Intensifying Russia/ Ukraine fears reinforce “risk off” theme

Macroeconomic/ geopolitical developments

• The markets were dominated last week with shifts between “risk on” then “risk off” themes with conflicting reports regarding the potential for conflict starting between Russia and Ukraine.
• Reports of Russian troops withdrawing saw a “risk on” move earlier in the week, which was dismissed by Western statements regarding a potentially imminent invasion, flipping to a “risk off” tone to end the week.

• This has side-tracked the financial markets from their prior focus on inflation and central banks, notably the US Fed.
• However, ongoing hawkish comments from FOMC members continues to concern markets too.

Global financial market developments

• Global stock averages were extremely erratic last week but concerns over the possible conflict between Russia and Ukraine, saw a negative weekly close, led lower by the US indices and once more the tech sector.

• Higher yield pressures abated last week, with US Treasury yields correcting back lower from multi-year highs, with a global safe-haven bond rally, driven by the Russia/ Ukraine worries.
• The US Dollar tried to rally, again with a safe-haven bid.
• Gold surged, even with a slightly firmer US Dollar, as both a safe-haven and inflation hedge.

• Oil has setback from a multi-year high, completing a topping pattern and looking for a deeper correction
• Copper has again tried to reinforce the prior upside breakout effort, retaining a positive bias in broader range.

Key this week

• Geopolitical focus:
  • Closely watching for military developments on the Ukrainian/ Russian border.
  • The US President’s Day holiday is on Monday 21^st February, US markets closed
• Central Bank Watch: The Reserve Bank of New Zealand (RBNZ) interest rate decision, statement and press conference is on Wednesday.
• Macroeconomic data: The global Markit Flash PMI, German IFO, plus US Consumer Confidence, GDP, Personal Consumption Expenditure (PCE) and Durable Goods are the standout data points for the week.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued