S&P500
The markets need positivity, but Russo-Ukrainian conflict is not over.
The Dow lost 0.7%, the NASDAQ fell by 2.2%, and the S&P 500 tumbled 1.3% on Friday.
Russo-Ukrainian conflict remains the main topic at the start of the new week, almost supplanting all other issues. For Monday morning, everyone is expecting a new round of talks via video link. The past two rounds have yielded almost no results, apart from some progress on humanitarian issues, such as opening corridors for civilians to exit towns besieged by Russian troops. Perhaps on the positive side, there has been a decrease in clashes over the past week. Only in Mariupol and Chernihiv were there active fighting. The map of the parties' combat positions has changed little over the week. The situation looks like the conflict is entering a protracted positional phase. Last week, Russia launched missile strikes, particularly against an airport near Lviv, just a few kilometers from the Ukraine-Poland border. At the same time, the Russian military made a statement that it might strike an arms transport for Ukraine. In response, Biden said that any Russian strike on Poland would receive a harsh response. A little earlier, Biden had said that any Russian strike on a NATO country would receive a military response from the US, even if it was the start of a world war.
In Asia, China's stock index plunged by 2.5%, while Japan's added 0.6%.
Oil lost its upward momentum last week after a strong fall of $20. Oil is down by 2% on Monday, with Brent at $109.
The US last week passed a ban on US imports of hydrocarbons from Russia. At the same time, Germany, Europe's main buyer of Russian gas, said it would continue to buy gas from Russia unless Russia itself stops supplying. The EU's decision not to adopt bans on oil and gas exports from Russia has stopped a sharp rise in oil and gas prices.
The S&P 500 trades at 4,204 and is expected to be in the range between 4,160 and 4,240.
The main economic event of the week will be the Fed meeting and rate decision on Wednesday. Everyone widely expects a Fed rate hike of at least +0.5%, but all are wondering what the Fed will say about a rate hike in the future. JPM analysts had previously predicted that the Fed would raise rates at every meeting until the end of this year.
The ECB has sharply raised its 2022 average oil price forecast by $20, from $71 to $92.
USDX is at 99.10 and is likely to trade in the range between 98.80 and 99.40. The dollar rose at the end of last week. Demand for the US currency increased both as a defensive asset during the Russia-Ukraine conflict and on expectations of a Fed rate hike and rising US bond yields. The dollar stands at the highs of the year, while the euro is under pressure as the ECB is not at all ready to raise the euro rate yet.
USD/CAD trades at 1.2780 and is seen moving in the range of 1.2700-1.2900. The pair is once again staying in a wide range. The rise in the dollar and the rise in oil are balancing out their influence for the time being.
The week is off to a relatively quiet start, with Russo-Ukrainian conflict remaining elevated. The US market is ready to rise, especially if there is at least a slight positive in the negotiations on the conflict.