Market News 20 Feb
Increased Volatility Amid New U.S. Tariff Threats
Financial markets experienced heightened volatility on Wednesday as investors reacted to new tariff threats from U.S. President Donald Trump and unstable negotiations to end the conflict between Russia and Ukraine.
The U.S. dollar and Japanese yen strengthened as safe-haven currencies, with investors avoiding riskier assets. The dollar rose against currencies that typically perform well when risk appetite is high, such as the euro, British pound, Australian and Canadian dollars. Meanwhile, the yen strengthened against major currencies, including the dollar, euro, Swiss franc, and pound.
The dollar fell 0.4% against the yen, reaching 151.495, while the euro dropped 0.6% to 157.925 yen. The euro also declined 0.2% against the dollar to $1.0424. The dollar index rose 0.2% to 107.18 after declining 1.2% last week.
The British pound received a short-term boost from stronger-than-expected UK inflation, which hit a 10-month high of 3% in January. However, it later fell 0.2% to $1.2585.
Stock Markets
U.S. stock indices closed higher:
Dow Jones gained 71.25 points (+0.16%) to close at 44,627.59;
S&P 500 rose 14.57 points (+0.24%) to 6,144.15;
Nasdaq Composite climbed 14.99 points (+0.07%) to 20,056.25.
Among S&P 500 sectors, healthcare posted the largest gains, while materials and financials lagged behind.
Notable individual stock movements:
Nikola plummeted 39.1% after filing for bankruptcy;
Celanese fell 21.5% due to a quarterly loss;
Shift4 declined 17.5% after weak Q4 results;
Global Blue jumped 17.5% after Shift4 announced a $2.5 billion acquisition;
Analog Devices surged 9.7% on strong earnings.
Precious Metals
Gold prices fluctuated, reaching a record high before declining as the dollar strengthened.
Spot gold fell 0.2% to $2,928.49 per ounce after hitting a record $2,946.85.
Gold futures dropped 0.4% to $2,936.10 per ounce.
Silver fell 0.4% to $32.74 per ounce.
Platinum declined 1.7% to $970.45.
Palladium decreased 1.6% to $971.47.
Oil Markets
Oil prices remained near a one-week high amid supply disruption concerns in Russia and the U.S.
Brent rose 0.3% to $76.04 per barrel.
WTI gained 0.6% to $72.25 per barrel.
Drone attacks on Russian infrastructure reduced crude flows through the Caspian Pipeline Consortium by 30-40%. In the U.S., cold weather threatened production, which could cut North Dakota's output by 150,000 barrels per day. Meanwhile, OPEC is considering delaying its planned production increase in April.
Macroeconomic Outlook and Federal Reserve Policy
The latest Federal Reserve meeting minutes revealed concerns over Trump's tariff policies and their impact on inflation. While the Fed has paused its rate-cut cycle, it is discussing slowing or halting its quantitative tightening (QT) program due to debt ceiling issues.
According to Goldman Sachs, the "X-date" for raising the debt ceiling is expected in late Q2 or Q3 2025. If the limit is not raised, the U.S. Treasury may default on its obligations, potentially triggering a global financial crisis.
U.S. housing data disappointed:
Housing starts fell 9.8% to 1.366 million units (expected: 1.390 million).
Building permits increased 0.1% to 1.483 million (expected: decline to 1.460 million).
On global markets:
Euro Stoxx 50 declined 1.31% due to U.S. tariff threats.
Shanghai Composite rose 0.81%.
Nikkei 225 dropped 0.27%.
The yield on 10-year U.S. Treasuries declined by 1.8 basis points to 4.533%. German and UK bond yields also moved higher.
The Federal Reserve's monetary policy, uncertainty regarding inflation, and Trump's tariff policies continue to exert pressure on the markets. Despite its recent decline, investors are still looking for safe-haven assets, boosting the dollar, yen, and gold. Amid geopolitical threats, oil prices continue to fluctuate.
Markets will be watching the Fed's next actions, the debt limit talks, and the possible effects of new tariffs on the world economy in the near future.