U.S. futures fall, oil rises as West isolates Russia: Market plummets


(Bloomberg) – U.S. stock futures fell Monday, while bonds and oil rose amid heightened market uncertainty after Western nations unveiled tougher sanctions on Russia over its invasion of Ukraine.

Bloomberg Most Read

Contracts on the tech-heavy S&P 500 and the Nasdaq 100 fell more than 2%. Oil and palladium rose about 5%, with an air of unrest in commodity markets on fears of supply disruptions.

Rallies in the dollar, gold and Treasuries underscored demand for safe-haven assets. The euro fell on risks to the European economy. An Asia-Pacific stock index wobbled as Japanese stocks fluctuated. The Bitcoin cryptocurrency held losses after retreating below $38,000.

Tighter sanctions further cut commodity-rich Russia off from global finance by seeking to prevent its central bank from using foreign exchange reserves to undermine sanctions. They also exclude some Russian lenders from the SWIFT messaging system that underpins trillions of dollars worth of transactions.

Doubts are now growing about the Bank of Russia’s ability to support the Russian financial system and the ruble. Opting out of SWIFT may leave holes in international banking forcing monetary authorities to supply dollars to the market, according to Credit Suisse Group AG strategist Zoltan Pozsar.

Escalating conflict and tightening Western sanctions cast a shadow over markets. Hostilities threaten to stoke inflation by jeopardizing flows of key resources such as wheat, natural gas, oil and metals, exacerbating the elevated pandemic-era price pressures that were already haunting the global recovery.

The U.S. Treasury yield curve has flattened, indicating that investors expect slower growth and continued inflation. A key question is how all this may affect the Federal Reserve’s plan for a series of interest rate hikes starting in March. The liquidity squeeze caused large swings in the markets even before the Ukraine crisis.

“The markets will once again have to digest the next stage of this crisis,” Ben Emons, global macro strategist at Medley Global Advisors, said on Bloomberg Television, adding that sanctions have the effect of slowing market liquidity.

Fear of the ruble

Ukrainian and Russian officials are scheduled to meet on the border with Belarus, hours after President Vladimir Putin put Russian nuclear forces on high alert. Ukrainian President Volodymyr Zelenskiy expressed skepticism about the talks.

In Russia, citizens lined up at ATMs across the country to withdraw foreign currency, fearful of a collapse of the ruble. On Friday, S&P Global Ratings downgraded Russian bonds below investment grade.

Meanwhile, BP Plc will exit its stake in Russia’s largest oil company, Rosneft PJSC, which could take a financial hit of up to $25 billion. Norway plans to exclude Russian assets from its $1.3 trillion sovereign wealth fund.

The conflict “will likely boost energy prices significantly, resulting in immediate inflationary effects and a major drag on global growth,” Silvia Dall’Angelo, senior economist at Federated Hermes, wrote in a note. “It is fair to say that the crisis increases the margin of error for central bank policies.”

What to watch this week:

  • President Joe Biden’s State of the Union address on Tuesday.

  • Reserve Bank of Australia policy decision, Tuesday.

  • Fed Chairman Jerome Powell testifies before Congress on monetary policy, Wednesday and Thursday.

  • OPEC+ meeting, Wednesday

  • Euro zone CPI, Wednesday

  • Bank of Canada interest rate decision, Wednesday.

  • ECB publishes report of its February meeting, Thursday.

  • U.S. unemployment, nonfarm payrolls, Friday.

Some of the major movements in the markets:

Shares

  • S&P 500 futures were down 2.3% as of 9:12 a.m. in Tokyo. The S&P 500 was up 2.2% on Friday.

  • Nasdaq 100 futures lost 2.5%. The Nasdaq 100 was up 1.5% on Friday.

  • Japan’s Topix index rose 0.1%.

  • South Korea’s Kospi index gave up 0.3%.

  • Australia’s S&P/ASX 200 index fell 0.1%.

Currencies

  • The Bloomberg spot dollar index rose 0.5%.

  • The euro was at $1.1192, down 0.7%.

  • The Japanese yen was at 115.57 to the dollar.

  • The yuan was at 6.3178 per dollar, down 0.1%.

Bonds

Commodities

  • West Texas Intermediate crude oil up 5.3% to $96.42 a barrel

  • Gold rose 1.1% to $1,909.41 an ounce

Bloomberg Businessweek’s most read

©2022 Bloomberg L.P.



Reference-ca.finance.yahoo.com

Leave a Comment