The ASX200 managed to close out Thursday in positive territory but only just after US equity futures turned lower following reports on social media alleging that Ukrainian forces had shelled Russian forces in the self-proclaimed Lugansk People’s Republic – the unconfirmed news reports came from the Sputnik Russian state-affiliated media. The rumours quickly wiped away 85% of the local markets midday gains with the drop illustrating the manner in which heightened geo-political tensions in Eastern Europe is keeping equity markets on their toes in these uncertain times.
Reporting season was overall helping the market in the morning but its hard to argue with the prospect of a major conflict in the Ukraine, after lunch buyers appeared to simply back off as opposed to unleashing an particularly aggressive selling. The weakness was directly correlated with a sharp dip in US S&P futures i.e. spread traders buy the weak US futures and sell the local SPI futures aiming to reverse as normality returns – this by definition was enough to eradicate the morning gains after volumes dried up, nothing which overly worries MM assuming of course we don’t see full out conflict.
We also saw yesterday that Australian unemployment remained flat at 4.2% in January although there was a large fall off in hours worked due to COVID. The rate remains the lowest in 13-years but with the data largely in line with expectations the bond & FX markets shrugged it off as largely unimportant as they watched Mr Putin et al for more meaningful clues to what comes next for financial markets i.e. potential Ukraine conflict has taken over from inflation as equities short-term focus.
Overnight US stocks followed through on selling in their futures with the S&P500 closing down 2% on the ongoing Ukraine concerns while Europe fared better with the regions indices falling between 0.5-1%. The ASX200 is poised to follow suit with the SPI futures calling an 80-point drop early in the day as investors will start to consider what exposure they’re comfortable to hold as it could prove a long weekend in Eastern Europe.
MM remains bullish the ASX while its above 7200
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