STATE OF THE MARKETS
Stocks dropped amid safe haven flows. US stocks dropped lower after its secretary of state confirmed that the embassy will move temporarily amid growing tension in the Russia-Ukraine border. Safe haven flows were noted in rising gold and dollar as bonds and stocks fell. Dow (-0.50%), S&P (-0.38%) and Russell (-0.46%) closed in the red while Nasdaq (-0.00%) was flat as yields rose across the board.
The shorter 2Y closed higher at 1.57%, the 5Y at 1.90% while the longer 10Y spiked to 2% before falling back to 1.98% and the 30Y closed at 2.29% as the Dollar index shot past the 96 mark and settled around 96.30 as New York closed.
In the commodities market, the growing political tension sent concerns on supply disruption from Russia, prompting energy traders to bid crude and gold higher. The black gold settled at $93/bl, a level not seen since September 2014, while the precious metal settled above $1,870.70/oz as New York closed. Elsewhere, iron ore rebounds back to $150.80/tn as inflation concerns continue to plague markets.
In the FX space, safe haven flows were evident as Yen seized the helm of demand in short and long term accounts, while Swiss advanced in the demand in both short and medium term accounts. Concerns in crude supplies sent Loonie back in the demand territories across the board.
On Tuesday, markets look for earnings reports from Airbnb (ABNB), Zoetis (ZTS), Fidelity (FIS), Marriott (MAR), Ecolab (ECL), Roblox (RBLX), Welltower (WELL) and Akamai (AKAM) as well as the latest US PPI and Empire State manufacturing index.
OUR PICK – AUD/USD
Geopolitical tension and patience RBA may suppress Aussie. Aussie is currently supported by rising commodity prices like gold and iron ore, but the Russia and Ukraine conflict will not end anytime soon as the conflicting areas in Ukraine are controlled by separatist that want to be part of Russia. This is what happened in the Crimean peninsula back in 2014. We also see the RBA’s stance of patience in policy tightening will suppress the Aussie in the medium term.
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