Investability bulletin 18/02/22: Russian Riddles

Russia continues to confuse the markets, and more pain for US tech

Winston Churchill said Russia was “a riddle, wrapped in a mystery, inside an enigma”. The motivations and precise ambitions of Mr Putin are similarly hard to fathom. So, we should probably stop guessing what he is trying to achieve and look at the facts on the ground. That is, at least, the position the White House and NATO are taking. They still think Russia could invade Ukraine ‘within days’. There is a lot of noise around this but I say again, people are not making a 1yr investment decision based on what Putin might or might not do; that’s all about interest rates and earnings.

Joe Biden says Russia is set to invade Ukraine ‘within days’, whilst the headlines coming from the ground certainly don’t paint a picture of de-escalation. Lots of chatter about ‘false flag’ attacks being lined up as an excuse for Russian incursion. But diplomacy continues, with Russia’s foreign minister Sergei Lavrov set to meet US secretary of state Antony Blinken for talks next week. The amount of gaslighting on the Russian side is extraordinary. 

Markets continue to chop around on these Russia headlines. European equities are a tad higher this morning after a sharp fall for Wall Street yesterday. The S&P 500 declined more than 2%, taking it back under 4,440 and near Monday’s low. Another mixed bag from Asia, while oil is sharply lower with WTI back under $90, mainly it seems on hopes Iranian crude will return to the market. The FTSE 100 added about 0.2% in early trade as it tried to repair some of the –0.9% damage done yesterday. Global stock markets are mildly lower this week, on the whole holding up pretty well against these Russia-Ukraine headlines. It’s all about rates/inflation – headline trading aside.

More carnage for ARK Innovation ETF (ARKK): Shares in Roku (ROKU) sank more than 20% in after-hours trading as the company came up short on fourth-quarter revenues and delivered soft guidance for the first quarter of this year. Roku is the number two holding in ARKK after Tesla (TSLA), which declined 5% yesterday. ARKK fell 6.44% for the session and is close to its YTD low at $68. 

More on Tesla (TSLA)… “The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government,” Musk said in a court filing Thursday, as he seeks to bring the regulator’s 2018 securities case against him to a close. “The SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in even-handed fashion.” Does he mean his first amendment rights to, er, compare Justin Trudeau to Hitler (now deleted)? Or commit securities fraud? Or, again, commit securities fraud? I’m not sure Musk has been silenced much…I mean it seems he’s able to say what he wants. But more importantly for Musk is the competition coming. Consumer Reports says Ford’s Mustang Mach-E beat the Model 3 to its top electric vehicle for 2022. Overall, Tesla fell seven spots to 23rd place in Consumer Reports ranking of 32 major auto brands, its poorest showing yet. 

More spec tech wreck: A juicy headline from the boys and girls at Bloomberg: “Palantir shares tumble after it announces earnings that illustrated continued lack of profits”. Back in the day we would call this a loss. But anyway, it shows that speculative tech remains a tough place to be right now and there is probably still further to run lower. Palantir (PLTR) shares fell by almost 16% on the earnings…and yep it’s another top ARKK holding. 

Data yesterday: Philly Fed prices paid down to 69.3 from 72.5 … inflation cooling? The headline manufacturing index was down to 16 from 23.2 and below the 20 expected. Initial jobless claims a bit higher than expected at 248k. Housing starts were a big miss at –4.1%…growth and inflation slowing down? Kinda at odds with that super-hot retail sales and PPI numbers…getting a grip on where the US economy is right now is not easy, and only adds to uncertainty over the course of policy actions from the Fed = more rates volatility. Freddie Mac reported that US 30-year fixed mortgage rates have climbed to 3.92% from 3.69% a week ago. 

UK data out this morning was encouraging as retail sales rose 1.9% month-on-month in January, up 9.1% annually. France’s unemployment rate fell to its lowest level since 2008 in the final quarter of last year. Japanese inflation weakened, with CPI ex fresh food slowing to 0.2% vs f/c 0.3% and 0.5% prior. 

US existing homes sales figures out later plus we hear from the Fed’s Waller, Williams and Brainard. US stock markets will be closed on Monday for Washington’s Birthday holiday. 

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