Commodity price declines were supporting risk sentiment more broadly. The biggest rallies in European equity indices since March 2020 were carrying over into Asia, but to a more limited extent. In March 2020, the trigger was unprecedented support from central banks. Very high inflation means that response is less likely today. However, lower vol is a prerequisite for greater risk-taking from active investors that drive a self-sustained rally. Although the ECB is likely to frame any delay in tapering the APP Thursday in the context of ultimately normalizing monetary policy, expectations for a recovery fund at the Mar. 10-11 emergency summit of EU leaders are building. Such support would be crucial in further stabilizing European equity markets in the near term, absent a positive outcome from Ukraine-Russia negotiations, with their respective foreign ministers due to meet in Turkey.Meanwhile, CPI inflation is on tonight's docket in the US, where headline and core price pressures were likely to accelerate, possibly forcing the Fed's hand. However, a miss on the core CPI would help support any European fiscal-related risk rally.
Gold
Historically, geopolitical risk premium in gold fades reasonably quickly. The differentiator or the unknown at this time is the longer-term impact of higher commodity prices, particularly oil as sanctions on Russia force global supply reconfiguration.Some CTA sell triggers already came into play—a reminder that systematic flow can move markets both ways, especially when the active gold investor base sits on the sidelines.Asia buying provided reasonably good support on this morning's dip. With no clear short-term technical support levels on the charts, 1970 may be a psychological level to watch. US CPI will have a bigger following in the gold community than normal.