Saikat Chatterjee’s Market Outlook: A Look at What the Day Holds

After U.S. Secretary Antony Blinken agreed that he would meet with Sergei Lavrov (Russia’s Foreign Minister), markets let out a sigh and raised hope for a diplomatic settlement to the dispute over Ukraine.

U.S. stock futures rose half a percentage, U.S. Treasury yields rebounded after New York session lows. Safe-haven currencies like the Japanese retreated because of the positive sentiment that calmed investors’ nerves.

However, markets are still skeptical that there will be a quick diplomatic solution with the Ukrainian government and Russian-backed rebels from Ukraine’s eastern trading new accusations of shelling or other ceasefire violations.

Indicated volatility is a measure of the market’s nervousness. However, the gauge for implied volatility in stock markets is just a touch away from a one year high. Meanwhile, currency markets are covered with options contracts large enough to provide protection in case of markets fluctuations.

Markets were also not helped by the unending beating of war drums. However, new comments made by the U.S. Federal Reserve did little to alleviate the situation before the March meeting that was widely regarded as the most significant central bank policy gathering of the year.

Loretta Mester from the Cleveland Fed stated that policy accommodations must be removed faster than they were after the Great Recession.

She spoke out in support of an uneven mix of Fed officials’ opinions in recent days. While some Fed officials favor a slower pace of rate rises, Jim Bullard, the St. Louis Fed president, is a strong advocate for a complete percentage point hike in rates by July.

Futures are now less likely to predict a rate increase of 50 basis points next month. However, global stocks will see a weekly decline for the second week in a row, which indicates that investors remain uneasy about policy tightening.

Markets should be more informed by Friday’s key developments

Data: U.S. Home Sales for January. UK Retail Sales.

Macro Speaker Corner: Fed’s Evans (Waller), Williams, and Brainard

Earnings from the USA: Deere (NYSE)

Carmaker Renault After it made a profit in 2021, the PA plans to repay state aid received for the coronavirus pandemic.

(Graphic: world stocks, https://fingfx.thomsonreuters.com/gfx/mkt/byvrjxgneve/world%20stocks.JPG)