Market Update - Mar 4

Europe seems to have it worse than the US at the moment, where the Tech selloff overnight was tempered by gains in defensive sectors like Utilities. The headline SPX index was down only half a point and has been largely rangebound over the?last week after the invasion. The Energy sector has now gained 31% YTD, well outpacing last year's entire gain of 45%, and all the other SPX sectors are down YTD. Those which come the closest are Staples and Financials, which are down -1.6% and -2.8% respectively.

US yields were mostly sideways yesterday but have gapped lower in Asia this morning with the 10Y once again below the 1.8% level. HY spreads were marginally wider and inflation breakevens were a little lower after Powell's testimony to the Senate reiterated the Fed's appetite to hike in March. Market pricing-in a 25 bp hike at the moment.

Ukraine's refugees have now crossed 1 mn according to the UN and about half of them have transited into Poland, which is already home to about 2 mn Ukrainians. Poland for its part has rolled out the welcome mat and is helping set up infrastructure to help those in need - rare for the traditionally illiberal society. Ukraine and Russia have agreed to a third round of talks at the Belarus border but a lasting ceasefire is highly unlikely here. Ukraine's President Zelensky has called on Putin to engage, saying one on one talks are the only way to resolve the situation. Putin has not responded to the invitation so far, only saying that the military operation was going according to plan. Russia has managed to occupy a couple of key ports and regional capital in the south of Ukraine so far.

Commodities continued their uptrend with talk of a potential Iran deal in the 'next 24 to 48 hours' not dampening Crude's run just yet. JPM has now come out with a USD 185 a barrel forecast should Russian supply continue to be impacted for the rest of the year.

Anecdotal reports from trader Trafigura suggest that there aren't many customers for Russia's crude despite record discounts - most likely looking to avoid any potential sanctions. And on that front, despite bipartisan support in the Capitol for sanctioning Russian energy exports, the White House has not done so fearing a negative impact on inflation and Eurozone supplies.

Ahead today, the main event is the NFP number where the estimate for jobs added in Feb is at 423k. The unemployment rate is expected to dip to 3.9% from 4% currently.

Have a great weekend.

“Buying a mutual fund or ETF does not automatically make you a passive investor. If your mutual fund is actively managed, you are an active investor.”

―?Naved Abdali -