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Some positive moves at the start of trading on Tuesday for European stock markets. The FTSE 100 rose around 1% as it looked to reclaim some of yesterday’s losses, whilst shares in Frankfurt and Paris were up around 1.5% as all sectors rallied. Asian stocks were mixed overnight as the situation in Ukraine weighed, but some news on the wires is helping lift risk sentiment and sent oil down more than $1 in short order. Risk currencies also caught the tailwind as GBP and EUR advanced against the USD. EURCHF rallied on the news.


Headlines from Interfax flashed saying that a number of drills have finished and troops are expected to return to bases; some units of western and southern military districts have started returning to bases. This seems to be helping risk catch some more bid in early trade….shows risks of trading headlines and shows market sensitivity to the situation over there. Far from clear what is going on – beware.


As regards the situation regards Ukraine and Russia – UK warning Russia could invade in days, repeating the US line. Lavrov, the Russian foreign minister, says diplomacy can still work…Ukraine keeps saying no invasion imminent… then president Zelensky says date is known and set for Feb 16th… then officials say he was being ironic… I’m not sure I really know what to make of it all. So, does the geopolitical noise still drive price action? Absence of fresh news you see fading of the recent selling and this is what we are seeing in early European trade.  


Mining profits: BHP declared a record $7.6bn dividend as it reported a 57% jump in underlying attributable profit of $9.7bn in the six months to December. Glencore also declared a $3.4bn dividend and £550m share buyback plan on a record profit. In an inflationary environment of shortages, hard assets are worth owning. 


European stocks closed off the lows on Monday but still had a bruising session. US stocks were also broadly lower, though again well above the session lows. The Nasdaq Composite was up 1% at point as investors sought some sanctuary in large cap tech, but finished flat. Futures are indicated higher. 


Gold is still bid, catching some geopolitical premium, though dipped a bit on the Russian troop movement headlines. Would Russia sell down chunks of its massive gold reserves to prop up the currency should sanctions bite? Rates are going up, inflation expectations are moderating a touch…how can this be bullish? Real yields are still moving higher. 


Commentary from James Bullard was again hawkish…other policymakers might be coming round? The front end is not going to be a fade. Ten-year Treasury yields shot back above 2%. US producer price inflation on tap at 13:30 GMT, expected to be hot again at +0.5% month-on-month , having risen 9.7% year-on-year in Dec. Empire State mfg index and German ZEW sentiment reports are also on the calendar today.

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