Bears roam as Russian aggression lingers, gold pops
The back and forth between Russia and Ukraine is weighing on sentiment in the markets. Lingering tensions and concerns that Russia will maintain a heavy military presence on its border with Ukraine has prompted dealers to sell stocks. In recent weeks, there have been instances where the prospect of an outright invasion seemed more likely, but in the past 24 hours we seem to have been stuck in no man’s land, and seeing as traders despise uncertainty, equity benchmarks are under pressure. The mood is likely to remain fragile until the Russian government makes a noticeable withdrawal of military personnel and hardware. Reports of artillery fire in eastern Ukraine have apparently left two Ukrainian soldiers wounded, this update underlines the political uncertainty in the region. European stock markets are set to finish lower as the FTSE 100 is down 1.2% and the DAX has lost 0.9%.
In the US, the mood is down beat too as the S&P 500 has fallen over 1.2%. Last night, the minutes from the Federal Reserve’s meeting were posted. Unsurprisingly, the Fed are worries about the high levels of inflation. Some policy members expressed concern that if monetary policy is tightened too quickly, it could derail the recovery. The US economy is in a relatively good shape, but the recovery isn’t as strong as it was in the middle of last year, so the Fed will be conscious not to lift rates too aggressively in the face of an economy that is moving down a gear. Today’s economic data was not too hot as the as the jobless claims report increased by 23,000 to 248,000, while economists were anticipating it to fall to 217,000. The Philly Fed manufacturing index dropped from 23.2 to 16, which indicates the US’s economic rebound is fading a little. The US dollar is essentially flat on the day and the euro is down versus most major currencies on account of the fears relating to the Ukraine-Russia situation. Gold is enjoying a bullish run as some dealers now feel the Fed might not be as hawkish as originally though considering last night’s update. Also, the general risk-off mood in the markets is driving up demand for assets that are considered to be lower risk. The yellow metal flirted with the $1,900 mark earlier today.
