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Daily Wrap Up 09 March 2022

9 Mar 2022 04:16 PM

Stocks rebound as fear fades, oil slips

Despite the ongoing Russian invasion of Ukraine, the mood in the markets has swung around and stocks are enjoying a major rally. The invasion started almost two weeks ago, and stock markets have been hammered. Yesterday, the US announced plans to ban the purchase of Russian energy, and the UK are aiming to phase out oil imports from Russia too. The fact that Western governments seem to be carrying out an economic war against Russia, rather than military conflict, has helped the overall sentiment. If the violence doesn’t escalate further, it is possible that markets will continue to stabilise. The DAX is up 7% as a mixture of bargain hunting and short covering is driving up the market. Germany’s equity benchmark is arguably the most exposed of the major European stock markets to the Ukraine-Russia situation, and now that sentiment is improving, the index is driving higher. The FTSE 250 is considered to be a good barometer of the UK economy, and it is benefitting from the overall lift in stocks. The FTSE 250 is up 4%, while the FTSE 100 is only up 2.6%. A sharp mover lower in oil and metal prices is weighing on commodity stocks like Shell, BP, Rio Tinto and Glencore.

Tomorrow, the European Central Bank (ECB) will announce its interest rate decision. Even though the consensus estimate is for interest rates to be left on hold, the update will be in focus. At the last meeting, the central bank didn’t rule out the possibility of lifting rates this year. Chatter of a war-induced recession is doing the rounds, as the elevated oil price could hamper growth. EUR/USD is enjoying a major rally as it appears that some market participants are closing out their euro trades ahead of meeting. The upward move in the euro is like the jump seen in stocks, as risky assets are in high demand.

By contrast, gold and silver have fallen from their peaks as lower risk assets are coming under selling pressure. As a reaction to the violence witnessed in Eastern Europe, stock markets tumbled and in turn precious metals rose sharply. Gold boomed yesterday in the wake of the US’s ban on Russian energy, but now that things have settled down, the assets are lower on the session. Oil continues to see high volatility as the energy embargos are in the news. WTI is down nearly 5% as dealers are banking profit from the 14-year high that was registered yesterday. The EIA report showed that US oil stockpiles fell by 1.9 million barrels, a bigger draw than expected.

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