S&P500
The US stock market has closed last week in positive territory. The Dow Jones added 0.8%, the NASDAQ gained 2%, and the S&P 500 increased by 1.2%.
US indexes gained 5% over the past week in the strongest rally since the end of 2021. Markets advanced as investors hoped for the end of war in Ukraine, despite the Fed interest rate hike.
Asian markets were mixed early on Monday, with the Shanghai Composite losing 0.2% and the Nikkei 225 gaining 0.6%.
Bond trading has restarted at the Moscow Stock Exchange, but equities trading remains closed. Most Russian foreign currency reserves have been frozen due to western sanctions, forcing the Russian central bank to increase the interest rate to 20% - the highest level since the financial crisis of 1998. International rating agencies have stated Russia was close to a default. However, Russia managed to pay its interest payments last week. The next payments are due in mid-May.
Oil prices have gained 4% on Monday, with Brent crude reaching $111.7 per barrel.
Germany has made a long-term gas supply deal with Qatar, the world's leading exporter of liquified natural gas. Berlin is actively seeking a replacement for Russian natural gas imports due to its failure to convince Moscow to stop the war in Ukraine.
The S&P 500 is trading at 4,463 and is expected to be in the 4,420 – 4,500 range.
The US stock market rose sharply last week. If situation in Ukraine improves, equities could regain the highs of late 2021.
This week, representatives of Western nations will meet to agree on the collective response to the war between Russia and Ukraine, with NATO, EU, and G7 summits scheduled on March 24.
The war in Ukraine has turned into a stalemate, with no major offensives reported. Russia could advance on Ukraine again, but the chances of a major breakthrough are low, and the two sides are now more evenly matched. The situation remains dire in Mariupol, where a humanitarian catastrophe is taking place. Heavy fighting has led to numerous civilian casualties. UN personnel cannot enter the city, which has no power, water, and food. Civilian evacuation is very difficult, and calls by other nations and international organizations have been ignored. Among other surrounded cities under heavy bombardment are Kharkiv, Chernihiv, and Sumy. The capital Kyiv has not been blockaded and remains under Ukrainian control.
The war threatens to send food prices skywards. Due to the war, Ukraine, which was one of the world's biggest suppliers of wheat, sugar and vegetable oil, is now a net importer of food. Shortages of Ukrainian-made flour have already been reported in the EU. If the war does not end before early May, it could derail the planting season in the country. The prices of wheat have jumped to $1,300 per ton from $800 before the war, but retreated to $900-1000 afterwards. Sugar prices in the international market remain steady, however Russia is experiencing sugar shortages.
Rising wheat prices would push up prices of other foodstuffs as well, such as meat, milk products and eggs. This would boost inflation, resulting in new interest rate increases by the Fed and other central banks. The hikes would weigh down on economic growth and employment, as well as put pressure on the stock market.
Although Russia and Ukraine claim they are ready for a diplomatic solution to ending the war, their positions are very different. A peace treaty is highly unlikely to be signed in the upcoming days.
On Thursday, durable goods orders data will be released, but summits on the situation in Ukraine would overshadow it.
USDX is trading at 98.30 and is expected to be in the 98.00 – 98.60 range. Despite the Fed funds rate hike, the US dollar index is consolidating within the range, with no upward movement at the moment. Last week, the ECB signaled it was ready to increase its interest rate in the second half of 2022.
USD/CAD is trading at 1.2610, and is expected to be in the 1.2500 - 1.2700 range. Rising oil prices are putting heavy pressure on the pair, which could break through 1.2600 and fall towards 1.2500.
Everyone hopes for a ceasefire in Ukraine and an end to the war, but it's very unlikely to happen in the upcoming days.
