Weekly Trading Update 18.02.2022

Week of Feb 21

Geopolitics took center stage causing a big spike in gold, while oil markets paused for breath after a multi-week rally. Wall Street and the FTSE fell back on the risk-off sentiment.

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Week in review

Last week, markets were dominated by fluctuating risk sentiment around news over the Russia-Ukraine crisis. News reports released just hours apart often contradicted each other, leading to general market uncertainty. Equity markets were pulled lower, while commodities mostly benefited on haven appeal and supply-risks. 

While all are hoping the situation can be resolved in talks between the US’s Anthony Blinken and Russia’s Sergey Lavrov this weekend, it's by no means assured. Russian military drills near the Ukrainian border and in Belarus are expected to be completed on Sunday. Separatists in the Donbas region of Eastern Ukraine, however, aren't taking any chances, and are reportedly evacuating women and children to Russia.

The release of the FOMC minutes ahead of an expected rate hike, took a back seat to geopolitics but still contributed to gold crossing $1900 per oz to reach an 8-month high. Analysts concluded that the FOMC minutes essentially confirmed a rate hike, which should be expected at the next Fed meeting – but the lack of specifics on reducing the balance sheet (QT) and no specific path for rate hikes were seen as dovish - leaving the USD marginally lower on the week.

On the commodity side, the OPEC President said that demand would outstrip supply for a longer period, changing the organization's script a little bit. It is already leading to speculation that OPEC+ could discuss raising production faster at the next meeting. WTI crude oil started to fall since, breaking below $90/bbl and could fall to $85/bbl. 

The theme of volatile reactions to earnings misses continued in the wake of the biggest ever daily loss of value from Facebook (Meta). The highlight this week was Roblox, the online games platform for kids lost a quarter of its value in a day thanks to weak guidance.

The week ahead

President’s Day

The US and Canada will be out on holiday on Monday, meaning it could be a slow start to the new week. 

PMIs

The release of Flash PMIs on Monday is likely to be a primary driver for forex traders, with investors paying particular attention to how the pricing environment is affecting businesses. Figures from the Eurozone, US, UK, Japan, and Australia are on tap.

Banks earnings

The big 5 UK banks from HSBC to Natwest to Barclays report Q4 earnings this week (look out for our preview reports!). Bank shares have been among the best performing in 2022 thanks to two Bank of England rate hikes and expectations for more. Each bank has its own earnings profile but the boom in new mortgages taken out of the last year, alongside the economy returning to pre-pandemic levels portend well for net interest margins. 

RBNZ meeting

The Reserve Bank of New Zealand is on course to raise rates again this week to fight inflation and cool down a booming housing market. The Kiwi dollar and Aussie dollars- usually some of the highest yielding currencies have been top FX risers on expectation this yield advantage may soon return.

The rest 

Other notable data events include German Ifo Business Climate, detailed GDP from Germany and core PCE inflation data from the US.

Earnings to watch: Galp, Fresenius, Endesa, ASM, Macy's, eBay, Lloyds, Petrobras, Saipem, Pirelli, Aza, Telefonica, Bouygues, Moderna and Dell.