Daily Wrap Up 15 February 2022

15 Feb 2022 04:36 PM

Stocks jump as Russia retreats, gold falls

The mood in the markets is upbeat as the Russian government announced it will start to reduce the number of troops its has stationed on the Ukrainian border, which sent out a message that a conflict is very unlikely to happen. A few hours ago, President Putin announced that he doesn’t want a war in Europe, and that added to optimistic sentiment. Tensions are still high as Moscow is clearly concerned about the possibility of Ukraine joining NATO, but for now traders only seem to care that a war will not break out. Continental equity markets such as the DAX and the CAC are advancing at an impressive rate seeing as they have the most to benefit from a war being avoided. The markets are both up over 1.7%. Germany’s economy is heavily reliant on natural gas from Russia so the largest economy in Europe can continue to tick along. In the near-term, it seems unlikely the Russian government would ramp up hostilities with Ukraine again but looking further down the track is it an issue that could easily resurface. The drop in tensions has dented the oil market as WTI and Brent crude are down over 4%. Recently we have seen the oil market hit a seven year high, partially due to worries about heightened tensions in Eastern Europe. The sell off in BP and Shell shares is holding back the FTSE 100 as the index is only up 0.8%.

US stocks are driving higher this afternoon following the Russian withdrawals of troops announcement. The story has been very influential in the past few sessions, so the positive news from Moscow acted as a green light to the bulls. Inflation has been the dominant theme in US markets lately, and considering today’s PPI data, the high cost of living is likely to remain on traders’ minds. PPI remained at 9.7%, but economists were expecting it to drop to 9.1%. While costs continue to remain very high at the factory level, it is likely that inflation will stay elevated too. CPI hit 7.5% last week, the highest mark in 40 years, and that is a major factor behind the hawkish tone from the Federal Reserve. It has been a volatile session for gold, as the yellow metal hit a seven-month high overnight, but then moved sharply lower as the political mood improved in regards to Russia-Ukraine update -the flight to quality trade was undone.

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