Morning Minutes

Oil Rallies, Stocks Swing in Both Directions as Ukraine Tensions Escalate




Tensions between Russian and Ukraine continued to escalate over the weekend with Russia recognizing some breakaway parts of Ukraine as independent countries and sending in “peacekeepers”. The initial market reaction last night when US futures reopened was a plunge off a cliff that saw Dow Futures down more than 500 points at one time. Overnight cooler heads have prevailed and US index futures have clawed their way back to flat earlier this morning. With the open of US exchanges approaching, however, the index futures have started to sink once again and were recently down 0.2%-0.5%. European markets are reflecting mixed sentiment with the FTSE up 0.3% as the UK economy reopens and the pound weakens, while the Dax down 0.1%.

Energy prices continue to reflect heightened tensions which comes as no surprise with Russia a major oil & gas producer and Ukraine a key pipeline transit country. WTI crude oil is up 3.7% this morning, while Brent crude is up 2.7%, natural gas is up 3.8% and gasoline is up 4.0%.

Currency and fixed income trading continue to suggest that capital continues to leave risk markets and rotate toward defensive stances. The US 10-year treasury note yield has slipped back into the low 1.90s% as US bonds rally, gold and the US Dollar appears to be advancing in tandem, and cryptocurrencies are down again with bitcoin falling 1.35%.

Canadian bank earnings season starts on Thursday, but until then, the focus of corporate news is on results from US retailers. Today’s numbers have been positive with Home Depot ($3.21 vs street $3.18, same store sales 8.1% vs street 5.0%), and Macys ($2.45 vs street $2.00, 5% dividend increase, up 8.3% premarket) reporting better than expected results. One notable disappointment, however, was mattress retailer Tempur-Sealy ($0.88 vs street $0.96, down 8.7% premarket).

In economic news, US flash manufacturing PMI (street 56.0 vs previous 55.5) and US flash service PMI (street 53.0 vs previous 51.2) report are due at 9:45 pm EDT. Tonight the Reserve Bank of New Zealand is expected to raise its benchmark interest rate by another 0.25% to 1.00%, potentially reflecting continued pressure on central banks around the world to tighten monetary policy.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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