About $3.5 trillion of stock and index options expire today in the US; Japan and Russia keep interest rates unchanged and oil remains higher
Friday comes with the prospect of a new wave of volatility, this time boosted by the expiration of futures and options on indices and stocks in the United States. The lack of clarity on the evolution of talks between Russia and Ukraine adds caution and affects investors’ willingness to position themselves in riskier assets.
Both European bourses and US index futures have been in the red since early in the morning. Oil continued on its biggest rally in 16 months, pressured by the impact of Russia’s war with Ukraine on supplies: the WTI-type barrel was quoted at around US$ 104. The 10-year US Treasury bonds gained in value, with its premiums giving way in the face of the last closing.
Volatility is likely to be higher today, as about $3.5 trillion of stock and index options expire today in the US, a quarterly event known as the Triple Witching.
The winds of uncertainty brought on by the war continue to blow and expectations are high regarding this diplomatic meeting: President Joe Biden will try to persuade Xi Jinping to increase pressure on Moscow to end the conflict in Ukraine. It will be his first phone call with the Chinese president since the Russian invasion began. China’s position in the war is difficult to pinpoint, as Beijing has avoided public criticism of Russian President Vladimir Putin and offered rhetorical support to Ukraine.
The Bank of Japan (BoJ) kept its interest rates and asset purchase policy unchanged, distancing itself from the policy adopted by other world central banks, such as the Federal Reserve (Fed) and Bank of England (BoE). “Inflation is around 8% in the US and around 6% in Europe, but in Japan, it is still below 1%, justified the BoJ leader, Haruhiko Kuroda.
However, the monetary authority downgraded its assessment of the Japanese economy, citing the impact of Covid. It also highlighted the high degree of uncertainty about how the war in Ukraine could affect Japan’s economy and prices.
Amid sanctions and a precipitous economic downturn, Russia has also kept its interest rates at 20% – the highest level in nearly two decades. However, the country’s monetary authority warned of great uncertainty, as the economy is undergoing a “large-scale structural transformation”.
Meanwhile, the Russian Ministry of Finance said the payment of coupons in two tranches of Eurobonds is already with Citigroup Inc., confirming information that JPMorgan Chase & Co. processed the funds. S&P Global Ratings cut Russia’s credit rating, saying its debt is “highly vulnerable to non-payment”.
President Joe Biden will try to persuade Xi Jinping to increase pressure on Moscow to end the war in Ukraine on Friday, in his first phone call with the Chinese president since the invasion began.
US officials have struggled to identify China’s position in the war, as Beijing avoided public criticism of Russian President Vladimir Putin and offered rhetorical support to Ukraine.
White House national security adviser Jake Sullivan met with China’s top diplomat and Politburo member Yang Jiechi in Rome on Monday for about six hours, but neither side announced a firm result from negotiations.
Publicly, China has said it is trying to help promote diplomacy to stop the conflict. However, US officials are concerned that Beijing could help Russia evade economic sanctions or even supply it with weapons, as the two countries declared shortly before the invasion that their friendship was “boundless”.
White House Press Secretary Jen Psaki said in a statement Thursday that the call “is part of our ongoing efforts to keep the lines of communication open.”
Another positive journey on international exchanges. The S&P 500 has achieved its longest three-day bull cycle since November 2020. One of the news well-received by investors was the notification from JPMorgan that it has processed the payment of $117 million in bonds issued by Russia, a sign that the country appears to have avoided its first foreign debt default.