Fears of a Russian invasion, central bank speakers, peak oil
By Geoffrey Smith
Investing.com — Global stock markets are falling and commodity prices are being pushed higher by fears of a Russian invasion of Ukraine and its possible consequences (in the form of Western sanctions). US equities are also expected to extend their open decline. The Fed’s Esther George reiterates her calls for the central bank to sell its bond portfolio, and uber-hawk James Bullard will speak later. Only raw materials are bucking the trend, as global buyers begin to frantically search for alternative suppliers of energy, agricultural and industrial products. Here’s what you need to know in financial markets on Monday, February 14.
1. Russia fears planning a Valentine’s Day massacre for the markets
Fears of Russia invading Ukraine continued to rattle global markets, following warnings from the White House and other governments of an impending move from Moscow.
Benchmark European stock indices fell as much as 3.2% in the first half of the trading session amid what appear to be last-ditch diplomatic efforts to avert war.
The German Chancellor will travel to Kyiv and Moscow on Monday for talks amid hints of Ukrainian concessions, but the tone was set on Saturday after a phone call between US President Joe Biden and his Russian counterpart Vladimir Putin, after which Biden again threatened Russia if it invaded.
A White House reading after the call said while the United States was keen to continue diplomatic engagement “in full coordination with our allies and partners, we are also prepared for other scenarios.” G7 finance ministers followed that up on Monday with a warning of “massive and immediate” consequences for the Russian economy.
2. George beats the drum again for QT; Bullard, Lagarde speech ogled
A new barrage of central bank rhetoric is underway after repeated negative shocks to US inflation data last week.
Kansas City Federal Reserve Chair Esther George repeated her view in an interview with The Wall Street Journal that the Fed should start selling bonds on the $9 trillion portfolio it has amassed during previous episodes of “quantitative easing”. George argued that the Fed’s huge portfolio makes it more difficult to implement monetary policy and that asset sales would prevent the yield curve from flattening – a nod to those who fear that the recent flattening of the yield curve does not portend a recession.
Later in the day, the chairman of the St. Louis Fed – who has already nailed his inflation hawk colors to the mast – will speak. So will the president of the European Central Bank, who has spent most of the past week trying to reverse the hawkish shift she signaled at her last press conference. Fortunately, the data calendar is relatively empty.
3. Stocks set to extend post-Michigan declines; Lockheed Martin in the spotlight
U.S. stock markets are set to open significantly lower on war fears, further heightening a mood that had already turned negative late last week in response to the University of Michigan consumer confidence index for February.
As of 6:20 a.m. ET (11:20 a.m. GMT), they were down 273 points, or 0.8%, while they were also down 0.8% and down 1.1%. The NASDAQ also underperformed on Friday as traders eyed a simultaneous combination of weaker consumer activity and tighter monetary policy to bring inflation down.
Actions likely to be targeted later include Lockheed Martin (NYSE:), which caved in to the inevitable over the weekend and scrapped its deal to buy Aerojet Rocketdyne (NYSE:) due to antitrust concerns. The development is the latest sign of the Biden administration’s crackdown on industry concentration, following its resistance and multiple Canadian bids for rail operator Kansas City Southern (NYSE:).
4. Trade flows resume with the reopening of the bridge between the United States and Canada
There was better news from the US-Canada border, where after an Ontario court authorized the forced dismissal of truckers protesting the Trudeau government’s Covid-19 policies.
With the dominant strain of the virus, Omicron, now causing a greatly reduced incidence of serious illness in many countries, it is becoming increasingly difficult to sustain the public health policies that have so disrupted social and economic life over the past few years. last two years.
However, the pandemic still has teeth. In , authorities said hospitals across the city had been overwhelmed with Covid-19 cases, reflecting how the highly contagious Omicron is still able to spread like wildfire through poorly vaccinated populations.
5. Oil and commodities tighten on Russia fears
Crude oil prices hit new seven-year highs overnight on concerns about the availability of Russian oil exports in the event of Western sanctions in response to an invasion of Ukraine.
As of 6:30 a.m. ET (11:30 GMT), futures were down 0.2% on the session at $92.88 a barrel, while down 0.2% at 94, $22 a barrel. Overnight, WTI soared to $94.81 a barrel, in part on fears that the US and EU would exclude Russian banks from the SWIFT financial messaging system, the channel through which almost all international buyers execute their payments for Russian energy exports.
A lack of access to SWIFT would force international buyers to look for alternative energy sources in the short term, at a time when the oil market already has little spare capacity to speak of. Cuts were also visible on other products for which Russia is one of the main exporters, such as , and .