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Escalating Tensions With Russia May Lead To Pullback On Wall Street
US Market
The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move back to the downside following the rebound seen in the previous session.
The downward momentum on Wall Street comes amid concerns about escalating tensions between the U.S. and Russia.
After President Joe Biden gave Ukraine permission to attack Russian territory using U.S.-made long-range missiles, Russian President Vladimir Putin has signed a decree amending the country’s nuclear doctrine.
Kremlin Spokesperson Dmitry Peskov said the updated doctrine says Russia “reserves the right to use nuclear weapons in the event of aggression with the use of conventional weapons against it or the Republic of Belarus, which creates a critical threat to sovereignty or territorial integrity.”
“Aggression against the Russian Federation by any non-nuclear state with the participation or support of a nuclear state is considered a joint attack,” Peskov added, according to NBC News.
Shortly before the Kremlin updated its nuclear weapons doctrine, Ukraine reportedly used U.S.-made long-range missiles to attack a Russian military facility in the Bryansk border region.
Following the sell-off seen during last Friday’s session, stocks moved back to the upside during trading on Monday. The Nasdaq and the S&P 500 regained ground, although the narrower Dow ended the day modestly lower.
While the Nasdaq climbed 111.69 points or 0.6 percent to 18,791.81 and the S&P 500 rose 23.00 points or 0.4 percent to 5,893.62, the Dow edged down 55.39 points or 0.1 percent to 43,389.60.
The rebound on Wall Street may partly have reflected bargain hunting, as traders looked to pick up stocks at somewhat subdued levels following the steep drop seen last week.
The major averages pulled back well off their record highs last week amid concerns about the outlook for interest rates along with worries about the impact of President-elect Donald Trump’s proposed policies and cabinet nominees.
Buying interest was somewhat subdued, however, as traders looked ahead to the release of quarterly results from AI darling Nvidia (NASDAQ:NVDA).
Nvidia, which has recently been a driver of the markets, is scheduled to release its fiscal third quarter results after the close of trading on Wednesday.
In U.S. economic news, the National Association of Home Builders released a report showing homebuilder confidence has improved by much more than anticipated in the month of November.
The report said the NAHB/Wells Fargo Housing Market Index climbed to 46 in November after rising to 43 in October. Economists had expected the index to inch up to 44.
With the much bigger than expected increase, the housing market index reached its highest level since hitting 51 in April.
Gold stocks moved sharply higher on the day, resulting in a 4.2 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid a substantial increase by the price of the precious metal.
Considerable strength was also visible among computer hardware stocks, as reflected by the 2.8 percent surge by the NYSE Arca Computer Hardware Index.
Super Micro Computer (NASDAQ:SMCI) led the sector higher after a report from Barron’s said the company is expected to file a plan to avoid being delisted from the Nasdaq.
Natural gas, steel and oil stocks also saw significant strength, while airline stocks showed a notable move to the downside.
U.S. Economic News
New residential construction in the U.S. tumbled by more than expected in the month of October, according to a report released by the Commerce Department on Tuesday.
The report said housing starts dove by 3.1 percent to an annual rate of 1.311 million in October after slumping by 1.9 percent to a revised rate of 1.353 million in September.
Economists had expected housing starts to decrease by 1.8 percent to an annual rate of 1.330 million from the 1.354 million originally reported for the previous month.
The Commerce Department said building permits also fell by 0.6 percent to an annual rate of 1.416 million in October after plunging by 3.1 percent to a revised rate of 1.425 million in September.
Building permits, an indicator of future housing demand, were expected to inch up by 0.1 percent to a rate of 1.430 million from the 1.428 million originally reported for the previous month.
At 1:10 pm ET, Kansas City Federal Reserve President Jeffrey Schmid is scheduled to speak on the economic and monetary policy outlook before the Greater Omaha Chamber.
Europe
European stocks are reeling under a bout of selling pressure on Tuesday following an escalation in the Russia – Ukraine war and amid uncertainty about the U.S. interest rate trajectory and the outlook for global economic growth.
Russia’s warning on its updated nuclear doctrine is weighing on sentiment, prompting investors to move away from riskier assets. The Kremlin said the aim of the updated nuclear doctrine was to make potential enemies understand the inevitability of Russian retaliation for an attack.
Investors are also digesting the latest batch of regional economic data, including reports on euro area inflation, eurozone current account data, and Swiss trade data.
While the French CAC 40 Index is down by 1.4 percent, the German DAX Index is down by 1.2 percent and the U.K.’s FTSE 100 Index is down by 0.4 percent.
In the UK market, Diploma is down more than 6.5 percent on weak earnings and disappointing revenue guidance.
Melrose Industries is declining 3.2 percent, while IAG, Rolls-Royce Holdings, Informa, Weir Group, Schrodders, Entain, B&M European Value Retail, Whitbread, Barclays Group, Prudential, Associated British Foods, Lloyds Banking Group, Antofagasta and HSBC Holdings are down 1 to 3 percent.
Mulberry Group shares are down more than 6 percent, weighed down by a wider first-half loss.
Impeiral Brands is up 2.5 percent on stronger than expected operating profit in the latest quarter. The company said its expects another strong performance next year.
