Russia fears rise again, StanChart announces buyback

Russia, Ukraine headlines weigh on market sentiment after a less hawkish than expected Fed helped a positive close on the S&P 500.

• Stocks fall on unsubstantiated claims of firing in Ukraine
• Standard Chartered announces $750 million share buyback despite missing forecasts
• Gold rises to a multi-month high after a less hawkish Fed & on safe haven flows

Wall Street closed mixed with the S&P 500 in positive territory whilst the Dow and Nasdaq closed mildly lower as investors continued evaluating the situation in Russia. Russian claims that it was withdrawing some troops from the border were thrown into question by NATO who said that there was no such de-escalation evident on the ground.

Fed minutes

A less hawkish than feared Fed helped risk sentiment, lifting stocks higher towards the close. Whilst there was nothing notably new in the minutes, Fed policy makers seemed to broadly agree to take a measured approach to tightening monetary policy. Expectations for a 50-basis points interest rate hike in March have eased, pleasing equity bulls. 

However, it is worth keeping in mind that the Fed meeting was before CPI printed at 7.5%, before January’s stellar jobs report and before the strong beat on Q4 GDP, suggesting that any easing of hawkish Fed expectations could be premature.

The positivity seen at the end of play in the US was cut short on reports that Russian backed rebels have been fired on by the Ukraine government in eastern Ukraine. These reports are unsubstantiated and could be a means instigated by Russia to pave the way for an invasion. Headlines from eastern Europe have prompted a risk-off move in the market, hurting demand for stocks, whilst safe havens are back in favour. 

Banks earnings

UK bank earnings come into focus. Standard Chartered is the first of the big banks in the UK to report in what is broadly expected to be a good season for the banks. Rising interest rates and the prospect of further rate rises across the year could pave the way for strong results and encouraging forward guidance. 

Standard Chartered announced a $750 million share buyback on optimism surrounding its outlook as interest rates rise. The bank reported a 55% increase in adjusted pre-tax profits for 2021 to $3.9 billion. However, this was below the company’s own estimate of $4.3 billion. Furthermore, the growth strategy put forward failed to convince investors and the Hong Kong listed share price fell 3%. Tomorrow NatWest will report its numbers.

Gold

Gold is pacing higher for a second straight session, as it approaches multi-month highs of 1880. The precious metal received a strong boost from the less hawkish than expected Fed minutes. As long as inflation is rising and the Fed appears to be behind the curve, non-yielding, inflation hedge Gold will find a bid. 

Fed speaker James Bullard, who has turned particularly hawkish following the January inflation print is due to speak again today and could take some of the wind out of gold’s sails. The precious metal is also being supported by safe haven flows as Russia, Ukraine headlines highlight how fluid and fragile the situation is.