Russia and Ukraine’s conflict has affected everyone from neighboring countries to the Dow Jones Industrial Average. Stock futures declined after Western countries expressed their skepticism over the skirmish despite Russia’s claims that it is withdrawing its troops from the border.
Things had improved slightly after the Central Bank clarified its stance on how it plans to deal with inflation in the US. In the latest meeting of the Federal Reserve, officials assured the public that they were considering a near-term interest rate hike and would figure out when to do it in upcoming meetings.
The Russia-Ukraine Conflict & International Tensions
On February 15, the S&P 500 closed higher by 1.6% in its first rise in four sessions. The American president reassured people that the US is working on improving stability across Europe. In a statement made by the White House, President Biden said, “As long as there is hope of a diplomatic resolution that prevents the use of force and avoids the incredible human suffering that would follow, we will pursue it.”
Later, in a televised address, Biden also reiterated the USA’s commitment to Ukraine’s sovereignty and territorial integrity. He also mentioned that there are more than 150,000 troops on the border.
For the past few months, the US and Europe have apprehensively watched Russia deploy troops along its borders. Earlier, Russia had implemented a similar strategy to annex Crimea, which resulted in some severe sanctions against the country. The United States, Ukraine, and NATO have accused Russia of misleading the world about its intentions.
Inflation, Fed Rate Hikes and the Stock Market
Inflation has continued to rise year-on-year (YoY) and gotten worse as a result of the Covid-19 pandemic. Further, the unstable trajectory of domestic economic growth has held back investors from going all in.
As inflation pressures continue to build, people have increasingly tried to predict the central bank’s moves to feel some modicum of control on the future.
Wall Street, which has long been allergic to an uncertain future, is worried about the effects of inflation. Inflation in the US is at a 40-year high. It has also impacted President Boden’s approval ratings which could make it harder for his administration to approve a stimulus package. Americans, across parties, have felt the pinch of rising prices and appealed to the government for some respite.
Crude oil prices and energy stocks rose sharply on February 16 as traders got clarity on the Biden administration’s stance. Investors have been spooked by the escalating conflict as it could disrupt Russian energy supplies which can have a cascading effect on world markets.
The stock market, which showed signs of recovery, slipped further on Thursday as Moscow’s actions contradicted its words. Troops continued to build near its border with Ukraine, and NATO accused Russia of increasing forces by 7,000. Unsurprisingly, Nasdaq has gone down by 11.8% this year.
The geopolitical uncertainty has cast a dark shadow over stock futures, sending gold prices soaring. Despite the reassurance from the Feds that inflation would be tackled and that they are working on significantly reducing the central bank’s approximately $9 trillion balance sheet, markets reacted to the ambiguity in the air.
Investors and traders are keeping their eyes peeled for the Federal Reserve’s meeting next month, where officials have promised to provide solutions to deal with soaring prices.
Meanwhile, on Thursday, the Kremlin announced that Russia will withdraw its troops from the border over an extended period of time. However, they did not announce a timeline for said activity.
Experts believe that inflation must be reigned in, and tensions between US and Russia must deescalate for markets to decide a way forward.