DCC, BT Group, Endeavour Mining, British Land, Fresnillo, BAE Systems, United Utilities and AstraZeneca are up with sharp to moderate gains.
In the German market, Siemens is down 3.4 percent. Infineon, Continental, Deutsche Bank, Brenntag, Daimler Truck Holding, Mercedes-Benz, Volkswagen, Deutsche Post, Beiersdorf, BASF and Porsche are lower by 1.4 to 3 percent.
Rheinmetall is rising more than 5 percent. E.ON and Symrise are up with modest gains.
In the French market, Stellantis is down more than 4%. Vivendi is lower by nearly 3 percent, while Accor, STMicroElectronics, Renault, Kering, ArcelorMittal, Saint-Gobain, LVMH, BNP Paribas, Teleperformance, Societe Generale, TotalEnergies and Legrand are declining 1.3 to 2.5 percent.
On the economic front, final data from Eurostat showed the consumer price index in the Euro Area increased 0.3 percent month-over-month in October, the most in six months, following a 0.1 percent decline in September. Annual inflation accelerated to 2 percent in October, up from 1.7 percent in September.
Core consumer prices in the Euro Area increased 2.7 percent in October over the same month in the previous year, the data said.
The euro area current account surplus increased in September on a rebound in primary income, data from the European Central Bank showed. The current account surplus totaled 37 billion euros in September, up from 35 billion euros in the previous month. The surplus was forecast to fall to 27.0 billion euros.
Switzerland’s foreign trade surplus decreased somewhat in October amid a surge in exports, data from the Federal Customs Administration showed.
The trade surplus rose to 5.97 billion Swiss francs in October from 4.03 billion Swiss francs in September.
In real terms, exports jumped 11.2 percent over the month, reversing a 2.3 percent decrease in September. Imports increased at a stable rate of 0.7 percent. In nominal terms, both exports and imports grew by 10.2 percent and 1.8 percent, respectively.
Asia
Equity markets in Asia closed on a positive note on Tuesday amidst growing hopes of more stimulus measures and expectations from the rate review by the Peoples Bank of China due on Wednesday. Australia’s S&P/ASX200 touched an all-time high. Markets also cheered the global easing in bond yields.
China’s Shanghai Composite Index climbed 0.7 percent to finish trading at 3,346.01. The day’s trading ranged between 3,346.76 and 3,284.13. The Shenzhen Component Index jumped 1.9 percent to close at 10,743.84.
The Japanese benchmark Nikkei 225 Index rose 0.5 percent to close at 38,414.43. The day’s trading range was between 38,560.10 and 38,246.36.
Japan Steel Works topped with a gain of 11.6 percent followed by Fujikura that added 7.2 percent. Ebara Corp. rallied 5.2 percent followed by Nidec Corp. and Panasonic that added more than 4 percent.
Bandai Namco Holdings, Konica Minolta and Astellas Pharma all slipped more than 3 percent. Recruit Holdings and Oriental Land Co. both lost a little less than 3 percent.
The Hang Seng Index of the Hong Kong Stock Exchange added 0.4 percent from the previous close to finish trading at 19,663.67. The day’s trading range was between a high of 19,758.57 and a low of 19,522.59.
The Korean Stock Exchange’s Kospi Index edged up 0.1 percent or 2.88 points to close trading at 2,471.95. The day’s trading range was between 2,479.39 and 2,465.15.
Australia’s S&P/ASX200 Index closed trading at 8,374.00, gaining 0.9 percent and setting a new 100-day high. The day’s trading range was between 8,300.20 and 8,446.40.
Software business Technology One jumped more than 10 percent after reporting an 18 percent profit growth. Sonic Healthcare, Block, and De Grey Mining, all rallied more than 6 percent. ALS followed with gains of 5.7 percent in the day’s trading.
Elders which completed an equity raising plunged more than 10 percent. Neuren Pharmaceuticals and Pilbara Minerals slipped more than 5 percent. Liontown Resources declined 4.1 percent followed by Pexa Group that slipped 3.8 percent.
The NZX 50 of the New Zealand Stock Exchange added 0.4 percent to close trading at 12,816.32, versus the previous close of 12,764.65. Trading ranged between 12,746.55 and 12,840.36.
Healthcare business Pacific Edge topped with a gain of 4.2 percent. Agribusiness Scales Corporation and healthcare business Ryman Healthcare rallied a little less than 3 percent whereas Meridian Energy and Investore Property added a little less than 2 percent.
Synlait Milk topped losses with a decline of 5 percent. KMD Brands erased 2.3 percent. Telecommunications business Spark New Zealand, infrastructure investment firm Infratil, and software business Serko all lost more than 1 percent in the day’s trading.
Commodities
Crude oil futures are slipping $0.19 to $68.97 a barrel after surging $2.14 to $69.16 a barrel on Monday. Meanwhile, after soaring $44.50 to $2,614.60 an ounce in the previous session, gold futures are jumping $23.20 to $2,637.80 an ounce.
On the currency front, the U.S. dollar is trading at 153.55 yen compared to the 154.66 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0587 compared to yesterday’s $1.0598.
