell by 1.19%.
OIL
Crude prices are moving to more than seven-year highs on Monday, boosted by the prospect of possible European and American sanctions against Russia in the event of an invasion of Ukraine which could disrupt Russian oil exports.
The barrel of Brent gained 1.05% to 95.43 dollars after reaching 96.16 dollars earlier in the session, the highest since September 2014.
That of American light crude (WTI) advanced 1.32% to 94.33 dollars, after a peak at 94.94 dollars.
RATES/EXCHANGES
The yield on ten-year Treasuries is stable, torn between geopolitical fears which are putting downward pressure and inflationary tensions which took it to 2.0630% on Friday, its highest since July 2019. It is changing on Monday at 1.951%.
On the foreign exchange market, the euro remains under pressure in the face of fears over Ukraine after falling sharply on Friday and moving to 1.1346 dollars.
(Paris editorial office; +33 1 49 49 50 00)