Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Monday, June 26. Welcome to the last week of the second quarter.
State of Play
It was a very interesting weekend with a series of bizarre events in Russia. As of 0640 financial markets appear to be taking it all in stride:
European stocks are turning in a quiet session without much movement. We did have a bit of selling in China which returned after a market holiday. Here in the US index futures are effectively flat with no major US index moving more than 0.2% from the break-even point;
There isn’t much action in commodities either. Wheat futures are up 3% but little movement elsewhere. WTI crude oil is up 0.5% to trade around $69.50/barrel. Copper is flat;
Cryptos are down just a bit with Bitcoin down 1.5% to trade around $30,200;
Bonds are seeing a few bids, with the yield on the 2-year down 5 basis points to 4.70% and the 10-year yield down 5bps to 3.69% (yields move inversely to prices).
Known Events
There’s very little on the calendar today. We’ll get earnings from Carnival Cruise Lines (CCL 0.00%↑) before the open at 0930. Dallas Fed Manufacturing at 1030 and a few bond auctions. That’s about it.
This dearth of new data leaves us with time to ponder the events of the weekend when for about 24 hours it seemed as if the Russian state was going to implode. There are more questions than answers on this right now and probably very few people qualified to answer them. For that matter, there are probably just as few people who even know the identities of those who might be qualified to provide answers.
For our purposes this should be a stark reminder that unknown events, especially of a geopolitical nature, can upend everything that is going on economically and in markets. It’s happened once already, last February. Markets soon recovered from that shock. Will the next one be as benign?
The Bottom Line©️
Stocks and (perhaps more interestingly) commodities are largely unchanged from Friday. That seems a little naive in light of what happened — and may still be unfolding, for all we know. Remember that markets hate uncertainty more than they hate bad news. It stands to reason that the type of uncertainty we’re facing globally would affect risk appetite.
Or maybe Russia is its own thing, contained to its own borders and maybe a few places like Belarus and Kazakhstan (and obviously Ukraine)? Maybe the geopolitical order can handle a Russian implosion without upsetting its balance?
Again, these assumptions sound a little naive. Just because the global economy (eventually) shrugged off whatever happened from the Ukraine invasion doesn’t mean full-scale disintegration of the Russian state will proceed as seamlessly. Presumably the global economy has figured out a way to expand without Russian oil. Still, the uncertainties this presents should make anybody a little nervous. Or not? Vote in the daily poll below:
Housekeeping
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