Good mood didn’t last long as the US didn’t let the tensions de-escalate insisting that Russia is certainly not pulling back its troops but is rather increasing its presence at the Ukrainian border. The US warning hit the investor appetite at yesterday’s session and reversed the earlier week gains in stock indices.

As a result, the safe have flows boosted gold, again, as crude oil remained steady around the $92 per barrel.

US equities were soft but the S&P500 erased a part of losses at a late-session rally after the release of the Federal Reserve (Fed) minutes, the pricing on the fed funds front flipped to give more chance for a 25bp hike in March, instead of a 50-bp hike.

In the FX markets, the US dollar remains strong, while the pound-dollar is eking out gains above the 1.35 mark as the high inflation in the UK keeps the Bank of England (BoE) hawks in charge of the market.

In the individual stocks, Nvidia’s strong results didn’t boost the share price in the afterhours trading, Virgin Galactic couldn’t extend Tuesday’s days on worries that they may have some execution problems sending people to the moon and Roblox tanked 26% on softer results.

Investors loved the sound of peace and the risk appetite came back yesterday as Russians started pulling a part of their troops back from the Ukrainian border. Although, news of a cyber-attack on some Ukrainian banks and some government websites including the defense ministry’s website raised a couple of eyebrows again, and turned all eyes to the Russians. But there is no report suggesting that Russia is behind the cyber-attack just yet.

Oil fell as much as 4% yesterday on de-escalation news. Gold dropped 35 dollars, as the safe haven money poured into the risk assets. European and US indices rallied.

But, released yesterday, the US producer inflation data came in as a bad surprise, yet again. With the looming inflation worries, let’s see if today’s FOMC minutes will kill that joy.

Hopeful news is that the latest Fed decision was more hawkish than expected, and the minutes could smooth out a part of the extra hawkishness.

There is a certain relief in the Ukraine-Russia crisis as the two sides seem willing to continue their diplomatic efforts to avoid a military action. The latter could help reversing a part of yesterday’s aggressive selloff in the European markets, and the FTSE 100 could outperform its peers on the back of firm energy and oil prices.

Base case: no war

Ukrainian president criticized news giving a date for a potential Russian invasion and said that it could eventually drop its dream to become part of NATO, as a powerful sign of its commitment to de-escalate the tensions at its Russian border.

US producer prices:

The S&P500 slid 0.38% and closed just near the 4400 mark, the Dow dropped near 0.50%, as Nasdaq closed Monday’s session flat.

Today, the inflation talk continues with the US producer prices due later in the session. Analysts expect a certain easing in the PPI index to 9.1% from last month’s surprise to 9.7%. Given the rise in oil and commodity prices, there is a higher chance of seeing a positive than a negative surprise.

Any positive surprise could send the PPI index above the 10% psychological mark and keep the bears in charge of the market, regardless of a more hopeful mood due to the diplomatic efforts between Russia and Ukraine.

The week starts on quite a tense note as the tensions between Ukraine and Russia don’t seem to be headed in the right direction with reports on Friday hinting at the possibility of a Russian invasion before ‘the end of the Beijing Olympics’.

European equities are deep in the red, with FTSE 100 somehow doing less bad than the others on rising energy and commodity prices, but the Euro Stoxx is already down 2.33% and the DAX by 2.85%.

US crudes flirts with the $95 per barrel, and gold welcomes decent safe-haven capital. While US sovereigns, energy and gold are the favorite destinations for those who are seeking protection in the actual environment, any relief on the Ukrainian front could send the recent gains in oil and gold crumbling.

On the economic agenda: US PPI and FOMC minutes will be closely watched. We know that engineering a policy that would bring inflation down to the 2% target in the US would also bring an unnecessary stress on the market and on the economy. Would that help cooling the Fed hawks?

Thursday’s data showed that consumer prices in the US advanced from 7.0% to 7.5% in January, more than 7.3% penciled in by analysts. The Fed hawks came back in charge aggressively following the US inflation print as St Louis President Bullard said he’d ‘like to see 100 basis points in the bag by July 1’.

All three major US indices were moody yesterday, but Nasdaq led losses as it’s the most sensitive to the rate changes.

Rising hawkish noises from the Federal Reserve (Fed) backed the US dollar. The EURUSD is back below the 1.14 mark and Christine Lagarde insists that acting too fast could choke the economy’s recovery, but not acting at all will choke the economy, as well.

In commodities, gold first rallied than fell warning again that it may not be the best inflation hegde at the current levels, but commodity ETFs and energy-heavy stock indices are. In this episode, you will find my favorite inflation hedge plays.

Cheers!

Risk appetite was surprisingly strong into the US inflation data, expected to advance to another forty-year high at today’s print, but futures are pointing to the south this morning, as the US inflation data is still a threat to the overall market mood, and could be a pivot moment for this week.

There is a decent acceleration in the gold prices, as gold is now behaving positively in risk-on markets, and negatively in risk-off markets given that the rising yields hit appetite in gold as much as they hit appetite in equities. Therefore, if we see the markets changing direction and hit the south, again, we could well see gains in gold crumble and pull the price of an ounce back below the $1800 mark.

On the earnings front, news are good. BP, Disney and Uber announced strong earnings.

Elsewhere, gains in Bitcoin remained limited below the $38K mark. JP Morgan said that Bitcoin’s fair value is about the $38K level, though the way they compete the fair value may not be … fair after all!

Risk sentiment improves both in the European and the American stock markets since yesterday, thanks to the abating sovereign bond selloff. Financials and mining stocks took the lead, small caps outperformed their big cap peers, with Russell 2000 bouncing 1.63%, whereas gains in the major US indices remained between 0.85% and 1.30%.

US crude slipped below the $90 per barrel although the weekly API data suggested a 2-million barrel decline in the US inventories versus the expectation of a 400’000 barrel build.

Caution! Improved sentiment is put on the back of more optimism about reopening, meanwhile the hawkish Fed expectations and the rising yields continue being a serious threat to the actual gains, as the major triggers behind the latest bond selloff are still in play. This means that there is a high risk of a sudden mood swing before Thursday’s US inflation data.

Elsewhere, Turkey’s finance minister said that inflation in Turkey rose for reasons that foreigners cannot understand, so as a Turkish citizen, let me explain why!

US equities lack a clear direction as the sovereign bond selloff intensifies across the globe, pressuring the yields higher, and the equity valuations lower.

But, cryptocurrencies are on the rise, with meme coins gaining the most in the crypto space despite poor and volatile risk appetite.

In FX, the EURUSD faces important resistance between 1.1480/1.1550 before we call it the end of the weak euro against the US dollar, the GPBUSD may not keep it above the 1.35 while the Turkish lira is stoic to the global FX moves, and sky-rocketing inflation in Turkey.

In stock news, Peloton, due to announce earnings today, is in focus on rumours that it could be the acquisition target for Big Tech companies including Apple, Amazon and Disney. Why would anyone buy Peloton?