A look at the day ahead in markets from Julien Ponthus

While the Kremlin complains about “daily” Western predictions of a Russian invasion of Ukraine, investors for their part have had no choice but to adjust to each day’s unique sabre rattling noise and assess the probability of a conflict hitting global financial markets.

Today’s news that U.S. President Joe Biden and Russian President Vladimir Putin have agreed in principle to a summit over Ukraine has lifted U.S. and European stocks futures and helped Asian shares pare some losses.

But as much as a swift diplomatic breakthrough to reset Europe’s security framework appears unlikely for now, so does a full-fledged confrontation between the West and Russia.

What analysts are struggling to do, is pricing how the various scenarios in between will impact a vast range of asset classes, from energy to wheat, gold, stocks, bonds and currencies to name a few.

At the moment, the prospect of de-escalation is moving capital away from safe havens with the euro jumping 0.4% to $1.1367 and the dollar retreating 0.36% against its rivals.

This morning also sees oil prices ease on the hope of summit over Ukraine and news of a possible nuclear deal between Iran and world powers. Still at about $93 a barrel, oil remains close to the symbolic $100 bar for the liking of many countries.

A flurry of data from France, Germany and the UK this morning will shed some light on how much of a toll inflation, tighter monetary policy and this winter’s COVID-19 Omicron wave have taken on the economic recovery.

And while European companies hoping to fund deals via bond markets are facing a sudden jump in borrowing costs, business goes on unabated with French payments company Worldline entering exclusive talks to sell its TSS terminals business to Apollo Funds in a deal potentially worth around 2.3 billion euros.

Key developments that should provide more direction to markets on Monday:

-Arab oil producers say OPEC+ should stick to current output agreement

– China’s new home prices perk up

– Japan’s manufacturing activity expanded at the slowest pace in five months

– Thai economy returns to growth in Q4

– Flash PMIs for France, Germany, EU, UK

(Graphic: Global markets and Ukraine tensions, https://fingfx.thomsonreuters.com/gfx/mkt/byprjxggmpe/Global%20markets%20and%20Ukraine%20tensions.PNG)

(Reporting by Julien Ponthus)

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