Aurelia Butler

NEW YORK (Reuters) – Geopolitical worries have added another layer of volatility to an already-jumpy market as investors priced in the possibility of escalating conflict between Russia and Ukraine, though some doubted the issue would weigh on U.S. asset prices over the longer term. Reports of rising tensions between the two countries slammed stocks on Friday and lifted prices for Treasuries, the dollar and other safe-haven assets, as investors already rattled by a hawkish turn from the Federal Reserve digested a potentially more serious conflict in Eastern Europe. “The market is reacting because an actual invasion has not yet been priced in,” said Michael Farr of Farr, Miller and Washington LLC. “The severity of an invasion, if one occurs, will correlate to the severity of the market’s reaction.” Russia has massed enough troops near Ukraine to launch a major invasion, Washington said on Friday. It urged all U.S. citizens to leave the country within 48 hours after Moscow further stiffened its response to Western diplomacy. White House national security adviser Jake Sullivan said it remained unclear whether Putin had definitively given the order to invade, and that he expected U.S. President Joe Biden to press for a phone call soon with his Russian counterpart. Despite Friday’s market gyrations, some investors were skeptical whether a more serious conflict could be a drag on broader markets over the longer term. “The reaction the market is likely to have is selling until it becomes more evident what an invasion looks like and then what kind of response U.S. and European allies have to it,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “We’re not suggesting making any changes predicated on the news cycle around the topic.”The benchmark S&P 500 index closed down nearly 1.9% while the tech-heavy Nasdaq was off around 2.8%. The moves followed weakness on Thursday sparked by expectations that the Fed will become more hawkish to fight surging inflation. The Cboe Volatility Index, known as Wall Street’s fear gauge, was up for a second straight session and hit its highest level since the end of January. Worries over the conflict will “create volatility until people verify it’s true and what is the duration before international leadership steps in and to what extent does the rest of the world step in,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York. “We just have to see how this plays out over the weekend and whether or not international leadership can bring this under wraps,” he said. More

WASHINGTON (Reuters) – The U.S. Treasury Department on Friday rejected an appeal by 18 Democratic lawmakers who want the International Monetary Fund (IMF) to end its practice of charging mostly middle and lower-income countries significant surcharges on larger loans that are not repaid quickly.The IMF has estimated that borrowing countries will pay over $4 billion in surcharges on top of interest payments and fees from the start of the pandemic through the end of 2022.Jonathan Davidson, the Biden administration’s assistant Treasury secretary for legislative affairs, told the lawmakers that the surcharges were meant to address the increased risk to shareholders involved in lending large sums to member countries. They do not apply to the world’s poorest countries, Davidson added and loans made often had rates well below market rates.”Revenue from surcharges for those countries who do pay them helps build precautionary balances to protect the IMF’s shareholders against potential losses,” Davidson wrote in his reply to a Jan. 10 letter from lawmakers, a copy of which was seen by Reuters.”In Treasury’s view, surcharges need to be considered in the context of the overall balance sheet of the IMF, most importantly its ability to absorb potential losses from nonrepayment of its lending,” he said.Washington’s view is vital since the United States is the largest shareholder in the global lending institution, which is funded by its member states; although Germany, France and Britain have been open to reviewing the surcharge policy.Representatives Jesus Garcia, Alexandria Ocasio-Cortez and Pramila Jayapal last month led a letter to Treasury Secretary Janet Yellen, urging her to back a review of a policy they said was “unfair and counterproductive,” and robbed countries of resources needed to combat the COVID-19 pandemic.Argentina, which is expected to spend some $3.3 billion on surcharges from 2018 to 2023, has repeatedly asked for temporary relief from the surcharges given the COVID-19 crisis, but IMF executive board members remain divided over the broader issue.IMF executive board members reviewed the role of surcharges, now the fund’s largest source of revenue, late last year, without coming to a final decision. More

“The economy is recovering, the output gap is closing, but it would still be below its potential,” Adrián Armas, manager of economic studies at the Central Bank, told a newsconference, citing the bank’s December and January advance indicator reports.Peru’s economy has consistently exceeded monthly pre-pandemic levels since June 2021, according to central bank data.Business expectations about the local economy remain pessimistic, however, amid political uncertainty triggered by the administration of leftist President Pedro Castillo, who just named his fourth Cabinet in six months in office. Armas said there was the possibility of a deterioration in political stability, but that “the bank, as it has already done, has a high response capacity to deal with this situation.”The bank also expects that Peruvian inflation, which registered its highest annual rate in 13 years last year, will begin to slow down from July and fall to within the target range of between 1% and 3% in the fourth quarter of 2022, Armas said.The official added that there was a recovery in the services sector, electricity production, exports of agricultural products, and formal employment growth.Peru’s exports are expected to reach 63 billion dollars in 2021, largely due to higher metal prices, representing 28.1% of the gross domestic product, “a historical record,” Armas said.”The external environment continues to be highly favorable for the Peruvian economy,” he added.Peru is the world’s second largest producer of copper. Some large mines in the country have been facing conflicts with local communities and in some cases have slowed down production.Peru has also vaccinated over 80% of its population, which has strengthened the economy. “People are starting to go out with more confidence,” Armas said. More

