Risk-off Tuesday

Midday Update

Tuesday is quickly turning into “Risk-off Tuesday” in financial markets, as a number of bearish market catalysts cause traders to seek-out safe-haven asset classes, such as the USD and bonds.

Tensions on the Ukraine border are probably having the most impact, however, the news that Japan is going to move some of the larger provinces in Tokyo into lockdown today are not helping.

Yesterday, the bearish reversal came as a story from the New York post stated that the CDC was having trouble keeping track of the Omicron spread. Tech stocks soon took a leg lower after that broke.

Additionally, fears that Omicron is spreading throughout China had kept traders on edge. Should we see the Winter Olympics cancelled it could further accelerate losses in global equity markets.

The thought of China moving into a mass lockdown is likely to send shivers down most economist’s spines as it would have a tremendous impact on GDP, and moreover, global economic growth.

In terms of market moves, the UK100 is moving away from a multi-year high, after climbing above the 7,620 level on Monday, albeit very briefly. The CAC40 and GER30 are also nursing +1% losses today.

As always, US futures is the big driver of much of the broader market, and with the Nasdaq and S&P500 rapidly moving into the red we should therefore expect a continuation of the intraday move lower.

Do keep an eye on the EURUSD today. It is testing the 1.1380 to 1.1390 zone. Should we see that area crack the EURUSD pair could quickly travel down towards the 1.1350 to 1.1360, which has been a huge pivot for the market.

Gold is also losing steam alongside silver. With the Ukraine and Russia tensions, it is not entirely clear to me why gold and silver are breaking lower. Both are considered safe haven in times of potential war.

Bitcoin is under pressure once today alongside the other main cryptos, such as ETH and XRP. Institutional money has yet to return to crypto after a notable exodus at the start of the year. BTC could quickly tumble if $40,000 breaks.

Day Ahead

Later today we have the NYC manufacturing number, which is strangely known to be a market mover. If this number comes in weak it could further hit sentiment. Aside from that we have shorter-dated bond auctions coming from the United States treasury later today.