Stocks Wilt Under Pressure From Rising Yields

Europe

Germany's IFO survey was stronger than expected. The current assessment rose to 90.6 from 89.2, recouping nearly half of January's decline. The expectations component rose to 94.2 (from a revised 91.5) and is the highest since last October. That puts the overall measure of the business climate at 92.4 (vs. 90.5 median forecasts) and 90.3 in January.  

The Biden administration appears to be seeking to avoid antagonizing Germany and singled out a single Russian ship for violating prohibitions on the construction of the Nord Stream 2 Pipeline. The ship, the Fortuna, and its owner, KVT-RUS, have already been sanctioned. Yet to appease Germany is to frustrate others, such as Poland and the Baltics. Their ultimate protection from Russia lies in with the US, not the EU. As under Ostpolitik during the Cold War with the Soviet Union, Germany pursued its own relationship. That said, Germany and France seem more sensitive to pushing Putin into ever-closer ties with China. As the US did to Germany over the pipeline, so too will the EU do to Russia over the imprisonment of Navalny. The sanctions will ultimately be a minor inconvenience but not a serious blow. It could announce travel bans and asset freezes of some of Putin's allies. The new measures could be announced at the outcome of the EU foreign ministers' meetings today with the final decision at next month's EU summit. This is Merkel's last year as German Chancellor, and she will leave behind a growing rift with eastern and central Europe rule of law, media pluralism, and migration, to which must be added security and defense.  

The euro is trading within its pre-weekend trading range (~$1.2080-$1.2145). It drifted lower in the second half of the Asia Pacific session but the dip below $1.21, where the five and 20-day moving averages converged and were snapped up in the European morning. Initial resistance is around $1.2150, though last week, it traded up to almost $1.2170 before selling off to nearly $1.2020.Key resistance is seen near $1.220. Sterling extended its recent gains to a little above $1.4050 today. It pulled back to around $1.3980 before Europe entered the fray and found eager buyers. Note that the upper Bollinger Band is a little above $1.4030 today.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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