Ukraine-Russia tensions reach new levels

Od: Miguel A. Rodriguez

13:32, 07 březen 2022

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The war in Ukraine continued on Friday when there was a moment of maximum tension, with the largest nuclear power plant in Europe suffering Russian attacks.

This caused additional concerns about the possibility of a nuclear disaster with implications on a large scale. Fortunately, everything indicates that the military action did not affect the nuclear plant.

The stock markets sink

The market reacted with an intensification of risk aversion that brought considerable falls in the North American stock indices, greater than 1.5% in the case of the technological Nasdaq. But the most affected were the European indices, with the German DAX suffering the biggest daily loss since the epidemiological crisis. From a technical perspective, the index has broken the most important supports, such as the one located in the 13230 area, entering a downward trend.

The jobs report did little to calm the water

All these facts made the important North American employment figure go almost unnoticed. The US jobs report showed nonfarm payroll increased by 678,000 vs. an estimate of 400,000 with revisions of +92,000 to the previous figure. The unemployment rate fell to 3.8%. However, the surprise was the flat reading of average hourly earnings, which provided some relief. Overall, the tight labor market should give the Fed more room to tighten policy as it also raises expectations of higher inflation. Last week, Chairman Powell said that while he favored a 25bp hike to start the monetary policy tightening process, he would not oppose a 50bp hike at future meetings.

Oil & gas keep on rising, the US Dollar indecisive

Oil and natural gas continued to rise during the session on Friday, and in the foreign exchange market, the US dollar behaved unevenly against its peers. Although it strengthened against the pound and especially against the euro, it weakened against the yen - which rose due to its refuge currency characteristic - and against the Australian dollar - which is linked to commodity prices and benefits from the current situation, especially if Russia is removed from international trade.

AUD/USD continued its bull run started in February and was technically showing a double bottom pattern that was pointing to a theoretical target in the 0.7550 area.

Sources: Bloomberg, Reuters.

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