For most of the current week, markets seemed to behave as if there was uninterrupted optimism in the world. However, the news services show a completely different picture of reality, which no longer seems so optimistic.
At the end of the week, optimism in the markets seems to have given way to pessimism and risk aversion. Investors may have begun to realize that hopes for a quick end to Russia's invasion of Ukraine may not be fulfilled.
Instead of a ceasefire, a nuclear warning
On the contrary. Russian officials are dampening optimism about a ceasefire agreement, saying that reports of progress in the talks are false. The Pentagon, in turn, warns that Russia could threaten to use nuclear weapons if the war continues.
Recent reports indicate that Russia has bombed an aircraft repair center in the suburb of Lviv in western Ukraine. U.S. President Joe Biden is preparing to speak with Chinese President Xi Jinping to discuss the conflict and warn of retaliation if Beijing supports Russia's attacks on Ukraine by supplying weapons.
In stock markets, a worse ending to a better week
Consequently, at the end of the week, US stock markets started Friday's session on a weak note. All major US indices fell by around 0.5 percent as the lack of progress in peace negotiations between Russia and Ukraine caused sentiment to moderate.
For the week as a whole, Wall Street seems to be looking better than in the past few. After the Federal Reserve announced a widely expected 25 basis point interest rate hike and announced six more hikes this year, the Dow Jones gained nearly 4.7 percent and the S&P rose nearly 5 percent for its best week since November 2020. The tech-heavy Nasdaq outperformed this week, rising 6 percent to reach 14,000 points.
In Europe, after the earlier euphoria of stock buying, there is also doubt at the end of the week. European equities were under selling pressure on Friday, with the DAX and CAC 40 losing more than 1 percent and the FTSE MIB losing almost 3 percent. In all sectors, declines were led by auto stocks. At the end of the week, the DAX is above 14200 points and could gain more than 4 percent from Monday.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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