WORLDWIDE: HEADLINES
Wall Street Surges As Easing Geopolitical Worries Fuel Broad Rally
Wall Street ended sharply higher on Tuesday, as signs of de-escalating tensions along the Russia-Ukraine border sparked a risk-on session.
All three major indexes notched solid advances on the day, with market leading tech and tech-adjacent stocks providing the biggest boost and putting the Nasdaq, which gained 2.5%, out front.
The Philadelphia SE Semiconductor index (.SOX) jumped 5.5% in its largest one-day percentage gain since March 2021.
Geopolitical heat was turned down a notch after Russia said it had withdrawn some of its troops near the Ukraine border, prompting bullish equities sentiment and causing crude prices to slide on easing supply concerns.
The announcement received guarded responses, and the United States and NATO said they had yet to see evidence of a drawdown.
Stocks briefly pared gains late in the session, when U.S. President Joe Biden said that while diplomatic efforts are ongoing.
“Nice rally today, thanks to (Russian President Vladimir) Putin,” said David Carter, managing director at Wealthspire Advisors in New York.
“Markets have been moving based on Putin or (Federal Reserve Chairman Jerome) Powell,” Carter added. “Putin and his intentions with Ukraine and Powell and his intentions regarding interest rates.”
The CBOE market volatility index (.VIX) backed down from a three-week high.
On the economic front, a report from the Labor Department showed producer prices surged in January at twice the expected rate, reinforcing economist expectations that the Federal Reserve will take on stubbornly persistent inflation by aggressively hiking key interest rates.
Full coverage: REUTERS
U.S. SEC Is Probing Wall Street Trades In Large Blocks Of Shares
The U.S. Securities and Exchange Commission (SEC) is probing whether financial executives may have broken the rules by tipping off hedge funds ahead of large sales of shares, known as “block trades,” according to a source with knowledge of the matter.
The Wall Street Journal first reported the probe on Monday. The newspaper said the SEC was investigating Morgan Stanley (MS.N) and Goldman Sachs (GS.N), along with the U.S. Department of Justice.
All four parties declined to comment.
Broker-dealers frequently buy and sell blocks of shares, either on behalf of clients or as part of a hedging strategy, which are large enough to move the company’s share price.
Block trading tends to increase during times of volatility as institutional investors rebalance their portfolios.
Information on such share sales ahead of time could be extremely valuable. Inappropriately sharing material, nonpublic information could run afoul of U.S. laws, the source said. Firms could also face scrutiny if they fail to have processes in place to prevent misuse of information.
The SEC has sent subpoenas to several hedge funds and banks, demanding trading records and information about investors’ communication with bankers, according to the WSJ report, which also said regulators had begun looking into irregularities related to block trades since at least 2019.
Full coverage: REUTERS
WORLDWIDE: FINANCE/BUSINESS
Asia Stocks Rally As Fears Of Russia Invading Ukraine Ease
Asian shares rallied on Wednesday as fears of a Russian invasion of the Ukraine this week dissipated after Moscow indicated it was returning some troops to base from exercises, delivering investors a measure of relief.
The tension between world powers over the Ukraine situation, which has developed into one of the deepest crises in East-West relations for decades, has been front-and-centre of investors’ minds.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) surged 0.9% in early regional trade on Wednesday, playing catch-up with a rally in U.S. and European stocks on Tuesday.
“If we continue to see signs that diplomacy is working and a de-escalation of tensions, I think we’ll see a kind of reversal trade,” said Kyle Rodda, a market analyst at IG in Melbourne.
“We’ll probably see stocks boosted on the fact that implied volatility is a little bit lower,” Rodda said, adding that it would likely weigh on oil and gold prices.
Japan’s Nikkei (.N225) soared 1.9% to rebound from two days of falls, while Australia’s S&P/ASX200 (.AXJO) gained half a percent.
Elsewhere in the region, Hong Kong’s Hang Seng Index (.HSI) jumped 1.1% early in the session, and China’s CSI300 Index (.CSI300) was up 0.4%.
Investors’ attention was likely to turn to economic and monetary policy developments amid ongoing speculation the U.S. Federal Reserve might raise rates by a full 50 basis points in March.
Full coverage: REUTERS
Euro Holds Gains After Hopes Of Easing In Ukraine Tensions
The euro held on to overnight gains in early Asian trade on Wednesday having jumped on reports that some Russian forces had moved away from the Ukraine border, though, with tensions still elevated, the common currency failed to make further progress.
The Russian defence ministry on Tuesday published footage to demonstrate it was returning some troops to base after exercises, however, U.S. President Joe Biden said the United States had not verified the move. read more
In addition, hours after Moscow’s announcement, Ukraine said the online networks of its defence ministry and two banks were overwhelmed by a cyber attack.
The common European currency was steady at $1.1356 on Wednesday, having jumped 0.45% the day before.
Shares around the world rebounded following the reports, MSCI’s gauge of global equities (.MIWD00000PUS) closed up 1.34%. The Australian dollar , typically seen as sensitive to risk sentiment, echoed the euro, rising 0.37% on Tuesday, before steadying.
By contrast, the safe haven yen softened slightly and was last at 115.65 per dollar, having briefly touched 114.99 on Monday, when tensions were higher.
Overall, the dollar index which measures the greenback against six major peers, lost ground on Tuesday and was at 96.008.
However, analysts said the dollar was unlikely to fall too far.
The greenback “shed ground overnight as the Ukraine geopolitical risk premium came out of markets, but expectations of an aggressive Fed hike cycle should keep a base for the (dollar index) in place,” said analysts at Westpac in a morning note to clients.
Full coverage: REUTERS
Oil Retreats From 7-year High As Russia Says It Withdraws Some Troops
Oil tumbled over 3% on Tuesday, retreating from a seven-year high after Russia said some of its military units were returning to their bases following exercises near Ukraine, a move that appeared to de-escalate tension between Moscow and the West.
It was not clear how many units were being withdrawn, and by what distance, after a build-up of an estimated 130,000 Russian troops. An earlier Interfax report on the troop movements had prompted oil to extend losses.
“The situation is very fluid, but today is definitely a calmer day,” said Robert Yawger, executive director of energy futures at Mizuho. “It’s going to be a minute-to-minute, day-to-day type of thing.”
Brent crude fell $3.20, or 3.3%, to settle at $93.28 a barrel. U.S. West Texas Intermediate (WTI) crude fell $3.39, or 3.6%, to end at $92.07 a barrel.
Both oil benchmarks hit their highest since September 2014 on Monday, with Brent touching $96.78 and WTI reaching $95.82. The price of Brent jumped 50% in 2021, while WTI soared around 60%, as a global recovery in demand from the COVID-19 pandemic strained supply.
The latest Russia-Ukraine development drew a cautious response from Ukraine and Britain, after days of U.S. and British warnings that Moscow might invade its neighbor at any time.
On Tuesday, Ukraine said its defense ministry and two banks had been subject to a cyber attack, appearing to point the finger at Russia.
Investors are also watching talks between the United States and Iran on reviving Tehran’s nuclear deal with world powers, which could potentially allow for increased Iranian oil exports.
Russian Foreign Minister Sergei Lavrov spoke to his Iranian counterpart Hossein Amirabdollahian on Monday, and they noted a “tangible move forward” in reviving the Iran nuclear deal, Russia’s foreign ministry said.
Full coverage: REUTERS
