Daily summary: Equities slide on report of Russian mobilization and Fed rate hike fears

• European indices fall for third session amid rising geopolitical tensions
• Russian troops are reportedly leaving assembly points and moving to attack positions
• Fed holds emergency closed meeting

European indices finished the first session of the week lower as the travel and leisure sector underperformed due to rising geopolitical tensions over Ukraine invasion and a looming policy tightening cycle. DAX fell 2.02%, CAC 40 lost 2.27% and FTSE 100 finished 1.69% lower. Over the weekend US intelligence warned Russia might launch a military attack before the Beijing Olympics end in a week. Stocks managed to cut some losses in the afternoon after Russian Foreign Minister Lavrov said there is always a chance to find the agreement and suggested to President Putin that Moscow should continue along the diplomatic path in its efforts to extract security guarantees from the west. Nevertheless, the US decided to close its embassy in Kyiv and relocate diplomatic operations to Lviv, according to WSJ. Also the newspaper revealed that the State Department ordered destruction of networking, computer equipment in the Kyiv facility. 

Moods worsened again in the evening after CNN  reported the President of Ukraine Volodymyr Zelensky said Ukraine “has been informed” that Wednesday, February 16 “will be the day of the attack”. Sell-off intensified after US officials announced that satelite images show Russian troops leaving assembly points and moving to attack positions despite earlier comments from Russian politicians. 

Meanwhile ECB president Lagarde spoke before the  European Parliament, however did not provide any new information. She sees signs that bottlenecks may be starting to ease however inflation will likely remain high in the near term. Central bank continue to see risks to the outlook as broadly balanced over the medium term. Risks to the inflation outlook are tilted to the upside, particularly in the near term. ECB will take action at the right time to achieve inflation target

Downbeat moods prevail on Wall Street as investors weigh Russia-Ukraine tensions and wait for the outcome of the closed meeting of the Board of Governors of the Federal Reserve. Many investors speculate that today's meeting was set up to increase the key rate after the inflation data appeared publicly. Economists at Goldman Sachs raised their Fed forecast to seven hikes for 2022, and said it sees the 10-year hitting 2.25% this year. Both Dow Jones and S&P 500 fell over 1.0%, while Nasdaq lost 0.70%. Earlier St. Louise Fed President James Bullard said that he would like the central bank to "front-load" its rate hikes to quickly remove accommodation and get inflation under control.  Our credibility is on the line here and we do have to react to the data,” he added. “However, I do think we can do it in a way that’s organized and not disruptive to markets.”

On the data front, US consumer inflation expectations for the year ahead decreased for the first time in 14 months to 5.8% in January of 2022 from 6% in the previous two months. Similarly, three-year ahead inflation expectations decreased by 0.5 percentage point to 3.5%, the largest one month decline since 2013.

Mostly upbeat moods prevail today in commodity markets despite stronger dollar and higher treasury yields. The US 10-year Treasury again briefly jumped above 2.00%, however this did not stop precious metals. Gold broke above $1860 level and is testing resistance at $1870.00, while silver jumped to $23.90. WTI price managed to erase early losses and trades around $95.30 after OPEC Secretary General Barkindo said that some of the cartel members are having challenges meeting output targets, while EU official Borrell said that the Iran nuclear deal is “in sight” Major cryptocurrencies move lower on Monday. Bitcoin erased early gains and trades below $42 000 while Ethereum price dropped below $2900 level.

USDJPY pair launched today's session lower, however sellers failed to break below the major support zone around 115.00 which is marked with previous price reactions, long-term upward trendline, 200 SMA (red line) and 61.8% Fibonacci retracement of the last upward wave. Later in the session dollar bulls regained control and the pair broke above 38.2% retracement, however did not manage to break above local resistance zone around 115.82. Source: xStation5