US open; Stocks fall on Russia risk, Fed fears

US stocks point lower at the start of a key week. Escalating tension between Russia and Ukraine, plus fears of a hawkish Fed are dragging on stocks.

USA (2)

US futures

Dow futures -0.23% at 34150

S&P futures -0.44% at 4375

Nasdaq futures -0.75% at 14324

In Europe

FTSE -1.2% at 7397

Dax -1.8% at 15293

Euro Stoxx -2.2% at 4134

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Nasdaq trades 12% lower so far this year, with more losses due today

After a rough week last week, US futures are once again on the back foot amid a dismal mood at the start of a critical week for the markets.

Risk off trade is the order of the day as tensions escalate between Russia and Ukraine and ahead of the FOMC later this week. The double whammy of risk events is proving too much for Wall Street to handle with the Nasdaq once again leasing the charge lower as the tech rout deepens.

The Fed is broadly expected to signal a March interest rate hike on Wednesday and a balance sheet reduction later in the year.

Meanwhile, embassy staff are being pulled out of Kiev amid growing fears that Russia could send troops into Ukraine imminently. Talks last week between the US and Russia failed to pave the way to a solution. Fears of war are driving the risk off trade with bonds rising. Safe haven assets and currencies are also pushing northwards. Gold is one of the few risers and the Swiss France trades at a 6 year high against the Euro.

In corporate news:

Haliburton Q4 adjusted profits doubled from a year earlier, beating forecasts following a rebound in oil and gas prices. The oilfield services company lifted its dividend. EPS $0.36 on revenue of $4.3 billion beating forecasts of $4.1 billion.

IBM is due to report after the close, marking the first earnings release since spinning off Kyndryl.

Where next for the Nasdaq?

The Nasdaq has broken below an important long term trendline dating back to June 2020. I it has also fallen below its 200 and 50 sma on the daily chart, in addition to a key horizontal support at 14400 the October low. The RSI has tipped into oversold territory so we could see some consolidation at this level or even a move higher before the selloff continues. Support can be seen at 14000 round number and April 2021 high. Meanwhile buyers could look for a move over the 200 sma at 15060 to negate the near term downtrend and retake the multi-month rising trendline

nasdaq chart

FX markets USD rises, GBP drops below 1.35

The USD is rising, boosted by safe haven flows and as investors position themselves for the start of the Fed meeting tomorrow. The Fed is broadly expected to set the market up for a rate hike in March.

GBP/USD falls to a two-week low as investors dump riskier assets and currencies and as UK business activity unexpectedly falls in July. UK Composite PMI declines to 53.4, down from 53.6 in December, as Omicron restrictions bite.

GBP/USD -0.53% at 1.3483

EUR/USD -0.38% at 1.1300

 

Oil remains around multi-year highs on geopolitical tensions

Oil prices are edging a few points lower but remain well supported close to 7 year highs amid growing concerns of supply disruption. Escalating tensions between Russia and Ukraine in addition to tensions in the middle east come at a time when supply in the market is already tight. Both Russia and UAE are important members within the OPEC+ group, a group which is already struggling to ramp up production to meet upwardly revised quotas.

Russia is Europe’s top energy supplier; the EU relies on Russia for around 35% of its natural gas supply. Further tensions and any sanctions from the EU could see Russia slow supply to Europe, which could send energy prices even higher. Germany has already said that it could halt the new Nord Stream gas pipeline from Russia which was hoped to increase gas imports. The move could be Europe shooting itself in the foot.

WTI crude trades -0.2% at $84.94

Brent trades -0.1% at $87.00

Learn more about trading oil here.

 

Looking ahead

14:45 US Manufacturing & services PMI

 

 

 

 

 

 

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