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RUSSIA-UKRAINE RISKS: LOOKING FOR HEDGES (1101 GMT)

It's not the base case for many traders but an escalation of Russia-Ukraine tensions into a war-type situation is still a big risk which investors need to watch closely, especially as markets seem to have priced in little or nothing so far.

And for UBS it's time to consider ways to hedge.

According to strategists at the Swiss investment banks, it looks that markets have been following the "2014 template" which saw little impact to international assets through Crimea tensions & Russia sanctions. But this time could be different.

"Troops are amassed on both sides of the Russia-Ukraine border; NATO is pushing back harder than in 2014; the US and EU are threatening much more punitive sanctions that could cut trade and financing flows to/from Russia; energy and metals markets are already very tight. Given that the market can arguably be surprised only in one direction, it's wise to look for hedges," they wrote.

Here's what they recommend looking at for protection.

(1) DAX put spreads

(2) SXEE (European Oil & Gas) call, SX7E (European Banks) put spreads

(3) JPY call, ZAR put

(4) USD call, PLN put

(5) Buy Schatz (2y Germany) vs EUR swaps

(Danilo Masoni)

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EUROPEAN STOCKS REBOUND, UBS BEST PROFIT IN 16 YEARS (0848 GMT)

European stocks are trading higher with all the top regional bourses in positive territory, rebounding from a gloomy January, after some optimism from the U.S. boosted global equities.

U.S. inflationary pressures should ease in 2022 due to weaker demand for goods, easing supply bottlenecks and a receding coronavirus pandemic, a U.S. Treasury's top economist said. u

After hitting its worst month since late-2020, the pan-European STOXX 600 index has jumped to a 12-day high, up 1.2%, with financial services, tech  and basic resources leading the gains all up between 2.5% and 2%.

In terms of single stocks, Swiss bank UBS UBSG.S is the top performer, with shares up 6% after posting its best annual profit since 2006.

(Joice Alves)

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BETTING ON A "VERY UNLIKELY" ECB RATE MOVE (0820 GMT

Reserve Bank of Australia governor Philip Lowe stood firm on Tuesday  against markets pricing several interest rate rises this year, showing he was adamant that rates would not rise until inflation is "sustainably" within the target range.

That hasn't shaken markets' conviction any, with a RBA rate rise priced for as early as May.

A similar drama may play out in Europe, where markets are wagering the European Central Bank will raise interest rates by 10 basis points, almost three times this year. Bets are starting to be placed in fact on a July move as well.

To quote ECB boss Christine Lagarde, a 2022 rate rise does seem "very unlikely". That's what she said last month but since then, she will have watched robust Q4 economic readings trickle in, including German annual inflation on Monday at 4.9%.

Chances are euro area price growth will overrun the ECB's 3.2% average forecast for this year.

With ECB rate rise bets piling up and four-five Fed rate hikes discounted already for 2022, the euro bounced off 19-month lows against the greenback and German bond yields rose to the highest since 2019.

If jobs data later on Tuesday shows wage pressures on the rise, Lagarde will, like Lowe, find herself battling markets at the Feb. 3 ECB meeting.

Meanwhile, is it time to call time on the equity selloff On the last day of January, global stocks managed a 1.7% rebound, led by a 3.5% jump in the Nasdaq.

For now, a firmer session appears to lie ahead. In Europe, good news continues to trickle in on the earnings front, with UBS the latest bank to post forecast-beating profits and a bumper buyback programme.

(Sujata Rao)

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EUROPEAN SHARES SEEN TRACKING WALL STREET RALLY (0725 GMT)

European futures are on the rise, pointing for a opening in the black for bourses across the region after U.S. shares climbed higher amid new optimism from the Treasury's top economist.

In a statement released alongside the Treasury's quarterly borrowing estimates, Assistant Secretary for Economic Policy Ben Harris said that inflationary pressures should ease in 2022 due to weaker demand for goods, easing supply bottlenecks and a receding coronavirus pandemic. 

European STOXX and Dax futures are rising 1.3% and 1.1%, respectively. FTSE futures are 0.8% up.

That brings some relief to investors after concerns over policy tightening, inflation and geopolitical tensions saw the STOXX 600 mark its worst month since late-2020.

(Joice Alves)

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