Stocks sink amid geopolitical headwinds

Stock markets remained very volatile throughout the week, driven by the rising tensions between western countries and Russia. The latter seemed to withdraw its troops from the border with Ukraine on Monday. Yet this apparent de-escalation came to a screeching halt two days later when Joe Biden said he was convinced that Russia had decided to invade Ukraine.

The return of risk-off sentiment to Wall Street prompted investors to sell stocks. The Dow Jones Industrial Average sank 659 points, or -1.9% week-over-week, while the S&P 500 fell -1.58% and the NASDAQ Composite lost -1.76%. Small cap stocks barely outperformed their large cap counterparts (Russell 2000 down -1.03%).

European markets followed suit. The MSCI EMU ended the week with a loss of -1.86% and the FTSE was not far behind (-1.92%). In Asia, equity indices closed mixed. The Nikkei fell -2.07%, the Kospi was flat and the Shanghai Composite gained +0.80%.

Sea of red across sectors  

Consumer staples were the only S&P sector that weathered the storm (+1.11%). Economic data showed that consumers continued to spend, shrugging off omicron fears. Unlike past weeks, energy stocks slumped -3.71%, snapping a three-week winning streak, after a tweet from Iran’s main negotiator in the nuclear deal claimed that an agreement was closer than ever. Oil prices fell accordingly: WTI crude down -2.18% in spite of the Russia-Ukraine conflict. Once again, communication services were among the hardest-hit sectors (-2.47%), weighed down by FB-Meta platforms (-6.10% WTD, -38.71% YTD) and Google-Alphabet (-2.73%). It was also a tough period for health care (-2.23%) as the unprecedented wave of omicron infections eased, with new cases rapidly dropping around the globe. Moderna nosedived -9.66% while Pfizer sank -4.43%. Financials declined too (-2.29%), as geopolitical worries cooled off interest rates. Real estate continued to slide (-1.80% WTD), extending its losing streak to seven weeks (-13.94% YTD).

Lull in bond yields, choppy week for cryptos, gold price skyrockets

On the interest rate front, Treasury yields were on the back foot with the U.S. 10-year T-note retreating from +1.94% to +1.93%. The bearish trend was fairly pronounced in Europe. The yield on German 10-year government bonds decreased from +0.30% to +0.19%.

Prices of IG corporate bonds closed mixed. They rose +0.33% in Europe and fell -0.58% in the U.S. High-yield bonds were sold off on both sides of the Atlantic (-0.10% in Europe, -0.17% in the U.S.). As was the case in the first two weeks of February, emerging debt outperformed the other bond asset classes (+0.32% in local currencies). Yet the greenback remained strong enough (dollar index at 96.11). Elsewhere, the yellow metal still fed on rumors of war. Gold prices jumped +2.14% (spot price at $1,898.63/Oz). By contrast, cryptos turned choppy as tensions between Russia and Ukraine reached a fever pitch. BTC USD crashed below $40,000 (-10% over the week).

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