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Indices Across The World React to Growing Tensions in Ukraine, Another BoE Rate Hike & Oil Falls to Start the Week Ahead of Fed Meeting

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U.S. stocks make a last minute comeback!

The selling pressure on stocks continued to be extreme to start the week with the major U.S. indices all being down for much of the day before a staggering reversal to end the session.

At one point the Dow was down 1,115 points, while the NASDAQ had fallen 4.9% and the S&P 500 hit correction levels as it had dropped over 10% from its record close on Jan. 3rd.

With the market appearing to be well oversold in recent days, trading in the late afternoon Monday may mark a reversal in sentiment for the market as traders attempt to navigate the tensions over Ukraine and expected tightening from the Fed. 

💡 What does Russia hope to accomplish?
To those involved in talks it hasn’t become clear what Russia hopes to gain from this move. Even foreign policy analysts are having trouble trying to pin point Russia’s intentions. It’s clear however that Ukraine joining NATO would shift power in favor the Western Powers that joined to mediate the growing prominence of Soviet forces.

Russian officials have repeatedly denied that it is anything more than a military exercise. 

To put the reversal in context this was the first time since 2008 during the Global Financial Crisis that the NASDAQ had recovered from being down over 4% to close in positive territory.

After all of the drama, at the close U.S. markets had moved into the green with the Dow up 0.29%, the S&P 500 rising 0.28% and the NASDAQ reversing its recent fortunes with a 0.63% gain on the day.

FTSE 100 lower, markets prepare for another BOE hike

London’s FTSE 100 was also trading in the red on Monday, as markets prepared for a potential BOE interest rate hike.

The Bank of England had already moved to increase interest rates in December as Britain’s inflation surged, and it looks as if they could be set to take further actions.

Reports on Monday suggest that the BOE may look to raise interest rates, as consumer prices in the UK rose to a 30-year high last month.

Source: Bloomberg

Ahead of the BOE’s policy meeting next week, a poll conducted by Reuters expects the bank to push rates up to 0.5% from 0.25%.

If this were to occur, it would be the first time since 2004 that the MPC voted to hike rates after back to back meetings.

The FTSE 100 closed the session 2.63% lower.

Oil prices drop ahead of Fed meeting

After hitting multi-year highs on Thursday, oil prices fell to start this week, as traders prepared for the first Fed meeting of the year.

Many have already priced in that the Federal Reserve will hike rates in Q1, however as inflation continues to rise in the U.S. and the rest of the world, some believe that the move could come sooner.

💡 More on this
One of the key factors to this was the fact that job vacancies also rose, hitting a new high of 1.3 million in the quarter.

In addition to a potential rate hike, the Fed is also expected to give more guidance on tapering, as it looks to move away from helicopter money.

Gold prices were higher on the news.

“If you don’t find a way to make money while you sleep, you will work until you die.”

-Warren Buffett

Eliman Dambell

Senior Market Analyst

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