US stock markets fell Friday on fears over rising tensions in Ukraine

Market movers today

Main focus will continue to be the situation in the Ukraine crisis (see below).
On the data front we get US NAHB housing index. It has covered some lost ground over the past months but may take a breather in August.
The rest of the week the main market mover will continue to be the Ukraine crisis. On the economic front we get US and UK inflation (Tuesday), minutes of latest meetings in the Fed and Bank of England (Wednesday) and Flash PMI out of euro area and China (Thursday).

Selected market news

US stock markets fell Friday on fears over rising tensions in Ukraine, as Ukraine said its artillery had destroyed a large part of a column of armoured vehicles that had been seen entering Ukraine from Russia. However, the negative sentiment stabilised on news that Ukrainian and Russian foreign ministers were meeting in Berlin with their German and French counterparts to try to bring an end to the fighting in eastern Ukraine and the US stock market recovered most of its initial losses ending a very volatile session only slightly lower. Yields on 10-year US treasuries dropped more than 6bp to 2.3397% after yields on 10-year German government bonds earlier Friday dropped below 1% for the first time to an all-time low at 0.951%.

The meeting in Berlin ended with no immediate breakthrough in the negotiations. According to an article on WSJ, German foreign Minister Steinmeier said after the meeting that ‘I hope and I believe that we made progress on a few points’ and ‘the governments will decide today or tomorrow whether to pursue the talks’. Hence, from a risk on/risk off perspective we might have moved slightly in a more positive direction, which is also reflected in the improved market sentiment this morning, where most regional Asian stock indices trade higher. All in all, however, there is no doubt the situation is grave.

Friday night, Fitch announced that it has upgraded Ireland’s rating to A- from BBB with a stable outlook. Further upgrades are contingent on lower debt to GDP and improvement in the banking sector Fitch said in its statement.

Last night, Bank of England Governor Mark Carney, in an interview with Sunday Times, said that the central bank could hike rates before wages start to increase. ‘We have to have the confidence that prospective real wages are going to be growing sustainably before raising borrowing costs but we don’t have to wait for the fact of that turn to raise them’, he said. GBP strengthened on the comments against all G10 currencies overnight and EUR/GBP initially dipped below 0.80 earlier this morning.

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