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Daily Wrap Up 29 March 2022

29 Mar 2022 04:23 PM

Stocks jump as Russia changes tactics, gold slumps

The mood surrounding the war in Ukraine has lightened as Russia announced it will reduce military action around Kyiv and Chernihiv. A few hours ago, talks between Ukrainian and Russian delegates ended, it was the first face to face talks that were held since 10 March. Despite the fact the conflict is still carrying on, sentiment is upbeat as the negotiations were viewed in positive light. At this stage in the war, few people are predicting a quick end to the violence, but today’s meeting could be the start of a process that leads to a ceasefire. Germany’s DAX hit a level last seen prior to the Russian invasion of Ukraine – this highlights the drastic shift in sentiment in the past few weeks. The FTSE 100 posted a new five-week high.

EUR/USD is driving higher due to the news about the Ukraine-Russia war. Out of the major currencies, the euro was the hardest hit because of the conflict, but now the political noises are a little positive, the euro is booming. In recent weeks, dealers have been reluctant to buy the single currency for fear that energy supplies from Russia would be deliberately cut or accidentally impacted, but now the situation is improving, the euro is the outperformer.

Gold is being left out in the cold as traders are keen to buy riskier assets like stocks. Considering the news that Russia is changing its tactics, gold’s appeal has fallen as equities are proving more popular. Gold dropped below the $1,900 mark briefly, but it is now back above that level. It is important to remember the US dollar is suffering greatly today - as a result of the euro’s rally - but that still couldn’t prevent a dramatic decline in the yellow metal.

It is another bearish day for oil as the news from the Russia-Ukraine situation has lowered fears about an energy shortage. Earlier this month, WTI and Brent crude hit 14-year highs due to concerns about supply levels. Russia is a major exporter of oil and there were worries the Moscow administration might squeeze output as a way of hitting back against the sanctions that Western governments imposed. Further heat has been removed from the oil market in light of the latest developments in Ukraine.

The Australian dollar is broadly weaker across the board as metals slide. The Aussie typically rises when minerals rally – which they did amid the height of the Ukraine war – but now that they have cooled, and we have seen a pullback in the Aussie. Australia is closely tied-in with the Chinese economy, and news that Shanghai has been put on lockdown due to rising Covid-19 cases has hurt industrial metals, and that is weighing on the Australian dollar.

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