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.

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