“However, in either case, the long-term consequences for Russia would be very severe as Europeans would likely, belatedly, resolve to never again make themselves energy dependent on the whims of a Russian leader,” according to Kelly.
“While Monday’s episode will have important implications for Russia’s political relations with foreign partners, a significant market event is likely avoided for the time being, but the trajectory in the coming weeks will be important to monitor from a rising market risk perspective,” said Ed Mills of Raymond James.
Stock-index futures plunged overnight in reaction to the Russian moves but steadied somewhat ahead of Tuesday’s opening bell. Equities began the day lower, but saw choppy price action in morning trade, with the S&P 500 and Nasdaq Composite moving between gains and losses before extending their decline in afternoon activity.
Geopolitical risks have already led investors to pare bets on how aggressively the Federal Reserve may tighten monetary policy this year to fight inflation.
Putin has miscalculated “how unified the West is,” according to Craig Columbus, chief executive officer of Columbus Macro, which oversees about $1 billion.
“I don’t think Russia is the primary thing that’s weighing on markets,” he said by phone Tuesday. Rather, concerns tied to inflation and a tightening of monetary policy are what’s “driving a recalibration of assets.”
*While Putin’s actions have escalated tensions, the moves so far have fallen short of the sort of full-scale invasion that remains the biggest potential worry for investors.*
*Oil prices jumped but have pulled back from highs, while haven-related buying of Treasurys faded, allowing yields to edge higher.*
Stocks appeared to find support in early trading after a pair of surveys of purchasing managers showed private-sector activity in the U.S. economy picked up last month as the spread of the omicron variant of the coronavirus faded.
*On the economic data front, the IHS Markit manufacturing PMI rose to 52.5 in February from 50.5. The IHS Markit services PMI jumped to 56 in February from 51.1 the month prior.*
A “flash” index of activity by service-oriented companies jumped to 57.5 this month from an 18-month low of 51.1 in January, IHS Markit said. A similar gauge of manufacturers rose to 52.5 in February from 50.5.
“The market had gotten way ahead of itself in terms of expecting Fed rate hikes and now we have this heightened political risk that’s going to mean potentially tighter financial conditions, and that means a slower process of rate increases from the Fed and probably a flatter yield curve,” Charles Schwab’s Kathy Jones said on Bloomberg TV Tuesday.
*Markit manufacturing and services PMI data beat estimates, suggesting recent growth concerns have been driven by the omicron variant. Still, U.S. consumer confidence is at its lowest since September.*
*Traders are also keeping an eye on the Federal Reserve, as the U.S. central bank is expected to raise rates multiple times starting next month. Traders are betting that there is a 100% chance of a Fed rate hike after the March 15-16 meeting, with expectations tilting toward a 0.25 percentage point move, according to the CME Group’s FedWatch tool.*
*Expectations of tighter monetary policy have put pressure on stocks, particularly those in rate-sensitive sectors like tech, and have sent Treasury yield sharply higher to start 2022. The benchmark 10-year Treasury yield ended last week around 1.93% after briefly breaking above 2%. The 10-year began 2022 trading at around 1.51%.*
“The market is worried about a lot of different things and it certainly doesn’t want to be thinking about Russia/Ukraine on top,” Marko Papic, partner and chief strategist at Clocktower Group, said. “It’s a catalyst for further selloff.”
European stocks were volatile on Tuesday as global markets were shaken by developments in the Russia-Ukraine crisis.
By: via @AlliesFin Serve Stock Market
