Market Wire - Jobless Claims Fall, Markets Remain Focused on Ukraine Risks
Karl Schamotta - Chief Market Strategist, firstname.lastname@example.org
The number of Americans filing new claims for unemployment benefits dropped to 232,000 last week, -17,000 less than in the prior week. Data released by the Department of Labor this morning showed the 4-week moving average – used to smooth out weekly volatility and discern longer-term trends – falling to 236,250, a decrease of -7,250 from the previous week's revised 243,500.
But with Russia’s attack on Ukraine increasingly resembling a full-scale invasion, and risk aversion gripping the global financial system, any market reaction was impossible to discern. Equity futures are pointing to a sharp drop at the open, and the Brent crude benchmark is trading above $105 a barrel, while West Texas Intermediate is up almost 8 percent from yesterday’s levels.
Investors are struggling to quantify the impact a commodities-led stagflationary shock might have on the real economy, while also reassessing the likelihood of a rapid rise in central bank policy rates. Odds on a 50-basis point move at the Fed’s March meeting have plunged, and yields have come under pressure across the curve.
With the European Central Bank now even less likely to raise rates, interest differentials are tilting further in the dollar’s favour, sending the common currency lower. Our rough calculations suggest the euro is headed toward its biggest daily loss since early 2020, when the pandemic was gaining momentum. The greenback is rising against all of its major counterparts, with traders trampling oil-linked and risk-sensitive currencies alike as they rush into the world’s deepest and most liquid financial markets.
As suggested last night, previous risk-off episodes have tended to result in violent reversals - and market participants would be wise to prepare. But the complexities associated with today’s situation suggest that markets are unlikely to revert to previous form for some time to come.