© Reuters. FILE PHOTO: On November 1, 2021, an electronic stock price list is on display in the conference hall in Tokyo. REUTERS / Issei Kato
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Elizabeth Howcroft
London (Reuters)-European equities on Tuesday began trading high after the economic downturn in Asia, with global equities recording the largest monthly decline since the pandemic hit in March 2020.
The move stems from concerns over tensions between Russia and the West and prospects for monetary tightening.
The buildup of Russian troops at the Ukrainian border has raised fears of Russia’s invasion. NATO said on Monday that it is keeping Eastern Europe on standby and strengthening with more ships and fighters.
The Federal Reserve Board will begin a two-day meeting on Tuesday. Investors are expected to provide guidance on the trajectory of monetary tightening prior to the March meeting, which expects the first rate hike after the pandemic.
Tightening monetary policy usually damages high-risk assets such as stocks and makes government bonds more attractive to investors.
The European market opened higher after a weak Asian session where the stock index expanded Wall Street losses.
Is showing signs of recovery after rising 0.5% to its lowest since October on Monday.
London rose 0.3%.
However, the MSCI World Equity Index, which tracks equities in 50 countries, fell 0.2%.
Global stocks fell 6.5% this month. This is the highest since the monthly decline of 13.8% when the COVID-19 pandemic struck the market in February 2020.
Eddie Chen, Head of International Multi-Asset Investment at AllSpring Global Investments, said:
Mr Chen said the geopolitical risks surrounding Ukraine will last much longer, but investors are likely to be more certain from the Fed at this week’s meeting.
The global equity index is below the 200-day moving average. When this last happened, stocks fell 30% and bounced off.
But Cheng of Allspring said that such a decline is unlikely this time without a driver as big as the beginning of the COVID-19 pandemic.
“We don’t expect stocks to fall completely just because there is only one geopolitical risk,” he said.
The sale of shares has a limited impact on the interest rate market, with investors pricing this year at about 100 basis points for the Federal Reserve and the Bank of England’s rate hike.
Investors aren’t expecting a rate hike at this week’s Fed meeting, but according to Acon’s Refinitiv data, the market is priced 5.4% likely this will happen.
At 0915 GMT, the US 10-year yield was 1.7778%, a bit higher on the day.
Germany’s 10-year benchmark yield rose 3 bps at -0.073%, supporting bonds in a risk-averse tone.
While the Eurodollar fell, it rose 0.2% at 96.07.
Oil prices recovered some of the previous day’s losses as geopolitical tensions fueled supply instability.
Meanwhile, cryptocurrencies have fallen further. It was trading for about $ 36,230. On Monday, it halved from November’s record high of $ 69,000, reaching a six-month low of $ 32,950.72.
