It’s been a subdued start to the week for markets in Europe, with the rise in oil prices helping to boost the FTSE 100 by way of decent gains for BP and Shell, pushing the index to its highest levels since 2 March.
Europe
The DAX, on the other hand, is lagging, after the Bundesbank said that Russia’s invasion of Ukraine had the potential to measurably hurt the German economy and make any economic performance in Q2 much weaker than expected due to higher energy prices.
Sentiment around events in Ukraine continues to keep markets on edge after the Ukrainian government rejected an ultimatum by Russia to surrender the port city of Mariupol or face the consequences.
Chilean copper miner Antofagasta is higher after announcing that it would be exiting its Pakistan business, Reko Diq, receiving the sum of around $900m in the process.
Ted Baker shares have continued their recent run higher, with another solid day of gains on speculation that a bid could well be forthcoming from US private equity firm Sycamore, who were reported to be considering making a cash offer for the business late last week.
The rise in oil prices is not good news for travel and leisure with easyJet and Ryanair both under pressure, while IAG is also lower.
US
After one if its best weeks since 2020 US markets opened in a rather subdued fashion, slipping slightly lower, as higher bond yields tempered upside momentum, with US yields starting to show signs of inverting in a sign that bond markets fear a slowdown is coming.
Boeing shares have slid sharply on reports that a 737-800 has crashed in China, tragically killing all 132 people on board. The crash has prompted China to ground all similar aircraft with a view to finding out why the accident happened. The crash is likely to prompt similar groundings on the part of other airlines of the affected aircraft, with all the associated costs that is likely to entail.
Airline stocks are also lower, with some of the weakness probably down to the sharp rise in oil prices, which is likely to hit margins. American Airlines and United Airlines are both lower.
Manchester United shares have taken a move to the upside after being upgraded by Deutsche Bank on the basis of its current low valuation.
FX
It’s been a bit of a mixed bag for currencies today with little in the way of movement one way or the other. The pound is slightly firmer across the board ahead of this week's February CPI print and Wednesday’s spring statement from the Chancellor of the Exchequer.
The rise in yields currently being seen in bond markets appears to be a widespread phenomenon, with UK 10-year yields retesting the highs from last week, while yields in Europe are also on the rise, with the German 10 year hitting a new three year peak, and the Italian 10 year yield retesting its February peaks of 2%.
Commodities
Brent crude oil prices have continued their rebound from last week’s lows, supported by an expectation that the EU might well consider imposing their own oil embargo on Russia oil, despite concerns over any such ban might do to their own economies. A weekend attack by Houthi rebels on Saudi Arabian oil infrastructure hasn’t exactly helped sentiment either, as we look to post three successive days of gains. Concerns over supply shortages appear to have put a floor under prices in the short term, and even without Russian supply, OPEC has been struggling to meet its current output levels, which it increased by 400k barrels a day at the start of the month.
Gold prices appear to be meandering for the moment, with little in the way of impetus to drive prices higher. While equity markets continue to look well supported, along with higher bond yields, there appears little reason to be piling into gold at this point, although it should find buyers on any dips.
Wheat prices have also pushed higher as concerns over Ukrainian supply increases on reports that Russia has started to shell Odesa, in a move that could see Russian forces attempt to cut off the whole of Ukraine from access to the Black Sea.
Volatility
The see-sawing of sentiment around Chinese stocks continues, albeit at a slightly more modest level than we were seeing a few days ago. It does however mean that this market is dominating in terms of price action once again, with Pinduoduo and JD.com remaining in the spotlight, but it was the Hong Kong listing of Chinese property developers Country Garden that topped the board. Daily vol here printed at 644%, up from 240% on the month.
This meant that Chinese indices also remained active with the A50 posting daily vol of 91% versus a monthly print of 54%, whilst the Hong Kong 50 recorded 74% for the day against 46% on the month.
Commodities markets are looking rather more subdued. Lumber continues to offer exaggerated levels of intraday vol but the daily print has now slipped below the monthly. Cocoa price action also remains on the radar after downside pressure on prices as a result of improving crop forecasts out of West Africa. UK Cocoa posted daily vol of 47.75% against a monthly print of 44.86%.
As for fiat currencies, that Bank of England news on Thursday pushed sterling to the fore. While the quarter-point hike was widely expected, the pound sold off heavily in the immediate aftermath of the news, before resuming its march higher. Cable saw daily vol hit 10.93% against a monthly 8.57%. Then a quick look at our proprietary share baskets showed China Tech taking the lead here, printing 395% on the day against 202% on the month, and in terms of ETFs, it was the iShares A50 tracker that topped out with daily vol of 99% against 68% on the month.
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