The geopolitical tensions in Eastern Europe | 18 March 2022

#SP500:

U.S. consumer sentiment fell more than expected in early March as gasoline prices surged to a record high, boosting one-year inflation expectations to the highest level since 1981. The University of Michigan's preliminary consumer sentiment index dropped to 59.7 in the first half of this month, the lowest reading since September 2011, from a final reading of 62.8 in February. U.S. gasoline prices are averaging a record $4.331 per gallon compared with $3.48 a month ago. Further increases are likely after President Joe Biden on Tuesday banned imports of Russian oil into the United States, as part of a wide-ranging tough sanctions against Russia. This is a negative signal for the U.S. stock market.

Trading recommendation: sell 4300 and take profit 4133.

#CAC40:

The geopolitical tensions in Eastern Europe will have a material impact on economic activity and inflation through higher energy and commodity prices, the disruption of international commerce and weaker confidence. The extent of these effects will depend on how the conflict evolves, on the impact of current sanctions and on possible further measures. Inflation has continued to surprise on the upside because of unexpectedly high energy costs. Price rises have also become more broadly based. The baseline of the ECB staff projections, the euro area economy should still grow robustly in 2022 but the pace will be slower than was expected before the outbreak of the war.

Trading recommendation: sell 6501 and take profit 6080.

XAUUSD:

Investors have sent $10.5 billion into commodities-focused ETFs and mutual funds since the start of the year, including a $2.8 billion gain in the week that ended March 2 that was the largest one-week positive inflow since July 2020. The demand for commodities is likely to remain strong even if geopolitical tensions ebb. Massive rallies in commodities have increased pressure on the Federal Reserve and other central banks to tighten monetary policy and fight inflation. This has ramped up worries that doing so will hurt economic growth as rising prices already weigh on consumers. This is a positive signal for gold.

Trading recommendation: buy 1964.50 and take profit 1992.50