By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News, March 30, 2022
Western stock markets on Wednesday erased some of their strong gains from the previous day, continuing to monitor developments in negotiations between Moscow and Kyiv, but also economic risks.
Around 11:50 GMT, European stock indices were technically suffering the backlash of the previous day: Paris CAC40 was down 0.90%, Frankfurt by 1.36% and Milan by 0.34%, while London advanced by 0.15%, supported by oil stocks. In Zurich, the SMI fell 0.44%.
On Wall Street, futures on the main indices sketched a slight decline of between 0.20% and 0.33% before the opening.
How to understand this trend as the markets will close in few hours ? The stock market are trying to gauge the seriousness of the peace talks between Russia and Ukraine, after 36 days of war.
Talks between Russian and Ukrainian delegations in Istanbul on Tuesday yielded nothing “very promising” or “breakthrough,” commented the Kremlin on Wednesday, breaking with much more positive remarks from Russian officials who took part in the negotiations.
The improvement in risk appetite on Tuesday was accompanied by a decline in gold prices, the US dollar and commodities (energy, metals and agriculture).
Oil recovers, the euro strengthens
If the dollar continued to lose ground on Wednesday, oil prices rose again, as the market remained skeptical of Moscow’s promises to drastically reduce its military operations in Kyiv and Cherniguiv in Ukraine.
Around 11:50 GMT, the barrel of Brent from the North Sea, the European benchmark, for delivery in May, took 2.06% to 112.50 dollars.
The barrel of US West Texas Intermediate (WTI) for delivery the same month gained 2.30% to $ 106.64.
The euro maintained its rise (+0.40%) against the US currency at 1.1134 dollar around 11:10 GMT after having reached earlier 1.1155 dollars per euro, a level more seen since March 1.
Investors will keep a close eye on the US and European monthly reports on private sector job creation for March. Solid figures could push the US Federal Reserve to a more drastic monetary tightening than is expected to correct inflation.
The number of job openings was little changed at 11.3 million on the last business day of February, the U.S. Bureau of Labor Statistics reported on March 29. Hires edged up to 6.7 million while total separations were little changed at 6.1 million. U.S. job openings decreased in finance and insurance (-63,000) and in nondurable goods manufacturing (-39,000). Job openings increased in arts, entertainment, and recreation(+32,000); educational services (+26,000) and federal government (+23,000).
In Europe, the President of the European Central Bank, Christine Lagarde, warned on Wednesday during a conference in Cyprus that the war in Ukraine can have lasting economic impact and urged European governments to invest without delay to make the european economy more resilient.
This is why Europe “needs a plan to ensure that the necessary investment is implemented quickly and in the most flexible way, combining public and private funding“.
The industrial sector, the first to suffer from supply declines in the event of a halt in Russian deliveries, was in bad shape: Thyssenkrupp (-3.35%, at MDax), HeidelbergCement (-4.03%), Siemens (-2.5%), Saint-Gobain (-3.47%), Renault (-3.60%), Airbus (-2.22%), Faurecia (-5.23%).
The French central bank released on March 24 its economic forecast for the euro zone. According to Bank of France, foreign demand to the euro area is expected to fall from 9.9% in 2021 to 4% in 2022, 3.2% in 2023 and 3.6% in 2024. Compared to global imports, foreign demand for the euro area is more heavily affected by the conflict, given the relatively large share of euro area trade with Russia and the countries of Central and Eastern Europe, which are particularly exposed to the adverse consequences of the conflict.
Bank of France considers that the growth rate of foreign demand to the euro area was left unchanged for 2022 (the impact of the invasion fully offsetting the positive growth acquis of 2021) and was revised downwards for 2023 and 2024. Supply-side bottlenecks would be expected to begin to ease in 2022 and fully resolve in 2023.
Lastly, the French central bank acknowledged that “the war between Russia and Ukraine will have important effects on economic activity in the euro area through higher energy and commodity prices, trade disruptions and declining confidence.“
Read also : How to invest in gold
Gold prices reached today $ 1,934 per troy ounce and are now at $ 1,927.10 at 09:06 AM NY Time. Over the past 30 days, the price of the gold troy ounce grew by 0.91%.
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© Copyright 2022 – Swann Collins, investor, writer and consultant in international affairs.