Comments from the Polish government stating Russia is on the verge of invading Ukraine spooked stocks. Putin is showing no sign of backing down since last week’s tightened sanctions as Russia is massing even more troops on its neighbor’s border.
Equities were already down following the strongest reading for the ISM non-manufacturing since Decembers 2005, strength suggesting the Fed might change monetary policy as early as mid-2015. I rhetorically ask is good now bad?
Perhaps the issue at hand is that no one knows when or how much the FOMC must increase interest rates. Markets hate uncertainty and any potential change from the status quo is typically met with selling.
This uncertainty might be amplified by the simple fact that never ever has any central bank attempted to change monetary policy or unwind positions from today’s massively accommodative stance. Mistakes will be made for there are no benchmarks as to follow.
Markets were also unnerved by a decline in China’s non-manufacturing index to the lowest level on record.
I must write yesterday’s decline was on extremely light volume and lacking of conviction, similar to the advance the day before.
What will occur today? How will the trade data be interpreted?
Last night the foreign markets were down. London was down 1.22%, Paris down 1.27% and Frankfurt down 1.52%. Japan was down 10.5% and Hang Seng down 0.26%.
The Dow should open moderately lower on concerns that sanctions over Ukraine will intensify, an intensification that will hurt global growth. The 10-year is up 10/32 to yield 2.49%.
Chief Economic Strategist Managing Director
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