S&P 500 enters a correction
• The S&P 500 index plunged by over 10% from its January peak, signalling a correction as investors assessed the new sanctions on Russia. A correction happens when an index closes more than 10%
below its record closing level.
• Us President Joe Biden announced the first economic sanction on Russian elites and two major financial institutions while promising to impose harsher punishments should Russia continue its aggression.
Furthermore, the European Union also introduced new sanctions as German Chancellor Olaf Scholz halted the Nord Stream 2 gas pipeline that connects Russia to Germany.
• The S&P 500 and Dow Jones Industrial Average shed 1.01% and 1.42%, respectively, and the technology-heavy Nasdaq Composite lost 1.23%. Meanwhile, US Treasuries were broadly lower while the
yield curve flattened as the commodities rally ranging from oil, agriculture and metals have underscored economic risks from inflation.
• International Brent crude oil benchmark rose 1.5% at US$96.84 per barrel amid fears that the escalating tension could lead to supply disruptions on Russia’s energy export. US West Texas Intermediate crude also climbed 1.4% at US$92.35 per barrel, after hitting its peak of US$96 since August 2014.
• Geopolitical risks are fuelling further pressure on global markets, which have already been affected by the outlook of tighter Federal Reserve monetary policy to combat inflation. Expectations of rate hikes are heightened as investors continue to weigh higher commodity prices in light of the Russia-Ukraine tension.
• In Asian markets, stocks slid for a third consecutive day amid rising tensions in Ukraine, coupled with new regulatory scrutiny on China’s technology sector. The MSCI Asia Pacific Index plunged by over
2.1% on the day, hitting a three-week low, hurt by a sharp selloff in Chinese technology giants. In contrast, energy was among the least affected as oil prices rose.
• Alibaba Group Holding Ltd tumbled by 3.1% in Hong Kong after Chinese regulators told companies to check their financial exposure to Ant Group Co, which Alibaba owns a one-third stake. Last Friday, Chinese technology stocks took a hit after regulators announced new rules for food delivery platforms. China issued new guidelines requiring food-delivery platforms to cut the fees they charge restaurants.
• The Hang Seng Tech Index fell to its lowest since its inception in July 2020 amid ongoing regulatory pressure from Chinese policymakers on the technology sector. Some analysts believe that the country’s
policy pivot is unlikely to soften even if valuations become more attractive.