Marketmind: World markets calm after Russia drama
Send a link to a friend
[June 26, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan.
More perplexed by events than anything else, world markets stayed
relatively calm on Monday after a dramatic Russian military mutiny at
the weekend was uneasily quelled.
Fractious geopolitics have been front of mind for global investors ever
since the pandemic and Russian invasion of Ukraine early last year. But
the fleeting risk of civil war and a toppling of Russian President
Vladimir Putin revealed greater instability in the nuclear power than
many had assumed.
The quick truce to avert Progozhin's mercenary mutineers entering Moscow
on Saturday left even seasoned Kremlinoligists scratching their heads.
An eerie calm held in Moscow on Monday.
For markets, the threat of a power vacuum in a nuclear military power
holds obvious risks - but the most extreme of which are near impossible
to price and hence most asset managers hold and wait. Without more
information, rock-bottom volatility measures and the dollar edged higher
- though remained contained in recent holding patterns.
Looked through an energy or commodity price lens, Russian oil, gas and
many of its commodities are already either cut off from western markets
or under some form of sanction - and so supply threats pack less of a
price punch.
The different scenarios tested could just as easily see regime change in
Moscow eventually returning commodity supplies to markets and cutting
prices - a potential positive for inflation and interest rates dogging
world assets.
Aside from the VIX, which popped from pre-pandemic lows to its highest
in 10 days just under 15, there was a mildly negative tilt to stocks -
which were already on the back foot from downbeat June global business
surveys last week.
Shanghai stocks underperformed with losses of more than 1%. The offshore
yuan - now down almost 5% in just six weeks - fell to another 2023 low
on Monday.
MORE SUBDUED
European stocks and Wall Street futures were more subdued, and modestly
in the red. Shares of major European defence firms Leonardo, Saab and
Rheinmetall dropped between 5% and 6%.
Brent crude oil prices were actually lower on Monday, and still down
almost 35% year-on-year. Gold was lower too, but wheat prices rose about
2%.
[to top of second column] |
Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., May 30, 2023.
REUTERS/Brendan McDermid
For Russian markets themselves, the rouble slipped to 15-month lows
- but it too had been falling last week as oil prices ebbed. Largely
now isolated from western investment, Russian stocks fell about 1%.
Away from the Russian drama, the week ahead focuses on the latest
inflation updates from Europe and the United States, with the
results of U.S. bank stress tests on Wednesday a marker after the
March regional bank failures.
The fallout from last week's dour business readouts was that
European firms were struggling more than U.S. counterparts this
month. Germany's Ifo survey bore that out on Monday.
U.S. Treasury yields slipped lower, perhaps with a smidgen of a
safety bid from the weekend events helping too. Two-year Treasury
yields dipped briefly below 4.70% - some 10 basis points below last
week's peaks - ahead of an auction of new paper later on Monday.
The world's central bank umbrella body, the Bank for International
Settlements (BIS), called on Sunday for more interest rate hikes,
warning the world economy was now at a crucial point as countries
struggle to rein in inflation.
Turkey's lira slid again to record lows after the central bank took
steps to simplify rules governing lenders' holdings and foreign
deposits after a sharp but underwhelming interest rate rise last
week.
In banking, HSBC has decided to leave its longstanding headquarters
in Canary Wharf in east London in favour of a move to a much smaller
office in the centre of the city.
Events to watch for later on Monday:
* Dallas Federal Reserve's June manufacturing survey
* U.S. Treasury auctions 2-year notes, 3- and 6-month bills
* European Central Bank Forum on Central Banking in Sintra, Portugal
* Atlanta Federal Reserve President Raphael Bostic, St Louis Fed
President James Bullard and Cleveland Fed chief Loretta Mester all
speak
(By Mike Dolan, editing by Ed Osmond mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |