European equity markets plunged lower overnight, once again, triggered by dire economic sentiment and the growing realisation of the damage the Ukrainian situation will have on Europe. The important ZEW Economic Sentiment reports, out from Germany and the EU, collapsed deep into negative territory. Europe is in a terrible state, with the sanctions imposed by themselves upon Russia, putting them at the economic mercy of the intended victim. Russia is a major supplier of European energy and agriculture and Europe will struggle to find ready replacements, which could drive them deep into recession and the cold. The EUR trades 1.0920, while the Yen continues to collapse, ahead of the important Bank of Japan monetary policy meeting.
The FOMC meeting is due to raise rates by 25 basis points tonight and any variation could cause pandemonium in markets. The Ukraine is sitting down with the Russians for further peace talks, which offers some hope, while oil prices fell below US$100/barrel. These allowed US equities to recover some of the recent losses, but remain extremely vulnerable. The RBA minutes warned of fallout from the Ukrainian war, in terms of inflation, supply and cost of goods. The AUD gave further ground, falling to 0.7170, while the NZD bounced above 0.6950.
All eyes remain on the FOMC and the Ukrainian peace negotiations.