NEW YORK (Reuters) -Investors are bracing for more gyrations in bitcoin and other cryptocurrencies, as worries over a hawkish Federal Reserve threaten to squelch risk appetite across markets. The volatility traditionally associated with cryptocurrencies has been on full display in recent weeks. Bitcoin, the largest cryptocurrency, is up by around 33% since Jan. 24 and recently traded at $43,850, rebounding from a tumble that cut its price in half from November’s record high. Its main rival, ether, is up around 45% since Jan. 24 at around $3,200, following a nearly 56% nosedive from its record high of $4,868, also in November.While proponents of cryptocurrencies once touted their lack of correlation to other assets, bitcoin and its peers saw huge gains over the last two years, rallying along with stocks as the Fed and other central banks pumped unprecedented levels of stimulus into the global economy. Bitcoin is up 1,039% since March 2020 and ether has risen 2,940%, though the rallies in both cryptocurrencies have been interrupted by numerous-stomach churning selloffs. Their recent volatility has come amid a broader market selloff driven by investors recalibrating https://www.reuters.com/business/investors-gird-more-hawkish-fed-after-sharp-inflation-rise-2022-02-10 their portfolios to account for a more aggressive Fed, which is now expected to raise rates as many as seven times https://www.reuters.com/markets/europe/goldman-ups-fed-hike-forecast-7-rate-increases-2022-after-cpi-data-2022-02-11 this year as it fights surging inflation. The benchmark S&P 500 index is down 5.5% year-to-date, while the tech-heavy Nasdaq has lost 9.3%. Worries that an aggressive central bank tightening cycle going forward will hamstring risky assets has made it difficult for some traders to maintain their bullish outlook on bitcoin and other cryptos, an asset class already identified with intense volatility. Escalating tensions in Ukraine, where Washington warned a Russian invasion could begin any day, could also spark broad market moves, investors said.Bitcoin has “really become the ultimate momentum trade and there are so many risks that can trigger a 40% drop out of nowhere,” said Ed Moya, senior analyst at Oanda. Bitcoin’s volatility hasn’t stopped some analysts from trying to gauge the currency’s fair value or point out potentially important price levels. Analysts at JPMorgan (NYSE:JPM) estimate bitcoin’s current fair value at around $38,000 – some 15% below its recent price – based on its volatility in comparison with that of gold, another asset investors often use to hedge their portfolios against inflation and economic uncertainty. Vanda (NASDAQ:VNDA) Research, meanwhile, said in a recent note that most of the bearish bets on a weaker bitcoin price were entered at around $47,000, and “there could be a large short-squeeze if the aforementioned threshold is crossed, and retail investors return to crypto-trading.”Meanwhile, correlations between bitcoin and the S&P 500 reached an all-time high on Jan 31, according to data from BofA Global Research, undercutting the case for those hoping to use the cryptocurrency as a hedge against market turbulence. Investors next week are expecting minutes from the Fed’s most recent monetary policy meeting, due out Wednesday. Walmart (NYSE:WMT) and chipmaker Nvidia (NASDAQ:NVDA) Corp will be among the companies reporting results, as corporate earnings season rolls on. Some investors are steeling themselves to ride out the volatility in bitcoin, betting that the long-term value proposition of blockchain technology, the built in supply limit, and the network effect it produces, will endure despite frequent price swings. Jurrien Timmer, director of global macro at Fidelity, likened the current speculation in cryptocurrencies to the turbulence tech stocks experienced during the dot-com era more than two decades ago, a boom-and-bust period that saw a comparatively small group of companies left standing. “Amazon (NASDAQ:AMZN) is still around and Apple (NASDAQ:AAPL) is still around and they’re bigger than ever and the thinking is that for bitcoin that will be the same,” he said. “But it’s not immune to those waves of speculation and sentiment.” Bitcoin could reach $100,000 as soon as 2023, Timmer has said, based on his supply/demand models.Others believe mature cryptocurrencies like bitcoin and ether are unlikely to deliver the kind of eye-watering gains they have notched since their founding. Instead, they are looking to the universe of new, alternative coins https://www.reuters.com/markets/europe/cryptoverse-after-bitcoin-winter-investors-hunt-risk-virtual-worlds-2022-02-08 that are being created to take advantage of the money pouring into the crypto space, including the metaverse and NFTs, which saw $30 billion worth of venture capital investment last year, according to PitchBook. Some altcoins include cosmos, Terra Luna, and Polkadot, which are down around 20.5%, 38% and 25.5% year-to-date, respectively, according to coinmarketcap.com.Understanding the risks linked to them https://www.moodysanalytics.com/articles/2021/block_by_block_assessing_risk_in_decentralized_finance and decentralized finance is going to be one of the main challenges for investors in 2022, said Lily Francus, director of quantitative research strategy at Moody’s (NYSE:MCO) Analytics. Cryptocurrencies “are going to remain very volatile going forward, but there are significant players on both the institutional side and the retail side that are still growing, so the interest is still growing,” said Oanda’s Moya. More