Equities Feel The Heat Due To The Ongoing Tensions In Eastern Ukraine

EQUITIES SLIDE ON TENSIONS IN EASTERN UKRAINE

Once of the main events yesterday, that was the announcement by the Russian President, Vladimir Putin, was that Russia is recognizing Donetsk and Lugansk regions, as independent states. On that news, the Russian rubble took a beating against its major counterparts, moving back to the area, where it was at the end of January. The Russian MOEX index lost just over 10% and the RTS index closed roughly with a 13% loss. But the Russian indices started declining already after the opening bell, rather than after Putin’s announcement. The U.S. stock exchange was closed yesterday, however the European bourses were operating. Those have also closed in the red due to the geopolitical tensions.

EURO STOXX 50 — TECHNICAL OUTLOOK

The Euro Stoxx 50 index had also taken a dive recently and it is now trading below a short-term downside resistance line drawn from the high of February 10th. Given the steep downmove, which we saw recently, a small correction higher could be possible. However, if the price remains below that downside line, we will stay bearish.

DEVELOPING COUNTRIES ARE GAINING TRACTION

While all eyes are glued to the events surrounding Eastern Ukraine, China and some other developing countries are slowly growing their economies. Countries like Mexico are seeing growth levels returning to pre-pandemic ones, according to a report published on Monday by the Organisation for Economic Cooperation and Development (OECD). According to OECD, the country’s GDP is expected to grow by 2.3% in 2022, and by 2.6% in 2023. One of the main contributors to this success is the U.S., as it is one of the main importers of Mexican goods. And with the expected interest rate hikes by the Fed throughout the course of this year, USD is expected to strengthen, especially against some of the Emerging Market currencies, such as the Mexican peso. Weaker MXN against USD could boost the Mexican exports to the U.S., as they would become cheaper for the U.S. consumer.

WTI OIL — TECHNICAL OUTLOOK

Today, WTI oil was able to jump above the high of February 14th, which is at 95.85, this way creating a new high for February. The commodity continues to trade above a short-term upside support line drawn from the low of January 10th. As long as the price trades somewhere above that upside line, we will stay positive.

ECONOMIC DATA FOR TODAY

This morning we have received the BoJ’s core CPI figure from Japan. There was no initial forecast available, however, the actual number declined slightly, going from the previous +0.9% to +0.8%.

AS FOR THE REST OF TODAY’S EVENTS

Also, the U.S. will release the CB consumer confidence index for the month of February. The current expectation is for the number to drop from 113.8 to 110.0. If the actual figure shows up even lower than the forecast, this could affect USD in a negative way against its major counterparts. That said, we believe that any affect may be a temporary occurrence, as USD could stay vulnerable to the broader market sentiment.

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