Equities stage “peak-Ukraine” rally

US equities staged an impressive rally overnight, wiping out the earlier day’s losses and rallying to finish strongly in the green. Positive US data played its parts, but mostly it appears to be a relief rally sparked by the announcement of the scope of US sanctions on Russia. Without explicitly cutting off Russian energy from international markets, equities staged a “peak-Ukraine” rally. The S&P 500 finished 1.49% higher, the Nasdaq a breath-taking 3.34% higher, and the Dow Jones just 0.26% higher. The latter was hobbled by still high commodity and metals prices, while the tech-heavy Nasdaq was priced as having limited exposure to the Russia/Ukraine situation.

That peak-sanctions rally has spilt over into Asia today, although with less exuberance than New York, partly due to Asia’s strong reliance on imported energy and commodities. Investors are also unlikely to want to go into the weekend heavily long risk, something also being seen in oil markets today, which is capping gains.

Japan’s Nikkei 225 is 1.33% higher, with South Korea’s Kospi climbing by 1.35%. China’s Shanghai Composite is 0.80% higher with the CSI 300 rallying by 1.10%. A weak Alibaba result overnight is crimping Hong Kong, the Hang Seng easing by 0.35%.

In regional markets, Singapore is 1.0% higher, Kuala Lumpur has jumped 1.40%, with Jakarta rising 0.85%, and Taipei is flat. Australian markets are also cautious, the ASX 200 is unchanged, while the All Ordinaries is up just 0.20%.

European markets seeing red 

European markets suffered heavy losses overnight, with those with a high exposure to Russia and Ukraine having especially bad days. The “peak-Ukraine” rally in the US and Asia is unlikely to have the same scope thanks to geography, but some small gains are expected. European markets will continue to have the highest propensity to bad news coming from Eastern Europe.

Given the price action overnight, US markets are likely to have another positive session into the end of the week, given that Wall Street is already pricing in that the West has blinked and quickly reached its threshold for economic pain to support Ukraine, and that we have seen the worst of the sanction announcements. However, weekend caution should limit gains.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley