INVESTORS re-discovered much of their appetite for riskier bets by Thursday afternoon with the MSCI global index finishing well above its session low and the US dollar paring gains while oil futures pulled back from multi-year records after Russia’s invasion of Ukraine and responses from other countries.
After falling sharply earlier in the day, US Treasury yields pared most of their declines and Russia’s rouble recouped much of its losses against the dollar while safe-haven gold was in the red after earlier rising as much as 3.5%.
While the S&P had steadily regained lost ground after hitting its session low around the open, a noticeable improvement in risk appetite followed US President Joe Biden’s unveiling of new sanctions against Russia. He said the US is working with oil producers to secure global energy supplies.
While Biden insisted that US forces will not fight in Ukraine he said additional forces would be authorised to go to Germany. Sanctions cited involved Russian banks and technology imports but did not involve oil and gas (O&G) or the SWIFT international banking system.
Investors who are most concerned about inflation in areas such as energy were relieved by what the sanctions did not include, according to Natixis Investment Managers Solution portfolio manager Jack Janasiewicz.
“Historically speaking whenever you get military incursions, the blueprint has been to sell in the run up to the incursion and once tanks start rolling in across borders, you’re supposed to buy it,” said Janasiewicz.
He noted that investors were buying assets such as technology stocks which had been selling off ahead of the invasion.
“You’re selling your winners to buy the losers right now. That’s the rotation we’re seeing,” he said.
MSCI’s gauge of stocks across the globe closed down 0.46% after earlier falling more than 3% to touch its lowest level since March 2021.
The Dow Jones Industrial Average closed up 92.07 points or 0.28% at 33,223.83 while the S&P 500 gained 63.2 points or 1.50% to 4,288.7 and the Nasdaq Composite added 436.10 points or 3.34% to close at 13,473.59.
US crude settled up 0.77% at US$92.81 per barrel but well below its session high of US$100.54 and Brent settled up 2.3% at US$99.08 compared with its session high of US$105.79.
The US dollar index was up 0.91% with the euro down 1.01% at US$1.1195. Earlier, the greenback had risen to a two-year high and as much as 1.62% against a basket of major currencies.
The Russian rouble weakened 4.51% versus the greenback to 84.96 per US dollar after softening to a record low of 89.986 per dollar.
Spot gold was last down 0.3% at US$1,902.86/ounce after earlier rising as high as US$1,973.96. – Feb 25, 2022
