Geopolitical tensions | 04 March 2022

#SP500:

The S&P is down 8% year-to-date and confirmed it was in a correction by falling more than 10% from its record high earlier this week - its biggest decline since stocks lost nearly a third of their value in the COVID-19 selloff of March 2020 before doubling from their lows. Yet while bargain hunters over the last two years could count on the Fed's historically loose monetary policy to offer stocks support, today they face heightened geopolitical uncertainty and a central bank that is expected to pull out the stops in its fight against inflation – starting with a widely anticipated rate increase in March. BlackRock earlier this week added to its strategic overweight in equities, saying investors may be overestimating how hawkish central banks will need to be in their battle against inflation.

Trading recommendation: buy 4201 and take profit 4310.

#WTI:

A deal among OPEC+ oil producers including Russia is showing no cracks so far after Russia's invasion of Ukraine, OPEC+ sources said, and the group is likely to stick to a planned output rise at a meeting next week. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, meets on March 2 to decide whether to increase output by 400,000 barrels per day in April. "Russia has a close partnership with the Saudis, so the cooperation will go on," the Russian oil source said. "Regarding the next meeting - no changes are expected for now." Four other OPEC+ sources also said they expected no changes to the deal. They cited reasons that included the need to maintain the cohesion of OPEC+ and keep a steady course, and to not politicise the decision since OPEC+ is not a political organization.

Trading recommendation: buy 90.50 and take profit 93.10.

XAUUSD:

Russia's invasion of Ukraine triggered sharp swings in the precious metals market. Prices of the safe-haven metal rallied more than 3% to as high as $1,973.96 in the last session after Russia attacked Ukraine. The risk premium and safe haven demand will continue to support gold, but the upside is limited by the possible rate hike by the U.S. Federal Reserve this March. Ukraine's Western allies ratcheted up their response to Russia's land, sea and air invasion late on Saturday with sanctions to banish major Russian banks from the main global payments system and other measures aimed at limiting Moscow's use of a $630 million war chest of central bank reserves.

Trading recommendation: buy 1895.50 and take profit 1910.50