Markets in a whipsaw amid the Russia Ukraine crisis
February 25 2022 - Team Stockal
Russia announced a special military operation and fired missiles at several cities in Ukraine and landed troops on its coast on Thursday. U.S. President Joe Biden says NATO will respond to an “unjustified” attack by Russia on Ukraine, fears catastrophic loss of life. With rising fears of inflation and supply chain bottlenecks, commodity prices are now shattering roofs. Crude oil prices breached the $100 per barrel mark for the first time since September 2014 on the back of global supply concerns mushroomed out of the current Ukraine/Russia crisis.
Markets rebound strongly on Thursday’s trade
Markets saw a sharp reversal as U.S. President Joe Biden unveiled some harsh new sanctions against Russia after Moscow began an all out invasion of Ukraine.
The White House warns Americans that the conflict is likely to lead to higher fuel prices in the United States, but U.S. officials have been working with counterparts in other countries on a combined release of additional oil from global strategic crude reserves. The markets hit session highs in the wake of Biden’s comments and continued their trend upwards.
“The tough stand the U.S. and Europe is taking is sending a loud message to the financial markets that they’re going to try to cripple as much as they can the Russian economy,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The Cboe Volatility Index (VIX) – the Wall Street’s fear gauge was up over 55% in the past nine trading sessions after surging to 37 at one point now closed at 30 levels. The Nasdaq Composite was down 3.45% at the beginning trades on Thursday before rebounding back to end the day up 3.44% as investors bought the dip in technology and growth stocks. The 6.89% swing in yesterday’s trade is the widest since March 20, 2020. On the Dow Index, the reversal from -2.5% to finish at 0.3% was also exceptional.
Top gainers on Thursday’s trade remain the Big Tech names
Crude oil and Gold continue to rally along with the commodities index
Gold prices continue its upward trend
- Gold prices touched its one-year high and crossed the psychological levels of $1900 per ounce during the week.
- Higher inflation remains a concern currently and Gold is seen as a safe haven and a hedge against rising inflation for investors once again and likely to push gold prices upside.
- Gold prices are expected to inch higher to $2000 per ounce in the coming days.
- ETFS Gold Trust (SGOL) CMP: $18.24 represents the low-cost investment ETF to play a potential for further rise in the yellow metal.
- SPDR Gold Trust ETF (GLD) CMP: $177.49
- iShares Gold Trust ETF (IAU) CMP: $36.15
Energy sector to remain positive
- Brent Crude breaches the $100 a barrel mark, adding to supply concerns on the back of stand-off between Russia and the West over Ukraine.
- Moscow remains the key oil player producing about 10.5M barrels per day or roughly about 11% of the World’s supply.
- Crude oil demand will remain higher as oil prices inch higher and may surpass the current levels as President Biden and Washington begin to impose sanctions on Russia and perhaps subsequent restrictions on oil exports from the country.
- Chevron Corporation (CVX) CMP: $132.4 and Cheniere Energy (LNG) CMP: $115.72 Both are direct beneficiaries from the increase in natural gas prices in the U.S. and other countries apart from rising crude oil prices.
- Exxon Mobil Corp. (XOM) CMP: $76.46
- SPDR Energy Select Sector ETF (XLE) CMP: $66.95
Commodities rallies too
- Apart from the rise in crude oil prices, other commodities were also impacted with Russia and Ukraine being the major suppliers of metals and grains.
- Commodity prices climb higher as investors look for a safe haven amid rising uncertainties.
- Russia and Ukraine together account for a quarter of global trade in the grain and concerns about the Black Sea shipment disruptions are likely to send the food costs even higher.
- Aluminium closed in on an all-time high at $3,342 a ton on the London Metal Exchange (LME)
- PowerShares DB Base Metals ETF (DBB) CMP: $23.97
- iShares S&P GSCI Commodity-Indexed Trust ETF CMP: $20.17
- Invesco DB Agriculture Fund ETF (DBA) CMP: $21.39