2022/02/22 (007) Column

This is just unreal!
Can the war still be prevented?
USD Little Changed as Traders Await Developments in Ukraine,
meanwhile Oil Rises to Highest Since `14 & Wheat Approch 9-Year High!


US Stocks Sell-Off

All three major US stocks declined on Tuesday, as tensions between Russia and Ukraine dented risk appetite. Yesterday, President Putin ordered troops into two Moscow-backed separatist regions of eastern Ukraine after announcing that he would recognize their independence, triggering sanctions from Western nations. Today, US President Biden said he believes it is the beginning of Russia’s invasion of Ukraine and announced the US is implementing sanctions on Russian financial firms, sovereign debt, and individuals. Biden also said sanctions will widen if Russia continues its aggression. On the economic front, the IHS Markit US Manufacturing PMI rose to 57.5 in February of 2022 from 55.5 in January, beating forecasts of 56, preliminary estimates showed. The Dow Jones fell for the 4th straight session by 483 points to 33,597; the S&P 500 lost 1% to 4,305 and entered a technical correction, and the Nasdaq Composite slipped 1.2% to 13,382.

Wheat Prices Approch 9-Year High

Wheat prices remained above $8.4 per bushel, approaching a 9-year high of 8.52 hit in November as supply concerns grew after tensions escalated on the Russia Ukraine border. Russian President Vladimir Putin ordered the deployment of troops to two pro-Moscow regions in eastern Ukraine after recognizing them as an independent. Russia and Ukraine are the world’s biggest wheat exporters, accounting for roughly 30% of the market. Additionally, low inventories in Canada andin the US, the third and second-largest exporters globally, added to upside risks. Total stocks of wheat in Canada were 38% down on the year at the end of 2021, as yields were poor due to drought in farms in the Prairie region. Droughts also hampered US production with sales and exports in the week ending February 3rd totaling 17.3 million tonnes, 21% lower than USDA projections of 22.05 million tonnes.

Gold Rally Pauses

Gold eased to around the key $1,900/oz level on Tuesday after rising to as high as $1,913/oz earlier in the session, the highest in nearly 9 months as investors scooped up short-term profits while waiting for more developments in the Ukraine crisis. Russian President Vladimir Putin recognized on Monday the independence of two breakaway regions in eastern Ukraine and later ordered forces into the area. US president Joe Biden responded by ordering sanctions on the two separatist regions, with the European Union vowing to take additional measures. Oil jumped to a fresh 7-year high on fears that a major conflict could disrupt supply, adding to concerns of further inflationary pressures. Meanwhile, investors are also keeping an eye on the Federal Reserve, as it is expected to raise rates multiple times starting in March to tame rising inflation.
Dollar Little Changed as Traders Await Developments in Ukraine

The dollar index was around 96 on Tuesday, reversing from early gains, as investors track the crisis in Ukraine and the risks to growth and inflation. Russian president Vladimir Putin recognized on Monday the independence of two breakaway regions in eastern Ukraine and later ordered forces into the area. US president Joe Biden responded by ordering sanctions on the two separatist regions, with the European Union taking additional measures. Moreover, Federal Reserve governor Michelle Bowman suggested Monday that a 50 basis point rate hike at the March meeting could happen if PCE inflation to be released later in the week comes in above expectations.Oil Rises to Highest Since 2014

WTI crude futures were changing hands around $93 per barrel on Tuesday morning, having surged more than 4% to an over seven-year high of almost $96 earlier this session on worries about possible supply disruptions amid escalating tensions in Europe. In the latest developments, President Vladimir Putin ordered troops into two Moscow-backed separatist regions of eastern Ukraine after announcing that he would recognize their independence, a move that already triggered sanctions from Western nations. Meanwhile, investors continued to monitor efforts to revive the 2015 Iran nuclear agreement. Analysts suggested that a potential deal could add more than 1 million barrels a day of Iranian crude to the market.