S&P 500 outlook clouded by Russian SWIFT ban, APAC stocks steady

Ukraine crisis, SWIFT ban, nuclear alert, Nonfarm payrolls - Asia-Pacific week-ahead

The G7 countries moved ahead to ban some Russian banks from accessing the SWIFT payment network as part of the latest round of sanctions against Moscow. The bloc also threatened further sanctions over Russia’s invasion of its neighbor. In response, President Vladimir Putin put Russia’s nuclear deterrent on high alert on Sunday, marking a further escalation of the tensions.

The fight in the Ukrainian capital city of Kyiv continued over the weekend even though talks between Russia and Ukraine will be held on Monday, creating a large amount of uncertainty that the market tends to dislike. Futures on US equity benchmarks tumbled at the Monday open, setting a sour tone for the Asia-Pacific markets.

The SWIFT system is crucial to the settlement of trade in crude oil and other Russia-produced natural resources. Therefore, it marks the most stringent punishment against Russia so far. Sales of energy products accounted for over 60% of Russia’s total exports in 2021. As a result, crude oil and natural gas prices are expected to surge due to a potential withdrawal of Russian recourses, adding supply constraints in an already tight market. WTI crude oil prices leaped over 5% to $96.4 at open.

Rising crude oil and other commodity prices as a result of the Ukraine War may lead to even higher price levels around the globe, putting pressure on the Federal Reserve to tighten monetary policy more aggressively to rein in inflation. On the flip side, however, heightened geopolitical uncertainties and the resulting economic impact may allow the central bank to hold back interest rate hikes. The Fed now needs to carefully balance the trade-off between inflation and geopolitical risks.

WTI Crude Oil – Daily

APAC markets look set to kick off the week on the back foot amid heightened geopolitical risks. Rising oil prices are negative catalysts for Asia’s major oil importers such as China, Japan and India. Japan’s Nikkei 225 lost half a percent at open, while Australia’s ASX 200 index registered a small gain.

For the week ahead, China NBS manufacturing PMI and US Markit manufacturing PMI dominate the economic docket alongside US nonfarm payrolls. Find out more from the DailyFX calendar.

Friday’s US nonfarm payrolls figure will be closely scrutinized for clues about the health of the labor market and wage pressure. The unemployment rate is expected to drop to 3.9%, and some 450k jobs are expected to be added in February. Average hourly earnings are forecasted to grow 0.5% MoM. Stronger-than-expected figures may strengthen the Fed’s hawkish stance, whereas disappointing readings may lead to the opposite.

S&P 500 Index technical analysis

The S&P 500 index may have entered a meaningful correction after breaching below an “Ascending Channel” as highlighted on the chart below. Prices extended lower after the formation of a “Double Top” chart pattern, which is commonly viewed as a bearish trend-reversal indicator. Prices rebounded sharply from a key support level of 4,200, but the overall trend remains bearish-biased. The MACD indicator is about to form a bullish crossover beneath the neutral midpoint, suggesting that near-term selling pressure may be fading.

S&P 500 Index – Daily Chart

Nikkei 225 technical analysis

The Nikkei 225 index breached below a “Symmetrical Triangle” pattern and thus opened the door for further downside potential. Prices rebounded near a key support level of 25,770, but the overall trend remains bearish-biased. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that near-term momentum remains weak.

Nikkei 225 Index – Daily Chart

ASX 200 Index technical analysis

The ASX 200 index formed a “Double Top” chart pattern and has since entered a technical correction. Prices formed a bearish long-range bar on Thursday, underscoring downward momentum. An immediate support level can be found at 6,960 – the 23.6% Fibonacci retracement. Breaching below this level may intensify near-term selling pressure and expose the next support level of 6,758. The MACD indicator formed a bearish crossover, suggesting that a technical correction is underway.

ASX 200 Index – Daily Chart

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