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Bitcoin Slump, Ukraine War Fears, Iran Talks - What's Moving Markets

EconomyJan 24, 2022 13:10
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By Geoffrey Smith -- Bitcoin and other cryptocurrencies lead risk assets lower as concerns about war in Ukraine trigger a broad selloff. That's stopping U.S. futures from making any real bounce despite last week's violent selloff. Oil edges lower as Iran says it's closing in on a deal to remove U.S. sanctions, while Unilever (NYSE:UL) stock soars on reports that the scourge of Procter & Gamble (NYSE:PG), Nelson Peltz, has taken a stake in it. Here's what you need to know in financial markets on Monday, 24th January.

1. Bitcoin now down 50% from ATH

Cryptocurrencies continued their selloff, extending a self-reinforcing spiral of liquidations and loss of technical momentum.

The world’s biggest cryptocurrency fell another 6.7% to $33,569 as of 5:55 AM ET (1055 GMT) and is now down over 50% from the all-time high it posted only two months ago. Analysis by the Korean-based site CryptoQuant suggests that over 38% of all Bitcoin ever mined is now trading at a loss, compared to a peak ratio of 34% during the previous selloff in the middle of last year.

The developments come as the rising trend in interest rates puts sustained pressure on risk assets and on leveraged portfolios everywhere. More concretely, it follows fresh evidence of the world’s central banks clamping down on private digital currencies after the Russian Central Bank proposed an outright ban on mining and use of cryptocurrency.

2. Ukraine fears trigger broad selloff

The situation on the Russian-Ukrainian border also continues to punish risk assets. The U.S. and U.K. both instructed the families of their diplomats living in Ukraine to leave the country, suggesting that both countries still see an elevated near-term risk of a Russian invasion.

The New York Times and others reported that President Joe Biden is considering the dispatch of up to 50,000 combat troops to Ukraine, while the U.K. – whose government warned at the weekend of Russian intentions to instal a puppet government in the country after invading - has reportedly sent some 2,000 anti-tank launcher system to Ukraine.

Russia dismissed the U.K. allegations as baseless. On Friday, Russia’s Foreign Minister Sergey Lavrov had said the country has no intention of sending troops into Ukraine.  Russian assets came under heavy pressure nonetheless on Monday as a Kremlin spokesman warned that there was an extremely high risk of Kyiv launching military action against two Russian-backed breakaway statelets in eastern Ukraine: the ruble fell nearly 2% to a 14-month low against the dollar, while the benchmark RTS stock index fell 9.4%, also to a 14-month low. European stock markets fell by around 1%.

3. Stocks set to extend losses; Peltz lights a fire under Unilever

U.S. stock markets are set to open lower as the risk-off mood worsens in the light of developments in eastern Europe.

By 6:15 AM ET, Dow Jones futures had reversed early gains to be flat, although they were off their overnight lows. S&P 500 futures were still down 0.1%, however, and Nasdaq 100 futures were down 0.2%. The market had appeared ready for a bounce from oversold territory after its worst week in months. The Dow lost 4.6% last week, while the S&P 500 lost 5.7% and the NASDAQ Composite 7.6%.

Stocks likely to be in focus later include Unilever, after news that activist investor Nelson Peltz has taken an unspecified stake in the company. Peltz had led a partially successful campaign for change at U.S. peer Procter & Gamble in recent years.  

The week in earnings starts relatively quietly with updates from Halliburton (NYSE:HAL) out early and from IBM (NYSE:IBM) after the close.

4. Omicron hits European services in January; Italy starts to push Draghi upstairs

The Eurozone economy stuttered in January as the wave of Omicron-variant of Covid-19 disrupted the service sector in both of the region’s two biggest economies.

IHS Markit’s composite purchasing managers’ index for the region fell by more than expected to 52.4, according to a preliminary reading, due largely to a slump in the French service sector. However, manufacturing in Germany and France performed better than expected amid signs that supply chain bottlenecks may be easing.

The Deutsche Bundesbank warned in its monthly report that the German economy probably contracted in the fourth quarter, however.

Elsewhere in the Eurozone, Italy starts its formal process for nominating a new President on Monday. The evidence so far suggests that former ECB President Mario Draghi will move upstairs from the Prime Minister’s office, allowing the normal rough and tumble of Italian politics to resume.  Former Prime Minister Silvio Berlusconi withdrew his candidacy over the weekend, leaving no clear alternative to Draghi.

5. Oil falls on Iran, Abu Dhabi news

Oil prices weakened after Iranian negotiators said that they are closer to agreement on removing U.S.-led sanctions, removing an artificial constraint on global supply.

Reports suggest that that constraint has in any case weakened considerably over the last year, due to various maneuvers by Chinese buyers to get around the current measures.

Additionally, the United Arab Emirates reported that it shot down more long-range missiles aimed at the city of Abu Dhabi by Iranian-backed rebels in Yemen, something that eased fears of fresh disruptions to exports from one of OPEC’s more reliable suppliers.

By 6:30 AM ET, U.S. crude futures were down 0.4% at $84.77 a barrel, while Brent crude was down 0.4% at $86.75 a barrel.

Bitcoin Slump, Ukraine War Fears, Iran Talks - What's Moving Markets

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